Annual Report 2010-2011 - Colombo Stock Exchange

financial year are discussed below. The respective carrying
amounts of assets and liabilities are given in related notes to
the financial statements.
Defined benefit plans
The cost of defined benefit plans- gratuity is determined using
actuarial valuations. The actuarial valuation involves making
assumptions about discount rates, expected rates of return
on assets, future salary increases, mortality rates and future
pension increases. Due to the long term nature of these plans,
such estimates are subject to significant uncertainty. Further
details are given in Note 17.
Intangible assets
For the purposes of impairment testing, goodwill is allocated
to cash generating units when cash generating units to which
goodwill has been allocated are tested for impairment annually,
using Value in Use method. The calculation of value in use for
the cash generating unit is most sensitive to the assumptions of
sales growth, discount rates and cost increases due to inflation.
Further details are given in Note 4.
Inventory valuation - Produce inventory
The Group has valued part of unsold produce inventory at
since realized prices. The balance unsold inventory remained
as at the balance sheet date valued at an estimated selling
price based on most recent selling prices available subsequent
to the year end.
2.2 FOREIGN CURRENCY TRANSLATION
2.2.1 Foreign currency transactions
The consolidated financial statements are presented in
Sri Lanka rupees, which is the company’s functional and
presentation currency.
The functional currency is the currency of the primary
economic environment in which the entities of the group
operate.
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.
2.2.2 Foreign operations
The Balance Sheet and Income Statement of subsidiaries
which are deemed to be foreign operations are translated
to Sri Lanka rupees at the rate of exchange prevailing as at
the Balance Sheet date and at the average annual rate of
exchange for the period respectively.
Arpitalian Compact Soles (Private) Limited use US dollars
as its functional currency as it conducts the majority of its
business in US dollars and is entitled to the benefits provided to
companies approved by the Board of Investment of Sri Lanka.
Arpitalian Compact Soles (Private) Limited adopted US dollars
as its measurement and functional currency in line with SLAS
21 which deals with “Effects of Changes in Foreign Exchange
Rates” and has been translated to the presentation currency of
the group, Sri Lankan Rupees, for consolidation purpose.
The exchange differences arising on the translation are taken
directly to a separate component of equity. On disposal of a
foreign entity, the deferred cumulative amount recognized in
equity relating to that particular foreign operation is recognized
in the Income Statement.
2.3 TAX
2.3.1 Current tax
Provision for income tax is based on the elements of income
and expenditure as reported in the financial statements and is
computed in accordance with the provisions of the relevant tax
statutes.
2.3.2 Deferred tax
Deferred taxation is the tax attributable to the temporary
differences that arise when taxation authorities recognize and
measure assets and liabilities with rules, that differ from those
of the consolidated financial statements.
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 are recognized 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 utilized.
Unrecognized deferred tax assets are reassessed at each
balance sheet date and are recognized to the extent that it
has become probable that future taxable profit will allow the
deferred tax asset to be recovered.
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Annual Report 2010/2011 | Richard Pieris and Company PLC