Annual Report 2009/10 - Colombo Stock Exchange

24 Sierra Cables PLC - Annual Report 2009/10 Connecting Sri Lanka to Progress
Significant Accounting Policies
amounts over the estimated useful economic life of such assets.
The leased assets are depreciated over the shorter of the lease
term and their useful lives.
The depreciation rates of the assets are as follows:
Assets Depreciation %
Buildings on Freehold Land 5
Plant and Machinery 7.5
Motor Vehicles 20
Furniture and Fittings 20
Office/Factory Equipment 20
Computer Equipment 20
The useful life, residual values and depreciation methods of
assets are reviewed, and adjusted if required, at the end of each
financial year.
Leased Assets
Where assets are financed under an agreement under which
substantially all the risks and rewards of ownership are transferred
to the lessee, such assets are recorded in the Balance Sheet
as Property, Plant & Equipment at their cash price. The total
interest payable is accounted as interest in suspense, and the
corresponding credit is recorded as a payable to the lessor. The
instalments paid are used to reduce this liability.
An amount equal to the interest charge is transferred from the
interest in suspense account to the Income Statement.
Investments
All quoted and unquoted securities, which are held as non-current
investments, are valued at cost. The cost of the investment is the
cost of acquisition inclusive of brokerage and costs of transaction.
The carrying amounts of long term investments are reduced to
recognise a decline which is considered other than temporary, in
the value of investments, determined on an individual investment
basis.
In the Company’s Financial Statements, investments in
subsidiaries and associate have been accounted for at cost,
net of any impairment losses which are charged to the Income
Statement. Income from these investments is recognised only to
the extent of dividends received.
Investment in Treasury Bills/Commercial Papers reflected at the
cost and interest accrued as to the Balance Sheet date.
Impairment of Assets
The identifiable assets of the Company are reviewed at each
balance sheet date to determine whether there is any indication
of impairment. If any, such indication of impairment. If any, such
indication exists the recoverable amount of the asset is estimated
and shown in the Balance Sheet. The impairment loss is taken to
the Income Statement.
Inventories
Inventories are measured at the lower of cost and net realizable
value. Net realisable value is the estimated selling price less
estimated costs of completion and the estimated costs necessary
to make the sale.
The costs incurred in bringing inventories to its present location
and condition, are accounted for as follows:
Raw Materials - On actual cost, on first-in-first-out basis
Finished Goods and
Work in Progress - At actual cost, on first-in-first-out basis
Trade and Other Receivables
Trade and other receivable are stated at the amounts they
are estimated to realise, net of provisions for bad and doubtful
receivables.
Specific provision is made as provision for bad and doubtful debts.
Short-Term Investments
Treasury Bills and other interest bearing securities held for resale
in the near future to benefit from short-term market movements
are accounted for at cost plus the relevant proportion of the
discounts or premiums.
Cash and Cash Equivalents
Cash and cash equivalents in the Cash Flow Statement comprise
cash at bank and in hand and, net of outstanding bank overdrafts.
6. LIABILITIES AND PROVISIONS
Liabilities classified as current liabilities in the Balance Sheet are
those obligations payable on demand or within one year from the
Balance Sheet date. Liabilities classified, as non-current liabilities
are those obligations, which expire beyond a period of one year
from the Balance Sheet date.
Trade & Other Payables
Trade & Other Payables are stated at their cost.
Defined Benefit Plan - Gratuity
As required by the Sri Lanka Accounting Standard No. 16 (revised
2006) - “ Employee Benefits” which became effective from 1 July
2007, the group has provided for gratuity liability based on the
Gratuity Formula Method (Principal assumptions used are disclosed
in Note 15 to the Financial Statements).
However, according to the payment of Gratuity Act No. 12 of 1983,
the liability for gratuity to an employee arises only on completion
of five years continued service with the Company.
The liability is not externally funded nor actuarially valued. The
item is grouped under Non-Current Liabilities in the Balance
Sheet.
Being a listed company, Sierra Cables PLC has not adopted
actuarial valuation as there are no employees in the company.
However, other companies in the group have used the Gratuity
Formula Method as recommended by the Sri Lanka Accounting