Page 91 - 2596-CA SR Lanka- Annual Report 2022

2.1.5 Inventories amount cannot “exceed” the carrying Financial assets and financial
Inventories are stated at the lower of amount that would have been determined, liabilities are offset and the
cost and net realisable value after making net of depreciation, had no impairment net amount is reported in the
due allowances for obsolete and slow- loss been recognised for the asset in prior Statement of Financial Position,
moving items. Net realisable value is the years. Such reversal is recognised in the if there is a currently enforceable
estimated selling price in the ordinary statement of comprehensive income. legal right to offset the recognised
course of business less the estimated amounts and there is an intention
cost of completion and selling expenses. 2.1.7 Financial Assets - Initial to settle on a net basis, to realise
The cost of inventories is based on Recognition and Measurement the assets and settle the liabilities
weighted average cost. The cost includes (a) SLFRS 9 Financial Instruments simultaneously.
expenditure incurred in acquiring the SLFRS 9 Financial Instruments
inventories and bringing them to their replaces LKAS 39 on “Financial
existing location and condition. Instruments: Recognition and
Measurement” for annual periods The financial assets of the Institute
The inventories of the Institute include beginning on or after 1st January include receivables, loans and advances
study packs, study material, publications, 2018, bringing together all three to staff, fixed deposits held to collect
stationery and consumables. aspects of the accounting for contractual cash flows, government
financial instruments: classification securities, repurchase agreements and
2.1.6 Impairment of Non-Financial and measurement; impairment; cash and cash equivalents.
Assets and hedge accounting.
The Institute assesses at each reporting The Institute’s financial assets are
date whether there is an indication that an (b) Financial Assets subsequently measured at amortised cost
upon satisfaction of both of the following
asset may be impaired. If such indication The classification of financial
exists or when annual impairment assets at initial recognition conditions:
testing for an asset is required, the depends on the financial
Institute makes an estimate of the asset’s contractual cash flow a) The financial assets are held
within a business model with the
asset’s recoverable amount. An asset’s characteristics and the Institute’s
recoverable amount is the higher of business model for managing objective to hold financial assets
in order to collect contractual cash
an asset’s fair value less costs to sell them. With the exception of trade
and its value in use and determined for receivables that do not contain flows and
an individual asset, unless the asset significant financing component for b) The contractual terms of the
does not generate cash inflows that are which the Institute has applied the financial assets give rise on
largely independent of those from other practical expedient, the Institute specified dates to cash flows that
assets or group of assets. Where the initially measures financial assets are solely payments of principal
carrying amount of an asset exceeds at their fair value plus transaction and interest on the principal
its recoverable amount, the asset is costs. Trade receivables that do amount outstanding
considered impaired and is written down not contain a significant financing
to its recoverable amount. In assessing component for which the Institute Accordingly, financial assets at amortised
value in use, the estimated future cash has applied the practical expedient cost are subsequently measured using the
flows are discounted to their present are measured at the transaction effective interest (EIR) method and are
value, using a discount rate that reflects price determined under SLFRS 15. subject to impairment. Gains and losses
current market assessment of the time are recognised in profit or loss when
value of money and the risk specific to the In order for a financial asset the asset is derecognised, modified or
asset. to be classified and measured impaired.
at amortised cost or fair value
Impairment losses of continuing through OCI, it needs to give 2.1.8 Derecognition of Financial Assets
operations are recognised in the rise to cash flows that are
statement of comprehensive income in ‘solely payments of principal and A financial asset (or, where applicable,
those expense categories consistent with interest’ on the principal amount a part of a financial asset or part of an
the function of the impaired asset. outstanding. The Institute’s Institute of similar financial assets) is
business model for managing primarily derecognised when:
A previously recognised impairment financial assets refers to how
loss is reversed only if there has been it manages financial assets in • The rights to receive cash flows
a change in the estimates used to order to generate cash flows. from the asset have expired; or
determine the assets recoverable The business model determines
amount, since the last impairment loss whether cash flows will result
was recognised. If that is the case, the from collecting contractual cash
carrying amount of the asset is increased flows or selling the financial assets
to its recoverable amount. The increased or both.

CA SRI LANKA | Integrated Annual Report 2022 89