Annual report for 2004/05 - Hemas Holdings, Ltd

Notes to the Financial StatementsYear ended 31 March 2005The cost of the investment is the cost of acquisitioninclusive of brokerage fees, duties and bank fees.The carrying amount of long term investments is reduced torecognise a decline other than temporary in the value ofinvestments, determined on an individual investment basis.In the Company’s financial statements, investments insubsidiaries are accounted for in the equity method andassociates are carried at cost, net of any provision for otherthan temporary diminution in value, under the Company’saccounting policy for long term investments.c) Other InvestmentsTreasury bills and other interest bearing securities held forresale in the near future to benefit from short term marketmovements are accounted for at cost plus relevantproportion of the discounts or premiums.2.3 Liabilities and Provisions2.3.1 ProvisionsProvisions are recognized when the company has a presentobligation (legal or constructive) as a result of a past event,where it is probable that an outflow of resources embodyingeconomic benefits will be required to settle the obligationand a reliable estimate can be made of the amount of theobligation. If the effect of the time value of money ismaterial, provisions are determined by discounting theexpected future cash flows at a pre- tax rate that reflectscurrent market assessments of the time value of money and,where appropriate, the risks specific to the liability.2.3.2 Retirement Benefit Obligationsa) Defined Benefit Plan – GratuityGratuity is a Defined Benefit Plan. The Company is liable topay gratuity in terms of the relevant statute. In order tomeet this liability, a provision is carried forward in thebalance sheet, equivalent to an amount calculated based ona half month’s salary of the last month of the financial yearof all employees for each completed year of service,commencing from the first year of service. The resultingdifference between brought forward provision at thebeginning of a year and the carried forward provision at theend of a year is dealt with in the income statement.In respect of those employees those who have not completed5 years , the provision required at the end of 5 years is builtup on an increasing sum of digit basis and accordingly theretirement benefit cost is charged to the income statement.The gratuity liability is not externally funded nor actuariallyvalued. This item is grouped under Other DeferredLiabilities in the Balance Sheet.However, as per the payment of Gratuity Act No. 12 of 1983this liability only arises upon completion of 5 years ofcontinued service.b) Defined Contribution Plans – Employees’ Provident Fund &Employees’ Trust FundEmployees are eligible for Employees’ Provident FundContributions and Employees’ Trust Fund Contributions inline with the respective statutes and regulations. TheCompany contributes 12 % and 3% of gross emoluments ofemployees to Employees’ Provident Fund and Employees’Trust Fund respectively.2.4 Income Statement2.4.1 Revenue RecognitionRevenue is recognised to the extent that it is probable thatthe economic benefits will flow to the Company and therevenue and associated costs incurred or to be incurred canbe reliably measured. Revenue is measured at the fair valueof the consideration received or receivable net of tradediscounts, value added taxes, and other sales taxes and aftereliminating intra-group sales. The following specific criteriaare used for the purpose of recognition of revenue.a) Sale of GoodsRevenue from sale of goods is recognised when thesignificant risks and rewards of ownership of the goods havepassed to buyer; with the Company retaining neithercontinuing managerial involvement to the degree usuallyassociated with ownership, nor effective control over thegoods sold.b) Rendering of ServicesRevenue from rendering of services is recognised in theaccounting period in which the services are rendered orperformed.c) InterestInterest Income is recognised on an accrual basis.d) DividendsDividend income is recognised on a cash basis.e) Rental IncomeRental income is recognised on an accrual basis.f) OthersOther income is recognised on an accrual basis.Net gains and losses of a revenue nature on the disposal ofProperty, Plant & Equipment and other non current assetsincluding investments have been accounted for in theincome statement, having deducted from proceeds ondisposal, the carrying amount of the assets and relatedselling expenses. On disposal of revalued Property, Plant andEquipment, amount remaining in Revaluation Reserverelating to that asset is transferred directly to AccumulatedProfit.44H E M A S H O L D I N G S L I M I T E D