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NOTES TO THE FINANCIAL STATEMENTS
Year ended 31 March 2018
3.2.5 Classification and Subsequent Measurement of The company does not reclassify any financial
Financial Liabilities instrument into the fair value through profit or loss
The Company initially recognizes non-derivative category after initial recognition. Further, the company
financial liabilities on the date that they are originated. does not reclassify any financial instrument out of the
The Company classifies non-derivative financial fair value through profit or loss category if upon initial
liabilities into the other financial liabilities category. recognition it was designated as at fair value through
Such financial liabilities are recognized initially at profit or loss.
fair value less any directly attributable transaction No reclassifications of financial instruments were done
costs. Subsequent to initial recognition, these financial during the year.
liabilities are measured at amortized cost using the 3.3 Derecognition of Financial Assets and Financial
effective interest method. Liabilities
Other financial liabilities comprise of bank overdrafts, Financial Assets
interest bearing borrowings, customer deposits, trade The Company derecognizes a financial asset when
payables, accruals & other payables and amounts due the rights to receive cash flows from the asset have
to related parties: expired or the Company has transferred its rights to
Financial liabilities at fair value through profit or receive cash flows from the asset or has assumed an
loss include financial liabilities held for trading and obligation to pay the received cash flows in full without
financial liabilities designated upon initial recognition material delay to a third party under a ‘pass-through’
as fair value through profit or loss. Subsequent to initial arrangement; and either.
recognition, financial liabilities at fair value through (a) The Company has transferred substantially all
profit or loss are measured at fair value, and changes the risks and rewards of the asset, or
there in recognized in profit or loss. (b) The Company has neither transferred
Bank overdrafts nor retained substantially all the risks and
Bank overdrafts that are repayable on demand and form rewards of the asset, but has transferred
an integral part of the Company’s cash management are control of the asset.
included as a component of cash and cash equivalents On derecognition of a financial asset, the difference
for the purpose of the statement of cash flows. between the carrying amount of the asset (or the
carrying amount allocated to the portion of the asset
Deposits and bank borrowings - classified as other transferred), and the sum of;
financial liabilities carried at amortized cost (i) The consideration received (including any new
Deposits and bank borrowings are the Company’s asset obtained less any new liability assumed) and
sources of debt funding. (ii) Any cumulative gain or loss that had
The Company classifies capital instruments as financial been recognized in other comprehensive income
liabilities or equity instruments in accordance with the is recognized in profit or loss.
substance of the contractual terms of the instruments. Financial Liabilities
Subsequent to initial recognition deposits and bank The Company derecognizes a financial liability when its
borrowings are measured at their amortized cost using contractual obligations are discharged or cancelled or
the effective interest method. expire.
3.4 Offsetting of Financial Instruments
3.2.6 Reclassification of Financial Instruments Financial assets and financial liabilities are offset and
The Company reclassifies non-derivative financial the net amount reported in the statement of financial
assets out of the ‘held-for-trading’ category and into position if, and only if, there is a currently enforceable
the ‘available-for-sale’, ‘loans and receivables’, or legal right to offset the recognized amounts and there
‘held-to-maturity’ categories as permitted by the Sri is an intention to settle on a net basis, or to realize the
Lanka Accounting Standard – LKAS 39 on ‘Financial assets and settle the liabilities simultaneously.
Instruments: Recognition and Measurement’. Further,
in certain circumstances, the Company is permitted to Income and expenses are presented on a net basis only
reclassify financial instruments out of the ‘available- when permitted under SLFRSs, or for gains and losses
for-sale’ category and into the ‘loans and receivables’ arising from a group of similar transactions such as in
category. the company’s trading activity.
Reclassifications are recorded at fair value at the date
of reclassification, which becomes the new amortized
cost.
Reclassification is at the election of the Management
and is determined on an instrument-by-instrument
basis.
Annual Report 2018 57
