Lion Brewery (Ceylon) PLC Annual Report 2011 - Carson and ...

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Notes to the Financial Statements contd.
3.16 Expenditure Recognition
(a) Operating Expenses
All expenses incurred in day-to-day operations of the business and in maintaining the property, plant & equipment
in a state of efficiency has been charged to revenue in arriving at the profit or loss for the year. Provisioning has
been made for bad and doubtful debts, all known liabilities and depreciation on property, plant & equipment.
(b) Finance Expenses
Interest expenses are recognised on an accrual basis.
(c ) Borrowing Costs
All borrowing costs are recognised as an expense in the period in which they are incurred, except those that are
directly attributable to the construction of property, plant & equipment which are capitalised as a part of the cost of
the asset during the period of construction / development.
3.17 Income tax expenses
Income tax expense comprises current and deferred taxation.
(a) Current Taxation
The Company’s liability to taxation has been computed in accordance with the provisions of the Inland Revenue Act
No. 10 of 2006 and amendments made thereto, as stated in the respective notes to these Financial Statements.
However, in terms of the Agreement entered into with the Board of Investment of Sri Lanka, the operating profits of
the Company was exempt from income tax for a period of twelve years commencing 1st of June 1998 and ended on
31st May 2010.
(b) Deferred Taxation
Deferred taxation is provided on the balance sheet liability method for all temporary differences as at the balance
sheet date between the tax bases of assets and liabilities and their carrying amounts for financial reporting
purposes. The balance in the deferred taxation account represents income tax applicable to the difference between
the written down values for tax purposes of the assets on which tax depreciation has been claimed and the net book
values of such assets, offset by the provision for retirement benefit which is deductible for tax purposes only on
payment.
Deferred tax assets, including those related to temporary tax effects of income tax losses and credits available to
be carried forward are recognised only to the extent that it is probable that future taxable profits will be available
against which the asset can be utilised. 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 realised.
3. 18 Dividend Distribution
Dividend distribution to the Company’s shareholders is recognised as a liability in the period in which the dividends
are approved by the Company’s shareholders.
3.19 Related Party Transactions
Disclosures are made in respect of the transactions in which one party has the ability to control or exercise
significant influence over the financial and operating decisions/policies of the other, irrespective of whether a price is
being charged or not.
3.20 Segment Reporting
A segment is a distinguishable component of an enterprise that is engaged in either providing products or services
(Business Segment) or in providing products or services within a particular economic environment (Geographical
Segment) which is subject to risk and rewards that are different from those of the other segment.