Annual Report 2010-2011 - Colombo Stock Exchange

Employees’ Provident Fund / Employees’ Provident Fund and
Employees’ Trust Fund respectively.
2.5.2 Grants and subsidies
Grants are recognized where there is reasonable assurance
that the grant will be received and all attaching conditions
will be complied with. When the grant relates to an expense
item, it is recognized as income over the period necessary to
match the grant on a systematic basis to the costs that it is
intended to compensate. Where the grant relates to an asset,
it is set up as deferred income. Where the group receives
non-monetary grants, the asset and that grant are recorded at
nominal amounts and is released to the Income Statement over
the expected useful life of the relevant asset by equal annual
installments.
2.5.3 Provisions, contingent assets and contingent
liabilities
Provisions are made for all obligations existing as at the
Balance Sheet date when it is probable that such an obligation
will result in an outflow of resources and a reliable estimate can
be made of the quantum of the outflow.
All contingent liabilities are disclosed as a note to the financial
statements unless the outflow of resources is remote.
Contingent assets are disclosed, where inflow of economic
benefit is probable.
2.6 INCOME STATEMENT
2.6.1 Revenue recognition
Revenue is recognized to the extent that it is probable that
the economic benefits will flow to the group, and the revenue
and associated costs incurred or to be incurred can be reliably
measured. Revenue is measured at the fair value of the
consideration received or receivable, net of trade discounts and
value added taxes, after eliminating sales within the group.
The following specific criteria are used for recognition of
revenue:
a) Sale of goods
Revenue from the sale of goods is recognized when the
significant risk and rewards of ownership of the goods
have passed to the buyer with the group retaining neither
a continuing managerial involvement to the degree usually
associated with ownership, nor an effective control over the
goods sold.
b) Rendering of services
Revenue from rendering of services is recognized in the
accounting period in which the services are rendered or
performed.
c) Construction revenue
Construction revenue is recognized by reference to the stage
of completion, determined by taking into accounts the labour
hours incurred to date as a percentage of total estimated labour
hours for each contract. Where the contract outcome cannot be
measured reliably, revenue is recognized only to the extent of
expenses incurred that are recoverable.
d) Plantation companies
In keeping with the practice in the Plantation Industry revenue
or profit or loss on Perennial Crops are recognized in the
financial period of harvesting. Revenue is recorded at invoice
value net of brokerage, public sale expenses and other levies
related to turnover.
e) Turnover based taxes
Turnover based taxes include Value Added Tax, Economic
Service Charge, Turnover Tax and Nation Building Tax.
Companies in the group pay such taxes in accordance with the
respective statutes.
2.6.2 Dividend
Dividend income is recognized when the shareholders’ right to
receive the payment is established.
2.6.3 Rental income
Rental income is recognized on an accrual basis over the term
of the lease.
2.6.4 Royalties
Royalties are recognized on an accrual basis in accordance
with the substance of the relevant agreement.
2.6.5 Interest income
Interest income is recognized as and when the interest accrues.
2.6.6 Gains and losses
Net gains and losses of a revenue nature arising from the
disposal of property, plant and equipment and other noncurrent
assets, including investments, are accounted for in
the Income Statement, after deducting from the proceeds on
disposal, the carrying amount of such assets and the related
selling expenses.
Gains and losses arising from activities incidental to the main
revenue generating activities and those arising from a group
of similar transactions which are not material, are aggregated,
reported and presented on a net basis.
2.6.7 Other income
Other income is recognized on an accrual basis.
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Annual Report 2010/2011 | Richard Pieris and Company PLC