COMMERCIAL LEASING & FINANCE PLC · 2 days ago · 3.6 Property, Plant and Equipment 3.6.1 Freehold Property, Plant & Equipment 3.6.1.1 Basis of Recognition Property, plant and equipment

COMMERCIAL LEASING & FINANCE PLC

FINANCIAL STATEMENTS

FOR THE YEAR ENDED 31 MARCH 2018

Commercial Leasing & Finance PLC

Statement of Profit or Loss and Other Comprehensive Income

For the year ended 31st March 2018 2017 2018 2017

Note Rs. Rs. Rs. Rs.

Interest income 4 13,320,336,074 10,752,920,918 13,347,777,718 10,898,203,064

Interest expense 5 (6,994,794,629) (6,125,875,979) (6,994,794,629) (6,125,875,979)

Net interest income 6,325,541,445 4,627,044,939 6,352,983,089 4,772,327,085

Other income 6 2,234,424,249 2,331,372,193 2,477,072,059 2,331,372,193

Operating expenses

Direct expenses (585,305,241) (469,700,616) (585,305,241) (469,700,617)

Premises, equipment & establishment expenses (398,438,042) (346,377,030) (398,438,042) (346,377,030)

Personnel expenses 9.1 (1,387,268,219) (1,103,658,073) (1,387,268,219) (1,103,658,073)

Allowance for impairment & write offs 7 (1,055,991,702) (712,077,237) (1,055,991,702) (712,077,237)

Depreciation and amortization 8 (113,660,958) (109,605,722) (113,660,958) (109,605,722)

Other operating expenses (1,926,668,688) (1,709,840,997) (1,926,668,688) (1,709,840,997)

Results from operating activities before value added tax on financial

services and NBT 9 3,092,632,844 2,507,157,457 3,362,722,298 2,652,439,602

Value added tax on financial services and NBT 10 (610,955,235) (457,910,846) (610,955,235) (457,910,846)

Results from operating activities 2,481,677,609 2,049,246,611 2,751,767,063 2,194,528,756

Share of profit of equity accounted investee (net of tax) 23 153,267,666 10,245,454 153,267,666 10,245,454

Profit before Tax 2,634,945,275 2,059,492,065 2,905,034,729 2,204,774,210

Income tax expense 11 (760,711,882) (518,470,888) (760,711,882) (518,470,888)

Profit for the period from continuing operations 1,874,233,393 1,541,021,177 2,144,322,847 1,686,303,322

Discontinued operations

Profit/ (loss) for the period from discontinued operations 12 (81,495,104) 365,209,154 - -

Proft for the year 1,792,738,289 1,906,230,331 2,144,322,847 1,686,303,322

Other comprehensive income

Revaluation of property, plant and equipment 28.2 77,008,499 747,892,179 77,008,499 747,892,179

Actuarial losses on defined benefit plan 36.2 (6,094,101) (5,625,892) (6,094,101) (8,591,135)

Net change in fair value of available for sale finance assets 150,432,262 (42,068,926) 149,781,387 (40,107,127)

Effective portion of changes in fair value of cash flow hedges (114,212,830) 18,493,043 (114,212,830) 18,493,043 Share of other comprehensive income from equity accounted investee 11,933,238 199,410 11,933,238 199,410

Income tax recognised in other comprehensive income 35.3.1 67,750,875 (26,911,978) 67,750,875 (26,081,710)

Other comprehensive income for the year, net of tax 186,817,943 691,977,836 186,167,068 691,804,660

Total comprehensive income for the year 1,979,556,232 2,598,208,167 2,330,489,915 2,378,107,982

Profit attributable to;

Equity holders of the company 1,792,638,207 1,896,644,018 2,144,322,847 1,686,303,322

Non controlling interest 100,082 9,586,313 - -

1,792,738,289 1,906,230,331 2,144,322,847 1,686,303,322

Total comprehensive income attributable to;

Equity holders of the company 1,979,454,588 2,588,623,451 2,330,489,915 2,378,107,982

Non controlling interest 101,644 9,584,716 - -

1,979,556,232 2,598,208,167 2,330,489,915 2,378,107,982

Basic and diluted earnings per share 13.1 0.28 0.30 0.34 0.26

Earnings per share from continuing operation 13.2 0.29 0.24 0.34 0.26

Figures in brackets indicate deductions

Group Company

The notes form an integral part of these financial statements.

Commercial Leasing & Finance PLCStatement of Financial Position

As at 31st March 2017 2018 2017

Note Rs. Rs. Rs.

ASSETS

Cash and cash equivalents 14.1 2,150,419,980 2,377,557,530 1,487,849,203

Financial assets held for trading 15 2,715,175,089 153,996,501 2,715,175,089

Other investments 16 16,650,125,114 6,505,214,249 15,753,953,997

Rentals receivable on leases & hire purchases 17 14,081,274,833 14,983,512,091 13,972,747,976

Loans and advances 18 43,810,290,091 41,208,800,160 33,795,065,806

Factoring receivables 19 6,167,657,168 3,584,916,333 6,167,657,168

Amount due from related companies 20 4,189,200 370 -

Value added tax (VAT) recoverable 264,968,562 94,646,134 264,968,560

Current tax assets 21 85,864,450 89,836,635 77,088,006

Other current assets 22 452,484,209 139,629,894 392,503,024

Equity accounted investees 23 83,059,004 1,506,849,622 83,059,004

Investment properties 24 46,000,000 1,632,000,000 46,000,000

Investments in subsidiaries 25 - - 1,023,301,966

Goodwill 26 253,210,966 - -

Intangible assets 27 5,943,388 3,910,108 5,943,388

Property, plant and equipment 28 2,120,039,018 1,227,575,523 1,975,784,096

Total assets 88,890,701,072 73,508,445,150 77,761,097,283

LIABILITIES AND EQUITY

Liabilities

Bank overdraft 14.2 1,805,044,333 1,353,451,358 1,390,806,997

Derivative Liabilities 29 15,562,267 271,625,120 15,562,267

Deposits from customers 30 18,749,264,785 23,485,108,879 15,935,942,434

Loans and borrowings-current 31.2 20,028,639,204 9,619,669,022 17,978,500,029

Loans and borrowings- non current 31.2 26,288,430,792 19,312,993,198 26,288,430,792

Current tax liabilities 32 520,757,787 519,857,489 413,645,436

Amount due to related companies 33 5,360,025,600 158,747,591 84,598,219

Trade and other payables 34 1,149,909,607 1,714,303,031 1,068,731,735

Deferred tax liabilities 35.1.1 347,866,851 477,339,023 337,045,278

Employee benefits 36 95,895,277 89,326,490 72,300,062

Total liabilities 74,361,396,503 57,002,421,201 63,585,563,249

Equity

Stated capital 37 1,425,946,629 1,425,946,629 1,425,946,629

Reserves 38 1,682,756,039 1,995,771,184 1,709,933,458

Retained earnings 39 11,417,907,696 13,084,306,136 11,039,653,947

Equity attributable to equity holding of the parent 14,526,610,364 16,506,023,949 14,175,534,034

Non-controlling interests 2,694,205 - -

Total equity 14,529,304,569 16,506,023,949 14,175,534,034

Total liabilities & equity 88,890,701,072 73,508,445,150 77,761,097,283

Net assets value per share 2.28 2.59 2.22

Figures in brackets indicate deduction.

Sgd

Mrs. N.P. Kariyawasam

Head of Finance

The board of directors is responsible for the preparation and presentation of these financial statements.

Approved and signed for and on behalf of the Board by;

Sgd Sgd

Mr.U.H.Ebert Silva Mr.T.Sanakan

Director Director

Colombo,

18th June 2018

Group Company


These financial statements are prepared and presented in compliance with the requirements of companies Act No. 7 of 2007.


Statement of Changes in Equity

For the year ended 31st March 2018

Group Stated capital Revaluation

reserve

Hedging

reserve

Available-for-

sale reserve

General

reserve

Statutory

reserve fund

Retained

earnings Total

Non-controlling

interest Total equity

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Balance as at 31st March 2016 1,425,946,629 135,980,246 46,270,286 (87,474,653) 231,779,789 565,537,505 9,617,451,437 11,935,491,239 51,044,611 11,986,535,850

1,425,946,629 135,980,246 46,270,286 (87,474,653) 231,779,789 565,537,505 9,617,451,437 11,935,491,239 51,044,611 11,986,535,850

Total comprehensive income for the year

Profit for the year - - - - - - 1,896,644,018 1,896,644,018 9,586,313 1,906,230,331

Other comprehensive income - 747,892,179 18,493,043 (42,067,329) - - (5,625,892) 718,692,001 (1,597) 718,690,404

Share of other comprehensive income from equity accounted investee - - - - - - 199,410 199,410 - 199,410

Tax impact on other complrehensive income - (11,490,828) (16,996,400) - - - 1,575,250 (26,911,978) - (26,911,978)

Total comprehensive income for the period - 736,401,351 1,496,643 (42,067,329) - - 1,892,792,786 2,588,623,451 9,584,716 2,598,208,167

Transactions with owners directly recorded in the equity

Acquisition of NCI - - - - - - 2,495,674 2,495,674 (57,935,122) (55,439,448)

Transferred to/(from) during the year - - - - - 94,832,201 (94,832,201) - - -

- - - - - 94,832,201 (92,336,527) 2,495,674 (57,935,122) (55,439,448)

Balance as at 31st March 2017 1,425,946,629 872,381,597 47,766,929 (129,541,982) 231,779,789 660,369,706 11,417,907,696 14,526,610,364 2,694,205 14,529,304,569


Figures in brackets indicate deductions.


Statement of Changes in Equity


Company Stated capital Revaluation

reserve

Hedging

reserve

Available-for-

sale reserve

General

reserve

Statutory

reserve fund

Retained

earnings

Total

equity

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Balance as at 01st April 2016 1,425,946,629 135,980,245 46,270,290 (87,107,180) 288,079,789 544,604,281 9,443,651,998 11,797,426,052


Profit for the year - - - - - - 1,686,303,322 1,686,303,322

Revaluation of property, plant and equipment - 747,892,179 - - - - - 747,892,179

Other comprehensive income - - 18,493,043 (40,107,127) - - (8,591,135) (30,205,219)

Share of other comprehensive income from equity accounted investee - - - - - - 199,410 199,410

Tax Impact on Other Comprehensive Income - (11,490,828) (16,996,400) - - - 2,405,518 (26,081,710)

Total comprehensive income for the period - 736,401,351 1,496,643 (40,107,127) - - 1,680,317,115 2,378,107,982


Transferred to/(from) during the year - - - - - 84,315,166 (84,315,166) -

Balance as at 31st March 2017 1,425,946,629 872,381,596 47,766,933 (127,214,307) 288,079,789 628,919,447 11,039,653,947 14,175,534,034


Profit for the year - - - - - - 2,144,322,847 2,144,322,847

Revaluation of property, plant and equipment - 77,008,499 - - - - - 77,008,499

Other comprehensive income - - (114,212,830) 149,781,387 - - (6,094,101) 29,474,456

Share of other comprehensive income from equity accounted investee - - - - - - 11,933,238 11,933,238

Tax on other comprehensive income - (1,507,493) 67,552,021 - - - 1,706,347 67,750,875

Total comprehensive income for the period - 75,501,006 (46,660,809) 149,781,387 - - 2,151,868,331 2,330,489,915


Transferred to/(from) during the year - - - - - 107,216,142 (107,216,142) -

Balance as at 31st March 2018 1,425,946,629 947,882,602 1,106,124 22,567,080 288,079,789 736,135,589 13,084,306,136 16,506,023,949



Commercial Leasing & Finance PLC - - -

Statement of Cash Flows

For the year ended 31st March 2017 2018 2017

Note Rs. Rs. Rs.

OPERATING ACTIVITIES

Profit before income tax 2,059,492,065 2,905,034,729 2,204,774,210

Adjustment for:

Profit on disposal of property, plant and equipment 6 (5,434,017) (10,646,161) (5,434,017)

Depreciation 8 109,605,722 113,660,958 109,605,722

Provision for employee benefits 36.1 15,378,201 17,865,691 15,378,201

Net impairment loss on financial assets 7 712,077,237 1,055,991,702 712,077,237

Change in fair value of investments 15.1 (13,049,452) (47,242,344) (13,049,452)

Dividend income 6 (46,650,781) (6,199,403) (46,650,781)

Interest expense 5 6,125,875,979 6,994,794,629 6,125,875,979

Investment income (1,266,912,404) (950,953,503) (1,266,912,404)

Adjustment for unamortized finance cost - long term borrowings 99,495,912 91,509,210 99,495,912

FV gain on investment property 24 (4,000,000) (59,882,000) (4,000,000)

Share of equity accounted investee 23 (10,245,454) (153,267,666) (10,245,454)

Profit on deemed disposal of BRAC - (242,647,810) -

Cash flows from operating activities before working capital changes 7,775,633,008 9,708,018,032 7,920,915,153

Changes in :

Leases, hire purchase receivables 482,356,863 257,613,523 482,356,863

Advances and other loans receivable (6,812,760,209) (7,745,503,369) (6,812,760,207)

Factoring receivable (1,532,626,826) 2,039,390,136 (1,532,626,826)

Other receivables and related party receivables (94,865,221) (1,204,292,284) (94,865,221)

Trade and other payables and related party payable (405,587,476) 1,057,974,975 (405,587,476)

Customer deposits 3,588,295,981 7,549,166,445 3,588,295,981

Cash Generated from operations 3,000,446,120 11,662,367,458 3,145,728,267

Finance cost paid (6,018,678,763) (6,602,891,628) (6,018,678,763)

Income tax paid 32 (616,248,373) (282,413,797) (616,248,373)

Employee benefits paid 36 (2,011,238) (6,933,364) (2,011,238)

Net cash from /(used in) operating activities of continuining operations (3,636,492,254) 4,770,128,669 (3,491,210,107)

Net cash from operating activities from discontinuing opearations 749,956,844 - -

(2,886,535,410) 4,770,128,669 (3,491,210,107)

INVESTING ACTIVITIES

Net cash and cash equivalents on acquisition of subsidiary (55,439,448) - (55,439,448)

Acquisition of property, plant and equipment (276,330,327) (328,093,981) (276,330,327)

Acquisition of intangible assets (6,341,400) - (6,341,400)

Net additions to financial Instruments 15,479,445,915 11,636,255,118 15,479,445,915

Acquisition / (disposal)of investment properties - (483,118,000) -

Proceeds from the sale of property, plant and equipment 6,972,873 10,777,352 6,972,873

Dividend received from investments 43,410,781 13,597,365 43,410,781

Interest received 1,266,912,404 1,125,198,256 1,266,912,404

Net cash flow from investing activities from continuing Operations 16,458,630,798 11,974,616,110 16,458,630,798

Net cash flow from investing activities from discontinuing Operations (925,118,908) - -

15,533,511,890 11,974,616,110 16,458,630,798

FINANCING ACTIVITIES

Net cash proceeds from short-term interest bearing loans and borrowings (10,964,931,756) (15,817,680,813) (10,964,931,756)

Repayments of long-term interest bearing loans and borrowings (1,570,741,911) - (1,570,741,911)

Net cashflows used in financing activities from continuing operations (12,535,673,667) (15,817,680,813) (12,535,673,667)

Net cash flows used in financing activities from discontinuing operations (451,351,075) - -

(12,987,024,742) (15,817,680,813) (12,535,673,667)

Net (decrease) / increase in cash and cash equivalents (340,048,262) 927,063,966 431,747,024

Cash and cash equivalents at the beginning of the year 685,423,909 97,042,206 (334,704,818)

Cash and cash equivalents at the end of the year (Note A) 345,375,647 1,024,106,172 97,042,206

Note A

Cash in hand and favorable bank balances 14.1 2,150,419,980 2,377,557,530 1,487,849,203

Unfavorable bank balances used for cash management purposes 14.2 (1,805,044,333) (1,353,451,358) (1,390,806,997)

Cash and cash equivalents at the end of the year 345,375,647 1,024,106,172 97,042,206


Group Company



NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018

Corporate Information

1.1 General

Commercial Leasing & Finance PLC was incorporated as a Private Limited Company in April 1988 and

domiciled in Sri Lanka, in 1992 converted into a Public Limited Company and listed in the Colombo Stock

Exchange. In 2008 with the acquisition by Lanka Orix Leasing Company PLC, the company submitted an

application to delist from Colombo Stock Exchange and it was treated as de-listed with effect from July 01,

2009.

Further to Finance Leasing Act No 56 of 2000, on 07th December 2011, the Company has obtained the

License to carry on Finance Business under the Finance Business Act No 42 of 2011. Company has relisted

in Colombo Stock Exchange in June 2012 in compliance with the CBSL Directions with the divestment of

10% of the stated capital.

Ordinary shares of the Company are listed on the Diri savi board of the Colombo Stock Exchange (CSE).

The Consolidated Financial Statements of the Company as at and for the year ended 31st March 2018 comprise

of the Company and its subsidiary (together referred to as the “Group” and individually as “Group entities”)

and the Group’s interest in associates.

The registered office and the principal place of business of the Company is located at No.68, Bauddhaloka

Mawatha, Colombo 04.

1.2 Parent entity and Ultimate Parent Company

Lanka ORIX Leasing Company PLC is the holding company of the Group and therefore, it does not have an

identifiable immediate or ultimate parent of its own.

1.3 Principal Activities and Nature of Operations

The principal activities of the Company comprised of leasing, loans, factoring, Islamic financing, micro

financing and mobilization of public deposits.

Description of the nature of operations and principal activities of the subsidiary company and associate

company are given on note 23 and 25 respectively to these Financial Statements with any changes to the

principal activities during the financial year under review.

1.4 Number of Employees

The staff strength of the Company as at 31st March 2018 was 1,327 (31.03.2017 – 1,099).

2. Basis of Preparation

2.1 Statement of Compliance

The Financial Statements of the Company and those consolidated with such are prepared in accordance with

the Sri Lanka Accounting Standards (LKASs/SLFRSs) laid down by the Institute of Chartered Accountants

of Sri Lanka (ICASL) and the requirements of the Companies Act No.7 of 2007. These SLFRSs and LKASs

are available at www.casrilanka.com.



The presentation of these Financial Statements is also in compliance with the requirements of the Finance

Business Act no 42 of 2011 and the listing rules of the Colombo Stock Exchange. These Financial Statements,

except for information on cash flows have been prepared following the accrual basis of accounting.

The Group did not adopt any inappropriate accounting treatments, which are not in compliance with the

requirements of the SLFRSs and LKASs, regulations governing the preparation and presentation of the

Financial Statements.

2.2 Presentation of Financial Statements

The assets and liabilities of the Group presented in the Statement of Financial Position are grouped by nature

and listed in-order to reflect their relative liquidity and maturity pattern. An analysis regarding recovery or

settlement within twelve months after the reporting date (current) and more than twelve months after the

reporting date (non-current) is presented in note 40 (Maturity analysis)).

Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial

Position only when there is a legally enforceable right to off-set the recognized amounts and there is an

intention to settle on a net basis, or to realize the assets and settle the liability simultaneously. Income and

expenses are not offset in the Statement of Profit or Loss unless required or permitted by an accounting

standard or an interpretation, and as specially disclosed in the accounting policies of the Group.

2.3 Basis of Measurement

The Financial Statements of the Group and the Company have been prepared on the historical cost basis and

applied consistently with no adjustments being made for inflationary factors affecting the financial

Statements, except for the following material items in the Statement of Financial Position;

Items Basis of measurement Note No/s

Held-for-trading

financial instruments

Fair value 15

Derivative financial

instruments

Fair value 16.3

Available for sale –


Fair value 16.1

The liability for defined

benefit obligations

Net liability for defined

benefit obligations are

recognised as the present

value of the defined

benefit obligation, plus

unrecognised actuarial

gains, less unrecognised

past service cost, and

unrecognised actuarial

losses

36

Lands and buildings Measured at cost at the

time of acquisition and

subsequently at revalued

amounts which are the fair

values at the date of

revaluation

28

Investment properties Fair value 24



2.4 Functional and presentation currency

The functional currency is the currency of the primary economic environment in which the entities of the

Group operates. These Financial Statements are presented in Sri Lankan Rupees (LKR), which is the Group’s

functional currency and the presentation currency. All financial information has been rounded to the nearest

Rupee unless stated otherwise.

2.5 Use of Significant Judgments, Estimates and Assumptions

The preparation of the financial statements in conformity with SLFRSs/LKASs requires management to make

judgments, estimates and assumptions that affect the application of accounting policies and the reported

amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.

Estimates and underlying assumptions are based on historical experience and various other factors that are

believed to be reasonable under the circumstances, the results which form the basis of making the judgments

about the carrying amount of assets and liabilities that are not readily apparent from other sources.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates

are recognized in the period in which the estimates are revised and in any future periods affected.

Information about critical judgments, estimates and assumptions in applying accounting policies that have

the most significant effect on the amounts recognized in the financial statements are included in the following

notes to these Financial Statements.

Critical accounting estimate/judgment

Disclosure

reference

Note

Classification of financial assets and liabilities 2.13

Fair Value of financial instruments 3.3.3.6

Financial Instruments – fair value disclosure 3.3.3.5

Impairment of financial investments – available for sale 3.3.4.2

Revaluation of property, plant and equipment 3.6.1.4

Determination in fair value of Investment properties 3.4

Useful lives of intangible assets 3.5

Useful lives of property, plant and equipment 3.6.1.7

Defined benefit obligation 3.11

Deferred tax on undistributed profits of equity accounted investees 3.8.2

Write-off policy 3.3.4.4

Allowance for impairment 17.3 , 18.1.1,

19.1

Impairment of non-financial assets 3.3.8

Provisions for liabilities, commitments and contingencies 3.22



2.6 Comparative Information

Comparative information including quantitative, narrative and descriptive information is disclosed in respect

of the previous period in the Financial Statements in order to enhance the understanding of the current period’s

Financial Statements and to enhance the inter period comparability. The presentation and classification of the

Financial Statements of the previous year are amended, where relevant for better presentation and to be

comparable with those of the current year.

The share of results of equity accounted investees in the income statement and other comprehensive income

statement are shown net of all related taxes.

2.7 Materiality, Presentation and Aggregation

As per LKAS – 01 “Presentation of Financial Statements”, each material class of similar items is presented

separately in the Financial Statements. Items of dissimilar nature or function are presented separately unless

they are immaterial.

Notes to the Financial Statements are presented in a systematic manner which ensures the understandability

and comparability of Financial Statements of the Group and the Company. Understandability of the Financial

Statements is not compromised by obscuring material information with immaterial information or by

aggregating material items that have different natures or functions.

The assets and liabilities of the Group presented in the Statement of Financial Position are grouped by nature

and listed in an order that reflects their relative liquidity and maturity pattern.

2.8 Offsetting

Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial

Position, only when there is a legally enforceable right to offset the recognised amounts and there is an

intention to settle on a net basis or to realise the assets and settle the liabilities simultaneously. Income and

expenses are not offset in the Income Statement, unless required or permitted by an Accounting Standard or

Interpretation (issued by the International Financial Reporting Interpretations Committee and Standard

Interpretations Committee) and as specifically disclosed in the Significant Accounting Policies of the Group.

2.9 Going Concern

The Board of Directors is satisfied that the Group has adequate resources to continue its operations in the

foreseeable future and management is not aware of any material uncertainties that may cast significant doubt

upon the Group’s ability to continue as a going concern. Therefore, going-concern basis has been adopted in

preparing these Financial Statements.

2.10 Directors’ Responsibility for the Financial Statements

The Board of Directors is responsible for the preparation and fair presentation of these Financial Statements

in accordance with Sri Lanka Accounting Standards and as per the provisions of the Companies Act No. 07

of 2007. This responsibility includes: designing, implementing and maintaining internal controls relevant to

the preparation and fair presentation of Financial Statements that are free from material misstatement, whether

due to fraud or error; selecting and applying appropriate accounting policies; and making accounting

estimates that are reasonable in the circumstances.

The Board of Directors acknowledges their responsibility as set out in the “Annual Report of the Board of

Directors on the Affairs of the Company” and “Director’s Responsibility for Financial Reporting”.



These Financial Statements include the following components;

A Statement of Financial Position providing the information on the financial position of the Group

and the Company as at the yearend;

A Statement of Profit or Loss providing the information on the financial performance of the Group

and the Company for the year under review;

A Statement of Other Comprehensive Income providing the information of the other comprehensive

income of the Group and the Company;

A Statement of Changes in Equity depicting all changes in shareholders’ funds during the year under

review of the Group and the Company;

A Statement of Cash Flows providing the information to the users, on the ability of the Group and

the Company to generate cash and cash equivalents and the needs of entities to utilize those cash

flows, and

Notes to the Financial Statements comprising Accounting Policies and other explanatory information.

2.11 Approval of Financial Statements by the Board of Directors

The Financial Statements of the Group and the Company for the year ended 31 March 2018 (including

comparatives) were approved and authorized for issue by the Board of Directors on 18 June 2018.

2.12 Changes in Accounting Policies

The Group and the Company has consistently applied the accounting policies as set out in Note 3 to all

periods presented in these consolidated financial statements.

2.13 New Accounting Standards Issued But Not Effective at Reporting Date

The Accounting standards issued but not effective at the reporting date is given below with expected impact

on Group financial statements. The Group will apply the accounting standards when they become effective.

SLFRS 9 – ‘Financial Instruments’

SLFRS 09, issued in July 2014, is effective for annual periods beginning on or after 1 January 2018, with

early adoption permitted. It replaces LKAS 39 – “Financial Instruments: Recognition and Measurement”.

The Group will apply SLFRS 9 as issued in July 2014 with effect from 1 January 2018 based on the

transitional provisions.

The Group has assessed the impact on transition based on gap analysis and quantifications performed on its

Financial Statements as at 31 March 2017 on adoption of SLFRS 9 with the assistance of an external

consultant.



The Group is now in the process of testing and refining the data and models used for the calculation of initial

impact assessment.

SLFRS 9 include three major sections, i.e.

• Classification and measurement of financial assets and financial liabilities

• Impairment of financial assets

• Hedge accounting

The summary of the impact to the Company is presented in the table below:

Area LKAS 39 requirement SLFRS 9 requirement Impact to the Group

Financial asset

classification and

measurement

Four categories (HTM,

L&R, FVTPL and

AFS)

Classification is based

on ability and intention

to hold and the

marketability of the

instrument.

Three categories

(Amortised cost, FV

through profit or loss

and FV through OCI)

Classification is based

on characteristics of


and the business model

of the portfolio.

No significant impact

If equity instrument is classified

as FV through OCI, no fair value

gain/loss is recognised in profit

or loss.

Financial liabilities Two categories – FV


and amortised cost.

Two categories – FV


and amortised cost.

No change.

Impairment Incurred loss approach. Expected loss

approach.

1. Provisions for all claims

including SLDB and

corporate debentures.

2. Life time ECL for watch list

(30-90days outstanding

category).

3. Provisions for undrawn and

unutilised exposures.

4. Incorporation of forward

looking information/

macroeconomic factors.

Hedge accounting The result of

retrospective

effectiveness should be

within the range of 80-

125%.

Elimination of the 80-

125% qualitative

threshold for

recognising

effectiveness.

No impact to the Group’s

presently designated hedge

relationship.



• Classification and measurement of financial assets and financial liabilities

SLFRS 9 contains a new classification and measurement approach for financial assets that reflects the

business model in which assets are managed and their cash flow characteristics.

SLFRS 9 includes three principal classification categories for financial assets: measured at amortised cost,

FVOCI (Fair Value through Other Comprehensive Income) and FVTPL (Fair Value Through Profit or Loss).

It eliminates the existing LKAS 39 categories of held for trading, held to maturity, loans and receivables and

available for sale.

All equity instruments should be fair valued either through profit or loss or OCI. Fair value through Other

Comprehensive Income (OCI) is an irrecoverable option without recycling (i.e. the amount recognised in

OCI/Reserves cannot be transferred to P&L at the time of disposal).

The standard will affect the classification and measurement of financial assets held as at 1 January 2018 as

follows:

Trading assets and derivative assets held for risk management, which are classified as held for trading

and measured at FVTPL under LKAS 39, will also be measured at FVTPL under SLFRS 9.

Loans and advances to banks and to customers that are classified as loans and receivables and

measured at amortised cost under LKAS 39 will in general also be measured at amortised cost under

SLFRS 9.

Held-to-maturity investment securities measured at amortised cost under LKAS 39 will in general

also be measured at amortised cost under SLFRS 9.

Debt investment securities that are classified as available for sale under LKAS 39 may, under SLFRS

9, be measured at amortised cost, FVOCI or FVTPL, depending on the particular circumstances.

The equity investment securities that are classified as available for sale under LKAS 39 will be

designated as FVOCI on 1 January 2018.

SLFRS 9 does not change the measurement rules of financial liabilities.

• Impairment of financial assets

SLFRS 9 brings out the concept of expected loss against the incurred loss principle used in LKAS 39.

Accordingly,

a) Life Time Expected Credit Loss (ECL) to be provided for all loans. However, if loans credit

risk has not increased significantly from the grant date, the expected loss should be restricted

only to 12 months’ period.

b) The provision should be based on Exposure At Default (EAD) instead of outstanding balance

used under LKAS 39. As a result, undrawn loan commitments/unutilised credit facilities

would attract provisions.

c) Expected loss to be measured by internal estimates of following loss statistics:

• Probability of Default (PD) derived through age bucket transition matrix

• Loss Given Default (LGD)-based on historical recoveries of defaulted loans.

b) Incorporate forward looking information to adjust loss statistics calculated by the Bank.

These forward looking information include macroeconomic factors such as gross domestic

production, inflation etc.

c) SLFRS 9 requires provision to be made for all financial assets including foreign currency

denominated Government Securities and corporate debentures.



• Hedge accounting

Hedge accounting guidelines prescribed by SLFRS 9 do not have any impact on cash flow hedge

accounting currently in place in the Group.

SLFRS 15 – ‘Revenue from Contracts with Customers’

SLFRS 15 establishes a comprehensive framework for determining whether, how much and when

revenue is recognised. New qualitative and quantitative disclosure requirements aim to enable

Financial Statements users to understand the nature, amount, timing and uncertainty of revenue and

cash flows arising from contracts with customers. It replaces existing revenue recognition guidance,

including LKAS 18 on ‘Revenue’ and LKAS 11 on ‘Construction Contracts’ and IFRIC 13 on

‘Customer Loyalty Programmes’.

Entities will apply five-step model to determine when to recognize revenue and at what amount. The

model specified that revenue is recognised when or as an entity transfers control of goods and services

to a customer at the amount to which the entity expects to be entitled. Depending on whether certain

criteria are met, revenue is recognized.

SLFRS 15 is effective for annual reporting periods beginning on or after January 01, 2018, with early

adoption permitted.

The Group does not expect significant impact on its Financial Statements resulting from the

application of SLFRS 15 and pending the completion of detailed review, the financial impact is not

reasonably estimable as at the date of publication of these Financial Statements.

SLFRS 16 – ‘Leases’

SLFRS 16 requires lessees to recognise all leases on their Statement of Financial Position as lease

liabilities, with the corresponding right of use assets.

The profit or loss recognition pattern for recognised leases will be similar to existing finance lease

accounting, with interest and depreciation expense recognised separately in the Profit or Loss.

SLFRS 16 is effective for annual periods beginning on or after 1 January 2019.

Based on the high level impact assessment performed, the Group is not expecting a significant impact

on SLFRS 16 adoption except for the capitalisation of operating lease commitments.

The following amendments and improvements are not expected to have a significant impact on the

Group's financial statements

• Annual Improvements to SLFRSs (2014–2016) Cycle - various standards

• Amendments to LKAS 28 – Long-term interests in associates and joint ventures

• Amendments to SLFRS 10 and LKAS 28 – Sale or Contribution of Assets between an

Investor and its Associate or Joint Venture

• Amendments to SLFRS 2 – Classification and Measurement of Share-Based Payment

Transactions

• Amendments to IFRS 9 – Financial assets with a prepayment feature with negative

compensation

• Supplementary information on IFRIC 22 – Foreign Currency Transactions and Advance

Consideration

• IFRIC 23 – Uncertainty over Income Tax Treatments

• Annual Improvements to SLFRSs 2015–2017 Cycle – various standards



3. SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below have been applied consistently to all periods presented in these

Consolidated Financial Statements unless otherwise indicated.

These accounting policies have been applied consistently by entities within the Group.

3.1 Basis of Consolidation

3.1.1 Business combinations

The Group’s Financial Statements comprise, Consolidated Financial Statements of the Company and its

Subsidiaries in terms of the Sri Lanka Accounting Standard – SLFRS 10 on ‘Consolidated Financial

Statements’ and the proportionate share of the profit or loss and net assets of its Associates in terms of the Sri

Lanka Accounting Standard – LKAS 28 on ‘Investments in Associates and Joint Ventures’.

The Group measures goodwill as the fair value of the consideration transferred including the recognized

amount of any non-controlling interest in the acquiree, less the net recognized amount (generally fair value)

of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. When the

excess is negative, a bargain purchase gain is recognized immediately in Profit or Loss.

The Group elects on a transaction-by-transaction basis whether to measure non-controlling interest at its fair

value, or at its proportionate share of the recognized amount of the identifiable net assets, at the acquisition

date.

Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs

in connection with a business combination are expensed as incurred.

3.1.2 Subsidiaries

Subsidiaries are entities controlled by the Group. Control exists when the Company has the power, directly

or indirectly, to govern the financial and operational policies of an entity so as to obtain benefits from its

activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken

into account.

Control over an investee is achieved when the Group is exposed, or has rights, to variable returns from its

involvement with the investee and has the ability to affect those returns through its power over the investee.

Specifically, the Group controls an investee if, and only if, the Group has:

Power over the investee (i.e., existing rights that give it the current ability to direct the relevant

activities of the investee) ;

Exposure, or rights, to variable returns from its involvement with the investee;

The ability to use its power over the investee to affect its returns.

When the Group has less than a majority of the voting or similar rights of an investee, the Group considers

all relevant facts and circumstances in assessing whether it has power over an investee, including:

The contractual arrangement with the other vote holders of the investee;



Rights arising from other contractual arrangements; and

The Group’s voting rights and potential voting rights

The Financial Statements of subsidiaries are included in the consolidated Financial Statements from the date

that control commences until the date that control ceases. Acquisition of subsidiaries is accounted for using

the acquisition method of accounting.

The accounting policies of subsidiaries have been changed where necessary to align them with the policies

adopted by the Group. If a member of the group uses accounting policies other than those adopted in the

consolidated Financial Statements for similar transactions and events in similar circumstances, appropriate

adjustments are made to its Financial Statements in preparing the consolidated Financial Statements.

Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying

amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign

operation and translated at the closing rate.

3.1.3 Non-Controlling Interests

Non-controlling Interests is the equity in a subsidiary not attributable, directly or indirectly, to the parent are

presented in the Statement of Financial Position within Equity, separately from the Equity attributable to

Shareholders Holders of the Parent (Company).

3.1.4 Acquisition of Non-Controlling interests

Subsequent to the acquisition of control, any further acquisition of net assets from non-controlling interest is

accounted for as transactions with owners in their capacity as owners. Therefore, no goodwill or gain on

bargain purchase is recognized as a result of such transactions.

Any difference between the amount by which the non-controlling interests is adjusted and the fair value of

the consideration paid or received shall be recognized directly in equity and attributed to the owners of the

parent.

3.1.5 Transactions do not result a change in control

Changes in the Group’s interest in a subsidiary that do not result in a loss of control status are accounted for

as transactions with owners in their capacity as owners. Adjustments to non-controlling interests and parent’s

equity are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to

goodwill recognized and no gain or loss is recognized in Profit or Loss.

3.1.6 Common control transactions

A business combination involving entities or businesses under common control is a business combination in

which all of the combining entities or businesses ultimately are controlled by the same party or parties both

before and after the combination, and that control is not transitory.

The acquirer of the common control transaction applies book value accounting for all common control

transactions.



In applying book value accounting, no entries are recognized in Profit or Loss; instead, the result of the

transaction is recognized in equity as arising from a transaction with shareholders.

3.1.7 Loss of Control

The parent can lose control of a subsidiary with or without a change in absolute or relative ownership levels.

Upon the loss of control, the Group derecognizes the assets and liabilities of the subsidiary, any minority

interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the

loss of control is recognized in the Statement of Profit or Loss.

If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the

date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as other financial

asset depending on the level of influence retained.

3.1.8. Equity accounted Investees - Associates

Associates are those entities in which the Group has significant influence, but not control, over the financial

and operating activities. Significant influence is presumed to exist when the Group holds between twenty and

fifty percent of the voting power of another entity.

Associates are accounted for using the equity method (equity accounted investees) and are initially recognized

at cost in the terms of Sri Lanka Accounting Standards – LKAS 28 on “Investment in Associates”. The

Group’s investment in associate includes goodwill identified on acquisition, net of any accumulated

impairment losses.

The Consolidated Financial Statements include the Group’s share of the income and expenses and equity

movements of equity accounted investees, after adjustments to align the accounting policies with those of the

Group, from the date that significant influence commences until the date that significant influence ceases.

Acquisitions of additional stakes of equity accounted investees, until the control is established, are accounted

as goodwill within the equity accounted investment if consideration paid is more than the net asset acquired

or taken into to profit or loss as gain on bargain purchase if the net asset acquired is more than the

consideration paid.

When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of

that interest (including any long-term investments) is reduced to zero and the recognition of further losses is

discontinued except to the extent that the Group has an obligation or has made payments on behalf of the

investee. Associate Companies of the Group which have been accounted for under the equity method of

accounting are disclosed under Note 23 to these Financial Statements.

3.1.9 Reporting Date

The Group’s Subsidiary Company has a common financial year end which ends on 31st March. The financial

year of Commercial Insurance Brokers Limited, an associate company of the Group ends on 31st December.

The difference between the reporting date of the above companies and that of the parent does not exceed three

months.

However, for the Group financial reporting purposes; the Financial Statements ending 31 March of the above

mentioned subsidiaries and associates are considered.



3.1.10 Balances and Transactions Eliminated on Consolidation

Intragroup balances and transactions, including income, expenses and dividends, are eliminated in full. Profits

and losses resulting from intragroup transactions that are recognized in assets, such as inventory and fixed

assets, are eliminated in full.

Unrealized gains arising from transactions with equity-accounted investees are eliminated against the

investment to the extent of the Group’s interest in the investee.

3.1.11 Business Combinations

All business combinations have been accounted for by applying the acquisition method in accordance with

the SLFRS 3 - Business Combinations. Applying this method involves the entity that obtains control over the

other entity to recognize the fair value of assets acquired and liabilities and contingent liabilities assumed,

including those not previously recognized.

3.1.12 Cost of Acquisition

The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and

liabilities incurred or assumed at the date of exchange. This excludes any transaction costs incurred.

3.1.13 Goodwill on Acquisition

Goodwill represents the excess of the cost of any acquisition of a subsidiary or an associate over the Group’s

interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired.

The Group tests the goodwill for impairment annually and assess for any indication of impairment to ensure

that its carrying amount does not exceed the recoverable amount. If an impairment loss is identified, it is

recognized immediately to the Statement of Profit or Loss. For the purpose of impairment testing, goodwill

acquired in a business combination is, from the acquisition date, allocated to groups of cash-generating units

that are expected to benefit from the synergies of the combination.

The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and

then to the other assets pro-rata to the carrying amount of each asset in the unit. Where goodwill forms part

of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with

the operation disposed of is included in the carrying amount of the operation when determining the gain or

loss on disposal of the operation.

Carrying amount of the goodwill arising on acquisition of subsidiaries and joint ventures is presented as an

intangible and the goodwill on an acquisition of an equity accounted investment is included in the carrying

value of the investment.

3.1.14 Gain on Bargain Purchase (negative goodwill)

If the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities

exceeds the cost of the acquisition of the entity, the Group will reassess the measurement of the acquiree’s

identifiable assets and liabilities and the measurement of the cost and recognize the difference immediately

in the Consolidated Statement of Profit or Loss.



3.2 Foreign currency

3.2.1 Foreign Currency Transactions

Transactions in foreign currencies are translated to the respective functional currency (Sri Lankan Rupees-

LKR) at exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the

functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items are

the difference between amortized cost in the functional currency at the beginning of the year, adjusted for

effective interest and payments during the year, and the amortized cost in foreign currency translated at the

exchange rate at the end of the year.

Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are

retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-

monetary items in a foreign currency that are measured in terms of historical cost are translated using the

exchange rate at the date of the transaction.

Foreign currency differences arising on retranslation are recognized in Statement of Profit or Loss.

3.3 Fair Value Measurement - SLFRS 13

SLFRS 13 Fair Value Measurement applies to SLFRSs that require or permit fair value measurement or

disclosures and provides a single SLFRS framework for measuring fair value and disclosures on fair value

measurement. The Standard defines fair value on the basis of an 'exit price' notion and uses a 'fair value

hierarchy', which results in a market-based, rather than entity-specific, measurement.

SLFRS 13, defines fair value, sets out in a single SLFRS a framework for measuring fair value disclosures

on fair value measurements.

Financial Instruments

3.3.1 Financial Assets

Financial assets are within the scope of LKAS 39 are classified appropriately as fair value through Profit or

Loss (FVTPL), loans and receivables (L & R), held to maturity (HTM), available-for-sale (AFS) at its initial

recognition.

All the financial assets are recognized at fair value at its initial recognition.

3.3.1.1 Financial Assets at Fair Value through Profit or Loss (FVTPL)

A financial asset is classified at fair value through Profit or Loss if it is classified as held for trading or is

designated as such upon initial recognition. Financial assets are designated at fair value through Profit or Loss

if the Group manages such investments and makes purchase and sale decisions based on their fair value in

accordance with the Group’s documented risk management or investment strategy. Upon initial recognition,

transaction costs are recognized in Profit or Loss as incurred.

Financial assets at fair value through Profit or Loss are measured at fair value, and subsequent therein are

recognized in Profit or Loss.



The Group’s investments in certain equity securities and derivative instruments which are not accounted

under hedge accounting are classified under fair value through Profit or Loss.

3.3.1.2. Loans and Receivables (L&R)

Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active

market. Such assets are recognized initially at fair value plus any directly attributable transaction costs.

Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective

interest method, less any impairment losses.

Loans and receivables of the Group comprise of the following,

3.3.1.2.1 Rental receivables on Finance Leases and Hire purchases

Assets leased to customers which transfer substantially all the risks and rewards associated with ownership

other than legal title, are classified as finance leases. Amounts receivable under finance leases are included

under “Lease Rentals Receivable”. Leasing balances are stated in the Statement of Financial Position after

deduction of initial rentals received, unearned lease income and the provision for impairment.

Assets sold to customers under fixed rate hire agreements, which transfer all risk and rewards as well as the

legal title at the end of such contractual period are classified as ‘Hire Purchase Receivable’. Such assets are

accounted for in a similar manner as finance leases.

3.3.1.2.2 Rental receivables on Operating Leases

Leases where the Company as the lessor effectively retains substantially all the risk and rewards incidental to

the ownership are classified as operating leases. Lease rentals from operating leases are recognized as income

on a straight-line basis over the lease term.

3.3.1.2.3 Advances and Other Loans to Customers

Advances and other loans to customers comprised of revolving loans, loans with fixed installments.

Revolving loans to customers are reflected in the statement of financial position at amounts disbursed less

repayments and allowance for impairment losses. Loans to customers with fixed installments are stated in the

statement of financial position net of possible loan losses and net of interest, which is not accrued to revenue.

After initial measurement, ‘loans and advances’ are subsequently measured at amortised cost using the EIR,

less allowance for impairment except when the Company recognises loans and receivables at fair value

through profit or loss. Amortised cost is calculated by taking into account any discount or premium on

acquisition and fees and costs that are an integral part of the EIR. The amortisation is included in ‘Interest

Income’ in the Statement of Profit or Loss. The losses arising from impairment are recognised in the Statement

of Profit or Loss.

3.3.1.2.4 Trade Receivables

Trade receivables are stated at the amounts they are estimated to realize, net of provisions for impairment.

An allowance for impairment losses is made where there is objective evidence that the Group will not be able

to recover all amounts due according to the original terms of receivables. Impaired receivables are written-

off when identified.



3.3.1.3 Held-to-Maturity Financial Assets

If the company has the positive intent and ability to hold debt securities to maturity, then such financial assets

are classified as held-to-maturity. Held-to-maturity financial assets are recognized initially at fair value plus

any directly attributable transaction costs. Subsequent to initial recognition held-to-maturity financial assets

are measured at amortized cost using the effective interest method, less any impairment losses.

Any sale or reclassification of a more than an insignificant amount of held-to-maturity investments not close

to their maturity would result in the reclassification of all held-to-maturity investments as available-for-sale,

and prevent the company from classifying investment securities as held-to-maturity for the current and the

following two financial years.

The Group does not have any financial assets designated as “held to maturity” as at the reporting date of

financial assets.

3.3.1.4 Available-for-Sale Financial Assets

Available-for-sale financial assets are non-derivative financial assets that are designated as available for- sale

and that are not classified in any of the previous categories of financial assets. Available-for-sale financial

assets are recognised initially at fair value plus any directly attributable transaction costs.

Subsequent to initial recognition, these are measured at fair value and changes therein, other than impairment

losses are recognized in other comprehensive income and presented within equity in the fair value reserve.

When an investment is derecognized, the cumulative gain or loss in other comprehensive income is

transferred to Profit or Loss.

Available-for-sale financial assets comprise of Treasury Bonds.

3.3.1.5 Cash and Cash Equivalents

Cash and cash equivalents comprise of cash in hand and cash at banks and other highly liquid financial assets

which are held for the purpose of meeting short-term cash commitments with original maturities of less than

three months which are subject to insignificant risk of changes in their fair value.

Bank overdrafts that are repayable on demand and form an integral part of the Company cash management

are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows.

3.3.2 Financial Liabilities

The Group initially recognizes debt securities, deposits from customers and loans & borrowings on the date

that they are originated. All other financial liabilities are recognized at initially on the trade date, which is the

date that the Group becomes party to the contractual provisions of the instruments.

The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or

expired.

The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such

financial liabilities are recognized initially at fair value plus any directly attributable transaction cost.

Subsequent to initial recognition, these financial liabilities are measured at amortized cost using effective

interest rate method.

Other financial liabilities comprise of loans & borrowings, debenture issued, bank overdraft, customer

deposits and trade and other payables.



3.3.3 Accounting for Non-derivative Financial Instruments

3.3.3.1 Recognition

The Group initially recognizes loans and advances, deposits, debt securities and subordinated liabilities on

the date at which they are originated. All the financial assets and liabilities other than regular purchases and

sales are recognized on the date the Group becomes a party to the contractual provisions of the instrument.

3.3.3.2 De-recognition

The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial

asset expires, or when it transfers the financial asset in a transaction in which substantially all the risks and

rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains

substantially all the risks and rewards of ownership and it does not retain control of the financial asset. Any

interest in transferred financial assets that qualify for de-recognition that is created or retained by the Group

is recognized as a separate asset or liability in the statement of financial position. On de-recognition of a

financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to

the portion of the asset transferred), and the sum of :

(i) the consideration received (including any new asset obtained less any new liability assumed) and

(ii) any cumulative gain or loss that had been recognized in other comprehensive income is recognized

in Profit or Loss.

The Group enters into transactions whereby it transfers assets recognized on its statement of financial

position, but retains either all or substantially all of the risks and rewards of the transferred assets or a portion

of them. If all or substantially all risks and rewards are retained, then the transferred assets are not

derecognized.

Transactions in which the Group neither retains nor transfers substantially all the risks and rewards of

ownership of a financial asset and it retains control over the asset, the Group continues to recognize the asset

to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the

value of the transferred asset.

3.3.3.3 Offsetting

Financial assets and liabilities are offset and the net amount presented in the statement of financial position

when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net

basis or to realize the asset and settle the liability simultaneously.

Income and expenses are not offset in the statement of profit or loss unless required or permitted by an

accounting standard or interpretation and as specifically disclosed in the accounting policies of the company.

3.3.3.4 Amortized cost measurement

The amortized cost of a financial asset or liability is the amount at which the financial asset or liability is

measured at initial recognition, minus principal repayments, plus or minus the cumulative amortization using

the effective interest method of any difference between the initial amount recognized and the maturity

amount, minus any reduction for impairment.



3.3.3.5 Fair value measurement

SLFRS 13 Fair Value Measurement applies to SLFRSs that require or permit fair value measurement or

disclosures and provides a single SLFRS framework for measuring fair value and disclosures on fair value

measurement. The Standard defines fair value on the basis of an 'exit price' notion and uses a 'fair value

hierarchy', which results in a market-based, rather than entity-specific, measurement.

SLFRS 13, defines fair value, sets out in a single SLFRS a framework for measuring fair value disclosures

on fair value measurements.

Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable,

willing parties in an arm's length transaction on the measurement date.

When available, the Group measures the fair value of an instrument using quoted prices in an active market

for that instrument. A market is regarded as active if quoted prices are readily and regularly available and

represent actual and regularly occurring market transactions on an arm's length basis.

If a market for a financial instrument is not active, the Group establishes fair value using valuation techniques.

Valuation techniques include using recent arm's length transactions between knowledgeable, willing parties

(if available), reference to the current fair value of other instruments that are substantially the same,

discounted cash flow analysis and other equity pricing models.

The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates

specific to the Group, incorporates all factors that market participants would consider in setting a price, and

is consistent with accepted economic methodologies for pricing financial instruments.

The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e.

the fair value of the consideration given or received, unless the fair value of that instrument is evidenced by

comparison with other observable current market transactions in the same instrument or based on a valuation

technique whose variables include only data from observable markets. When transaction price provides the

best evidence of fair value at initial recognition, the financial instrument is initially measured at the transaction

price and any difference between this price and the value initially obtained from a valuation model is

subsequently recognized in Statement of Financial position.

3.3.3.6 Valuation of Financial Instruments

The Group measures the fair values using the following fair value hierarchy that reflects the significance of

the inputs used in making the measurements.

Level 1 – Quoted market price (unadjusted) in an active market of an identical instrument.

Level 2 – Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e.,

derived from prices), this category included instruments valued using: quoted market prices in active markets

similar instruments; quoted prices for identical or similar instruments in markets are considered less than

active: or other valuation techniques where all significant inputs are directly observable from market data.

Level 3 – Valuation techniques use significant unobservable inputs. This category includes all instruments

where the valuation technique includes inputs not based on observable data and the unobservable inputs have

a significant effect on the instrument’s valuation.

This category includes instruments that are valued based on quoted prices for similar instruments where

significant unobservable adjustments or assumptions are required to reflect differences between the

instruments.



Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted

market prices or dealer price quotations. For all other financial instruments the Company determines fair

values using valuation techniques.

Valuation techniques include comparison to similar instruments for which market observable prices exist,

other equity pricing models and other valuation models.

The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the

financial instruments at the reporting date that would have been determined by market participants acting at

arm’s length.

The Group widely recognized valuation models for determining the fair value of common and simpler

financial instruments. Observable prices and model inputs are usually available in the market for listed debt

and equity securities. Availability of observable market inputs reduces the need of management judgment and

estimation and also reduces the uncertainty associated with determination of fair values. Availability of

observable market prices and inputs varies depending on the products and markets are prone to changes based

on specific events and general conditions in the financial markets.

3.3.4. Impairment of Financial Instruments

At each reporting date the Company assesses whether there is objective evidence that financial assets not

carried at fair value through Profit or Loss are impaired. A financial asset or a group of financial assets is

(are) impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition

of the asset(s), and that the loss event has an impact on the future cash flows of the asset(s) that can be

estimated reliably.

Objective evidence that financial assets (including equity securities) are impaired can include:

significant financial difficulty of the borrower or issuer;

default or delinquency by a borrower ;

restructuring of a loan or advance by the Group on terms that the Group would not otherwise consider

indications that a borrower or issuer will enter bankruptcy;

the disappearance of an active market for a security;

other observable data relating to a group of assets such as adverse changes in the payment status of

borrowers or issuers in the group of economic conditions that correlate with defaults in the group.

In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below

its cost is objective evidence of impairment.

3.3.4.1 Impairment of Financial Assets carried at Amortized Cost

The Group considers evidence of impairment for loans and advances at both a specific and non - specific

basis. All individually significant loans and advances and held-to-maturity investment securities are assessed

for specific impairment. All individually significant loans and advances and held-to-maturity investment

securities found not to be specifically impaired are then assessed for any impairment separately by grouping

them.

Loans and advances that are not individually significant are assessed for impairment by grouping them

together with similar risk characteristics based on product types.



In assessing non-significant impairment the Group uses statistical modeling of historical trends of the

probability of default, timing of recoveries and the amount of loss incurred, adjusted for management's

judgment as to whether current economic and credit conditions are such that the actual losses are likely to be

greater or less than suggested by historical modeling, default rates, loss rates and the expected timing of future

recoveries are regularly taken into account to ensure that they remain appropriate.

Impairment losses on assets carried at amortized cost are measured as the difference between the carrying

amount of the financial asset and the present value of estimated future cash flows discounted at the asset's

original effective interest rate. Impairment losses are recognized in Profit or Loss and reflected in an

allowance account against loans and advances. Interest on impaired assets continues to be recognized through

the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease,

the decrease in impairment loss is reversed through Profit or Loss.

3.3.4.2 Impairment of Available for Sale Investment Securities

Impairment losses on available for sale investment securities are recognized by transferring the cumulative

loss that has been recognized in other comprehensive income to Profit or Loss as a reclassification adjustment.

The cumulative loss that is reclassified from other comprehensive income to Profit or Loss is the difference

between the acquisition cost, net of any principal repayment and amortization, and the current fair value, less

any impairment loss previously recognized in Profit or Loss. Changes in impairment provisions attributable

to time value are reflected as a component of interest income. If, in a subsequent period, the fair value of an

impaired available-for-sale debt security increases and the increase can be related objectively to an event

occurring after the impairment loss was recognised, then the impairment loss is reversed, with the amount of

the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired

available-for-sale equity security is recognised in other comprehensive income.

In the case of equity investments classified as available for sale, objective evidence would also include a

‘significant’ or ‘prolonged’ decline in the fair value of the investment below its cost. Where there is evidence

of impairment, the cumulative loss measured as the difference between the acquisition cost and the current

fair value, less any impairment loss on that investment previously recognized in the Statement of Profit or

Loss is removed from equity and recognised in the Statement of Profit or Loss Income. However, any

subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in Other

Comprehensive Income.

3.3.4.3 Reversal of Impairment Loss

If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the

increase can be objectively related to an event occurring after the impairment loss was recognized in Profit

or Loss, the impairment loss is reversed, with the amount of the reversal recognized in Profit or Loss.

However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is

recognized in Other Comprehensive Income. The Group writes off certain loans and advances and investment

securities when they are determined to be uncollectible.

3.3.4.4 Write-off of Financial Assets carried at amortized cost

The Company writes off a loan or an investment debt security balance, and any related allowances for

impairment losses, when the Board of Directors determines that the loan or security is uncollectible. This



determination is made after considering information such as occurrence of significant changes in the

borrower’s/issuer’s financial position such that the borrower/issuer can no longer pay the obligation, or that

proceeds from collateral will not be sufficient to pay back the entire exposure. For smaller balance

standardized loans, write-off decisions generally are based on a product-specific past due status. The

Company generally writes off balances on its past due status reaching 12 months and if no collateral is

available.

The Company holds collateral against loans and advances to customers in the form of mortgage interests

over property, other registered securities over assets, and guarantees. Estimates of fair value are based on the

value of collateral assessed at the time of borrowing, and generally are not updated except when a loan is

individually assessed as impaired. Collateral usually is not held against investment securities, and no such

collateral was held at 31 March 2018 (2017: no collateral held).

3.3.4.5 De-recognition of Financial Assets and Financial Liabilities

Financial Assets

Financial assets (or, where applicable or a part of a financial asset or part of a group of similar financial assets)

is derecognized when;

The rights to receive cash flows from the asset have expired; or

The Group has transferred its rights to cash flows from the asset or has assumed an obligation to pay

the received cash flows in full without material delay to a third party under a ‘passthrough’ arrangement; and

either:

the Group has transferred substantially all the risks and rewards of the assets, or

the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but

has transferred control of the asset.

When the Group has transferred its rights to receive cash flow from an asset or has entered in to a pass through

arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the assets

nor transferred control of it, the asset is recognised to the extent of the Group’s continuing involvement in it.

In that case, the Group also recognises an associated liability. The transferred assets and the associated

liabilities are measured on a basis that reflects the right and obligation that the Group has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower

of the original carrying amount of the asset and the maximum amount of consideration that the Company

could be required to repay.

Financial Liabilities

A financial liability is derecognised when the obligation under liability is discharged or cancelled or expired.

Where an existing financial liability is replaced by another from the same lender on substantially different

terms, or the terms of an existing liability are substantially modified, such an exchange or modification is

treated as a derecognition of the original liability and the recognition of a new liability, and the difference in

the respective carrying amounts are recognised in the profit or loss.

3.3.5 Accounting for Derivative Financial Instruments

Derivatives are initially recognized at fair value on the date on which a derivative contract is entered into and

are subsequently re-measured at their fair value. Fair values are obtained from quoted market prices in active



markets, or using valuation techniques. All derivatives are carried as assets when the fair value is positive and

as liabilities when the fair value is negative.

3.3.5.1 Hedge accounting

The Group holds derivative financial instruments to hedge its foreign currency risk exposure. On initial

designation of the derivative as the hedge instrument, the company formally documents the relationship

between the hedging instrument and hedged item, its risk management objective and its strategy in

undertaking the hedge.

Central treasury documents the assessment, both at hedge inception and on an on-going basis, of whether or

not the hedging instruments, primarily forward rate contracts, that are used in hedging transactions are highly

effective in offsetting the changes attributable to the hedged risks in the fair values or cash flows of the hedged

items.

Derivatives are recognised initially at fair value; any attributable transaction costs are recognised in profit or

loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein

are accounted for as described below.

3.3.5.1.1 Cash flow hedge

When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows

attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast

transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative

is recognized in other comprehensive income and presented in the hedging reserve in equity. Any ineffective

portion of changes in the fair value of the derivative is recognized immediately in profit or loss.

When the hedged item is a non-financial asset, the amount accumulated in equity is retained in other

comprehensive income and reclassified to profit or loss in the same period or periods during which the non-

financial item affects profit or loss. In other cases as well, the amount accumulated in equity is reclassified to

profit or loss in the same period that the hedged item affects profit or loss.

If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or

exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast

transaction is no longer expected to occur, then the balance in equity is reclassified to profit or loss.

3.3.5.1.2 Hedge Effectiveness Testing

To qualify for hedge accounting, at the inception of the hedge and throughout its life, each hedge must be

expected to be highly effective and demonstrate actual effectiveness on an on-going basis. The documentation

of each hedging relationship sets out how the effectiveness of the hedge is assessed.

The method adopted by the Company to assess hedge effectiveness is based on its risk management strategy.

For expected effectiveness, the hedging instrument must be expected to be highly effective in offsetting

changes in cash flows attributable to the hedged risk during the period for which the hedge is designated. For

actual effectiveness to be achieved, the changes in fair value or cash flows must offset each other in the range

of 80% to 125%. The ineffective portion will be recognised immediately in income statement. In measuring

the effectiveness, the forecasted transaction of entering into another forward contract is also taken into

consideration.



3.3.6 Other non-trading derivatives (Derivatives that do not qualify for Hedge Accounting)

When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge

accounting, all changes in its fair value are recognised immediately in profit or loss.

3.3.7 Reclassification of Financial Instruments

The Group reclassifies non-derivative financial assets out of the ‘held for trading’ category and into the

‘available-for-sale’, ‘loans and receivables’ or ‘held to maturity’ categories as permitted by LKAS 39.

Further, in certain circumstances, the Group is permitted to reclassify financial instruments out of the

‘available-for-sale’ category and into the ‘loans and receivables’ category. Reclassifications are recorded at

fair value at the date of reclassification, which becomes the new amortised cost.

For a financial asset with a fixed maturity reclassified out of the ‘available-for-sale’ category, any previous

gain or loss on that asset that has been recognized in equity is amortised to Profit or Loss over the remaining

life of the investment using the EIR. Any difference between the new amortised cost and the expected cash

flows is also amortised over the remaining life of the asset using EIR. In the case of a financial asset does not

have a fixed maturity, the gain or loss is recognized in the Profit or Loss when such a financial asset is sold

or disposed of. If the financial asset is subsequently determined to be impaired, then the amount recorded in

equity is recycled to the Statement of Profit or Loss.

The group may reclassify a non-derivative trading asset out of the ‘held for trading’ category and into the

‘loans and receivables’ category if it meets the definition of loans and receivables and the Group has the

intention and ability to hold the financial asset for the foreseeable future or until maturity. If a financial asset

is reclassified, and if the Group subsequently increases its estimates of future cash receipts as a result of

increased recoverability of those cash receipts, the effect of that increase is recognized as an adjustment to

the EIR from the date of the change in estimate. Reclassification is at the election of management, and is

determined on an instrument-by-instrument basis.

3.3.8 Non-Financial Receivables

Other receivable balances are stated at estimated amounts receivable after providing for impairment.

3.4 Investment Properties

3.4.1 Basis of Recognition

Investment property is the property held either to earn rental income or for capital appreciation or for both,

but not for sale in the ordinary course of business, use in the production or supply of goods or services or for

administrative purposes.

3.4.2 Basis of Measurement

3.4.2.1 Fair value Model

Investment properties are initially recognized at cost. Subsequent to initial recognition the investment

properties are stated at fair values, which reflect market conditions at the reporting date. Gains or losses

arising from changes in fair value are included in the Statement of Profit or Loss in the year in which they

arise.



Where Group companies occupy a significant portion of the investment property of a subsidiary, such

investment properties are treated as property, plant and equipment in the Consolidated Financial Statements,

and accounted for as per LKAS 16- Property, Plant and Equipment.


Investment properties are de-recognized when either they have been disposed of or when the investment

property is permanently withdrawn from use and no future economic benefit is expected from its disposal.

Any gains or losses on the retirement or disposal of an investment property are recognized in the Statement

of Profit or Loss in the year of retirement or disposal.

3.4.2.3 Subsequent Transfers to/from Investment Property

Transfers are made to investment property when, and only when, there is a change in use, evidenced by the

end of owner occupation, commencement of an operating lease to another party or completion of construction

or development.

Transfers are made from investment property when, and only when, there is a change in use, evidenced by

commencement of owner occupation or commencement of development with a view to sale.

For a transfer from investment property to owner occupied property or inventories, the deemed cost of

property for subsequent accounting is its fair value at the date of change in use. If the property occupied by

the Company as an owner occupied property becomes an investment property, the Company, accounts for

such property in accordance with the policy stated under property, plant and equipment up to the date of

change in use.

For a transfer from inventories to investment property, any difference between the fair value of the property

at that date and its previous carrying amount is recognized in the Statement of Profit or Loss. When the

Company completes the construction or development of a self-constructed investment property, any

difference between the fair value of the property at that date and its previous carrying amount is recognized

in the Statement of Profit or Loss.

3.4.2.4 Determining Fair Value

External and independent valuers, having appropriate recognized professional qualifications and recent

experience in the location and category of property being valued, values the investment property portfolio as

at each reporting date. In financial periods within that period the fair value is determined by the Board of

Directors.

The fair values are based on market values, being the estimated amount for which a property could be

exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length

transaction after proper marketing wherein the parties had each acted knowledgeably.

3.5 Intangible Assets

3.5.1 Basis of Recognition

An intangible asset is recognized if it is probable that future economic benefits that are attributable to the

assets will flow to the entity and the cost of the assets can be measured reliably.



3.5.2 Basis of Measurement

Intangible assets acquired separately are measured as initial recognition at cost. Following initial recognition

intangible assets are carried at cost less any accumulated amortization and any accumulated impairment

losses. The useful life of intangible assets are assessed to be either finite or indefinite. Intangible assets with

finite useful life are amortized over the useful economic life and assessed for impairment whenever there is

an indication that the intangible asset may be impaired. The amortization period and the method for an

intangible asset with a definite useful life is reviewed at least at each financial year end. Intangible assets with

indefinite useful lives are tested for impairment annually either individually or at the cash generating unit

level.

3.5.3 Subsequent Expenditure

Subsequent expenditure on intangible assets are capitalized only when it increases the future economic

benefits embodied these assets. All other expenditure are expensed when incurred.

3.5.4 De-recognition

Intangible assets are de-recognized on disposal or when no future economic benefits are expected from its

use. The gain or loss arising from de-recognition of intangible assets are measured as the difference between

the net disposal proceeds and the carrying amount of the asset.

3.5.5 Amortization

Amortization is recognized in the Statement of statement of profit or loss on a straight-line basis over the

estimated useful life of intangible assets, other than goodwill, from the date that they are available for use.

The estimated useful life of each intangible asset is as follows;

Computer Software 5 years

License and Fees 20 years

Amortization methods, useful lives and residual values are reviewed at each reporting date and are adjusted

as appropriate.

3.6 Property, Plant and Equipment

3.6.1 Freehold Property, Plant & Equipment

3.6.1.1 Basis of Recognition

Property, plant and equipment are recognized if it is probable that future economic benefits associated with

the asset will flow to the Company and cost of the asset can be reliably measured.

3.6.1.2 Basis of Measurement

Items of property, plant and equipment are measured at cost/revaluation less accumulated depreciation and

accumulated impairment losses.

Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-

constructed assets includes the cost of materials and direct labor, any other costs directly attributable to



bringing the assets to a working condition for their intended use, the costs of dismantling and removing the

items and restoring the site at which they are located and capitalized borrowing costs.

Purchased software that is integral to the functionality of the related equipment is capitalized as part of that

equipment.

When parts of an item of property, plant and equipment have different useful lives, they are accounted for as

separate items of property, plant and equipment.

3.6.1.3 Cost Model

The Company applies the cost model to all property, plant and equipment except freehold land and buildings;

which records at cost of purchase together with any incidental expenses thereon less any accumulated

depreciation and accumulated impairment losses if any.

3.6.1.4 Revaluation Model

The Company revalues its land and buildings which are measured at its fair value at the date of revaluation

less any subsequent accumulated depreciation and accumulated impairment losses. Revaluations are made

with sufficient regularity to ensure that the carrying amount does not differ materially from that which would

be determined using fair value at the reporting date.

On revaluation of lands and buildings, any increase in the revaluation amount is credited to the revaluation

reserve through other comprehensive income in shareholder’s equity unless it off sets a previous decrease in

value of the same asset that was recognized in the Statement of Profit or Loss. A decrease in value is

recognized in the Statement of Profit or Loss where it exceeds the increase previously recognized in the

revaluation reserve. Upon disposal, any related revaluation reserve is transferred from the revaluation reserve

to retained earnings and is not taken into account in arriving at the gain or loss on disposal.

3.6.1.5 Subsequent Cost

Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated

with the expenditure will flow to the Company. Ongoing repairs and maintenance are expensed as incurred.

3.6.1.6 Reclassification to investment property

When the use of a property changes from owner-occupied to investment property, the property is re-measured

to fair value and reclassified as investment property. Any gain arising on re-measurement is recognized in

Profit or Loss to the extent that it reverses a previous impairment loss on the specific property, with any

remaining gain recognized and presented in the revaluation reserve in equity. Any loss is recognized

immediately in Profit or Loss.

3.6.1.7 Depreciation

Depreciation is based on the cost of an asset less its residual value. Significant components of individual

assets are assessed and if a component has a useful life that is different from the remainder of that asset, that

component is depreciated separately.

Depreciation is recognized in Profit or Loss on a straight-line basis over the estimated useful life of each

component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the



lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the

end of the lease term. Lands are not depreciated.

Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset

is classified as held for sale and the date that the asset is de-recognized.

Depreciation methods, useful life values are assessed at the reporting date. The estimated useful lives for the

current year are as follows:

Free-hold building 40 years

Fixtures 05 years

Office Furniture 05 years

Office Equipment 05 years

Free-hold motor Vehicles 04 years

Computer Equipment 05 years

Communication Equipment 01 years


An item of property, plant and equipment is de-recognized upon disposal or when no future economic are

expected from its use or disposal.

The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the

proceeds from disposal with the carrying amount of the property, plant and equipment, and is recognized net

within other income/other expenses in the Statement of Profit or Loss. When revalued assets are sold, the

amounts included in the revaluation surplus reserve are transferred to retained earnings.

3.6.2 Operating Lease Assets

When acting as lessor, the Company includes the assets subject to operating leases in ‘Property, Plant and

Equipment’ and accounts for them accordingly. Impairment losses are recognised to the extent that residual

values are not fully recoverable and the carrying value of the assets is thereby impaired.

3.6.3 Capital Work-in-Progress

Capital work-in-progress represents the accumulated cost of materials and other costs directly related to the

construction of an asset. Capital work in progress is transferred to the respective asset accounts at the time it

is substantially completed and ready for its intended use.

3.7 Impairment of Non-financial Assets

The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine

whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable

amount is estimated. An impairment loss is recognized if the carrying amount of an asset or its related Cash-

Generating Unit (CGU) exceeds its estimated recoverable amount.

The Company’s corporate assets do not generate separate cash inflows and are utilized by more than one

CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment

as part of the testing of the CGU to which the corporate asset is allocated.



Impairment losses are recognized in Profit or Loss. Impairment losses recognized in respect of CGUs are

allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then

to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.

An impairment losses recognized in prior periods are assessed at each reporting date for any indications that

the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the

estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that

the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of

depreciation, if no impairment loss had been recognized.

3.8 Tax expense

Tax expense comprises current, deferred tax and other statutory taxes. Income tax and deferred tax expense

is recognized in Statement of Profit or Loss except to the extent that it relates to items recognized in the

Statement of Other Comprehensive Income or Statement of Changes in in equity.

3.8.1 Current tax expense

Current tax is the expected tax payable or recoverable on the taxable income or loss for the year, using tax

rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of

previous years. Current tax payable also includes any tax liability arising from the tax on dividend income.

The provision for income tax is based on the elements of income and expenditure as reported in the Financial

Statements and computed in accordance with the provisions of the Inland Revenue Act. No 10 of 2006 and

subsequent amendments thereto.

Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be

recovered from or paid to the Commissioner General of Inland Revenue.

3.8.2 Deferred tax

Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and

liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not

recognized for:

Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a

business combination and that affects neither accounting nor taxable profit or loss;

Temporary differences related to investments in subsidiaries and jointly controlled entities to the

extent that it is probable that they will not reverse in the foreseeable future; and

Taxable temporary differences arising on the initial recognition of goodwill.

Taxable temporary differences arising on subsidiaries, associates or joint ventures who have not

distributed their entire profits to the parent or investor.

Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they

reverse, based on the laws that have been enacted or substantively enacted by the reporting date.



Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities

and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on

different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets

and liabilities will be realized simultaneously.

A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to

the extent that it is probable that future taxable profits will be available against which they can be utilized.

Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer

probable that the related tax benefit will be realized.

Deferred tax assets and liabilities are not discounted.

The net increase in the carrying amount of deferred tax liability net of deferred tax asset is recognized as

deferred tax expense and conversely any net decrease is recognized as reversal to deferred tax expense, in the

Statement of Profit or Loss.

3.8.2 Deferred Tax on Undistributed Profits of Equity Accounted Investees

The Group does not control its equity accounted investees. It is therefore generally not in a position to control

the timing of the reversal of a possible taxable temporary difference relating to the undistributed profits of

the equity accounted investees.

The Group calculates deferred tax based on the most likely manner of reversal, taking into account

management's intent and the tax jurisdiction applicable to relevant equity accounted investees.

The management intends to recover the carrying amount of the investment primarily through sale of the

investment rather than through dividends. The deferred tax implications are evaluated based on the tax

consequences on the sale of investments.

Since the carrying amount is expected to be recovered through a sale transactions which has no tax

consequences, no temporary difference arise on the equity accounted investees and no deferred tax is

provided.

3.8.3 Withholding Tax on Dividends

Dividend distributed out of taxable profit of the local companies attracts a 10% deduction at source and is not

available for set off against the tax liability of the Company. Withholding tax that arises from the distribution

of dividends by the Company is recognized at the same time as the liability to pay the related dividend is

recognized.

3.8.4 Economic Service Charge (ESC)

As per the provisions of Economic Service Charge Act No. 13 of 2006 and subsequent amendments thereto,

ESC is payable on the liable turnover at specified rates. ESC is deductible from the income tax liability. Any

unclaimed amount can be carried forward and set off against the income tax payable in the five subsequent

years as per the relevant provision in the Act.



3.8.5 Nation Building Tax (NBT)

As per the provisions of the Nation Building Tax Act, No. 9 of 2009 and the subsequent amendments thereto,

Nation Building Tax should be payable at the rate of 2% with effect from 1 January 2011 on the liable turnover

as per the relevant provisions of the Act.

3.8.6 Value Added Tax on Financial Services (VAT on FS)

VAT on Financial Services is calculated in accordance with the amended VAT Act No. 7 of 2003 and

subsequent amendments thereto. The base for the computation of VAT on Financial Services is the accounting

profit before income tax adjusted for the economic depreciation and emoluments of employees. VAT on

financial services is computed on the prescribed rate of 15%.

The VAT on Financial service is recognized as expense in the period it becomes due.

3.8.7 Crop Insurance Levy (CIL)

As per the provisions of the Section 14 of the Finance Act No. 12 of 2013, the CIL was introduced with

effect from April 01, 2013 and is payable to the National Insurance Trust Fund. Currently, the CIL is

payable at 1% of the profit after tax.

3.8.8 Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets

that take a substantial period of time to get ready for its intended use or sale, are capitalized as part of the

assets.

Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying

asset are recognized in Profit or Loss using the effective interest method.

Other Non-Financial Liabilities and Provisions

Liabilities are recognized in the Statement of Financial Position when there is a present obligation as a result

of a past event, the settlement of which is expected to result in an outflow of resources embodying economic

benefits. Obligations payable at the demand of the creditor within one year of the reporting date are treated

as current liabilities. Liabilities payable after one year from the reporting date are treated as non-current

liabilities.

3.8.9 Deposits due to Customers

Deposits include term deposits and certificates of deposits. They are stated in the Statement of Financial

Position at amount payable. Interest paid / payable on these deposits based on effective interest rate is

charged to the Statement of Profit or Loss.

3.8.10 Deposit Insurance Scheme

In terms of the Finance Companies Direction No 2 of 2010 “Insurance of Deposit Liabilities” issued on 27th

September 2010, all Registered Finance Companies are required to insure their deposit liabilities in the

Deposit Insurance Scheme operated by the Monetary Board in terms of Sri Lanka Deposit Insurance Scheme

Regulations No 1 of 2010 issued under Sections 32A to 32E of the Monetary Law Act with effect from 1st

October 2010.



Deposits to be insured include time and savings deposit liabilities and exclude the following.

Deposit liabilities to member institutions

Deposit liabilities to Government of Sri Lanka

Deposit liabilities to shareholders, directors, key management personnel and other related parties as defined

in Finance Companies Act Direction No 03 of 2008 on Corporate Governance of Registered Finance

Companies

Deposit liabilities held as collateral against any accommodation granted

Deposit liabilities falling within the meaning of dormant deposits in terms of the Finance Companies Act,

funds of which have been transferred to Central Bank of Sri Lanka

Registered Finance Companies are required to pay a premium of 0.15% on eligible deposit liabilities as at

end of the month to be payable within a period of 15 days from the end of the respective month.

3.9. Debt Securities Issued

These represent the funds borrowed by the Group for long-term funding requirements. Subsequent to initial

recognition debt securities issued are measured at their amortised cost using the effective interest method,

except where the Group designates debt securities issued at fair value through profit or loss. Interest

paid/payable is recognised in profit or loss.

3.10. Other Liabilities

Other liabilities are recorded at amounts expected to be payable at the Reporting date.

3.11 Employee Benefits

3.11.1 Defined Contribution Plans

A Defined Contribution Plan is a post-employment benefit plan under which an entity pays fixed contributions

into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for

contributions to Defined Contribution Plans are recognized as an employee benefit expense in the Statement

of Profit or Loss in the periods during which services are rendered by employees.

3.11.1.1 Employees’ Provident Fund (EPF)

The Company and employees contribute 12% and 8% respectively on the salary of each employee to the

above mentioned funds.

3.11.1.2 Employees’ Trust Fund (ETF)

The Company contributes 3% of the salary of each employee to the Employees’ Trust Fund.

3.11.2 Defined Benefits Plans

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group's

net obligation in respect of defined benefit pension plans is calculated by estimating the amount of future

benefit that employees have earned in return for their service in the current and prior periods; that benefit is

discounted to determine its present value. Any unrecognized past service costs are deducted.



The calculation is performed every three years by a qualified actuary using the projected unit credit method.

For the purpose of determining the charge for any period before the next regular actuarial valuation falls due,

an approximate estimate provided by the qualified actuary is used.

When the benefits of a plan are improved, the portion of the increased benefit related to past service by

employees is recognized in Profit or Loss on a straight-line basis over the average period until the benefits

become vested. To the extent that the benefits vest immediately, the expense is recognized immediately in

Profit or Loss.

The Group recognizes all actuarial gains and losses arising from the defined benefit plan in other

comprehensive income (OCI) and all other expenses related to defined benefit plans are recognize as

personnel expenses in Statement of Profit or Loss. This retirement benefit obligation is not externally funded.

However, according to the Payment of Gratuity Act No.12 of 1983, the liability for the gratuity payment to

an employee arises only on the completion of 5 years of continued service with the Company.

3.11.3 Short-term Employee Benefits

Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the

related service is provided. A liability is recognized for the amount expected to be paid under short-term cash

bonus if the company has a present legal or constructive obligation to pay this amount as a result of past

service provided by the employee, and the obligation can be estimated reliably.

3.12 Provisions, Contingent Assets and Contingent Liabilities

Provisions are made for all obligations (legal or constructive) existing as at the reporting date when it is

probable that such an obligation will result in an outflow of resources and a reliable estimate can be made of

the quantum of the outflow. The amount recognized is the best estimate of the consideration required to settle

the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the

obligation at that date.

All contingent liabilities are disclosed as a note to the Financial Statements unless the outflow of resources is

remote. Contingent assets are disclosed, where inflow of economic benefit is probable.

Statement of Profit or Loss and Other Comprehensive Income

3.13 Revenue Recognition

Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group, and

the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at

the fair value of the consideration received or receivable, taking into account contractually defined terms of

payment.

3.13.1 Interest Income on Leases, Hire Purchases, Loans and Advances

Interest income and expense are recognized in Profit or Loss using the effective interest method. The effective

interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the

expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying amount

of the financial asset or liability. When calculating the effective interest rate, the Group estimates future cash

flows considering all contractual terms of the financial instrument, but not future credit losses.



The calculation of the effective interest rate includes all transaction costs and fees paid or received that are

an integral part of the effective interest rate. Transaction costs include incremental costs that are directly

attributable to the acquisition or issue of a financial asset or liability.

Interest income and expense presented in the Statement of Profit or Loss includes,

interest on financial assets and financial liabilities measured at amortized cost calculated on an

effective interest basis

interest on available for sale investment securities calculated on an effective interest basis

Interest income and expense on all trading assets and liabilities are considered to be incidental to the

Company's trading operations and are presented together with all other changes in the fair value of trading

assets and liabilities in net trading income.

Fair value changes on other derivatives held for risk management purposes, and other financial assets and

liabilities carried at fair value through Profit or Loss, are presented in net income from other financial

instruments at fair value through Profit or Loss in the Statement of Profit or Loss.

The excess of aggregated contract receivable over the cost of the assets constitutes the total unearned income

at the commencement of a contract. The unearned income is recognized as income over the term of the

facility commencing with the month that the facility is executed in proportion to the declining receivable

balance, so as to produce a constant periodic rate of return on the net investment.

3.13.2 Service charge and facility fee from micro finance facilities

Collection on service charge and facility fee from micro finance facilities are accounted on cash basis.

3.13.3 Fees and Other Income

Fees and commission income and expense that are integral to the effective interest rate on a financial asset or

liability are included in the measurement of the effective interest rate.

Other fees and commission income, including account servicing fees are recognized as the related services

are performed.

Profit or loss on contracts terminated, collections on contracts written off, interest on overdue rentals, interest

earned on property sale and buy back agreements are accounted for on cash basis.

3.13.4 Net income from other financial instruments at fair value through Profit or Loss

Net income from other financial instruments at fair value through Profit or Loss relates to non-trading

derivatives held for risk management purposes that do not form part of qualifying hedge relationships and

financial assets and liabilities designated at fair value through Profit or Loss, and include all realized and

unrealized fair value changes, interest, dividends and foreign exchange differences.

3.13.5 Factoring Income

Revenue is derived from two sources, Funding and providing Sales Ledger Related Services.

Funding - Discount income relating to factoring transactions is recognized at the end of a given accounting

month. In computing this discount, a fixed rate agreed upon at the commencement of the factoring agreement

is applied on the daily balance in the client’s current account.



Sales Ledger Related Services - A service charge is levied as stipulated in the factoring agreement.

Income is accounted for on an accrual basis and deemed earned on disbursement of advances for invoices

factored.

The above revenue components are accounted on an accrual basis and deemed earned on disbursement of

advances for invoices factored.

3.13.6 Other Income

Rent income and non-operational interest income are accounted for on accrual basis.

Dividend income is recognized when the right to receive payment is established.

Gain on disposal of property, plant and equipment and other non-current assets, including investments held

by the Group have been accounted for in the Statement of Profit or Loss Income, after deducting from the net

sales proceeds on disposal of the carrying amount of such assets.

3.13.7 Rental Income

Rental income from investment property is recognized in Profit or Loss on a straight-line basis over the term

of the lease. Lease incentives granted are recognized as an integral part of the total rental income, over the

term of the lease. Rental income from subleased property is recognized as other income.

3.14 Expenses Recognition

Expenses are recognized in the Statement of Profit or Loss on the basis of a direct association between the

cost incurred and the earning of specific items of income. All expenditure incurred in the running of the

business and in maintaining the property, plant & equipment in a state of efficiency has been charged to

income in arriving at the profit for the year.

For the presentation of the Statement of Profit or Loss the Directors are of the opinion that the nature of the

expenses method present fairly the element of the Company’s performance, and hence such presentation

method is adopted.

3.15 Earnings per Share

The Group presents basic earnings per share data for its ordinary shares. Basic earnings per share is calculated

by dividing the Profit or Loss attributable to ordinary shareholders of the Group by the weighted average

number of ordinary shares outstanding during the year.

3.16 Statement of Cash Flows

The Cash Flow Statement has been prepared using the 'Indirect Method' of preparing Cash Flows in

accordance with the Sri Lanka Accounting Standard 7 'Cash Flow Statements.' Cash and cash equivalents

comprise short term, highly liquid investments that are readily convertible to known amounts of cash and are

subject to an insignificant risk of changes in value.

Cash and cash equivalents comprise of cash in hand and cash at banks and other highly liquid financial assets

which are held for the purpose of meeting short-term cash commitments with original maturities of less than

three months which are subject to insignificant risk of changes in their fair value.



3.17 Movement of Reserves

Movement of Reserves is disclosed in the Statement of Changes in Equity.

3.18 Related Party Transactions

Transactions with related parties are conducted on normal business terms. The relevant disclosures are given

in Note 39 to the Financial Statements.

3.19 Transactions with Related Parties

The Company carries out transactions in the ordinary course of its business with parties who are defined as

related parties in Sri Lanka Accounting Standard 24.

3.19.1 Transactions with Key Management Personnel

According to Sri Lanka Accounting Standard 24 “Related Party Disclosures”, Key management personnel,

are those having authority and responsibility for planning, directing and controlling the activities of the entity.

Accordingly, the company has pre-defined approved list of key management personal.

3.20 Operating Segments

An operating segment is a component of the Company that engages in business activities from which it may

earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the

Company’s other components. All operating segments operating results are reviewed regularly by Board of

Directors of the Company to make decisions about resources to be allocated to the segment and to assess its

performance, and for which discrete financial information is available.

Accordingly, the segment comprises of financial services are described in Note 46.

Segment results, assets and liabilities include items directly attributable to a segment as well as those that can

be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the period to

acquire segment assets that are expected to be used for more than one period.

Expenses that cannot be directly identified to a particular segment are allocated on bases decided by the

management and applied consistently throughout the year.

3.21 Subsequent Events

All material subsequent events have been considered and where appropriate adjustments or disclosures have

been made in the respective Notes to the Financial Statements.

3.22 Commitments and Contingencies

All discernible risks are accounted for in determining the amount of all known liabilities. Contingent

Liabilities are possible obligations whose existence will be confirmed only by uncertain future events or

present obligations where the transfer of economic benefit is not probable or cannot be reliably measured.

Contingent Liabilities are not recognized in the statement of financial position but are disclosed unless they

are remote.



3.23 Capital Management

The Board of Directors monitor the return on capital investment on a month basis. This review is mainly

carried out through return on investment analysis prepared on a quarterly basis. The plan forecasts are also

reviewed on a monthly basis to ensure that targets are met in order to manage the capital invested on the

Group Companies.

The Board of Directors also decides and monitors the level of dividends to ordinary shareholders. The

Company does not subject to any externally impose capital requirements. However, companies within the

group have such requirement based on the industry in which such company established. The group companies

which require externally imposed capital will monitor such requirement on a regular basis and report to

respective legal authority in order to ensure compliance with such regulatory requirement.


Notes to the Financial Statements


Rs. Rs. Rs. Rs.

4 Interest income

Interest income on;

Finance lease 2,855,538,892 2,752,713,098 2,855,538,892 2,752,713,098

Hire purchase - 809,424 - 809,424

Loans and advances 8,194,815,090 5,685,379,988 8,222,256,734 5,830,662,134

Hire rentals 17,967,053 16,517,838 17,967,053 16,517,838

Overdue rental 791,410,853 763,979,957 791,410,853 763,979,957

Factoring 1,295,537,680 1,303,970,860 1,295,537,680 1,303,970,860

Rentals & sales proceeds - contracts written off 165,066,506 229,549,753 165,066,506 229,549,753

13,320,336,074 10,752,920,918 13,347,777,718 10,898,203,064

5 Interest expense

Interest on other financial liabilities due to customers 2,863,023,326 1,428,276,406 2,863,023,326 1,428,276,406

Interest on bank overdrafts and other short-term borrowings 665,978,828 2,238,959,144 665,978,828 2,238,959,144

Interest on long term borrowings 1,571,046,631 1,597,328,655 1,571,046,631 1,597,328,655

Debenture interests 478,944,034 481,974,113 478,944,034 481,974,113

Charges on forward rate contracts 1,415,801,810 379,337,661 1,415,801,810 379,337,661

6,994,794,629 6,125,875,979 6,994,794,629 6,125,875,979

6 Other income

Dividend Income 6,199,403 46,650,781 6,199,403 46,650,781

Interest received from government securities 648,007,388 587,232,980 648,007,388 587,232,980

Interest income on commercial papers and fixed deposits 302,946,115 679,679,425 302,946,115 679,679,425

Profit on disposal of property, plant and equipment 10,646,161 5,434,017 10,646,161 5,434,017

Appreciation/ (loss) in market value of quoted investments - shares (47,242,344) 12,225,668 (47,242,344) 12,225,668

Appreciation in market value of quoted investments - unit trust 188,314,563 84,349,868 188,314,563 84,349,868

Documentation fees 297,701,251 203,742,960 297,701,251 203,742,960

Staff loan interest - 13,862 - 13,862

Commission Income 56,764,342 48,202,500 56,764,342 48,202,500

Sundry income 77,557,370 74,876,121 77,557,370 74,876,121

Foreign exchange gain / (loss) 18,505,196 18,280,679 18,505,196 18,280,679

Change in fair value of investment properties 59,882,000 4,000,000 59,882,000 4,000,000

Transfer fees and profit/(loss) on termination 615,142,804 566,683,332 615,142,804 566,683,332

Profit on deemed disposal on BRAC Lanka Finance PLC - - 242,647,810 -

2,234,424,249 2,331,372,193 2,477,072,059 2,331,372,193

7 Allowance for impairment and write offs

Lease receivables (Note 17.1.4) 212,256,723 180,823,308 212,256,723 180,823,308

Hire purchases (Note 17.2.4) 508,059 57,553,990 508,059 57,553,990

Advances & loans (Note 18.1.2) 299,876,221 149,013,173 299,876,221 149,013,173

Factoring (Note 19.1.1) 543,350,699 324,686,766 543,350,699 324,686,766

1,055,991,702 712,077,237 1,055,991,702 712,077,237

Group Company




Rs. Rs. Rs. Rs.

8 Depreciation and amortization

Depreciation of property, plant and equipment (Note 28) 111,627,678 105,921,514 111,627,678 105,921,514

Amortization off of intangible assets (Note 27) 2,033,280 3,684,208 2,033,280 3,684,208

113,660,958 109,605,722 113,660,958 109,605,722

9 Result from operating activities

Directors' fees & other Emoluments 16,092,126 20,980,883 16,092,126 20,980,883

Auditors' remuneration - statutory audit 1,185,000 1,300,000 1,185,000 1,300,000

Auditors' remuneration - audit related services 2,274,632 1,285,000 2,274,632 1,285,000

Depreciation & amortization 113,660,958 109,605,722 113,660,958 109,605,722

Legal and professional expenses 45,751,010 22,452,074 45,751,010 22,452,074

Personnel expenses (Note 9.1) 1,387,268,219 1,103,658,073 1,387,268,219 1,103,658,073

9.1 Personnel expenses

Salaries and other benefits 1,285,522,724 1,019,199,804 1,285,522,724 1,019,199,804

Defined contribution plan cost - EPF 67,103,843 55,270,191 67,103,843 55,270,191

Defined contribution plan cost - ETF 16,775,961 13,809,877 16,775,961 13,809,877

Defined benefit plan costs - Employee benefits 17,865,691 15,378,201 17,865,691 15,378,201

1,387,268,219 1,103,658,073 1,387,268,219 1,103,658,073

10 Value added tax on financial services and NBT

2018 2016 2018 2017

Rs. Rs. Rs. Rs.

Value added tax on financial services 535,606,180 375,691,226 535,606,180 375,691,226

Nation building tax on financial services 75,349,055 82,219,620 75,349,055 82,219,620

610,955,235 457,910,846 610,955,235 457,910,846

Group Company

Profit from ordinary activities before VAT on financial services, NBT and tax stated after charging all expenses including the following:

Group Company




Rs. Rs. Rs. Rs.

11 Income tax expense

Current tax expense (Note 11.1) 552,667,262 565,438,978 552,667,262 565,438,978

Deferred tax (reversal) / charge (Note 35.3.1) 208,044,620 (46,968,090) 208,044,620 (46,968,090)

Current income tax expense 760,711,882 518,470,888 760,711,882 518,470,888

Tax expense on discontinued operations 16,216,944 120,825,721 - -

Consolidated Current tax expense 568,884,206 686,264,699 552,667,262 565,438,978

11.1 Current tax expense

Current year income tax expense on ordinary activities (Note 11.2) 513,957,006 565,438,978 513,957,006 565,438,978

Under provision of taxes in respect of previous years 38,710,256 - 38,710,256 -

552,667,262 565,438,978 552,667,262 565,438,978

11.2 Numerical reconciliation of accounting profits to income tax expense,

Accounting profit before income tax 2,634,945,275 2,059,492,065 2,905,034,729 2,204,774,210

Aggregate disallowable expenses 8,944,828,348 9,264,447,079 8,944,828,348 9,264,447,079

Aggregate tax deductible expenses (5,428,766,931) (4,942,644,275) (5,428,766,931) (4,942,644,275)

Tax exempt income (4,394,347,708) (4,352,838,279) (4,394,347,708) (4,352,838,279)

(-) Allowable tax credits (838,642,856) (750,281,780) (838,642,856) (750,281,780)

(+/-) Other adjustments 917,544,607 741,250,117 647,455,154 595,967,971

Taxable profit 1,835,560,735 2,019,424,926 1,835,560,736 2,019,424,927

Income tax at 28 % 513,957,006 565,438,978 513,957,006 565,438,978

Current income tax expense 513,957,006 565,438,978 513,957,006 565,438,978

11.3 Deferred tax has been computed using the enacted tax rate of 28%

12 Discontinued Operations

12.1 Profit/ (loss) for the period from discontinued operations

2 months ended

31st May 2017

Year ended

31st Mar 2017

Interest income 621,834,234 3,385,929,993

Interest expense (184,961,256) (1,138,296,317)

Net interest income 436,872,978 2,247,633,676

Other income 28,180,508 9,083,471

Allowance for impairment & write offs (148,009,821) (338,894,294)

Expenses (231,684,370) (1,419,748,313)

Profit before tax 85,359,295 498,074,540

Income tax expense (16,216,944) (132,865,385)

Profit after tax 69,142,351 365,209,154

Results on divestment of group investments (Note 12.2) (150,637,455) -

Profit/ (Loss) for the period from discontinued operations (81,495,104) 365,209,154

Earnings/(loss) per share from discontinued operation (0.01) 0.06

Net cash from operating activities from discontinuing opearations (51,620,975) 749,956,846

Net cash used in investing activities from discontinuing opearions #REF! (925,118,908)

Net cash used in financing activities from discontinuing opearions (925,118,908) (451,351,075)

Group Company

The company is liable for tax at the rate of 28% on its taxable income in accordance with the inland revenue Act No 10 of 2006 and subsequent amendments made thereon.

The company held 99.76% of the issued share capital of BRAC Lanka Finance (BRAC) and it's holding diluted to 44.33% in May 2017 with the non subscription of rights

issued by BRAC, parent company, Lanka Orix Leasing Company PLC purchased all unsubscribed shares in order to maintain group control and to ensure that BRAC meets

the requirement for increased capital.




Rs. Rs. Rs. Rs.

Group Company

12.2 Effect of the disposal on the financial position of the Group

Property, plant and equipment (149,863,455)

(11,037,439,340)

Investment securities (1,220,413,497)

Investment in term deposits (1,374,516,382)

Cash and cash equivalents (216,458,574)

Trade and other current assets (198,856,704)

Bank overdrafts 410,138,019

Deposits from customers 3,396,330,685

Interest bearing loans & borrowings 4,398,438,955

Provision for taxation 118,329,295

Deferred tax liability 10,821,573

Trade and other payables 3,350,599,441

Retirement benefit obligations 24,769,828

Net Assets and Liabilities (2,488,120,156)

Less - Share Capital increased due to right issue 1,321,907,080

Net Assets disposed (1,166,213,076)

12.3 Results on divestment of group investments2 months ended

31st May 2018

Year ended

31st Mar 2017

Fair value of BRAC Lanka Finance PLC 1,265,987,676 Not Applicable

Less - Net Assets disposed (1,166,213,076) Not Applicable

Less - Goodwill on acquisition (253,210,966) Not Applicable

Add - Non controling interest 2,798,911 Not Applicable

(150,637,455)

13 Earnings per share

13.1 Amount used as the numerator

Net profit attributable to equity holders of the Company 1,792,638,207 1,896,644,018 2,144,322,847 1,686,303,322

Number of ordinary shares used as the denominator

Weighted average number of ordinary shares in issue (shares) 6,377,711,170 6,377,711,170 6,377,711,170 6,377,711,170

Earnings per Share 0.28 0.30 0.34 0.26

13.2 Earnings per share from continuing operations

Profit for the year from continuing operations 1,874,233,393 1,541,021,177 2,144,322,847 1,686,303,322

Weighted average number of ordinary shares in issue (shares) 6,377,711,170 6,377,711,170 6,377,711,170 6,377,711,170

Earnings per Share from continuing Operations 0.29 0.24 0.34 0.26

13.3 Earnings / (loss) per share from discontinuing operations

Profit/ (loss) attributable to equity holders of the company (81,299,516) 364,332,652

Weighted average number of ordinary shares in issue (shares) 6,377,711,170 6,377,711,170

Earnings per Share from discontinuing Operations (0.01) 0.06

14 Cash and cash equivalents Group

Components of cash equivalents 2017 2018 2017

Rs. Rs. Rs.

14.1 Favourable cash & cash equivalent balances

Cash in hand 170,515,473 171,636,959 158,027,247

Investment in REPO 575,000,000 - -

Balances with banks 1,404,904,507 2,205,920,571 1,329,821,956

2,150,419,980 2,377,557,530 1,487,849,203

14.2 Unfavourable cash & cash equivalent balances

Bank overdraft (1,805,044,333) (1,353,451,358) (1,390,806,997)

Total cash and cash equivalents in the cash flow statement 345,375,647 1,024,106,172 97,042,206

Company

Rentals receivable on lease assets, hire purchases ,operating leases advances and

other loans

Basic earnings per share is calculated by dividing the net profit for the year attributable to the ordinary shareholders by the weighted average number of ordinary shares

outstanding during the year.



Group

2017 2018 2017

Rs. Rs. Rs.

15 Financial assets held for trading

Equity shares (Note 15.1) 201,238,845 153,996,501 201,238,845

Unit trust (Note 15.2) 2,513,936,244 - 2,513,936,244

2,715,175,089 153,996,501 2,715,175,089

15.1 Equity shares

Balance as at beginning of the year 228,344,666 201,238,845 188,189,393

Marked to market adjustments (40,155,273) (47,242,344) 13,049,452

Balance at end of the year (Note 15.1.1) 201,238,845 153,996,501 201,238,845

15.1.1 Equity shares - Portfolio

2018

No. of Cost Fair Value No. of Cost Fair Value No. of Cost Fair Value

Shares Rs. Rs Shares Rs. Rs Shares Rs. Rs

Colombo Drydocks PLC 4,315 85,997 327,940 4,315 85,997 358,145 4,315 85,997 327,940

DFCC Bank PLC 38 380 4,332 38 380 4,438 38 380 4,332

Overseas Realty Ceylon PLC 113,680 1,664,891 2,296,336 113,680 1,664,891 2,057,608 113,680 1,664,891 2,296,336

Seylan Bank PLC 74,261 1,104,210 4,062,077 74,261 1,104,210 4,233,609 74,261 1,104,210 4,062,077

Hayleys Limited 734,144 216,803,911 194,548,160 734,144 216,803,911 147,342,701 734,144 216,803,911 194,548,160

219,659,389 201,238,845 219,659,389 153,996,501 219,659,389 201,238,845

15.2 Unit trust

2018


Units Rs. Rs Units Rs. Rs Units Rs. Rs

CAL High Yield Fund 101,735,645 1,700,000,000 1,710,450,880 - - - 101,735,645 1,700,000,000 1,710,450,880

CAL Investment Grade Fund 23,496,609 300,000,000 302,431,899 - - - 23,496,609 300,000,000 302,431,899

Invest trust Money market fund 39,603,960 500,000,000 501,053,465 - - - 39,603,960 500,000,000 501,053,465

2,500,000,000 2,513,936,244 - - 2,500,000,000 2,513,936,244

2017 2017

2017 2017

Group Company

As at 31st March As at 31st March As at 31st March

Company

As at 31st March

Group Company




Group

As at 31st March 2017 2018 2017

Rs. Rs. Rs.

16 Other investments

Financial investments - Available-for-sale (Note 16.1) 2,033,067,488 1,900,074,031 1,491,486,089

Loans and receivables (Note 16.2) 14,556,356,196 4,605,140,218 14,201,766,478

Derivative assets held for risk management (Note 16.3) 60,701,430 - 60,701,430

16,650,125,114 6,505,214,249 15,753,953,997

16.1 Financial investments - Available-for-sale

Investments in treasury bonds (Note 16.1.1) 1,872,958,045 40,182,554 1,424,507,339

Treasury bills (16.1.2) 93,119,693 1,792,912,727 -

Unquoted shares (Note 16.1.3) 67,189,750 66,978,750 66,978,750

(-) Specific allowances for impairment (16.1.4) (200,000) - -

2,033,067,488 1,900,074,031 1,491,486,089

16.1.1 Investments in treasury bonds

Cost Fair Value Cost Fair Value Cost Fair Value

Rs. Rs. Rs. Rs. Rs. Rs.

Softlogic Finance PLC 39,740,200 39,635,275 39,740,200 40,182,554 39,740,200 39,635,275

Entrust Securities PLC 21,367,125 24,723,263 - - 21,367,125 24,723,263

First Capital Treasuries Limited 502,413,529 497,454,983 - - 61,553,779 52,180,595

Capital Alliance 223,216,820 211,928,844 - - 223,216,820 211,928,844

Seylan Bank PLC 1,159,354,332 1,096,039,362 - - 1,158,450,150 1,096,039,362

Wealth Trust Securities Limited 3,078,818 3,176,318 - - - -

1,949,170,824 1,872,958,045 39,740,200 40,182,554 1,504,328,074 1,424,507,339

16.1.2 Treasury bills

Cost Fair Value Cost Fair Value Cost Fair Value


First Capital Treasures Limited 93,119,693 93,119,693 1,763,311,300 1,792,912,727 - -

93,119,693 93,119,693 1,763,311,300 1,792,912,727 - -

16.1.3 Unquoted shares


Shares Rs. Rs. Shares Rs. Rs. Shares Rs. Rs.

Equity Investments Lanka Ltd 16,875 168,750 168,750 16,875 168,750 168,750 16,875 168,750 168,750

Credit Information Bureau 210 21,000 21,000 100 10,000 10,000 100 10,000 10,000

Finance Houses Consortium (Pvt) Ltd. 20,000 200,000 200,000 - - - - - -

LOLC Myanmar Micro-Finance Company Limited 519,520 66,800,000 66,800,000 519,520 66,800,000 66,800,000 519,520 66,800,000 66,800,000

67,189,750 66,978,750 66,978,750

As at 31st March 2017 As at 31st March 2018 As at 31st March 2017


Group Company

Company

Group Company




16.1.4 Specific allowances for impairment Group

2017 2018 2017

Rs. Rs. Rs.

As at 01 April 2016 200,000 - -

Impairement loss for the period

Charge / (reversal) for the year - - -

200,000 - -

Balance as at 31st March 200,000 - -

Group

16.2 Loans and receivables As at 31st March As at 31st March As at 31st March

2017 2018 2017

Rs. Rs. Rs.

Repos 3,758,141,452 3,654,437,478 3,754,956,245

Investments in term deposits 9,091,563,770 950,702,740 8,740,159,259

Commercial papers 1,706,650,974 - 1,706,650,974

14,556,356,196 4,605,140,218 14,201,766,478

16.3 Derivative assets held for risk management Group


2017 2018 2017

Rs. Rs. Rs.

Forward rate contracts (Note.16.3.1) 60,701,430 - 60,701,430

16.3.1 Forward rate contracts

The fair value of the derivatives designated as cash flow hedges are as follows; Group

Assets Liabilities Assets Liabilities Assets Liabilities


60,701,430 15,562,267 - 271,625,120 60,701,430 15,562,267

The time periods in which the hedged cash flows are expected to occur and affect the statement of comprehensive income are as follows;

Within 1 Year 1-5 Years Over 5 Years Within 1 Year 1-5 Years Over 5 Years Within 1 Year 1-5 Years Over 5 Years

Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

22,173,892,831 - - 22,173,892,831 - - 9,492,089,194 7,873,209,130 -

For the year ended 31 March 2018 net loss of Rs.114.2 Mn (2017: Net gain of Rs. 18.5Mn) relating to the effective portion of cash flow hedges were recognised in other comprehensive income.


Group Company


Company

Company

Company

The company uses a mixture of forward foreign exchange contracts to hedge the foreign currency translation risk on its foreign borrowings.

Company



Group

As at 31st March 2017 2018 2017

Rs. Rs. Rs.

17 Rentals receivable on leases and hire purchases

Finance lease receivables (Note 17.1) 14,070,619,329 14,983,134,443 13,971,615,347

Hire purchase receivables (Note 17.2) 10,655,504 377,648 1,132,629

14,081,274,833 14,983,512,091 13,972,747,976

Rentals receivable on leases and hire purchases

Gross rental receivables 18,789,600,326 20,592,152,868 18,597,917,018

Unearned income (4,460,605,297) (5,422,000,302) (4,405,457,287)

Total rentals receivable ( Note 17.4) 14,328,995,029 15,170,152,566 14,192,459,731

Allowance for impairment (Note 17.3) (247,720,196) (186,640,475) (219,711,755)

Net receivables 14,081,274,833 14,983,512,091 13,972,747,976

17.1 Finance lease receivables

Gross rentals receivable 18,705,852,395 20,589,929,519 18,534,203,245

Unearned income (4,458,959,695) (5,422,000,302) (4,405,457,287)

14,246,892,700 15,167,929,217 14,128,745,958

Allowance for impairment (Note 17.1.3) (176,273,371) (184,794,774) (157,130,611)

14,070,619,329 14,983,134,443 13,971,615,347

Finance lease receivables

Receivables within one year (Note 17.1.1) 3,931,468,053 4,232,355,256 3,864,304,726

Receivable from one to five years (Note 17.1.2) 9,834,788,964 10,439,425,477 9,794,573,627

Overdue rental receivable 480,635,683 496,148,484 469,867,605

(-) Allowance for impairment (Note 17.1.3) (176,273,371) (184,794,774) (157,130,611)

14,070,619,329 14,983,134,443 13,971,615,347

17.1.1 Receivables within one year


Unearned income (2,255,465,978) (2,669,962,422) (2,226,692,606)

3,931,468,053 4,232,355,256 3,864,304,726

17.1.2 Receivable from one to five years


Unearned income (2,203,493,717) (2,752,037,880) (2,178,764,681)

9,834,788,964 10,439,425,477 9,794,573,627

17.1.3 Allowance for impairment

Allowance for individually significant impairment

Balance as at 1st April 75,083,077 64,040,405 75,083,078

Charge for the year (Note 17.1.4) 75,982,428 185,540,483 75,982,428

Write offs (87,025,101) (104,773,683) (87,025,101)

Balance as at 31st March 64,040,404 144,807,205 64,040,405

Allowance for individually non-significant impairment



Write offs (73,034,850) (79,818,877) (73,034,850)


Total allowances for impairment 176,273,371 184,794,774 157,130,611

17.1.4 Impairment provision for the year

Allowance for individually significant impairment 75,982,428 185,540,483 75,982,428

Allowance for individually non-significant Impairment 101,994,458 26,716,240 104,840,880

177,976,886 212,256,723 180,823,308

Company



Group

As at 31st March 2017 2018 2017

Rs. Rs. Rs.

17.2 Hire purchases receivables

Gross rentals receivable 83,747,931 2,223,347 63,713,773

Unearned income (1,645,602) - -

82,102,329 2,223,347 63,713,773


Net receivables 10,655,504 377,648 1,132,629

Hire purchase receivables

Receivables within one year (Note 17.2.1) 40,248,794 1,264,401 29,180,217

Receivables from one to five years (Note 17.2.2) 1,784,652 - -

Overdue rental receivable 40,068,883 958,946 34,533,556

(-) Allowance for impairment (Note 17.2.3) (71,446,825) (1,845,699) (62,581,144)

10,655,504 377,648 1,132,629

17.2.1 Receivables within one year

Gross rentals receivable 41,661,230 1,264,401 29,180,217

Unearned income (1,412,436) - -

40,248,794 1,264,401 29,180,217

17.2.2 Receivables from one to five years

Gross rentals receivable 2,017,818 - -

Unearned income (233,166) - -

1,784,652 - -




Charge for the year 25,540,985 1,244,186 25,540,985

Write offs (25,664,673) (30,554,429) (25,664,673)



Balance as at 1st April 21,211,705 31,466,620 825,597

Charge / (reversal) for the year 20,492,577 (736,127) 32,013,005

Write offs (1,371,983) (30,689,075) (1,371,983)

Balance as at 31st March 40,332,299 41,418 31,466,620


17.2.4 Impairment charge / (reversal) for the year


Allowance for individually non-significant Impairment 20,492,577 (736,127) 32,013,005

46,033,562 508,059 57,553,990

17.3 Allowance for impairment for leases and hire purchases receivables


Charge / (reversal) for the year 224,010,448 212,764,783 238,377,298

Write offs (187,096,606) (245,836,063) (187,096,606)


17.4 Concentration by sector

Gross amount Gross amount Gross amount %

2017 2018 2017

Manufacturing 1,036,708,997 7% 1,110,152,936 7% 1,026,186,898 7%

Agriculture 3,078,078,237 21% 3,620,113,104 24% 2,928,306,460 21%

Trade 2,656,323,207 19% 2,370,425,536 16% 2,650,895,646 19%

Transport 2,061,388,588 14% 2,084,796,934 14% 2,038,345,742 14%

Construction 851,706,794 6% 468,029,016 3% 851,199,229 6%

Services 2,311,801,596 16% 4,506,119,524 30% 2,575,590,617 18%

Micro and others 2,332,987,610 16% 1,010,515,516 7% 2,121,935,140 15%

14,328,995,029 15,170,152,566 14,192,459,731

Lease & hire purchase receivables amounting to Rs 11,251,780,305/- assigned under funding arrangement (2017- Rs..11,156,271,501 /-) also included

under lease and hire purchase receivebles.

Company

Group Company

% %



Group

2017 2018 2017

Rs. Rs. Rs.

18 Loans and advances

Advances and loans (Note 18.1) 43,810,290,091 41,208,800,160 33,795,065,806

43,810,290,091 41,208,800,160 33,795,065,806

18.1 Rentals receivable on loans to customers

Rentals receivable on loans to customers 43,319,653,715 40,374,967,327 33,319,861,208

Overdue loan installments 963,486,860 1,248,907,876 767,481,222

Total rentals receivable (Note 18.2) 44,283,140,575 41,623,875,203 34,087,342,430


43,810,290,091 41,208,800,160 33,795,065,806





Write off (40,371,451) (45,634,582) (40,371,451)


Allowance for individually non-significant Impairment



Write off (47,937,433) (131,443,220) (47,937,433)



18.1.2 Impairment provision for the year


Allowance for individually non-significant Impairment 98,935,077 165,423,619 52,797,833

273,790,343 299,876,221 149,013,173


Gross Amount as at

31.03.2017

Rs.

% %

Gross Amount as at

31.03.2018

Rs.

%

Gross Amount as

at 31.03.2017

Rs.

%

Manufacturing 7,268,604,505 16% 4,291,009,445 10% 2,508,977,549 7%

Agriculture 4,403,141,621 10% 2,754,191,081 7% 1,982,210,004 6%

Trade 10,707,219,175 24% 9,757,546,278 23% 8,138,979,996 24%

Transport 3,740,470,801 8% 3,901,268,927 9% 3,693,626,003 11%

Construction 1,761,569,560 4% 1,951,862,823 5% 1,692,140,310 5%

Services 9,222,130,468 21% 15,140,838,424 36% 8,274,454,391 24%

Micro and Others 7,180,004,445 16% 3,827,158,225 9% 7,796,954,178 23%

44,283,140,575 41,623,875,203 34,087,342,430

Group

2018 2018 2017

Rs. Rs. Rs.

19 Factoring receivables

Factoring receivables (Note 19.2) 6,546,928,552 4,016,678,708 6,546,928,552

Allowance for impairment (Note 19.1) (379,271,384) (431,762,375) (379,271,384)

Balance as at 31 March 6,167,657,168 3,584,916,333 6,167,657,168

19.1 Allowance for impairment




Overdue interest adjustement - (58,873,863) -

Write off (70,963,249) (431,985,845) (70,963,249)




Charge / (reversal) for the year (Note 19.1.1) (32,432,793) 9,419,168 (32,432,793)



19.1.1 Impairment charge / (reversal) for the year


Allowance for individually non-significant Impairment (32,432,793) 9,419,168 (32,432,793)

324,686,766 543,350,699 324,686,766

As at 31st March

Company

As at 31st March

Group Company

Loan receivables amounting to Rs 9,024,633,560/- assigned under funding arrangement (2017- Rs.10,774,897,266/-) also included under loan receivables.

Company




% % %

Agriculture 656,027,660 10% 563,753,230 14% 656,027,660 10%

Manufacturing 1,797,795,989 27% 851,490,240 21% 1,797,795,989 27%

Services 488,297,765 7% 218,829,016 5% 488,297,765 7%

Trading 978,286,361 15% 828,349,903 21% 978,286,361 15%

Transport 2,031,521,028 31% 1,202,785,530 30% 2,031,521,028 31%

Micro and Others 594,999,748 9% 351,470,789 9% 594,999,748 9%

6,546,928,552 4,016,678,708 6,546,928,552

Group

As at 31st March 2017 2018 2017

Rs. Rs. Rs.

20 Due from related parties

Dikwella Resort (Private) Limited - 370 -

Brown & Company PLC 4,189,200 - -

4,189,200 370 -

21 Current tax assets

With-holding tax recoverable 85,013,013 89,836,635 77,088,006

Other tax recoverable 851,437 - -

85,864,450 89,836,635 77,088,006

22 Other current assets

Financial assets

Loans to employess (Note 22.1) 1,275,545 1,196,787 1,275,545

1,275,545 1,196,787 1,275,545

Non-financial Assets

Prepayments and advances 263,401,107 126,926,465 203,490,152

Other non-financial receivables 187,807,557 7,628,042 187,737,327

Inventories - 3,878,600 -

451,208,664 138,433,107 391,227,479

Total other current assets 452,484,209 139,629,894 392,503,024

22.1 Loans to employees

Balance at the beginning of the year 1,339,513 1,275,545 1,339,513

Loans granted during the year 4,809,000 7,893,253 4,809,000

Loans recovered during the year (4,872,968) (7,972,011) (4,872,968)

Balance at end of the year 1,275,545 1,196,787 1,275,545

Company

As at 31st March

Group Company

Gross Amount 2017

Rs.

Gross Amount

2018

Rs.

Gross Amount

2017

Rs.



23 Equity accounted investee Principle Activity Holding % No. of Shares Balance (Rs.) Holding % No. of Shares Balance (Rs.) Holding % No. of Shares Balance (Rs.) Holding % No. of Shares Balance (Rs.)

Commercial Insurance Brokers Limited Insurance Brokering 40% 240,000 800,000 40% 240,000 800,000 40% 240,000 800,000 40% 240,000 800,000

Add : share of profits applicable to the company

Balance at the beginning of the year 82,259,004 75,054,139 82,259,004 75,054,139

Current year's share of profits before taxation 17,639,361 15,081,296 17,639,361 15,081,296

Taxation (6,221,388) (4,835,843) (6,221,388) (4,835,843)

Current year's share of profits after taxation 11,417,973 10,245,454 11,417,973 10,245,454

Actuarial loss (92,455) 276,959 (92,455) 276,959

Income tax on other comphrehensive income 25,888 (77,548) 25,888 (77,548)

Dividends received during the year (3,600,000) (3,240,000) (3,600,000) (3,240,000)

Sub total 90,010,410 82,259,004 90,010,410 82,259,004

Balance at the end of the year 90,810,410 83,059,004 90,810,410 83,059,004

BRAC Lanka Finance PLC Insurance Brokering 44% 105,499,048 1,265,987,676 - - - 44.33% 105,499,048 1,265,987,676 - - -

Add : share of profits applicable to the Company

Balance at the beginning of the year - - - -

Current year's share of profits before taxation 227,326,133 - 227,326,133 -

Taxation (85,476,441) - (85,476,441) -

Current year's share of profits after taxation 141,849,693 - 141,849,693 -

Actuarial loss 553,069 - 553,069 -

Fair value gains/(losses) that arose during the year 11,601,596 - 11,601,596 -

Income tax on other comphrehensive income (154,859) (154,859)

Dividends received during the year (3,797,962) - (3,797,962) -

Sub total 150,051,536 - 150,051,536 -

Balance at the end of the year 1,416,039,212 - 1,416,039,212 -

Total 1,506,849,622 83,059,004 1,506,849,622 83,059,004

23.1 Current year's share of profit

The Share of equity accounted investee profit is based on the audited financial statements of respective companies.

Summarized financial data as at financial year end of Commercial Insurance Brokers (Pvt) Ltd is stated below.

For the year ended 31st December 2017 2016

Rs. Rs.

Revenue 251,923,383 232,301,704

Profit before tax 44,329,541 37,703,241

Profit after tax 28,711,353 25,613,634

Total assets 303,563,966 273,855,907

Total liabilities 70,557,469 60,394,343

Summarized financial data as at financial year end of BRAC Lanka Finance PLC is stated below.

For the year ended 31st March 2018 2017

Rs. Rs.

Revenue 3,690,624,940 Not Applicable

Profit before tax 512,804,271 Not Applicable

Profit after tax 319,636,439 Not Applicable

Total assets 16,493,680,720 Not Applicable

Total liabilities 13,668,023,252 Not Applicable

Company

Group Company

As at 31st March 2018 As at 31st March 2017 As at 31st March 2018 As at 31st March 2017



24 Investment properties Group

As at 31 March 2017 2018 2017

Rs. Rs. Rs.

Balance at the beginning of the year - 46,000,000 -

Additions during the year 42,000,000 483,118,000 42,000,000

Transfers (to)/from property plant and equipment - 1,043,000,000 -

Change in fair value during the year 4,000,000 59,882,000 4,000,000

Balance at the end of the year 46,000,000 1,632,000,000 46,000,000

24.1 Valuation of investment properties

Group

Property & location Land extent Building

extent Historical cost

2017 2018 2017

Rs. Rs. Rs.

No 10,Third Lane,Pita kotte,Kotte 0A- 0R- 35.18P 1,647 42,000,000 46,000,000 52,000,000 46,000,000

No 156 & 122,Kolonnawa Road,Gothatuwa 1A- 1R- 33.71P 39,940 374,519,000 - 416,000,000 -

No 28A, Badulla Road Nuwara- Eliya Market approach 21.03P 5,426 108,599,000 - 107,000,000

No 305/5.Rajagiriya Road,Nawala 0A-3R-19.14P N/A 1,043,000,000 - 1,057,000,000

46,000,000 1,632,000,000 46,000,000

24.2 In 2016, folloing Investment property at Imaduwa, Galle amounted to Rs. 13.5 had been provided fully. Legal action has already been taken to secure the title from a third party .

25 Investment on subsidiaries

As at 31 March

No. of Shares Holding % Cost (Rs.) No. of Shares Holding % Cost (Rs.)

BRAC Lanka Finance PLC - - - 105,499,048 99.76% 1,023,301,966

- - 105,499,048 1,023,301,966

26 Goodwill Group

Rs. Rs. Rs.

2017 2018 2017

Goodwill on acquisition 253,210,966 - -

26.1 Goodwill is attribute to the acquition of BRAC Lanka Finance PLC.

Goodwill on acquisition is recognized as follows; Rs. Rs. Rs.

2017 2018 2017

Fair value of consideration paid 608,635,308 - -

Acquisition of NCI 243,611,315 - -

Identifiable assets acquired (599,035,657) - -

Goodwill 253,210,966 - -

Company

Company

Principle activity 2018 2017

Leasing, Hire purchase, Secured

Loans,Micro finance,Property mortgaged

loans and mobilization of public deposits.

Market approach

Market approach

Market approach

Company

The fair value of the investment properties were determined as at 31st March 2018, by Mr.W.M Chandrasena , R.I.C.S an independent valuers who hold recognized and relevant professional qualification and have recent experience in the location and category of the

investments properties.

Company

Method of valuation Fair value



27 Intangible assets

Group

Computer

softwares

Licence and

fees2018

Rs' Rs' Rs'

Carrying amount

As at 31st March 2017 2,505,330 3,438,059 5,943,388

Company

Computer

Softwares

Licence and

feesTotal

Rs' Rs' Rs'

Cost

Balance as at 1st April 2017 3,825,000 6,341,400 10,166,400

Balance as at 31 st March 2018 3,825,000 6,341,400 10,166,400

Accumulated amortization and impairement losses

Balance as at 1st April 2017 1,319,671 2,903,341 4,223,012

Amortisation charged 765,000 1,268,280 2,033,280

Balance as at 31st March 2018 2,084,671 4,171,621 6,256,292

Carrying amount

As at 31st March 2018 1,740,329 2,169,779 3,910,108

As at 31st March 2017 2,505,330 3,438,059 5,943,388



28 Property, Plant and Equipment


Carrying value

As at 31 March 2017 1,507,500,000 211,500,000 9,380,796 82,718,857 182,263,492 87,658,324 30,362,848 8,654,701 2,120,039,018


Cost/valuation

Balance as at 1st April 2017 1,507,500,000 211,500,000 93,197,377 152,385,292 207,134,019 226,342,837 108,223,956 - 2,506,283,481

Additions 120,180,000 2,057,977 8,982,500 57,709,054 78,927,868 60,236,582 - - 328,093,981

Revaluations 66,625,000 1,927,223 - - - - - - 68,552,223

Disposals - - (19,086,732) (3,291,120) (3,362,662) (1,153,670) (4,000,000) - (30,894,184)

Transfers / other adjustments - 389,800 - - 761,380 - (51,781,361) - (50,630,181)

Reclassification (1,043,000,000) - - 346,469 2,724,477 (3,070,946) (1,043,000,000)

-

Balance as at 31 st March 2018 651,305,000 215,875,000 83,093,145 207,149,695 286,185,082 282,354,803 52,442,595 - 1,778,405,320

Accumulated depreciation

Balance as at 31 March 2017 - - 86,120,941 89,164,350 138,668,473 138,684,513 77,861,108 - 530,499,385

Charge for the year - 8,456,276 6,809,131 25,694,305 32,146,673 30,693,753 7,827,540 - 111,627,678

Revaluations - (8,456,276) - - - - - - (8,456,276)

Disposals - - (18,955,541) (3,291,120) (3,362,662) (1,153,670) (4,000,000) - (30,762,993)

Transfers / other adjustments - - - - (296,636) - (51,781,361) - (52,077,997)

Balance as at 31 st March 2018 - - 73,974,531 111,567,535 167,155,848 168,224,596 29,907,287 - 550,829,797

Carrying value

As at 31 March 2018 651,305,000 215,875,000 9,118,614 95,582,160 119,029,234 114,130,207 22,535,308 - 1,227,575,523

As at 31 March 2017 1,507,500,000 211,500,000 7,076,436 63,220,942 68,465,546 87,658,324 30,362,848 - 1,975,784,096

ComputersAssets for Operating

Leases

Computer

SoftwareTotalCompany Freehold Lands

Freehold

Buildings

Freehold Motor

Vehicles

Furniture &

Fittings

Office

Equipment

ComputersAssets for Operating

Leases

Plant &

MachineryTotalGroup Freehold Lands

Freehold

Buildings

Freehold Motor

Vehicles

Furniture &

Fittings

Office

Equipment



28.1 Property, plant & equipment included fully depreciated assets that are still in use having a gross amount of Rs.349,324,832/- as at 31st March 2018 (2016/17- Rs. 273,651,405 )

28.2 Land & buildings of the company are stated based on a valuation performed by W.M Chandrasena, R I C S ( Sri Lanka) an Independent Chartered Valuer, as at 31st March 2018. The Details of which are as follows,

Information on freehold land and building of the company

Revaluation Extent Extent Accommodation

Land Building Total Land Building Surplus Land Building (Sq.Ft)


No.68, Bauddhaloka Mawatha,Colombo-04 342,000,000 208,000,000 550,000,000 313,500,000 197,687,296 38,812,704 0A- 0R- 19.00P 25,240 Head Office

No.04,UC Houses,New Town Anuradhapura. 75,280,000 - 75,280,000 - - 0A- 0R- 14.03P Anuradhapura

No 24,Abhaya Place,Anuradhapura. 44,900,000 - 44,900,000 - - 0A- 0R- 14.17P Anuradhapura

No 74,Colombo Road,Negombo 189,125,000 7,875,000 197,000,000 151,000,000 7,804,205 38,195,795 0A- 1R- 33.65P 3,740 Negambo 651,305,000 215,875,000 867,180,000 464,500,000 205,491,501 77,008,499

28.3

Class of Asset Cost

Accumulated

Depreciation Net Book Value Cost

Accumulated

Depreciation Net Book Value


Freehold lands 332,946,000 - 332,946,000 212,766,000 - 212,766,000

Freehold buildings 20,432,000 (12,770,000) 7,662,000 20,432,000 (12,259,200) 32,691,200

353,378,000 (12,770,000) 340,608,000 233,198,000 (12,259,200) 245,457,200

28.4 There were no restrictions on the title of the property plant and equipment as at the reporting date. Further there were no items pledged as securities for liabilities.

Company

2018 2017

If land and buildings were measured using the cost model,the carrying amounts would be as follows:

LocationValuation of Net Book Value of



Group

2017 2018 2017

Rs. Rs. Rs.

29 Derivative liabilities

Derivative liabilities held for risk management (Note 16.3.1) 15,562,267 271,625,120 15,562,267

15,562,267 271,625,120 15,562,267

30 Deposits from customers

Fixed and savings deposits at amortised cost

Fixed deposits 16,962,824,891 21,921,908,118 15,219,894,669

Saving deposits 1,446,192,999 788,591,008 386,997,426

Interest payable on customer deposits 340,246,895 774,609,753 329,050,339

18,749,264,785 23,485,108,879 15,935,942,434

31 Loans and borrowings

Short-term loans and others 13,134,044,966 2,004,131,506 13,134,044,966

Debentures (Note 31.3) 5,121,541,096 5,112,985,130 5,121,541,096

Long-term borrowings (Note 31.1) 28,061,483,934 21,815,545,583 26,011,344,759

46,317,069,996 28,932,662,219 44,266,930,821

31.1 Long-term borrowings

Balance at the beginning of the year 29,740,006,791 26,340,684,137 27,804,228,832

Repayments (2,022,091,986) (4,284,357,313) (1,570,741,911)

Amortized interest 674,221,240 (2,951,074) 107,197,216

Balance at the end of the year - Gross 28,392,136,045 22,053,375,750 26,340,684,137

Unamortized finance cost (330,652,111) (237,830,167) (329,339,378)

Balance at the end of the year 28,061,483,934 21,815,545,583 26,011,344,759

31.2 Loans and borrowings

Loans and borrowings- Current 20,028,639,204 9,619,669,022 17,978,500,029

Loans and borrowings- Non current 26,288,430,792 19,312,993,198 26,288,430,792

Total loans and borrowings 46,317,069,996 28,932,662,219 44,266,930,821

31.3 DebenturesYear of Issue

Year of

Redemption Type of Issue

Fixed Rate Semi

Annually

Rated, Senior, Unsecured, Redeemable debenture 2015 2020

Senior - Unsecured -

Redeemable 9.75%

Highest Price Lowest Price Last Traded Price Last Traded Date

Market summary

101.58 100.67 100.67 13-Oct-17

Interest rate of comparable government security

Buying and selling prices of treasury bond as at 31st March 2018.

5 Year Bond Price (Rs.) Yield (%)

Buying 103.82 10.26

Selling 104.59 10.07

Price (Rs.) Yield (%)

5 Year Bond 104.20 10.17

2018 2017

Debt to equity ratio 3.25 times 4.35 times

Quick asset ratio 1 times 1.118 times

Interest cover 1.42 times 1.36 times

Company

As at 31st March

Market prices and yield during the period

Company



As at 31st March Group

2017 2018 2017

Rs. Rs. Rs.

32 Current tax liabilities

Tax payable as at 1st April 588,902,778 413,645,436 464,454,831

Current tax expense for the year (Note 11) 686,264,699 552,667,262 565,438,978

Under/ (Over) Provision in respect of previouse year - (164,041,412) -

Tax paid during the year (754,409,690) (282,413,797) (616,248,373)

Tax payable as at 31st March 520,757,787 519,857,489 413,645,436

33 Amount due to related companies

Lanka Orix Leasing Company PLC 1,777,939,720 142,002,355 63,597,182

LOLC Motors Limited 1,984,497 3,002,161 1,939,271

LOLC Finance PLC 32,987,297 - 102,340

Lanka ORIX Information Technology Services Limited 306,478,406 10,831,909 16,047,729

LOLC Factors Limited 3,224,240,314 - -

Prosper Realty Ltd. 1,584,184 1,584,184 1,584,184

LOLC Micro Credit Limited 955,276 762,755 763,286

LOLC Corporate Services (Private) Limited 1,615,562 564,227 564,227

LOLC Life Insurance Limited 12,240,344 - -

5,360,025,600 158,747,591 84,598,219

34 Trade and other payables

Financial liabilities

Accrued Expenses 567,079,810 361,857,648 520,471,289

Creditors for cost of equipment 273,357,743 686,308,175 273,357,743

Other payable 169,184,348 337,459,353 165,708,934

Total financial liabilities 1,009,621,901 1,385,625,176 959,537,966

Non-financial liabilities

Other payable 140,287,706 328,677,855 109,193,769

Total non-financial liabilities 140,287,706 328,677,855 109,193,769

Total trade and other payables 1,149,909,607 1,714,303,031 1,068,731,735

35 Deferred tax assets & liabilities

35.1 Recognised deferred tax liabilities


Property, Plant & Equipment 327,618,515 91,733,185 169,774,776 47,536,938 267,198,627 74,815,616

Lease receivables 838,630,293 234,816,482 1,694,273,222 474,396,504 836,806,489 234,305,817

Employee benefits (95,895,278) (26,850,678) (95,420,547) (26,717,753) (72,300,061) (20,244,017)

Revaluation of Property, plant and equipment 111,326,650 31,171,462 116,710,553 32,678,955 111,326,650 31,171,462

Derivative Asset / (Liability) 60,701,430 16,996,400 (180,555,790) (50,555,621) 60,701,430 16,996,400

1,242,381,610 347,866,851 1,704,782,214 477,339,023 1,203,733,135 337,045,278

35.1.1 Movement in recognised deferred tax liabilities Group

2017 2018 2017

Rs. Rs. Rs.

Balance as at the beginning of the period 357,931,658 337,045,278 357,931,658

Reversal of deferred tax asset opening balance (2,048,360) - -

Originations / (Reversal) during the year (Note 35.3.1) (8,016,448) 140,293,745 (20,886,380)


Temporary Difference Tax Effect

Company

Temporary

Difference Tax Effect

Temporary

Difference Tax Effect

Group Company


Company



As at 31st March Group

2017 2018 2017

Rs. Rs. Rs.

Company

35.2 Deferred tax expense

Deferred tax liabilities

Originations / reversal during the period (Note 35.3.1) (8,016,448) 140,293,745 (20,886,380)

(8,016,448) 140,293,745 (20,886,380)

Group

35.3.1 Amount originating / (reversing) during the year 2017 2018 2017

Rs. Rs. Rs.

Recognised in profit and loss - Continuing Operating (46,968,090) 208,044,620 (46,968,090)

Recognised in profit and loss - Discontinued Operations 12,039,664 - -

Total Recognised in profit and loss (34,928,426) 208,044,620 (46,968,090)

Recognised in other comprehensive income - Continuing Operations 26,081,710 (67,750,875) 26,081,710

Recognised in other comprehensive income - Discontinuing Operations 830,269 - -

Total Recognised in other comprehensive income 26,911,978 (67,750,875) 26,081,710

(8,016,448) 140,293,745 (20,886,380)

Group

36 Employee benefits 2017 2018 2017

Present value of unfunded gratuity Rs. Rs. Rs.

Balance as at the beginning of the year 71,097,067 72,300,062 50,341,964

Benefit paid during the year (2,260,942) (6,933,364) (2,011,238)

Expense recognised in the income statement (Note 36.1) 21,433,260 17,865,691 15,378,201

Expense recognised in the other comprehensive income (Note 36.2) 5,625,892 6,094,101 8,591,135

95,895,277 89,326,490 72,300,062

36.1 Expense recognised in the income statement

Current service cost 12,019,721 9,189,684 8,247,722

Interest on obligation 9,413,539 8,676,007 7,130,479

21,433,260 17,865,691 15,378,201

36.2 Expenses recognized in other comprehensive income

Acturial loss / (gain) 5,625,892 8,227,464 8,591,135

Adjustment - (2,133,363) -

5,625,892 6,094,101 8,591,135

Company

Company



Group

2017 2018 2017

Actuarial assumptions

Rate of discount 12% 11.0% 12.0%

Salary increment rates 9% 9.0% 9.0%

Retirement age 55 years 55 years 55 years

36.3 Sesivitity of the actuarial assumptions

Assumption Rate change

Financial Position -

Liability Rate change

Financial Position -

Liability

Rs. Rs.

Discount rate +1 99,673,153 +1 77,572,906

-1 82,891,111 -1 67,655,514

Future salary increases +1 82,335,746 +1 67,608,702

-1 97,196,376 -1 77,539,170

There are no material issues pertaining to employees and industrial relations of the company.

37 Stated capital Group

2017 2018 2017

Rs. Rs. Rs.

Issued and fully paid (Note 37.1) 1,425,946,629 1,425,946,629 1,425,946,629

Number of shares (Note 37.2) 6,377,711,170 6,377,711,170 6,377,711,170

Group

37.1 Movement in stated capital 2017 2018 2017

Rs. Rs. Rs.

Balance at the beginning of the year 1,425,946,629 1,425,946,629 1,425,946,629


37.2 Movement in number of ordinary shares

No of shares at the beginning of the year 6,377,711,170 6,377,711,170 6,377,711,170

No of shares at the end of the year 6,377,711,170 6,377,711,170 6,377,711,170

Company

Sensitivity analysis on discounting rate and salary increment rate to statement of financial position and statement of profit and Loss.

Company

2018 2017

Company

All shares rank equally with regard to the company’s residual assets. The holders of ordinary shares are entitled to receive dividends as declared from time to

time, and are entitled to one vote per share at meetings of the company.

The employee benefit liability was actuarial valued under the projected unit credit (PUC) method by professionally qualified actuary firm Messers Piyal S.

Goonethilake and Associates on 31st March 2018.

The principle fnancial assumptions used in the valuation for the current and comparative years are as follows;

Company



Group

2017 2018 2017

Rs. Rs. Rs.

38 Reserves

Statutory reserve (Note 38.1) 660,369,706 736,135,589 628,919,447

Revaluation reserve (Note 38.2) 872,381,597 947,882,602 872,381,596

General reserve (Note 38.3) 231,779,789 288,079,789 288,079,789

Fair value reserve on AFS (Note 38.4) (129,541,981) 22,567,080 (127,214,307)

Hedging reserve (Note 38.5) 47,766,929 1,106,124 47,766,933

Total 1,682,756,039 1,995,771,184 1,709,933,458

38.1 Statutory reserve

38.2 Revaluation reserve

38.3 General reserve

38.4 Fair value reserve on available for sale

38.5 Hedging reserve

Group

As at 31st March 2017 2018 2017

Rs. Rs. Rs.

39 Retained earnings

Balance brought forward 9,617,451,437 11,039,653,947 9,443,651,998

Net profit for the year 1,896,644,018 2,144,322,847 1,686,303,322

Other comprehensive income (5,625,892) (6,094,101) (8,591,135)

Share of other comprehensive income from equity accounted investee 199,410 11,933,238 199,410

Transferred to/(from) during the year (94,832,201) (107,216,142) (84,315,166)

Tax on other comprehensive income (excluding tax on revaluation) 1,575,250 1,706,347 2,405,518

Acquisition of NCI 2,495,674 - -


This reserve is maintained to recognize the fair value changes of avalable for sale financial assets.

The hedging reserve comprises of the effective portion of the cumulative net change in fair value of cash flow hedging instruments related to hedge

transactions that have not yet affected the profit or loss.

Company

The carrying amount of the retained earnings represents the undistributed earnings held by the company. This could be used to absorb future losses

and dividend declaration.

Company

As at 31st March

The reserve is created according to Direction No.1 of 2003 issued under the Finance Business Act No.42 of 2011. The company transfers 5% of its

annual net profit after tax to this reserve in compliance with this direction.

The revaluation reserve relates to the revaluation surplus of Property, Plant and Equipments and the long term investments. Once the respective

revalued items have been disposed, the relevant portion of revaluation surplus is transferred to retained earnings.

General reserves are the retained earnings of a company which are kept aside out of company’s profits to meet future (known or unknown) obligations



40 Maturity analysis of financial assets and financial liabilities

40.1 Company

Carrying amount

31st March 2018 Less than 1 month 1-3 months 4 - 12 months 13 - 60 months

More than

60 months

Carrying amount

31st March 2017

Maturity analysis of financial assets Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Interest earning assets

Cash and cash equivalents 2,377,557,530 2,377,557,530 - - - - 1,487,849,203

Financials assets held for trading

Equity securities 153,996,501 153,996,501 - - - - 201,238,845

Unit Trust - - - - - - 2,513,936,244

Investment securities

Available-for-sale investment securities 1,900,074,031 1,900,074,031 - - - - 1,491,486,089

Loans and receivables 4,605,140,218 4,605,140,218 - - 14,201,766,478

Derivative assets held for risk management - - - - - - 60,701,430

Finance lease receivables, hire purchases and

operating leases

Finance lease receivables (Net) 14,983,134,443 349,987,371 847,560,460 3,319,351,556 10,255,312,659 210,922,398 13,971,615,347

Hire purchase receivables (Net) 377,648 377,648 - - - - 1,132,629

Advances and other loans

Loans and advances (Net) 41,208,800,160 2,176,089,782 4,253,493,018 14,263,493,624 20,476,862,009 38,861,729 33,795,065,806

Factoring receivables (Net) 3,584,916,333 289,968,529 44,811,017 87,938,741 3,162,198,046 - 6,167,657,168

Trade and other current assets

Loans to staff 1,196,787 1,196,787 - - - - 1,275,545

68,815,193,651 11,854,388,397 5,145,864,495 17,670,783,921 33,894,372,714 249,784,127 73,893,724,784

Maturity analysis of financial liabilities

Interest bearing liabilities

Non-derivative liabilities

Bank overdrafts 1,353,451,358 1,353,451,358 - - - - 1,390,806,997

Deposits liabilities

Deposits from customers 23,485,108,879 2,424,025,543 4,026,796,131 13,198,299,984 3,835,987,221 - 15,935,942,434

Interest bearing borrowings

Short term loans and others 2,004,131,506 - - 2,004,131,506 - - 13,134,044,966

Debentures 5,112,985,130 - - 112,985,130 5,000,000,000 - 5,121,541,096

Long-term borrowings 21,815,545,583 31,459,645 3,494,846,919 3,976,245,821 14,312,993,198 - 26,011,344,759

Other current liabilities 845,055,766 158,747,591 686,308,175 - - - 357,955,962

54,616,278,222 3,967,684,137 8,207,951,225 19,291,662,441 23,148,980,419 - 61,951,636,214

An analysis of the interest bearing assets and liabilities employed by the Company as at 31st March 2018, based on the remaining period at the balance sheet date to the respective contractual maturity date is given below.



41 Related party transactions

41.1 Identity of related parties

41.2 Transactions with key management personnel

(i) Loans to directors

No loans have been given to the directors of the company.

(ii) Compensation of key management personnel

Short-term employement benefits

2018 2017

Rs. Rs.

Directors fees and other emoluments 16,092,126 20,980,883

Other KMP emoluments 24,207,448 22,734,530

40,299,574 43,715,413

Long-term employment benefits

There are no long term employment benefits to key management personnel during the year.

(iii) Related party transactions

Accordingly, the value of all transactions carried out by the company with its related companies during the year ended 31 march 2018 are summarized bellow.

Company

Lanka ORIX Leasing Company PLC Parent Interest expense (15,605,133)

Transfer of funds (4,412,419,026)

Funds received 5,544,219,026

Handling fee (537,091,572)

Gurantee fees (9,750,000)

Asset hire expenses (21,821,997)

Show back Charge (50,312,810)

Settlement of expenses by LOLC (575,623,661) (142,002,355) (63,597,182)

BRAC Lanka Finance PLC Associate Loan given 700,000,000

Loan recovered (700,000,000)

Interest on loan 132,764,360 - -

Commercial Insurance Brokers (Pvt) Ltd Associate Insurance commission received 56,754,342 - -

LOLC Motors Limited Fellow SubsidiaryFund transfer settlement of valuation fee income 28,746,461

Settlement of expenses LOMO (2,610,700)

Valuation fee income of LOMO (27,198,651)

Interest income received 42,785,009 (3,002,161) (1,939,272)

Fellow SubsidiaryProvision for information services (125,519,451)

Payments 152,960,852

Expenses shared (22,225,581) (10,831,909) (16,047,729)

Browns & Company PLC Fellow SubsidiaryLease vehicle purchased 408,620,200 - -

Ishara Traders Other Related PartyLease vehicle purchased 4,900,000 - -

LOLC Micro Credit Ltd. Fellow SubsidiaryProvision for yard fee (7,800,000)

Expenses shared (1,618,050)

Fund transfer (Settlement of expenses by CLC) 9,418,581 (762,755) (763,286)

Prosper Realty Ltd. Fellow SubsidiaryProvision for rent Fee (16,200,000)

Fund transfer settlement of rent fee 19,010,200

Tax on shared rent fee (2,810,201) (1,584,184) (1,584,184)

LOLC Corporate Services (Pvt) Ltd Fellow SubsidiaryProvision for secretarial fees (5,769,840)

Tax on shared service (1,000,891)

Fund transfer (Settlement of expenses by CLC) 6,770,731 (564,227) (564,227)

Galoya Plantations Limited Fellow SubsidiaryInterest income received 30,253,045 - -

LOLC General Insurance Ltd. Fellow SubsidiaryInsurance premium paid 2,326,606 - -

There are no related party transactions other than those disclosed in Note 41 to the financial statements.

Amount due

from/(to) as at

31/3/2017

Rs.

Lanka ORIX Information Technology Services

Ltd

Name of the company Relationship Nature of the transaction

Transaction value

for the year ended

31st March 2018

Rs.

Amount due

from/(to) as at

31/3/2018

Rs.

The company carried out transactions in the ordinary course of it's business with parties who are defined as related parties in Sri Lanka Accounting Standard 24 (LKAS 24) ' Related Party

Disclosures', the details of which are reported below.

The company has related party transactions with, its equity accounted investee BRAC Lanka Finance PLC and Commercial Insurance Brokers (Pvt) Ltd and Lanka ORIX Leasing Company

PLC, the main shareholder of the Company and with its Directors.

According to Sri Lanka Accounting Standard (LKAS) 24 'Related Party Disclosures', key management personnel are those having authority and responsibility for planning, directing and

controlling the activities of the entity. Accordingly, the Board of Directors (including Executive and Non-Executive) and the heads of its core functions have been identified as key

management personnel of the company. Independent transaction with key management personnel, are disclosed as follows,

Company



41.3 Related party transactions exceeding 10%of the equity or 5% of the total assets of the entity as per audited financial statements, whichever is lower

There are no related party transactions those require specified disclosure in accordance with the continuing listing requirements of colombo stock exchange.

41.4

42 Contingent liabilities

2018 2017

Rs. Rs.

Guarantees issued to banks and other institutions 185,553,100 59,723,175

43 Capital commitments

2018 2017

Rs. Rs.

Forward exchange contracts 19,053,392,831 17,365,298,324

Facility limits not utilized 5,153,077,599 2,206,186,372

44 Litigation and claims

45 Events after reporting period

No circumstances have arisen subsequent to the reporting date which would require adjustments to or disclosure in the financial statements other than the following;

There were no significant capital commitments which have been approved or contracted for by the company as at the reporting date except for the following.

As at 31st March

Company

On this commitment the company will receive US $ 143,487,097 on conversion.

Litigation is a common occurrence in the finance industry due to the nature of the business undertaken. The group has formal controls and policies for managing legal claims. Once

professional advice has been obtained and the amount of loss reasonably estimated, the group makes adjustments to account for any adverse effects which the claims may have on its financial

standing.

The terms and conditions of the transactions with key management personnel and their related parties were no more favorable than those available, or which might reasonably be expected to

be available, on similar transactions to non-key management personnel related entities on an arm’s length basis.

As at 31st March

Company



46 Comparative information

The presentation and classifiaction of the following items in these financial statements are amended to ensure the comparability with the current year.

As at 31 March 2017

Other current assets

Loans and

Advances Other current assets

Loans and

Advances

Rs' Rs' Rs' Rs'

Insuarance premium receivables

As previously reported in the published financial statements for the year ended 31 March 2017 484,376,965 43,778,397,335 424,395,780 33,763,173,050

Adjustment made on insurance receivables (31,892,756) 31,892,756 (31,892,756) 31,892,756

Adjusted balance in the published financial statements for the year ended 31 March 2018 452,484,209 43,810,290,091 392,503,024 33,795,065,806

Trade & Other

payable

Trading liabilities -

fair value through

profit or loss

Trade & Other

payable

Trading liabilities -

fair value through

profit or loss

Trading liabilities - fair value through profit or loss Rs' Rs' Rs' Rs'

As previously reported in the published financial statements for the year ended 31 March 2017 1,165,471,874 - 1,084,294,002 -

Adjustment made on derivative liabilities (15,562,267) 15,562,267 (15,562,267) 15,562,267

Adjusted balance in the published financial statements for the year ended 31 March 2018 1,149,909,607 15,562,267 1,068,731,735 15,562,267

Group Company



47 Valuation of Financial Instruments

47.1 Fair Value Hierarchy

Group Note Carrying amount Level 1 Level 2 Level 3 Total

As at 31 March 2017 (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)

Assets

Equity securities 15.1 201,238,845 201,238,845 - - 201,238,845

Unit trust 15.2 2,513,936,244 2,513,936,244 - - 2,513,936,244

2,715,175,089 2,715,175,089 - - 2,715,175,089

Other Investment

Corporate bonds 16.1.1 1,872,958,045 - 1,872,958,045 - 1,872,958,045

Treasury bills 16.1.2 93,119,693 - 93,119,693 93,119,693

Unquoted equity securities 15.1.3 67,189,750 - - 67,189,750 67,189,750

Derivative assets held for risk management 15.3 60,701,430 - 60,701,430 - 60,701,430

2,093,968,918 - 2,026,779,168 67,189,750 2,093,968,918

Investment properties 24 46,000,000 - - 46,000,000 46,000,000

Property, plant and equipment 28 2,120,039,018 - - 2,120,039,018 2,120,039,018

4,809,144,007 2,715,175,089 2,026,779,168 67,189,750 4,809,144,007

47.2 Financial instruments not measured at fair value

Group

As at 31 March 2017

Note Level 1 Level 2 Level 3 Total Fair Value

Total Carrying

amount

Assets (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)


Loans & receivables

Repos 16.2 - 3,758,141,452 - 3,758,141,452 3,758,141,452

Investments in term deposits 16.2 - 9,091,563,770 - 9,091,563,770 9,091,563,770

Commercial papers 16.2 - 1,706,650,974 - 1,706,650,974 1,706,650,974

Others - - -

- 14,556,356,196 - 14,556,356,196 14,556,356,196

Finance lease receivables, hire purchases and operating leases

Finance lease receivables 17.1 - 13,001,477,374 - 14,070,619,329

Hire purchase receivables 17.2 - 14,591,712 - 10,655,504

Operating lease receivables - - - - -

- - 13,016,069,086 - 14,081,274,833


Advances and loans 18.1 - 43,698,128,964 43,698,128,964 43,810,290,091

Factoring receivables 19 - - 6,167,657,168 6,167,657,168 6,167,657,168

- - 49,865,786,132 49,865,786,132 49,977,947,259

- 14,556,356,196 62,881,855,218 64,422,142,328 78,615,578,288

Liabilities

Deposits liabilities 30 - - 16,559,337,762 16,559,337,762 18,749,264,785


Short-term loans and others 31 - - 13,134,044,966 13,134,044,966 13,134,044,966

Debentures 31 - 4,321,647,595 - 4,321,647,595 5,121,541,096

Long-term borrowings 31.1 - 28,390,823,310 28,390,823,310 28,392,136,045

- 4,321,647,595 41,524,868,276 45,846,515,871 46,647,722,107

- 4,321,647,595 58,084,206,038 62,405,853,633 65,396,986,892

Company Note Carrying amount Level 1 Level 2 Level 3 Total


Trading assets - fair value through profit or loss


153,996,501 153,996,501 - - 153,996,501

Other Investment

Corporate bonds 16.1.1 40,182,554 40,182,554 - 40,182,554

Treasury bills 16.1.2 1,792,912,727 - 1,792,912,727 - 1,792,912,727


Derivative assets held for risk management 16.3 - - - - -

1,900,074,031 - 1,833,095,281 66,978,750 1,900,074,031

Investment properties 24 1,632,000,000 - - 1,632,000,000 1,632,000,000


2,054,070,532 153,996,501 1,833,095,281 66,978,750 2,054,070,532

The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy into which each fair value measurement is categorised. For cash and

cash equivivalants, short term receivables and payables, the fair value reasonably approximates its cost.



Company Note Carrying amount Level 1 Level 2 Level 3 Total


Trading assets - fair value through profit or loss


Unit trust 15.2 2,513,936,244 2,513,936,244 2,513,936,244

2,715,175,089 2,715,175,089 - - 2,715,175,089

Other Investment

Corporate bonds 16.1.1 1,424,507,339 1,424,507,339 - - 1,424,507,339


Derivative assets held for risk management 16.3 60,701,430 - 60,701,430 - 60,701,430

1,552,187,519 1,424,507,339 60,701,430 66,978,750 1,552,187,519

Investment properties 24 46,000,000 - - 46,000,000 46,000,000


4,267,362,608 4,139,682,428 60,701,430 66,978,750 4,267,362,608

47.3 Financial instruments not measured at fair value

As at 31 March 2018


Total Carrying

amount



Repos 16.2 - - 3,654,437,478 3,654,437,478 3,654,437,478

Investments in term deposits 16.2 - - 950,702,740 950,702,740 950,702,740

- - 4,605,140,218 4,605,140,218 4,605,140,218


Finance lease receivables 17.1 - - 15,275,350,902 15,275,350,902 14,983,134,443

Hire purchase receivables 17.2 - - 377,646 377,646 377,648

- - 15,275,728,550 15,275,728,550 14,983,512,091


Advances and loans 18.1 - - 40,968,312,121 40,968,312,121 41,208,800,160


- - 44,553,228,454 44,553,228,454 44,793,716,494

- - 64,434,097,220 64,434,097,220 64,382,368,802

Liabilities Level 1 Level 2 Level 3 Total Fair Value

Total Carrying

amount

(Rs.) (Rs.) (Rs.) (Rs.) (Rs.)



Debentures 31 - 4,561,097,843 - 4,561,097,843 5,112,985,130


Long-term borrowings 31.1 - - 21,815,545,583 21,815,545,583 21,815,545,583

- 4,561,097,843 23,819,677,091 28,380,774,933 28,932,662,219

- 4,561,097,843 42,318,211,280 46,879,309,124 52,417,771,098

As at 31 March 2017


Total Carrying

amount



Repos 3,754,956,245 3,754,956,245 3,754,956,245

Investments in term deposits 16.2 - - 8,740,159,259 8,740,159,259 8,740,159,259

Commercial Papers 16.2 - - 1,706,650,974 1,706,650,974 1,706,650,974

- - 14,201,766,478 14,201,766,478 14,201,766,478


Finance lease receivables 17 - - 12,865,911,299 12,865,911,299 13,971,615,347

Hire purchase receivables 17 - - 1,132,629 1,132,629 1,132,629

- - 12,867,043,928 12,867,043,928 13,972,747,976


Advances and loans 18 - - 32,411,724,747 32,411,724,747 33,795,065,806


- - 38,579,381,915 38,579,381,915 39,962,722,973

- - 65,648,192,322 65,648,192,322 68,137,237,426

Liabilities




Debentures 31 - 4,321,647,595 - 4,321,647,595 5,121,541,096

Long-term borrowings 31.1 - 26,340,684,137 26,340,684,137 26,340,684,137

- 4,321,647,595 39,474,729,102 43,796,376,699 44,596,270,199

- 4,321,647,595 53,220,744,513 57,542,392,108 60,532,212,633

The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy into which each fair value measurement is categorised.



For the year ended 31 March 2018

48 Segment Information

Group

Conventional Financial

Services Islamic Financial Services Factoring Business Others/ Adjustments Total


Continuing Operations

Total revenue 13,592,190,184 663,014,831 1,299,555,308 - 15,554,760,323

Net interest cost (6,485,667,636) (91,690,031) (417,436,962) - (6,994,794,629)

Profit before operating expenses 7,106,522,548 571,324,800 882,118,346 - 8,559,965,694

Operating expenses (4,386,009,915) (97,280,840) (984,042,095) - (5,467,332,850)

Value added tax on financial services and NBT (552,500,362) (21,815,112) (36,639,762) - (610,955,235)

Profit from operations 2,168,012,271 452,228,848 (138,563,510) - 2,481,677,609

Discontinued Operations

Profit from operations of discontinued operations (net

of Tax) (81,495,104) (81,495,104)


Continuing Operations

Total revenue 11,419,532,246 355,845,395 1,308,915,470 - 13,084,293,111




Value added tax on financial services & NBT (392,976,292) (12,540,313) (52,394,242) - (457,910,846)


Discontinued Operations

Profit from operations of discontinued operations (net

of Tax) 365,209,154 365,209,154


Capital expenditure - - - 318,764,443 318,764,443

Depreciation of property plant and equipment - - - 113,660,958 113,660,958

Provision for/(reversal of provision for)doubtful debts

and bad debts written off 487,874,892 24,766,111 543,350,699 - 1,055,991,702





and bad debts written off 381,946,123 5,444,348 324,686,766 - 712,077,237

As at 31st March 2017

Total assets 55,580,644,901 2,274,558,132 6,167,656,168 24,867,841,871 88,890,701,072

Total liabilities 64,296,599,213 2,055,906,136 7,044,371,241 964,519,913 74,361,396,503

Business Segment




Company

Conventional Financial

Services Islamic Financial Services Factoring Business Others/ Adjustments Total


Total revenue 13,862,279,638 663,014,831 1,299,555,308 - 15,824,849,777




Value added tax on financial services and NBT (552,500,362) (21,815,112) (36,639,762) - (610,955,235)



Total revenue 11,564,814,390 355,845,397 1,308,915,470 - 13,229,575,257




Value added tax on financial services & NBT (392,976,292) (12,540,313) (52,394,242) - (457,910,846)

1,963,767,703 278,031,182 (47,270,128) - 2,194,528,757

Profit from operations





and bad debts written off 487,874,892 24,766,111 543,350,699 - 1,055,991,702





and bad debts written off 381,946,123 5,444,348 324,686,766 - 712,077,237


Total assets 52,383,673,626 3,808,507,424 3,584,916,332 13,731,347,768 73,508,445,150

Total liabilities 49,384,920,832 3,194,025,295 3,336,954,073 1,086,521,001 57,002,421,201


Total assets 45,493,254,649 2,274,558,132 6,167,656,168 23,825,628,334 77,761,097,283

Total liabilities 53,556,640,459 2,055,906,136 7,150,027,431 822,989,223 63,585,563,249

Business Segment

Commercial Leasing & finance PLC


49 Financial risk management

Overview

The company has exposure to the following risks from financial instruments:

1 Credit risk

2 Liquidity risk

3 Market risk

4 Operational risk

Risk management framework

Credit risk

Management of credit risk

Facilities granted to customers (Lease / Hire purchase / Loans)

1.

2.

3.

4.

5.

6.

7.

Allowances for impairment

Write-off policy

Regular audits of business units and company credit processes are undertaken by ERM.

The company establishes an allowance for impairment losses on assets carried at amortized cost that represents its estimate of incurred losses in its lease and

loan portfolio. The main components of this allowance are a specific loss component that relates to individually significant exposures, and, for assets

measured at amortised cost,individually non-significant impairment established for groups of homogeneous assets as well as for individually significant

exposures that were subject to individual assessment for impairment but not found to be individually impaired.

The company writes off a loan or an investment debt security balance, and any related allowances for impairment losses, when board of directors determines

that the loan or security is uncollectible. This determination is made after considering information such as the occurrence of significant changes in the

borrower’s/issuer’s financial position such that the borrower/issuer can no longer pay the obligation, or that proceeds from collateral will not be sufficient to

pay back the entire exposure. For smaller balance standardized loans, write-off decisions generally are based on a product-specific past due status.

Developing and maintaining the company’s risk grading in order to categorize exposures according to the degree of risk of financial loss faced and to focus

management on the attendant risks. The risk grading system is used in determining where impairment provisions may be required against specific credit

exposures. The current risk grading framework consists of eight grades reflecting varying degrees of risk of default and the availability of collateral or other

credit risk mitigation. The responsibility for setting risk grades lies with the final approving executive/committee as appropriate. Risk grades are subject to

regular reviews by company Risk.

Reviewing compliance of business units with agreed exposure limits, including those for selected industries, country risk and product types. Regular reports

on the credit quality of local portfolios are provided to company credit who may require appropriate corrective action to be taken.

Providing advice, guidance and specialist skills to business units to promote best practice throughout the company in the management of credit risk.

Each Branch and Regional Head is required to implement company credit policies and procedures, with credit approval authorities delegated from the

company credit committee. Each Branch and Regional Head is responsible for the quality and performance of its credit portfolio and for monitoring and

controlling all credit risks in its portfolios, including those subject to central approval.

Credit department has a Credit committee formed internally, is responsible for management of the company’s credit risk, including:

Formulating credit policies in consultation with Branch and Regional Heads, covering collateral requirements, credit assessment, risk grading and reporting,

documentary and legal procedures, and compliance with regulatory and statutory requirements.

Establishing the authorization structure for the approval and renewal of credit facilities. Authorization limits are allocated to branch and Regional Heads,

Senior Marketing Officers at Head Office. Larger facilities require approval by company/Group Credit, Head of company Credit, company Credit Committee

or the board of directors as appropriate.

Reviewing and assessing credit risk. company credit assesses all credit exposures in excess of designated limits, prior to facilities being committed to

customers by the business unit concerned. Renewals and reviews of facilities are subject to the same review process.

Limiting concentrations of exposure to counterparties, geographies and industries (for loans and advances), and by issuer, credit rating band and market

liquidity (for investment securities).

This note presents information about the company’s exposure to each of the above risks, the company’s objectives, policies and processes for measuring and

managing risk, and the company’s management of capital.

The board of directors has overall responsibility for the establishment and oversight of the company’s risk management framework. The board has

established the Integrated Risk Management Committee (IRMC), which are responsible for developing and monitoring company risk management policies

in their specified areas. All board committees have both executive and non-executive members and report regularly to the board of directors on their

activities.

The company’s risk management policies are established to identify and analyse the risks faced by the company, to set appropriate risk limits and controls,

and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products

and services offered. The company, through its training and management standards and procedures, aims to develop a disciplined and constructive control

environment, in which all employees understand their roles and obligations.

The company audit committee and the IRMC are responsible for monitoring compliance with the company’s risk management policies and procedures, and

for reviewing the adequacy of the risk management framework in relation to the risks faced by the company. The company audit committee is assisted in

these functions by Enterprise Risk Management division (ERM). ERM undertakes both regular and ad-hoc reviews of risk management controls and

procedures, the results of which are reported to the company audit committee.

Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and

arises principally from the company’s loans and advances to customers and other company's, and investment debt securities. For risk management purposes,

credit risk arising on trading assets is managed independently.



Exposure to credit risk

1. Lease and hire purchase portfolio

Note Finance lease Hire Purchase Total

Rs' Rs' Rs'

Carrying amount 17 14,983,134,443 377,648 14,983,512,091

Assets at amortized cost

individually significant impairment

Gross amount 144,807,205 1,804,281 146,611,486

Allowance for impairment (144,807,205) (1,804,281) (146,611,486)

Carrying amount - - -

for the rest of portfolio where individually non-significant Impairment is applicable

Gross amount 15,023,122,012 419,066 15,023,541,078

Allowance for impairment (39,987,569) (41,418) (40,028,988)

Carrying amount 14,983,134,443 377,647 14,983,512,090

14,983,134,443 377,647 14,983,512,090

2. Advances and other loans

Note Advances and loans Factoring

receivables

Total

Rs' Rs' Rs'

Carrying amount 17 & 18 41,208,800,160 3,584,916,333 44,793,716,493

Assets at amortized cost

individually significant impairment

Gross amount 287,390,480 768,566,787 1,055,957,267


Carrying amount - 369,390,773 369,390,773

for the rest of portfolio where individually non-significant Impairment is applicable

Gross amount 41,336,484,723 3,248,111,921 44,584,596,644


Carrying amount 41,208,800,159 3,215,525,559 44,424,325,720

41,208,800,159 3,584,916,333 44,793,716,493

3. Trade & Other Receivables

4. Cash and cash equivalents

5. Excessive risk concentration

Liquidity risk

Management of liquidity risk

The Company relies on bank borrowings and deposits from customers and Company's, as its primary sources of funding. While the Company's bank borrowings have maturities of

over one year, deposits from customers and Company's generally have shorter maturities and a large proportion of them are repayable on demand. The short-term nature of these

deposits increases the Company’s liquidity risk and the Company actively manages this risk through maintaining competitive pricing and constant monitoring of market trends.

In order to avoid excessive concentrations of risk, the Company’s policies and procedures include specific guidelines to focus on maintaining a diversified portfolio. Identified

concentrations of credit risks are controlled and managed accordingly. Selective hedging is used within the Company to manage risk concentrations at both the relationship and

industry levels.

Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or another financial

asset.

The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and

stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.

Company central Treasury receives information from other business units regarding the liquidity profile of their financial assets and liabilities and details of other projected cash

flows arising from projected future business. Company central Treasury then maintains a portfolio of short-term liquid assets, largely made up of short-term liquid investment

securities, loans and advances to Company's and other inter-Company facilities, to ensure that sufficient liquidity is maintained within the Company as a whole. The liquidity

requirements of business units and subsidiaries are met through short-term loans from Company central Treasury to cover any short-term fluctuations and longer term funding to

address any structural liquidity requirements.

The Company held cash and cash equivalents of Rs.2,377 million at 31 March 2018 (2017 : Rs.1,488 million) which represents its maximum credit exposure on these assets.

Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would

cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the

Company’s performance to developments affecting a particular industry.

The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the

Company’s customer base, including the default risk of the industry in which customers operate, as these factors may have an influence on credit risk.

The Credit Committee has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company’s standard payment and

delivery terms and conditions are offered. The Company’s review includes external ratings, when available, and in some cases Company references. Purchase limits are established

for each customer, which represents the maximum open amount without requiring approval from the Credit Committee ; these limits are reviewed quarterly. Customers that fail to

meet the Company’s benchmark creditworthiness may transact with the Company only on a prepayment basis.

More than 59 percent of the Company’s customers have been transacting with the Company for over one year. In monitoring customer credit risk, customers are Companied

according to their credit characteristics, including whether they are an individual or legal entity, whether they are a wholesale, retail or end-user customer, geographic location,

industry, aging profile, maturity and existence of previous financial difficulties.

Company

Commercial Leasing & finance PLC


Exposure to liquidity risk

Group

2017 2018 2017

At 31 March 86.04 37.54 98.45

Maturity analysis for financial assets and liabilities

Market Risk

Management of market risks

Rs. Rs.

Effect on Rate sensitive Assets 416,238,752 (416,238,752)

Effect on Rate sensitive Liabilities (216,702,057) 216,702,057

Sensitivity of profit or loss 199,536,695 (199,536,695)

Operational Risk

● requirements for the reconciliation and monitoring of transactions;

● compliance with regulatory and other legal requirements;

● documentation of controls and procedures;

●

● requirements for the reporting of operational losses and proposed remedial action;

● development of contingency plans;

● training and professional development;

● ethical and business standards; and

● risk mitigation, including insurance where this is effective.

50 Capital Management

The Company’s regulatory capital under the CBSL guidelines is as follows;

As at As at

31.03.2018 31.03.2017

Ordinary share capital 1,425,946,629 1,425,946,629

Statutory reserve 736,135,589 628,919,447

General reserve 288,079,789 288,079,789

Retained earnings (Excluding share of profits of equity accounted investee) 12,844,244,190 10,957,394,943

Tier I capital / Total Capital 15,294,406,197 13,300,340,808

The Company’s policy is to maintain a strong capital base so as to ensure investor, creditor and market confidence and to sustain future development of the business. The impact of

the level of capital on shareholders’ return is also recognized and the Company recognizes the need to maintain a balance between the higher returns that might be possible with

greater gearing and the advantages and security afforded by a sound capital position.

Capital Element

requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified;

Compliance with Company standards is supported by a programme of periodic reviews undertaken by ERM. The results of ERM reviews are discussed with the department heads to

which they relate, with summaries submitted to the Audit Committee and senior management of the Company.

The Company’s capital management is performed primarily considering regulatory capital.

The Company’s lead regulator, the Central Bank of Sri Lanka (CBSL) sets and monitors capital requirements for the Company.

The Company is required to comply with the provisions of the Finance Companies (Capital Funds) Direction No.01 of 2003, Finance Companies (Risk Weighted Capital Adequacy

Ratio) Direction No.02 of 2006 and Finance Companies (Minimum Core Capital) Direction No.01 of 2011 in respect of regulatory capital.

The Company’s regulatory capital consists primarily of tier 1 capital, which includes ordinary share capital, retained earnings and statutory reserves.

Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Company’s involvement with financial instruments, including processes,

personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and

generally accepted standards of corporate behaviour.

The Company’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Company’s reputation with overall cost effectiveness and

to avoid control procedures that restrict initiative and creativity.

The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management within each business unit. This

responsibility is supported by the development of overall Company standards for the management of operational risk in the following areas:

Requirements for appropriate segregation of duties, including the independent authorisation of transactions;

If Market rates

up by 1 % the

effect of the same

to the Interest

Income/(Expense

If Market rates

drop by 1 %

the effect of the

same to the

Interest

Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. The company’s policy is to

continuously monitor positions on a daily basis and hedging strategies are used to ensure positions are maintained within prudential levels.

The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the company’s income statement.

Company

Market risk is the risk that changes in market prices, such as interest rates, equity prices, foreign exchange rates and credit spreads (not relating to changes in the obligor’s/issuer’s

credit standing) will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk

exposures within acceptable parameters, while optimising the return on risk.

The key measure used by the Company for managing liquidity risk is the ratio of net liquid assets to deposits from customers. For this purpose net liquid assets are considered as

including cash and cash equivalents and Treasury bills and Repos maturing with in next financial year. A similar, but not identical, calculation is used to measure the Company’s

compliance with the liquidity limit established by the Company’s lead regulator, [Central Bank of Sri Lanka - CBSL]. Details of the reported Company ratio of net liquid assets to

deposits from customers at the reporting date and during the year were as follows:

Company

Note no 38 of the financials statements summarises the maturity profile of the undiscounted cash flows of the company’s financial assets and liabilities as at 31 March 2018. The

Company’s expected cash flows on these instruments vary significantly from this analysis.

Documents

COMMERCIAL LEASING & FINANCE PLC · 2 days ago · 3.6 Property, Plant and Equipment 3.6.1 Freehold Property, Plant & Equipment 3.6.1.1 Basis of Recognition Property, plant and equipment