Review of financial statements
Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB)
obtained undertakings from Specified Business Enterprises (SBEs) to make
corrections in financial statements which required changes in net profit
and equity amounting to Rs 1.2 billion during the year 2010. Types of
items for which undertakings were obtained are given below.
- Failure to recognize impairment of investments in equity
- Not making allowance in respect of doubtful debts
- Failure to recognize part of the surplus arising from a revaluation
- Failure to carry out revaluations with sufficient regularity
- Recognition of a gain expected from a contingent asset in the form
of a capital reserve
- Failure to prepare and present consolidated financial statements,
where control over a subsidiary was acquired during the financial
Letters of Assistance
The identified departures from Sri Lanka Accounting Standards
detected, which were material, but not significant as to require the use
of procedure using statutory provisions, were informed to the
enterprises, by letter, without extensive inquiries, so that enterprises
could, where necessary, take corrective action on their own. Such
letters not being directions issued by the Board, are intended to be
letters of assistance.
The main findings on which the letters of assistance were issued are
set out below.
* Not computing the present value of the liability in respect of
gratuity by using the projected unit credit method as required by the
* Not adopting a systematic basis of depreciating property, plant and
* Not recognizing deferred tax liability for taxable temporary
* Revaluation of property plant and equipment not made regularly,
where revaluation model has been selected
* Not revaluing the entire class of property, plan and equipment to
which the revalued asset belongs.
* Not using uniform accounting policies for like transactions and
other similar events when preparing consolidated financial statements.
* Recording a foreign currency transaction at an exchange rate which
prevailed two years before the date of the Balance Sheet.
* When computing earnings per share, not adjusting the weighted
average number of ordinary shares outstanding during the period and of
all periods presented for events that change the number of shares
without a corresponding change in resources.
* Not recognizing property held to earn rentals or for capital
appreciation as investment property.