Institute of Chartered accountants of Sri Lanka have announced separate set of Standards for smaller entities with effective from 01st January 2016 onward. 

SLFRS for Smaller Entities is a simple financial reporting standard which could be cost effectively used by smaller entities. It could be applied by an entity that is not any of the following:

(a) an entity that had revenue in excess of Rs. 100 million in the reporting period;

(b) an entity that had equity in excess of Rs. 50 million at the end of the previous reporting period;

(c) a company that is required to prepare group financial statements by the law relating to companies; or

(d) an entity that holds assets in a fiduciary capacity as one of its primary businesses.

The standard includes, among others, the following simplifications:

(a) complex requirements relating to financial instruments were excluded;

(b) complex requirements relating to fair value, value in use and actuarial valuations were excluded;

(c) measurement of items were further simplified, for example by the measurement of most leases on a straight line basis, exclusion of overheads from the cost of inventory, exclusion of borrowing costs from the cost of assets, measurement of retirement gratuity at the amount payable if the employees leave on the reporting date, and recognition of the cost of leave in the period in which leave is taken;

(d) changes in accounting policies and corrections of prior period errors to be presented as adjustments to retained earnings at the beginning of the reporting period, without the need to change comparative information; xiv

(e) transition to SLFRS for Smaller Entities has been made easier, by having the transition date as the beginning of the first reporting period of the financial statements prepared in compliance with SLFRS for Smaller Entities;

(d) requirements relating to disclosure substantially reduced;

(e) statement of profit or loss and retained earnings to be presented in place of statement of comprehensive income and the statement of changes in equity; and

(f) not including requirements relating to activities and transactions not likely to be carried out by a smaller entity. 

Please visit technical section of CA SRI LANKA website for further information - LINK

Going Concern Proposal to Follow Liquidation

The Financial Accounting Standards Board is expected soon to issue a new proposal for new disclosure requirements regarding when a company's ability to remain in business as a going concern is in jeopardy.

The board indicated in February it expected to issue a new exposure draft in late March or early April. FASB first issued a proposal in 2008 but made a series of course corrections on how to get such warnings out to investors. Most recently, the board has decided to adopt a new financial reporting model for management's assessment and disclosures, requiring management to consider each reporting period the likelihood that an entity might be unable to meet its obligations as they come due for a reasonable period of time into the future.

The proposal is expected to advise management that they must start providing disclosures in financial statements when existing events or conditions indicate they are nearing a point where it is more likely than not that they may not meet their obligations in the ordinary course of business. The proposal is expected to say management can consider whatever plans they have to head off such trouble in deciding if they must make such disclosures, but only if those actions are within the normal course of business.

Implications of recently issued exposure drafts

The Institute of Chartered Accountants of Sri Lanka in its capacity as the sole authority to promulgate accounting and auditing standards in the country recently organized a CFO Forum on the implications of recently issues exposure drafts. 

The forum specifically targeting Chief Financial Officers in the country covered four exposure drafts which were presented by the CA Sri Lanka Technical Division. 

The exposure drafts included; Classification and Measurement: Limited Amendments to IFRS 9 (ED/2012/5), Equity Method: Share of other Net Asset Changes (ED/2012/3), Clarification of Acceptable Methods of Depreciation and Amortisation (ED/2012/5) and Acquisition of an Interest in a Joint Operation (ED/2012/7). 

The presentations were followed by a panel discussion comprising industry experts Mr. Nishan Fernando, Managing Director of BDO Consulting (Pvt) Ltd, Mr. Reyaz Mihular,  Managing Partner of KPMG and Mr. Manil Jayesinghe, Senior Partner of Ernst & Young.

Amendments to LKAS wef 01.01.2016

Institute of Chartered accountants of Sri Lanka have announced some amendments to the current accounting standards with effective from 01st January 2016 onward. 

LKAS 16 and LKAS 41 – Agriculture: Bearer Plants

SLFRS 10, SLFRS 12 and LKAS 28 – Investment Entities: Applying the Consolidation Exception

LKAS 27 – Equity Method in Separate Financial Statements

SLFRS 10 and LKAS 28 – Sale or Contribution of Assets between an Investor and its Associate or Joint Venture

SLFRS 11 – Accounting for Acquisitions of Interests in Joint Operations

Please visit the technical section of the website of CA SRI LANKA for details - LINK.