Annual Report.CDR - Colombo Stock Exchange

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S I G N I F I C A N T A C C O U N T I N G P O L I C I E S 3.4. Taxation Income tax expense comprises of current and deferred income tax and social responsibility levy. 3.4.1. Current Tax The tax currently payable is based on profit for the year as adjusted for taxation purposes in accordance with the provisions of the Inland RevenueAct No. 10 of 2006 and amendments thereto. Taxable profit differs from profit as reported in the consolidated income statement because it excludes items of income or expense that are taxable or deductible in other years, and it further excludes items that are never taxable or deductible. The Company's liability for current tax is calculated using tax rates that have been enacted or substantively enacted by the balance sheet date. 3.4.2. Deferred Taxation Deferred tax is recognize on differences between the carrying amounts of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of taxable profit, and is accounted for using the balance sheet liability method. Deferred tax liabilities are generally recognized for all taxable temporary differences, and deferred tax assets are generally recognized for all deductible temporary differences to the extent that it is probable that taxable profits will be available against which those deductible temporary differences can be utilized. Such assets and liabilities are not recognized if the temporary differences arises from goodwill or from the initial recognition (other than in a business combination) of other assets and liabilities in a transaction that affects neither the taxable profit nor the accounting profit. The carrying amount of deferred tax assets is reviewed at each balance sheet date and reduced to the extent that it is no longer probable that sufficient taxable profits will be available to allow all or part of the asset to be recovered. Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the period in which the liability is settled or the asset realized, based on tax rates (and tax laws) that have been enacted or substantively enacted by the balance sheet date. The measurement of deferred tax liabilities and assets reflects the tax consequences that would follow from the manner in which the company expects, at the reporting date, to recover or settle the carrying amount of its assets and liabilities. Deferred tax assets and liabilities are offset when there is a legally enforceable right to set off current tax assets against current tax liabilities and when they relate to income taxes levied by the same taxation authority and the company intends to settle its current tax assets and liabilities on a net basis. 3.5. ValueAdded Tax on Financial Services The Value Added Tax of 20% on financial services is charged in accordance with the provisions of the ValueAdded Tax (Amended )Act No. 13 of 2004 with effect from January 2004 on the supply of financial services. The value addition comprises profit before tax of the company adjusted for book depreciation, prescribed components of the emoluments to the employees, and economic depreciation. 3.6. ValueAdded Tax on Taxable Supplies Value Added Tax on taxable supplies is paid according to the provisions of the Value Added TaxAct No. 14 of 2002 and the amendments thereto. T H E F I N A N C E C O . P L C - A N N U A L R E P O RT 2 0 0 9 - 2 0 1 0 23
S I G N I F I C A N T A C C O U N T I N G P O L I C I E S 3.7. Imputation of Tax credit on interest income from Treasury Bills Interest income from treasury bills is grossed by the addition of tax credit imputed to 10% withholding tax on the income realized during the period under review. 3.8. Foreign Currencies The financial statements of the company are presented in Sri Lanka Rupees, which is the company's functional currency. All transactions in currencies other than the functional currency are recorded in Sri Lanka Rupees, using the exchange rates prevailing at the time the transactions were effected. At each balance sheet date, monetary assets and liabilities denominated in foreign currencies are retranslated to Sri Lanka Rupee equivalents at the exchange rate prevailing on the balance sheet date. Non-monetary assets and liabilities denominated in foreign currencies are not retranslated. <strong>Exchange</strong> differences arising on settlement of monetary items and retranslation of monetary items, are recognized in profit or loss in the year in which they arise. 3.9. Borrowing Costs Borrowing costs directly attributable to the acquisition, construction, or production of qualifying assets, which are assets that necessarily take a substantial period of time to get ready for their intended use or sale, are added to the cost of those assets, until such time as the assets are substantially ready for their intended use of sale. Investment income earned on the temporary investment of specific borrowing pending their expenditure on qualifying assets is deducted from the borrowing costs eligible for capitalization. All other borrowing costs are recognized in profit or loss in the period in which they are incurred. 4. ASSETSAND BASES OFTHEIR VALUATION 4.1. Amounts due from customers (Loans andAdvances) Amounts due from customers are stated in the balance sheet net of provision for bad and doubtful loans. Interest is not accrued to revenue in the case of non-performing loans and advances. 4.1.1. Provision for loan losses Specific provision for possible loan losses are made on the basis of continuous review of all advances to customers in accordance with Sri Lanka Accounting Standard No. 33 “Revenue Recognition and disclosures in the financial statements of Finance Companies”, and the requirement as stipulated by the Central Bank of Sri Lanka (Direction No. 3 of 2006) based on an aged classification of advances as shown below: Period outstanding Provision made Arrears within 6 to 11 months 50% Arrears – 12 months and over 100% In addition, as a matter of prudence, general provisions are made wherever necessary based on past experience and judgment, taking into account risks inherent in any portfolio. Provisions are applied to write off advances, in part or in whole, when loans are considered partly or wholly irrecoverable. T H E F I N A N C E C O . P L C - A N N U A L R E P O RT 2 0 0 9 - 2 0 1 0 24
Page 2 and 3: C O N T E N T S Financial Highlight
Page 4 and 5: C O R P O R AT E I N F O R M AT I O
Page 6 and 7: K E Y E X E C U T I V E S M E S S A
Page 8 and 9: R E V I E W O F O P E R AT I O N S
Page 10 and 11: R E P O RT O F T H E D I R E C T O
Page 12 and 13: R E P O RT O F T H E D I R E C T O
Page 14 and 15: C O R P O R AT E G O V E R N A N C
Page 16 and 17: STATEMENT OF DIRECTORS RESPONSIBILI
Page 18 and 19: TELEGRAM: ASSETS, COLOMBO E-MAIL- t
Page 20 and 21: BALANCE SHEET AS AT 31.3.2010 31.3.
Page 22 and 23: CASH FLOW STATEMENT FOR THE YEAR EN
Page 26 and 27: S I G N I F I C A N T A C C O U N T
Page 32 and 33: NOTES TO THE FINANCIAL STATEMENTS F
Page 34 and 35: NOTES TO THE FINANCIAL STATEMENTS (
Page 58 and 59: S H A R E H O L D E R I N F O R M A
Page 60 and 61: B R A N C H N E T W O R K AMBALANTO
Page 62 and 63: S E RV I C E C E N T R E S Maharaga
Page 64 and 65: F O R M O F P R O X Y I/We………

Annual Report.CDR - Colombo Stock Exchange

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