Annual Report 2009/10 - Colombo Stock Exchange

Connecting Sri Lanka to Progress
Sierra Cables PLC - Annual Report 2009/10
23
Significant Accounting Policies
3. FOREIGN CURRENCY TRANSLATION
Foreign Currency Transactions
The Company Financial Statements are presented in
Sri Lanka Rupees, which is the Company’s functional and
presentation currency.
All foreign exchange transactions are converted to Sri Lanka
Rupees, at the rates of exchange prevailing at the time the
transactions are effected.
Monetary assets and liabilities denominated in foreign currency are
retranslated to Sri Lanka Rupee equivalents at the exchange rate
prevailing at the Balance Sheet date. Non-monetary assets and
liabilities are translated using exchange rates that existed when
the values were determined. The resulting gains and losses are
accounted for in the Income Statement.
4. INCOME TAX EXPENSES
Income tax expense comprises current and deferred tax. Income
tax expense is recognized in profit or loss except to the extent that
it relates to items recognized directly in equity, in which case it is
recognized in equity.
Current Tax
Current tax is the expected tax payable on the taxable income
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. 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 amendments thereto. Relevant details are
disclosed in Note 5 to the Financial Statements.
Deferred Tax
Deferred tax is provided using the liability method on temporary
differences at the Balance Sheet date between the tax bases
of assets and liabilities, and their carrying amounts for financial
reporting purposes.
Deferred tax assets and liabilities are recognised for all
temporary differences. Deferred tax assets are recognised for
all deductible temporary differences, carry-forward of unused
tax credits and unused tax losses, to the extent that it is probable
that taxable profit will be available against which the deductible
temporary differences, and the carry-forward of unused tax
credits and unused tax losses can be utilized.
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 profit will be available to allow
all or part of the deferred tax asset to be utilised. Unrecognised
deferred tax assets are reassessed at each Balance Sheet date
and are recognised to the extent that it has become probable
that future taxable profit will allow the deferred tax asset to be
recovered.
Deferred tax assets and liabilities are measured at tax rates that
are expected to apply to the year when the asset is realised or
liability is settled, based on the tax rates and tax laws that have
been enacted or substantively enacted as at the Balance Sheet
date.
Income tax relating to items recognised directly in equity is
recognised in equity.
Deferred tax assets and deferred tax liabilities are offset, if a
legally enforceable right exists to set off current tax assets against
current tax liabilities and the deferred taxes relate to the same
taxable entity and the same taxation authority.
5. VALUATION OF ASSETS AND THEIR BASES OF
MEASUREMENT
Property, Plant & Equipment
- Recognition and Measurement
The property, plant & equipment are recorded at cost less accumulated
depreciation and impairment losses as setout below.
Items of property, plant and equipment are derecognised upon
disposal or when no future economic benefits are expected from
its use. Any gain or loss arising on derecognition of the asset
is included in the Income Statement in the year the asset is
derecognised.
The cost of property, plant & equipment is the cost of purchase or
construction together with any expenses incurred in bringing the
assets to its working condition for its intended use.
Expenditure incurred for the purpose of acquiring, extending
or improving assets of permanent nature by means of which to
carry on the businesses or to increase the earning capacity of the
business has been treated as capital expenditure.
The cost of property, plant & equipment is the cash price equivalent
at the recognition date. If payment is deferred beyond normal credit
terms, the difference between the cash price equivalent and the
total payment is recognized as interest over the period of credit
unless such interest is recognized in the carrying amount of the
item in accordance with the allowed alternative treatment in SLAS
20 “Borrowing Costs”.
The carrying values of property, plant & equipment are reviewed
for impairment when events or changes in circumstances indicate
that the carrying value may not be recoverable.
- Subsequent Costs/ Replacement of Parts
The cost of replacing part of an item of property, plant & equipment
is recognized in the carrying amount of the item if it is probable
that the future economic benefits embodied within the part will
flow to the Company and its cost can be measured reliably. The
carrying amount of those parts that are replaced is derecognized.
The costs of the day-to-day servicing of property, plant and
equipment are recognized in profit or loss as incurred.
Depreciation
Provision for depreciation is calculated by using a straightline
method on the cost or valuation of all property, plant and
equipment, other than freehold land, in order to write off such