Annual Report - 2008 - Colombo Stock Exchange

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Ceylon Theatres PLC | Annual Report 2008 | 48Accounting Policiesstated separately in the Consolidated Balance Sheetunder the heading “Minority Interest”.resulting gains and losses are accounted for in the IncomeStatement.1.3.4. The result of associate companies have beenaccounted for under the equity method of accountingwhere the Group’s share of profit is incorporated inthe Consolidated Income Statement and the relatedinvestment carried forward in the ConsolidatedBalance Sheet at values adjusted to reflect theGroup’s share of retained assets.1.3.5. Goodwill arising in connection with the acquisitionof Subsidiaries, which is due to the excess of thepurchase price or consideration over the net assetsacquired, is shown as an intangible asset in theBalance Sheet and is tested for impairment andcarried at cost less accumulated impairment losses.1.6. Taxation1.6.1. Taxation has been provided on the elements ofincome & expenditure as reported in the financialstatements and computed in accordance with theprovisions of the Inland Revenue Act. No: 10 of 2006and subsequent amendments thereto. Relevantdetails have been disclosed in Note 5 to theseFinancial Statements.1.6.2. Deferred TaxationDeferred taxation is the tax attributable to thetemporary differences that arise when the carryingamount of assets differ from their value derived basedon the taxation rules (tax base).The excess of the value of the net assets of SubsidiaryCompanies over the purchase price or considerationat the date of acquisition is treated as negativegoodwill. Such negative goodwill is directly recognizedin the Income Statement.Deferred tax assets are recognised for all deductibletemporary differences, carry forward of unused taxcredits and unused tax losses only to the extent that itis probable that future taxable profits will be availableagainst which the assets can be utilized.1.4 Franchisee FeeFranchisee fee is shown at historical cost. Franchiseefee have a finite useful life and are carried at cost lessaccumulated amortisation. Amortisation is calculatedusing the straight-line method to allocate the cost ofFranchisee fee over their estimated useful life of 10years.1.5. Foreign Currency TranslationAll foreign exchange transactions are converted to SriLanka Rupees, which is the reporting currency, at therates of exchange prevailing at the time the transactionswere effected. Monetary assets and liabilities denominatedin foreign currencies are translated to Sri Lanka Rupeeequivalents using year end spot foreign exchange rates. Nonmonetaryassets and liabilities are translated using exchangerates that existed when the values were determined. TheThe carrying amount of deferred tax assets isreviewed at each balance sheet date and reduced tothe extent that it is no longer probable that sufficienttaxable profits will be available to allow all or part ofthe deferred tax assets to be utilized.Deferred tax assets and liabilities are measured at taxrates that are expected to apply to the year when theasset is realized or liability is settled, based on the taxrates that have been enacted or substantively enactedas at the balance sheet date.1.7. Borrowing CostsBorrowing costs are recognised as an expense in theperiod in which they are incurred, except to the extentwhere borrowing costs that are directly attributable to theacquisition, construction or production of Property, Plant
Ceylon Theatres PLC | Annual Report 2008 | 49& Equipment, that takes a substantial period of time to getready for its intended use or sale and are capitalised as partof that asset during the period of construction/development[Refer Note 9.6]1.8 Comparative InformationThe accounting policies have been consistently applied bythe Company and Group and are consistent with those usedin the previous year. Where necessary comparative figureshave been re-classified to conform with the current yearpresentation.2.1.5 Provision is made, where necessary, for obsolete,slow moving and defective inventories.2.2 Trade and other Receivables.Trade and other receivables are stated at the amounts theyare estimated to realize, net of provision for bad and doubtfuldebts.2.3 Related Company Current AccountsThese are treated as current assets/liabilities as they aredeemed to be of a temporary nature.1.9 Events after the Balance Sheet DateAll material events occurring after the Balance Sheet dateare considered and where appropriate adjustments to ordisclosures have been made in the respective notes to theFinancial Statements.2. Assets and Bases of their Valuation2.1. Inventories2.1.1 Inventories are valued at lower of cost or net realisablevalue, after making the due allowances for obsoleteand slow moving items. Net realisable value is theprice at which inventories can be sold in the ordinarycourse of business less the estimated cost ofcompletion and the estimated cost necessary to makethe sale.2.1.2 The cost of the inventory is determined at actual coston a first in first out and weighted average basis.2.1.3 In the case of manufactured products, cost includesall direct expenditure and appropriate proportionof fixed production overheads based on normaloperating capacity.2.1.4 Harvested crop is valued at since realised prices netof packing, despatch & selling expenses.2.4 InvestmentsInvestments are of a long-term nature and are stated atcost. No adjustment is made for the fall in value of theseinvestments, unless it is deemed to be permanent.The cost of the investment is the cost of acquisition inclusiveof brokerage fees, stamp duty and bank fees.2.5 Property, Plant & Equipment2.5.1 The Property, Plant & Equipment is recorded atcost/valuation less accumulated depreciation and anyaccumulated impairment losses.2.5.2 Expenditure incurred for the purpose of acquiringextending or improving assets of a permanent natureby means of which to carry on the business or toincrease the earning capacity of the business hasbeen treated as capital expenditure.2.5.3 The cost of Property, Plant & Equipment includesborrowing costs and any expenses incurred inbringing the assets to its working condition for itsintended use.2.6 Depreciation2.6.1 Freehold land is not depreciated. Depreciation hasbeen provided so as to write off the cost or valuation
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Annual Report - 2008 - Colombo Stock Exchange

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