Notes to the Consolidated Financial Statements - Seylan Bank
Notes to the Consolidated Financial Statements - Seylan Bank
Notes to the Consolidated Financial Statements - Seylan Bank
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284 North Bound > <strong>Seylan</strong> <strong>Bank</strong> Annual Report 2011<br />
<strong>Notes</strong> <strong>to</strong> <strong>the</strong> <strong>Consolidated</strong> <strong>Financial</strong> <strong>Statements</strong><br />
3.4.6.6 Commitments and Contingencies<br />
All discernible risks are accounted for in determining <strong>the</strong> amount of all known liabilities. The <strong>Bank</strong>’s share<br />
of any contingencies and capital commitments of a subsidiary for which <strong>the</strong> <strong>Bank</strong> is also liable severally or<br />
o<strong>the</strong>rwise are also included with appropriate disclosures.<br />
Contingent liabilities are possible obligations whose existence will be confirmed only by uncertain future<br />
events or present obligations where <strong>the</strong> transfer of economic benefit is not probable or cannot be reliably<br />
measured. Contingent liabilities are not recognised in <strong>the</strong> Balance Sheet, but are disclosed, unless <strong>the</strong>y are<br />
remote.<br />
3.4.6.7 Events after <strong>the</strong> Balance Sheet Date<br />
All material and important events which occur after <strong>the</strong> Balance Sheet date have been considered and<br />
disclosed in Note 44 or adjusted as applicable.<br />
3.5 Income Statement<br />
3.5.1 Revenue Recognition<br />
Interest Income: Interest receivable is recognised on an accrual basis. Interest ceases <strong>to</strong> be taken in<strong>to</strong><br />
revenue when <strong>the</strong> recovery of interest or principal is in arrears for 90 days. Thereafter, interest on advances<br />
is accounted for on a cash basis.<br />
Interest on non-performing debts is credited <strong>to</strong> <strong>the</strong> ‘Interest in Suspense' account which is netted in <strong>the</strong><br />
Balance Sheet against <strong>the</strong> relevant balance.<br />
3.5.2 Interest Income<br />
Interest receivable is recognised on an accrual basis. Interest from loans and advances ceases <strong>to</strong> be accrued<br />
when <strong>the</strong>y are classified as non-performing as explained in Note 21.5. Interest on non-performing loans and<br />
advances is accounted for on a cash basis. Interest on non-performing loans and advances is credited <strong>to</strong> <strong>the</strong><br />
‘Interest in Suspense Account’ which is netted in <strong>the</strong> Balance Sheet against <strong>the</strong> relevant loans and advances.<br />
Interest income from investments is recognised on an accrual basis.<br />
3.5.3 Dividend Income<br />
Dividend income is recognised when <strong>the</strong> right <strong>to</strong> receive income is established. Usually this is <strong>the</strong> ex-dividend<br />
date for equity securities.<br />
3.5.4 Accounting for Finance Lease Income<br />
Assets leased <strong>to</strong> cus<strong>to</strong>mers who transfer substantially all <strong>the</strong> risks and rewards associated with ownership<br />
o<strong>the</strong>r than <strong>the</strong> legal title are classified as finance leases. Amounts receivable under finance leases are<br />
included under ‘Lease Rental Receivable’. Leasing balances are stated in <strong>the</strong> Balance Sheet after deduction<br />
of initial rentals received.<br />
The excess of aggregate rentals receivable over <strong>the</strong> cost of <strong>the</strong> leased assets constitutes <strong>the</strong> <strong>to</strong>tal<br />
unearned income. The unearned income is taken in<strong>to</strong> revenue over <strong>the</strong> term of <strong>the</strong> lease, commencing from<br />
<strong>the</strong> month in which <strong>the</strong> lease is executed in proportion <strong>to</strong> <strong>the</strong> remaining receivable balance of <strong>the</strong> lease.