Page 92 - CA Sri Lanka Integrated Annual Report 2023

NOTES TO THE FINANCIAL STATEMENTS

Significant items of property, plant payments) less any lease incentives carrying amount and included in
and equipment with different useful receivable, variable lease payments the statement of comprehensive
lives are separately identified and that depend on an index or a rate, income in the year, the asset is
depreciated. and amounts expected to be paid derecognised.
under residual value guarantees.
Depreciation on property, plant The lease payments also include the 2.1.2 Library Books
and equipment purchased through exercise price of a purchase option Cost of library books are written off on the
restricted funds is charged to reasonably certain to be exercised straight-line basis over a period of three
the statement of comprehensive by the Institute and payments of years.
income. The correspondent grant penalties for terminating the lease, if
amount is amortised over the useful the lease term reflects the Institute 2.1.3 Capital Work-In-Progress
life of the related asset. exercising the option to terminate.
Variable lease payments that do not Capital work-in-progress is stated at cost,
(c) Right of Use Assets and Lease depend on an index or a rate are less any impairment losses. These are
Liabilities recognised as expenses (unless they expenses of a capital nature, directly incurred
The Institute recognises a right- are incurred to produce inventories) in the construction of property, plant and
of-use asset and a lease liability at in the period in which the event or equipment awaiting capitalisation. Capital
the lease commencement date. condition that triggers the payment work-in-progress would be transferred to
Right-of-use assets are measured occurs. the relevant asset category in property, plant
at cost, less any accumulated and equipment, when it is available for use
depreciation and impairment losses, In calculating the present value of i.e. when it is in the location and conditions
and adjusted for any remeasurement lease payments, the Institute uses necessary for it to be capable of operating in
of lease liabilities. The cost of right- its incremental borrowing rate at the manner intended by the Institute.
of-use assets includes the amount the lease commencement date 2.1.4 Intangible Assets
of lease liabilities recognised, initial as the discount rate, because the
direct costs incurred, and lease interest rate implicit in the lease a. Computer Software
payments made at or before the is not readily determinable. The Acquired computer software licenses
commencement date less any lease Institute determines its incremental are capitalised on the basis of the
incentives received. Right-of-use borrowing rate by obtaining interest costs incurred to acquire and bring to
assets are depreciated on a straight- rates from the Institute’s internal use. These costs are amortised over
line basis over the shorter of the records. After the commencement their estimated useful life of five to
lease term and the estimated useful date, the amount of lease liabilities ten (5-10) years.
lives of the assets. is increased to reflect the accretion
of interest and reduced for the lease Costs associated with maintaining
The estimated useful lives of right of payments made. In addition, the computer software programmes
use assets are as follows: carrying amount of lease liabilities is are recognised as an expense as
remeasured if there is a modification, incurred. Costs that are directly
Asset category Useful life a change in the lease term, a change associated with the production of
(years) in the lease payments (e.g., changes identifiable and unique software
to future payments resulting from a
Right of use 10 products controlled by the Institute
asset change in an index or rate used to are recognised as intangible assets
Improvements 10 determine such lease payments) or when the following criteria are met:
to Right of use a change in the assessment of an
asset option to purchase the underlying 1. it is technically feasible to complete
asset. the software product so that it will
Depreciation of improvement to right be available for use,
of use asset is calculated based on (d) Derecognition
the remaining lease period. An item of property, plant and 2. management intends to complete
equipment is derecognised upon the software product and use it,
At the commencement date of the disposal or when no future economic 3. there is an ability to use the software
lease the Institute recognises lease benefits are expected from its use product,
liability measured at the present or disposal. Any gain or loss arising
value of the lease payments to be on derecognition of the asset is 4. how the software product will
made over the lease term, the lease calculated as the difference between generate probable future economic
payments include fixed payments the net disposal proceeds and the benefits can be demonstrated,
(including in-substance fixed

90 CA Sri Lanka Integrated Annual Report 2023