Audited Financial Statements 31.03.2025

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1. 1. Functional and Presentation Currency

      The financial statements are presented in Sri Lankan Rupees, which is the Group's functional currency.

   2. Use of Estimates, Judgements and Assumptions

      The presentation of the financial statements of the Group and the Company in conformity with Sri Lanka Accounting Standards (SLFRS / LKAS) requires the management to make judgements, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates.

      Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimates are revised and any future periods affected.

      Information about significant areas of estimation uncertainty and critical judgements in applying accounting policies that have the most significant effect on the amounts recognised in the financial statements is included in the Note 20 - measurement of Employee Benefits.

   3. Materiality and Aggregation

      Each material class of similar items is presented separately in the Financial Statements. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by the Sri Lanka Accounting Standard - LKAS 1 on 'Presentation of Financial Statements'.

      Understandability of the Financial Statements is not compromised by obscuring material information with immaterial information or by aggregating material items that have different natures or functions.

      Notes to the Financial Statements are presented in a systematic manner that ensures the understandability and Comparability of Financial Statements.

      1. Offsetting

         Financial assets and financial liabilities are offset and the net amount reported in the statement of financial position, only when there is a legally enforceable right to offset the recognized amounts and there is an intention to settle on a net basis or to realise the assets and settle the liabilities simultaneously. Income and expenses are not offset in the income statement, unless required or permitted by Sri Lanka Accounting Standards and as specifically disclosed in the material accounting policies of the Group.

      2. Current versus Non-Current Classification

      The Group presents assets and liabilities in the statement of financial position based on current/non-current classification.

      An asset is current when it is expected to be realised or intended to be sold or consumed in the normal operating cycle and held primarily for the purpose of trading or expected to be realized within twelve months aŁer the reporting period.

      or

      Is cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least twelve months aŁer the reporting period.

      All other assets are classified as non-current.

      A liability is current when it is expected to be settled in the normal operating cycle and is held primarily for the purpose of trading and is due to be settled within twelve months aŁer the reporting period.

      or

      There is no unconditional right to defer the settlement of the liability for at least twelve months aŁer the reporting period.

      All other liabilities are classified as non-current liabilities.

      The Group classifies deferred tax liability, Employee Benefit Liability and Rent received in Advance under non-current liabilities.

      1.2.9.Going Concern

      The Management has made an assessment of its ability to continue as a going concern and is satisfied that it has adequate financial strength and resources to continue in business for the foreseeable future. Furthermore, the Management is not aware of any material uncertainties that may cast significant doubt upon the company's ability to continue as a going concern. Therefore, the Financial Statements of the Company continue to be prepared on a going concern basis.

      1.2.10. Changes in Material Accounting Policies

      The Company adopted Disclosure of Accounting Policies (Amendments to LKAS 1 and SLFRS Practice Statement 2) from 1 January 2023. Although the amendments did not result in any changes to the accounting policies themselves, they impacted the accounting policy information disclosed in the financial statements.

      The amendments require the disclosure of 'material', rather than 'significant', accounting policies. The amendments also provide guidance on the application of materiality to disclosure of accounting policies, assisting entities to provide useful, entity specific accounting policy information that users need to understand other information in the financial statements.

      Management reviewed the accounting policies and made updates to the information disclosed in Note 1.3 Material accounting policies (2022: Significant accounting policies) in certain instances in line with the amendments.

2. MATERIAL ACCOUNTING POLICIES

   The Company has consistently applied the following accounting policies to all periods presented in these financial statements, except if mentioned otherwise.

   In addition, the Company adopted Disclosure of Accounting Policies (Amendments to LKAS 1 and SLFRFS Practice Statement 2) from 1 January 2023. The amendments require the disclosure of 'material', rather than 'significant', accounting policies. Although the amendments did not result in any changes to the accounting policies themselves.

   
   
   

   NOTES TO THE FINANCIAL STATEMENTS (contd.)

   36

1. Basis of Consolidation

   The Group's financial statements comprise of the consolidation of financial statements of the Company and its Subsidiary prepared in terms of Sri Lanka Accounting Standard SLFRS 10 - 'Consolidated Financial Statements'. Subsidiary is disclosed in Note 13 to the Financial Statements.

   1. Business Combination and Goodwill

      Business combinations are accounted for using the acquisition method as at the acquisition date which is the date on which control is transferred to the Group. Control is the power to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, the Group takes into consideration potential voting rights that are currently exercisable.

      Goodwill acquired in a business combination is initially measured at cost being the excess of the cost of the business combination over the Group's interest in the net fair value of the identifiable assets, liabilities and contingent liabilities. Following initial recognition, goodwill is measured at cost less any accumulated impairment losses. Goodwill is reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired. For the purpose of impairment testing, goodwill acquired in a business combination is, from the acquisition date, allocated to groups of cash-generating units that are expected to benefit from the synergies of the combination.

      Impairment is determined by assessing the recoverable amount of the cash-generating unit to which the goodwill relates. Where the recoverable amount of the cash generating unit is less than the carrying amount, an impairment loss is recognised. The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and then to the other assets pro-rata to the carrying amount of each asset in the unit.

   2. Subsidiary

      Subsidiary is entity controlled by the Group. The Group 'controls' an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Financial Statements of Subsidiary is included in the Consolidated Financial Statements from the date on which control commences until the date when control ceases.

   3. Transactions with Non-controlling Interests

      The profit or loss and net assets of a subsidiary attributable to equity interests that are not owned by the Parent, directly or indirectly through subsidiaries, is disclosed separately under the heading "Non-Controlling Interest".

      1. Transactions with Non-controlling Interests

         The Group applies a policy of treating transactions with non-controlling interests as transactions with parties external to the Group. Losses within a subsidiary are attributed to the non-controlling interest even if that results in a deficit balance.

         The acquisition of an additional ownership interest or a disposal of ownership interest in a subsidiary without a change of control is accounted for as an equity transaction. Any excess or deficit of consideration paid over the carrying amount of the non-controlling interests is recognised in equity of the parent. No adjustment is made to goodwill as a result of such transactions.

      2. Loss of Control

         On the loss of control, the Group derecognises the assets including goodwill and liabilities of the subsidiary, any non-controlling interests and other components of equity related to the subsidiary. Any gain or loss arising on the loss of control is recognised in the Statement of Profit or Loss.

         If the Group retains any interest in the former subsidiary, then such interest is measured at fair value at the date that control is lost.

         A change in the ownership interest of a subsidiary, without a loss of control, is accounted for as an equity transaction.

      3. Profits and Losses

         The total profits and losses of the Company and its subsidiary for the period are included in the consolidation. The proportion of the profit or loss aŁer taxation attributable to Non Controlling Interest shareholders of the subsidiary is shown as a component of profit for the period in the Consolidated Statement of Profit or Loss.

      4. Assets and Liabilities

         All assets and liabilities of the Company and its subsidiary are included in the Consolidated Statement of Financial Position. Non controlling interest which represents the proportion of interest attributable to non controlling interest of subsidiary in the net assets employed by the Group is disclosed as a component of equity in the Consolidated Statement of Financial Position, separately from the Parent shareholders' equity.

      5. Transactions Eliminated on Consolidation

         All intra group balances and transactions, income and expenses, profits and losses resulting from intra group transactions that are recognised in assets, liabilities, income and expenses are eliminated in preparing the consolidated financial statements.

      6. Financial Period

      The Subsidiary has a common financial year as the Parent Company.

2. Foreign Currency Transactions

   All foreign currency transactions are translated to Sri Lankan Rupees at the exchange rates prevailing at the dates of the transactions.

   Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated into local currency at the exchange rate at that date.

   Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-monetary items in a foreign currency that are measured based on historical cost are translated using the exchange rate at the date of the transaction. Foreign currency differences arising on retranslation are recognised in the Statement of Profit or Loss.

   1. Financial Instruments

      A financial instrument is a contract that gives rise to a financial asset in one entity and a financial liability or equity instrument of another entity.

      
      
      

      NOTES TO THE FINANCIAL STATEMENTS (contd.)

      37

1. Financial Assets

   1. Initial Recognition and Measurement

      Receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument.

      A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at fair value through profit or loss (FVTPL), transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

   2. Subsequent Measurement

      On initial recognition, a financial asset is classified as measured at: amortised cost; fair value through other comprehensive income (FVOCI) - debt investment; fair value through other comprehensive income (FVOCI) - equity investment; or fair value through profit or loss (FVTPL).

      Financial assets are not reclassified subsequent to their initial recognition unless the Company changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

      The financial assets of the Group comprise financial assets measured at amortised cost and financial assets at fair value through profit or loss.

      Financial Assets at Amortised Cost

      The Group measures financial assets at amortised cost if both of the following conditions are met:

      • The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows and

      • The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

        Financial assets at amortised cost are subsequently measured using the Effective Interest Rate (EIR) method and are subject to impairment. Gains and losses are recognised in profit or loss when the asset is derecognised, modified or impaired.

        The Group's financial assets at amortised cost include cash & cash equivalent, trade & other receivables, investment in fixed deposits, Investments in Repurchase Agreements, Investments in Debentures and amounts due from related parties.

        Financial Assets at Fair Value through Profit or Loss (FVTPL)

        Financial assets at fair value through profit or loss include financial assets held for trading.

        Financial assets at fair value through profit or loss are carried in the statement of financial position at fair value with net changes in fair value recognised in the statement of profit or loss.

   3. De-recognition

      The Group derecognises a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

      The Group enters into transactions whereby it transfers assets recognised in its statement of financial position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets are not derecognised.

   4. Impairment of Financial Assets

   The Group reviews its individually significant receivables at each reporting date to assess whether an impairment loss should be recorded in the Statement of Profit or Loss, In particular, management's judgment is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the impairment allowance.

   The Group follows 'simplified approach' for recognition of impairment loss allowance on trade receivables. The application of simplified approach does not require the Group to track changes in credit risk. Rather, it recognises impairment loss allowance based on lifetime Expected Credit Loss ( ECLs ) at each reporting date, right from its initial recognition. As a practical expedient, the Group uses a provision matrix to determine impairment loss allowance on portfolio of its trade receivables.

   The provision matrix is based on its historically observed default rates over the expected life of the trade receivables and is adjusted for forward looking estimates. At every reporting date, the historical observed default rates are updated and changes in the forward-looking estimates are analysed. On that basis, the Group estimates provision on trade receivables at the reporting date, impairment loss allowance charges (or reversal) recognised during the period is recognised as income / expense.

   The Group considers a financial asset to be in default when internal or external information indicates that the Group is unlikely to receive the outstanding contractual amounts in full before taking into account any credit enhancements held by the Group. If outstanding contractual amounts remains for more than 3 months, management will take necessary actions to recover the balances through negotiations. Based on the likelihood of recoverability, Group considers a financial asset to be in default.

   A financial Asset is written off when there is no reasonable expectation of recovering the contractual cash flows.

   
   
   

   NOTES TO THE FINANCIAL STATEMENTS (contd.)

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1. Property, Plant & Equipment

   1. Recognition and Measurement

      Items of Property, Plant & Equipment are measured at cost (or at valuation in the case of certain items) less accumulated depreciation and accumulated impairment losses.

      When parts of an item of property, plant & equipment have different useful lives, they are accounted for as separate items (major components) of property, plant & equipment.

   2. Owned Assets

      The cost of Property, Plant & Equipment include expenditure that is directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, and any other costs directly attributable to bringing the asset to a working condition for its intended use and the cost of dismantling

      and removing the items and restoring the site on which they are located.

      Revaluation of condominium apartment is done with sufficient frequency to ensure that the fair value of the condominium apartment does not differ materially from its carrying amount, and is undertaken by professionally qualified valuers.

      Increases in the carrying amount on revaluation is recognised in other comprehensive income and accumulated in equity in the revaluation reserve, unless it reverses a previous revaluation decrease relating to the same asset, which was previously recognised as an expense. In these circumstances the increase is recognised as income to the extent of the previous write down.

      Decrease in the carrying amount on revaluation that offset previous increases of the same individual assets are charged against revaluation reserve directly in equity. All other decreases are recognised in profit or loss.

   3. Subsequent Costs

      The cost of replacing component of an item of property, plant & equipment is recognised in the carrying amount of the item if it is probable that the future economic benefits embodied within that part will flow to the Group and its cost can be measured reliably. The carrying amount of the replaced part is derecognised in accordance with the derecognition policy given below. The costs of the day-to-day servicing of property, plant & equipment are recognised in statement of profit or loss as incurred.

   4. Derecognition

      The carrying amount of an item of property, plant & equipment is derecognised upon disposal off or when no future economic benefits are expected from its use. Gains and losses arising on derecognition of the assets determined by comparing the proceeds from disposal with the carrying amount of property, plant & equipment and are recognised net within 'Other Income' in profit or loss.

   5. Depreciation

      Depreciation is recognised in profit or loss on a straight-line basis over the estimated useful lives of each part of an item of property, plant & equipment, since this most closely reflected the expected pattern of consumption of the future economic benefits embodied in the asset.

      The estimated useful lives are as follows.

      Condominium Apartments (Re-valued) Over 30 Years Site Buildings Over 10 Years

      Furniture & Fittings Over 5 - 8 Years

      Fixtures & Fittings Over 5 Years

      Office Equipment Over 5 - 8 Years

      Computers & Accessories Over 4 - 5 Years

      Communication Equipment Over 8 Years

      Air Conditioners Over 5 - 8 Years

      
      
      

      NOTES TO THE FINANCIAL STATEMENTS (contd.)

      39

1. Capital Work in Progress

1. Leasehold Property

   Leasehold Property includes of leasehold rights to land of Urban Development Authority situated at 3rd Lane, New Nuge Road, Peliyagoda which is on a 99 years lease. Leasehold Property is amortised over their remaining period of leases.

   1.3.6.1. Lease Rentals paid in Advance

   Prepaid lease rentals paid to acquire land use rights are amortised over the lease term. Details of the leasehold property are given in note 10 to the financial statements.

2. Investment Property

   Investment property is property held either to earn rental income or for capital appreciation or both, but not for sale in the ordinary course of business, use in the production or supply of goods or services or for administrative purposes.

   The Group adopts cost model to measure investment property. Investment property is measured at cost on initial recognition and subsequently carried at its cost less any accumulated depreciation and any accumulated impairment losses. Cost includes expenditure that is directly attributable to the acquisition of the investment

   property. The cost of self constructed investment property includes the cost of materials and direct labour, any other costs directly attributable to bringing the investment property to a working condition for their intended use.

   Depreciation is recognised on a straight-line basis over the estimated useful life of the investment property. The estimated useful life of investment property of the Group is as follows.

   Warehouse No. I Over 30 Years

   Warehouse No. II Over 30 Years

   Warehouse No. III Over 30 Years

   Warehouse No. IV Over 30 Years

   Warehouse No. V Over 10 Years

   Office Building Over 30 Years

   Investment property is derecognised when either they have been disposed off or when the investment property is permanently withdrawn from use and no future economic benefit is expected from its disposal. The difference between the net disposal proceeds and the carrying amount of the asset is recognised in the statement of profit or loss in the period of derecognition.

   Transfers are made to or from investment property only when there is a change in use. For a transfer from investment property to owner-occupied property, the deemed cost for subsequent accounting is the fair value at the date of change in use. If owner-occupied property becomes an investment property, the Group accounts for such property in accordance with the policy stated under property, plant and equipment up to the date of change in use.

3. Intangible Assets

   An intangible asset is initially recognised at cost, if it is probable that future economic benefit will flow to the enterprise, and the cost of the asset can be measured reliably.

   Following initial recognition, intangible assets are carried at cost less any accumulated amortisation and any accumulated impairment losses. Intangible assets with finite lives are amortised over the useful economic life, from the date that they are available for use and assessed for impairment whenever there is an indication that the intangible asset may be impaired.The amortisation period and the amortisation method for an intangible asset with a finite useful life is reviewed at least once at each financial year end.

   Intangible assets with indefinite useful lives are tested for impairment annually either individually or at the cash-generating unit level.

   
   
   

   NOTES TO THE FINANCIAL STATEMENTS (contd.)

   40

1. Intangible assets recognised by the Group

   1. Computer SoUware

      All computer soŁware cost incurred and licensed for use by the Group, which does not form an integral part of related hardware, which can be clearly identified and reliably measured with the probability of leading to future economic benefits, are capitalised under intangible assets. The Group amortises the computer soŁware over period of 5 years.

   2. Goodwill

   Goodwill arising on an acquisition represents the excess of the cost of acquisition over the fair value of net assets acquired. Goodwill is measured at cost less accumulated impairment losses.

   Gain from bargain purchase arising on an acquisition represents the excess of the fair value of the net assets acquired over the cost of acquisition. Gain from bargain purchase is recognised immediately in the Statement of Profit or Loss.

2. Derecognition of Intangible Assets

1. Inventories

   Inventories are measured at the lower of cost and net realisable value, aŁer making due allowances for obsolete and slow moving items. The cost of inventories includes expenditure incurred in acquiring the inventories and other costs incurred in bringing them to their existing location and condition. Net realisable value is the estimated selling price less estimated costs of completion and estimated costs necessary to make the sale.

   Accordingly, the costs of inventories are accounted for as follows.

   Transmission Equipment-at the lower of cost and net realisable value

2. Trade and Other Receivables

   Trade and Other Receivables are stated at the amounts estimated to be realised aŁer providing for impairment on trade and other receivables.

   Trade and Other Receivables and amounts due from related parties are recognised at cost, less provision for impairment.

3. Cash & Cash Equivalents

   Cash and Cash equivalents are defined as cash in hand, demand deposits and short term highly liquid investments, readily convertible to known amounts of cash and subject to insignificant risk of changes in value.

   For the purpose of the Statement of Cash Flows, cash & cash equivalents comprise of call deposit, savings accounts, cash in hand, cash at banks and bank overdraŁs.

4. Impairment of Non Financial Assets

   The Group assesses at each reporting date whether there is an indication that an asset may be impaired. If any such indication exists, or when annual impairment testing for an asset is required, the Group makes an estimate of the asset's recoverable amount. An asset's recoverable amount is the higher of an asset's or cash-generating unit's fair value less costs to sell and its value in use and is determined for an individual asset, unless the asset does not generate cash inflows that are largely independent of those from other assets or group of assets. Where the carrying amount of an asset exceeds its recoverable amount, the asset is considered impaired and is written down to its recoverable amount.

   Impairment losses of continuing operations are recognised in the Statement of Profit or Loss in those expense categories consistent with the function of the impaired asset.

   For assets, an assessment is made at each reporting date as to whether there is any indication that previously recognised impairment losses may no longer exist or may have decreased If such indication exists, the Group makes an estimate of the recoverable amount.

   A previously recognised impairment loss is reversed only if there has been a change in the estimates used to determine the asset's recoverable amount since the last impairment loss was recognised. If that is the case the carrying amount of the asset is increased to its recoverable amount.

   That increased amount cannot exceed the carrying amount that would have been determined, net of depreciation, had no impairment loss been recognised for the asset in prior years. Such reversal is recognised in the Statement of Profit or Loss.

5. Stated Capital

   Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognised as a deduction from equity, net of any tax effects.

   As per the Companies Act No. 07 of 2007, Section 58(1), Stated Capital in relation to a Company means the total of all amounts received by the Company or due and payable to the Company in respect of the issue of shares and in respect of calls in arrears.

6. Liabilities & Provisions

   1.3.14.1.Liabilities

   Liabilities classified as current liabilities on the statement of financial position are those which fall due for payment on demand or within one year from the reporting date. Non-current liabilities are those balances payable aŁer one year from the reporting date.

   All known liabilities are accounted for in the statement of financial position.

   
   
   

   NOTES TO THE FINANCIAL STATEMENTS (contd.)

   41

1. Provisions

   A provision is recognised in the Statement of Financial Position when the Company has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefits will be required to settle the obligation and the amount of the provision can be measured reliably in accordance with LKAS 37 - 'Provisions, Contingent Liabilities and Contingent Assets'. The amount recognised is the best estimate of the consideration required to settle the present obligation at the Reporting date, taking into account the risks and uncertainties surrounding the obligation at the date. Where a provision is measured using the cash flows estimated to settle the present obligation, its carrying amount is determined based on the present value of those cash flows.

   1.3.15.1.Commitments and Contingencies

   Capital commitments and contingent liabilities of the Company are disclosed in respective notes to the Financial Statements.

2. Employee Benefits

   1. Defined Benefit Plan - Retirement Gratuity

      A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The liability recognised in the Statement of Financial Position in respect of defined benefit plans is the present value of the defined benefit obligation as at the reporting date. The defined benefit obligation is calculated by the Group using the projected unit credit method based on the formula prescribed in "LKAS 19 - Employee Benefits".

      The present value of the defined benefit obligation is determined by discounting the estimated future cash outflows using interest rates that are denominated in the currency in which the benefits will be paid, and that have terms to maturity approximating to the terms of the related liability.

      Provision has been made for retirement gratuities for the first year of service for all employees, in conformity with "LKAS 19

      - Employee Benefits". However, according to the Payment of Gratuity Act No. 12 of 1983, the liability for gratuity payment to an employee arises only aŁer the completion of five years of continued service.

      Principal assumptions used in determining the defined benefit obligation are given in Note 20.3. Defined benefit plan liability has not been externally funded by the Company as well as subsidiary of the Group.

   2. Defined Contribution Plans - Employees Provident Fund & Employees Trust Fund

   A defined contribution plan is a post-employment benefit plan under which an entity pays fixed contributions into a separate entity and will have no legal or constructive obligation to pay further amounts.

   All employees who are eligible for Employees Provident Fund Contributions and Employees Trust Fund Contributions are covered by relevant contribution funds in line with respective statutes and regulations. Contribution plans are recognised as an expense in the statement of profit or loss when incurred.

3. Statement of Profit or Loss and Other Comprehensive Income

1. Revenue from Contracts with Customers

   The Group recognises revenue from contracts with customers when control of the goods or services is transferred to the customer at an amount that reflects the consideration that the Group is to be entitled in exchange for those goods or services. Determining the timing of the transfer of control of goods or services, at a point in time or over time, requires judgements taking into consideration the nature of goods or services that Group offers.

   SLFRS 15 requires an entity to disaggregate revenue recognised from contracts with customers into categories that depict how the nature, amount, timing and uncertainty of revenue and cash flows are affected by economic factors. The Group's contracts with customers are in similar nature and revenue from these contracts are not significantly affected by economic factors apart from the service categories.

   1. Rental Income

      Rent Income is recognised in the Statement of Profit or Loss as it accrues.

   2. Lease Rental Income

      The Company has sub leased part of the Land lease owned by the Company for a period of thirty years. The lease Rentals have been collected in advance and will be accounted as income as per the provisions of the lease agreement.

   3. Rendering of Services

      Revenue from rendering of services is recognised in the accounting period in which the services are rendered or performed.

   4. Sale of Goods

      Revenue is recognised on sale of goods when all significant risks and rewards of ownership have been transferred to the buyer which normally occurs on delivery of goods.

   5. Finance Income and Finance Costs

      Finance income comprises interest income on funds invested, dividend income and gains on the disposal of financial assets at fair value through profit or loss.

      
      
      

      NOTES TO THE FINANCIAL STATEMENTS (contd.)

      42

1. Segmental Reporting

   A segment is a distinguishable component of the Group that is engaged in either providing products or services (Business Segments) which is subject to risks and rewards that are different from those of other segments.

   Segment information is presented in respect of the Group's business activities. The business segment has been identified as the primary segment of the Group as there are no distinguishable components to be identified as geographical segments for the Group. The business segments are reported based on the Group's management and internal reporting structure.

2. Expenditure Recognition

1. STATEMENT OF CASH FLOWS

   The Statement of Cash Flows has been prepared using 'direct method'. Interests received are classified as investing cash flows for the purpose of presentation of Statement of Cash Flows.

   
   
   

   NOTES TO THE FINANCIAL STATEMENTS (contd.)

   43

1. RELATED PARTY TRANSACTIONS

   Disclosures have been made in respect of the transactions between parties who are defined as related parties as per Sri Lanka Accounting Standard (LKAS) 24 - "Related Party Disclosures".

   Related Party Receivables and Payables are treated as Current Assets and Current Liabilities as they are deemed to be of a temporary nature.

2. EARNINGS PER SHARE

   The Group presents Earnings per Share (EPS) data for its ordinary shares. EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period.

3. EVENTS AFTER THE REPORTING PERIOD

   All material events occurring aŁer the reporting period have been considered and appropriate adjustments to or disclosures have been made in the financial statements.

4. FINANCIAL RISK MANAGEMENT POLICIES

   The Group's principal financial liabilities comprise of loans and borrowings and trade and other payables. The main purpose of these financial liabilities is to finance the Group's operations. The Group has loan and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations.

   The Group is exposed to market risk, credit risk and liquidity risk. The Group's senior management monitors these risks. The Group's senior management is supported by an Audit Committee that advises on financial risks and the appropriate financial risk governance framework for the Group. The Audit Committee provides assurance to the Group's senior management that the Group's financial risk-taking activities are governed by appropriate policies and procedures and that financial risks are identified, measured and managed in accordance with group policies and group risk appetite.

   The Group's objectives, policies and processes for measuring and managing risk from financial instruments and the management of capital are reported separately in note 33 in conformity with Sri Lanka Financial Reporting Standards.

5. NEW ACCOUNTING STANDARDS ISSUED BUT NOT YET EFFECTIVE