ASSISTING TRANSITION TO SRI LANKA FINANCIAL REPORTING STANDARDS

City Housing and Real Estate Company PLC

Introduction Sri Lanka Accounting Standards – LKAS

1 Sri Lanka Accounting Standards –

SLFRS 1 Disclosure Requirements Applicable Accounting Standards Assisting Transition to Sri Lanka

Financial Reporting Standards – Diagnostic Stage

Meeting Agenda

INTRODUCTION

International Financial Reporting Standards (IFRS) is a set of accounting standards, developed by the International Accounting Standards Board (IASB)

Nearly 100 countries have adapted their local accounting standards to conform to IFRS.

Remove some of the subjectivity from financial reporting and provide a consistent basis for recognition, measurement, presentation and disclosure of transactions and events in financial statements.

Convergence of accounting standards will have the effect of attracting investment through greater transparency and a lower cost of capital for potential investors.

Transitioning to IFRS would allow companies to compete for capital in other countries, while reducing cost and complexity for companies operating internationally

INTRODUCTION

Sri Lanka Financial Reporting Standards (SLFRS) 1 to 8 8

Sri Lanka Accounting Standards(LKAS)1 to 41 29

International Financial Reporting Interpretation Committee (IFRIC)

1 to 19 19 Standing Interpretation Committee (SIC)

7 to 32 10

INTRODUCTION-WHAT IS APPLICABLE?

01st April 2011 - Transition Date (Starting point in accordance with SLFRS)

31st March 2012 - Comparative Period

31st March 2013 – Reporting Period

INTRODUCTION-DATES TO REMEMBER

3 Statements of financial position.  2 Statements of comprehensive income/two separate

income statements.

2 Statements of cash flows.  2 Statements of changes of equity and related notes.

Reconciliation of its equity reported in accordance with previous GAAP to its equity in accordance with SLFRS for date of transition and end of last period presented in accordance with previous GAAP.

INTRODUCTION-WHAT IS TO BE PRESENTED?

Sri Lanka Accounting Standards – LKAS 1Presentation of Financial Statements

The complete set of financial statements compliant with SLFRS comprises 5 elements:

a statement of financial position as at the end of the period

a statement of comprehensive income for the period

a statement of changes in equity for the period

a statement of cash flows for the period notes containing a summary of significant

accounting policies and other explanatory information.

Sri Lanka Accounting Standards – LKAS 1Presentation of Financial Statements

Fair presentation and compliance with SLFRS

Going concern Accrual basis of accounting Materiality and aggregation Offsetting Frequency of reporting Comparative information Consistency of presentation.

LKAS 1- General Features

Reporting entity The information whether the financial

statements are of an individual or of a group The date of the reporting entity and period

covered The presentation currency and the level of

rounding (thousands, millions…) LKAS1 lists the minimum content to be

presented in the financial statements, except for the statement of cash flows (subject to LKAS 7)

LKAS 1-Structure and Content

Minimum Content

ASSETS Property, plant and equipment Investment property Intangible assets Financial assets Investments accounted for using equity method Biological assets Inventories Trade and other receivables Cash and cash equivalents Totals of assets in accordance with SLFRS 5 Non-current assets Held for

Sale and Discontinued Operations Current tax assets Deferred tax assets

LKAS 1-Statement of Financial Position

EQUITY AND LIABILITIES Issued capital and reserves attributable to owners of

the parent Non-controlling interests Financial Liabilities Provisions Trade and other payables Totals of liabilities in accordance with SLFRS 5 Non-

current assets Held for Sale and Discontinued Operations

Current tax liabilities Deferred tax liabilities

LKAS 1-Statement of Financial Position

LKAS1 does NOT prescribe the precise format of the statement of financial position. Instead, several formats are acceptable if they fulfill all requirements outlined above.

LKAS 1-Statement of Financial Position

2 Basic Elements Profit or loss for the period: here, all

items of income and expenses must be recognized.

Other comprehensive income: items recognized directly to equity or reserves, such as changes in revaluation surplus, gains or losses from subsequent measurement of available-for-sale financial assets, etc.

LKAS 1-Statement of Comprehensive Income

PROFIT OR LOSS Revenue Gains and losses arising from the derecognition of

financial assets at amortized cost Finance costs Share of the profit or loss of associates and joint

ventures accounted for using the equity method Tax expense Post-tax profit/gain or loss of operations or assets in

accordance with SLFRS 5 (Non-current assets Held for Sale and Discontinued Operations)

Profit or loss

LKAS 1-Statement of Financial Position

Each component of other comprehensive income classified by nature

Share of the other comprehensive income of associates and joint ventures accounted for using equity method

Total comprehensive income

LKAS 1-OTHER COMPREHENSIVE INCOME

Write-downs of inventories to net realizable value or of property, plant and equipment to recoverable amount, as well as reversals of such write-downs

Restructurings of the activities of an entity and reversals of any provisions for the costs of restructuring

Disposals of items of property, plant and equipment

Disposals of investments Discontinuing operations Litigation settlements Other reversals of provisions

LKAS 1- Disclosure

total comprehensive income for the period, showing separately amounts attributable to owners of the parent and to non-controlling interests

the effect of retrospective application or restatement for each component of equity (if applicable)

the reconciliation between the carrying amount at the beginning and the end of the period for each component of equity. Here, the following changes shall be disclosed separately: ◦ those resulting from profit or loss◦ resulting from other comprehensive income◦ resulting from transactions with owners (contributions,

distributions and changes in ownership)

LKAS 1 -Statement of Changes in Equity

Present information about the basis of preparation of the financial statements and the specific accounting policies used;

Disclose any information required by SLFRSs that is not presented on the face of the balance sheet, income statement, statement of changes in equity, or cash flow statement; and

Provide additional information that is not presented on the face of the balance sheet, income statement, statement of changes in equity, or cash flow statement that is deemed relevant to an understanding of any of them

other disclosures, including:◦ Contingent liabilities and unrecognized contractual commitments◦ Non-financial disclosures, such as the entity's financial risk

management objectives and policies

LKAS 1-Notes to the Financial Statements

Sri Lanka Accounting Standards – SLFRS 1First-time Adoption of Sri Lanka Financial Reporting Standards (SLFRSs)

Objective

(a) is transparent to users and comparable for all periods presented;

(b) provides an appropriate starting point for accounting under SLFRS;

(c) can be obtained at a cost not to exceed the benefits provided to users.

Sri Lanka Accounting Standards – SLFRS 1First-time Adoption of Sri Lanka Financial Reporting Standards (SLFRSs)

STEP 1Derecognition Ex-If the entity's previous GAAP had allowed recognition of contingent assets as defined in

LKAS 37.10, these are eliminated in the opening SLFRS balance sheet

STEP 2RecognitionEx-Deferred tax assets and liabilities would be recognised in conformity with LKAS 12

STEP 3ReclassificationEx-LKAS 10 does not permit classifying dividends declared or proposed after the balance

sheet date as a liability at the balance sheet date.

Step 4Measurement

SLFRS 1- General principle

This SLFRS establishes 2 categories of exceptions to an entities opening SLFRS statement of Financial Position

SLFRS 1 -Measurement

Retrospective Application: A retrospective application is the application of a new accounting policy

as if that policy had always been applied.

Prospective Application: A prospective application is the application of a new accounting policy to transactions after the date of the policy change, with recognition of the effect of changes in accounting estimates in the current and future periods.

SLFRS 1

Two categories of exceptions are,

1. Mandotory Exceptions

2. Optional Exemptions

SLFRS 1

Estimates

Derecognition of financial instruments

Hedge accounting

Non-controlling interest

SLFRS 1-Mandotory Exceptions (Prohibits Retrospective Application)

Share-based payment transactions Insurance contracts Fair value or revaluation as deemed cost Leases Employee benefits Cumulative translation differences Investments in subsidiaries, jointly controlled entities, associates and joint

ventures Assets and liabilities of subsidiaries, associated and joint ventures Compound financial instruments Designation of previously recognised financial instruments Fair value measurement of financial assets or financial liabilities at initial

recognition Decommissioning liabilities included in the cost of property, plant and

equipment Financial assets or intangible assets accounted for in accordance with

IFRIC 12 Service Concession Arrangements Borrowing costs

SLFRS 1-Optional Exemptions

at least three statements of financial position;

two statements of comprehensive income; two separate income statements ( if

presented); two statements of changes in equity; and related notes, including comparative

information

SLFRS 1-Disclosures

Reconciliations of its equity reported under previous GAAP to its equity under SLFRS at:

The date of transition to SLFRS; and The end of the latest period presented

in the entity’s most recent annual financial statements under previous GAAP

SLFRS 1-Disclosures Cont.,

Disclosure Requirements

Applicable Accounting Standards

Assisting Transition to Sri Lanka Financial Reporting Standards – Diagnostic Stage

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