Notes to the Consolidated Financial Statements - Seylan Bank

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286 North Bound > Seylan Bank Annual Report 2011 Notes to the Consolidated Financial Statements 3.5.8 VAT on Financial Services The value base for value added tax for the Bank is the adjusted accounting profit before tax and emoluments of employees. The adjustment to the accounting profit before tax is for economic depreciation computed on prescribed rates instead of the rates adopted in the Financial Statements. The rate of VAT on financial services changed from 20% to 12% with effect from 1st January 2011 as it was announced by the 'fiscal proposal' for the year 2011. 3.5.9 Fee and Commission Income All fee and commission income have been recorded when a trade takes place. 3.5.10 Profit or Loss on sale of Property, Plant & Equipment/Investments Gains or losses of a revenue nature on the disposal of Property Plant & Equipment and share portfolio are accounted for in profit or loss. 3.5.11 Lease Payments Lease payments made under operating leases are recognised in profit or loss of each period during the lease term. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability. 3.5.12 Interest Expenses Interest payable is recognised on an accrual basis. Other expenses have been recognised in the accounts as they are incurred in the period to which they relate. 3.5.13 Earnings Per Share The Bank presents Basic Earnings per Share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit after taxation, minority interest and preference dividends by the weighted average number of ordinary shares in issue (both voting and non-voting) during the year ended 31st December. Weighted average number of ordinary shares has been calculated as per SLAS 34 considering the theoretical ex-rights value per share and the adjustment factor applicable for Rights Issue. 3.5.14 Segment Reporting A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment), or in providing products and services within a particular economic environment (geographical segment), which is subject to risks and returns different from those of other business segments. For the purposes of segment reporting disclosures, the information is presented in respect of the Group’s business segments, which is based on the Group’s management and internal reporting structure. The Group comprises the following major business segments - Banking, Consumer Financing (Leasing), Treasury and Property/Investments. Inter-segment pricing is determined on an arm’s length basis.
North Bound > Seylan Bank Annual Report 2011 287 Measurement of segment assets, liabilities, segment revenue and results is based on the accounting policies set out above. Segment revenue results, assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis. Disclosure by geographical region is not provided for as the Group’s activities are located in Sri Lanka and the economic environment in which the Group operates is not subject to risk and return that are significantly different on a geographical basis. 3.5.15 Cash Flow The cash flow has been prepared using the Direct Method of preparing cash flows in accordance with the Sri Lanka Accounting Standard 9 - ‘Cash Flow Statements’. For the purpose of the Cash Flow Statement, cash and cash equivalents include notes and coins on hand, unrestricted balances held with Central Bank and highly liquid financial assets with original maturities of less than three months, which are subject to insignificant risk of changes in their value, and are used by the Bank in the management of its short-term commitments. 3.5.16 Financial Risk Management (a) Introduction and Overview Bank has implemented a risk management framework in order to identify, measure, mitigate and control the various risk falling within market credit and operational risk. The Bank has exposure to the following risks from financial instruments: • Credit risk • Liquidity risk • Market risk • Operational risk (b) Risk Management Framework The Board of Directors has overall responsibility for the establishment and oversight of the Bank’s risk management framework. The Board has established the Asset and Liability (ALCO), Risk Management Committees, which are responsible for developing and monitoring risk management policies in their specified areas. All Board Committees have both executive and non-executive members and report regularly to the Board of Directors on their activities. The risk management policies are established to identify and analyse the risks faced by the Bank, to set appropriate risk limits and controls, and to monitor risks and adherence to limits. Risk management policies and systems are reviewed regularly to reflect changes in market conditions, products and services offered. The Bank, through its training and management standards and procedures, aims to develop a disciplined and constructive control environment, in which all employees understand their roles and obligations. The Audit Committee is responsible for monitoring compliance with the risk management policies and procedures.
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Notes to the Consolidated Financial Statements - Seylan Bank

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