Annual Report 2012 - National Savings Bank

218THE RESULTS OF A CHALLENGING YEARNOTES TO THE FINANCIAL STATEMENTSpaid to the Commissioner General of InlandRevenue in respect of the current as well asprior years. The tax rates and tax laws usedto compute the amount are those that areenacted or subsequently enacted by the dateof Financial Position. Accordingly, provisionfor taxation is made on the basis of the profitfor the year as adjusted for taxation purposein accordance with the provision of theInland Revenue Act No. 10 of 2006 and theamendment thereto, at the rates specified inNote 13 to the Financial Statements.Deferred TaxationDeferred tax is provided using the liabilitymethod on temporary differences at theReporting date between the tax basesof assets and liabilities and their carryingamounts for financial reporting purpose.Deferred tax assets are recognized for alldeductible differences. Carry forward ofunused tax credits and unused tax losses,to the extent that it is probable that taxableprofits will be available against which thedeductible temporary differences and thecarry forward of unused tax credits andunused tax losses can be utilized.The carrying amount of a deferred tax assetis reviewed at each Reporting date andreduced to the extent it is no longer probablethat sufficient taxable profit will be availableto allow all or part of the deferred tax assetto be utilized. Unrecognised deferred taxasset are re-assessed at each Reportingdate and are recognize to the extent that isprobable that future taxable profit will allowthe deferred tax asset to be recovered.Deferred tax assets and liabilities aremeasured at the tax rate that are expectedto apply in the year when the assets arerealised or the liabilities are settled, basedon tax rates and tax laws that have beenenacted or subsequently enacted at the dateof Financial Position.Value Added Tax on Financial Services (VAT)Bank’s total value addition was subjected toa 12% Value Added Tax as per section 25A ofthe Value Added Tax Act. No. 14 of 2002 andamendments thereto.2.8 ProvisionsProvisions are recognized when the Bank hasa present obligation (legal or constructive) asa result of a past event, and it is probablethat an outflow of resources embodyingeconomic benefits will be required to settlethe obligation and a reliable estimate canbe made of the amount of the obligation.The expenses relating to any provision ispresented in the Income Statement net ofany reimbursement2.9 Contingent LiabilitiesWhere, as a result of past events, there maybe an outflow of resources embodying futureeconomic benefits in settlement of a presentobligation or a possible obligation whoseexistence is confirmed only by occurrence/non occurrence of one or more uncertainfuture events, a provision is made if there isa present obligation that probably requires anoutflow of resources.2.10 Events after the Reporting PeriodThe Bank updates disclosures relating toany event occurred between the end ofthe reporting period and the date when thefinancial statements are authorized for issueand provide evidence of the conditions thatexisted at the end of the reporting period.2.11 Foreign Currency TransactionsForeign currency transactions are translatedinto the functional currency, which isSri Lankan Rupees, using the exchange ratesprevailing at the dates of the transactions.Monetary assets and liabilities denominatedin foreign currencies at the Reporting dateare retranslated to Sri Lankan Rupees at thefunctional currency rate at the Reportingdate. All exchange differences arising onthe settlement of monetary items or ontranslating monetary items at rates differentto those at which they are initially recordedare recognized in the Income Statement inthe period in which they arise.Non-monetary items that are measured interms of historical cost in a foreign currencyare translated using the exchange rates atthe dates of the initial transactions. Nonmonetaryitems measured at fair value ina foreign currency are translated using theexchange rates at the date when the fairvalue was determined.The Income Statement and the FinancialPosition of Foreign Currency Banking Unitis translated to Sri Lankan Rupees at themiddle rate of exchange prevailed during theperiod.2.12 Statement of Cash FlowsThe statement of cash flows has beenprepared by using the “Indirect Method” ofpreparing cash flows in accordance with theLKAS 7.NATIONAL SAVINGS BANK . ANNUAL REPORT 2012