Financial Statements - Hemas Holdings, Ltd

DRIVING PERFORMANCE ● ENRICHING LIVES091 Hemas Holdings PLC Annual Report 2012/132.5 Significant Accounting Judgments,Estimates and AssumptionsThe preparation of the Group financialstatements requires management to makejudgments, estimates and assumptions thataffect the reported amounts of revenues,expenses, assets and liabilities and thedisclosure of contingent liabilities, at the endof the reporting period. However, uncertaintyabout these assumptions and estimatescould result in outcomes that require amaterial adjustment to the carrying amount ofthe asset or liability affected in future periods.JudgmentsIn the process of applying the Group’saccounting policies, management hasmade the following judgments, which havethe most significant effect on the amountsrecognised in the financial statements:Deferred Tax AssetsDeferred tax assets are recognised for allunused tax losses to the extent that it isprobable that taxable profit will be availableagainst which the losses can be utilised.Significant management judgment is requiredto determine the amount of deferred taxassets that can be recognised, based uponthe likely timing and level of future taxableprofits together with future tax planningstrategies.Estimates and AssumptionsThe key assumptions concerning thefuture and other key sources of estimationuncertainty at the reporting date, that havea significant risk of causing a materialadjustment to the carrying amounts of assetsand liabilities within the next financial year,are described below. The Group based itsassumptions and estimates on parametersavailable when the financial statementswere prepared. Existing circumstances andassumptions about future developments,however, may change due to market changesor circumstances arising beyond the controlof the Group. Such changes are reflected inthe assumptions when they occur.Fair Valuation of Investment PropertiesThe Group carries its investment propertiesat fair value, with changes in fair value beingrecognised in the income statement. Inaddition, it measures land and buildings atrevalued amounts with changes in fair valuebeing recognised in other comprehensiveincome. The company engaged independentvaluation specialists to determine fair valueas at 31 March 2013. For the investmentproperty valuation specialists have usedvaluation techniques based on an openmarket value for existing use basis.The determined fair value of the investmentproperties is more sensitive to the openmarket value for existing use basis. The keyassumptions used to determine the fair valueof the investment properties, are furtherexplained in Note 11.Share Based Payment TransactionsThe Group measures the cost of equitysettled transactions with employees byreference to the fair value of the equityinstruments at the date at which they aregranted. Estimating fair value for the sharebased payment transactions requiresdetermining the most appropriate valuationmodel, which is dependent on the termsand conditions of the grant. This estimatealso requires the determination of mostappropriate inputs to the valuation modelincluding the expected life of the shareoption, volatility and making assumptionsabout them.Defined Benefit PlansThe cost of defined benefit plans-gratuityis determined using actuarial valuations.The actuarial valuation involves makingassumptions about discount rates, futuresalary increases and retirement age. Dueto the long term nature of these plans,such estimates are subject to significantuncertainty. All assumptions are reviewed ateach reporting date.Fair Value of Financial InstrumentsWhere the fair value of financial assets andfinancial liabilities recorded in the statementof financial position cannot be derived fromactive markets, their fair value is determinedusing valuation techniques including thediscounted cash flow model. The inputs tothese models are taken from observablemarkets where possible. Where this is notfeasible, a degree of judgment is required inestablishing fair values.2.6 Effect of Sri Lanka AccountingStandards Issued but not yetEffective:The following SLFRS have been issued bythe Institute of Chartered Accountants of SriLanka that have an effective date in the futureand have not been applied in preparing thesefinancial Statements. Those SLFRS will havean effect on the Accounting policies currentlyadopted by the group and may have animpact on the future financial statements.(i) SLFRS 9 – Financial Instruments:Classification and measurementSLFRS 9, as issued reflects the firstphase of work on replacement of LKAS39 and applied to classification andmeasurement of financial assets andliabilities. This standard will be effectivefor the financial period beginning on orafter 1 January 2015.(ii) SLFRS 13 – Fair value measurementSLFRAS 13 establishes a single sourceof guidance under SLFRS for all fair valuemeasurements. SLFRS 13 providesguidance on all fair value measurementsunder SLFRS. This Standard wasoriginally effective for the financial periodbeginning on or after 1 January 2013 andearly application was allowed. Howevereffective date has been deferredsubsequently.In addition to the above, followingstandards were also issued with anoriginal effective date of 1 January 2013,which were also deferred subsequently.SLFRS 10 - Consolidated FinancialStatementsSLFRS 11 - Joint Arrangements SLFRS12 - Disclosure of Interests in OtherEntities.The Group will adopt these standardswhen they become effective. Pending adetailed review, the financial impact is notreasonably estimable as at the date ofpublication of these financial statements.