Notes to the Consolidated Financial Statements - Seylan Bank

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276 North Bound > Seylan Bank Annual Report 2011 Notes to the Consolidated Financial Statements determined that it has both the positive intention and ability to hold the securities until their maturity date. Unquoted long-term investments are stated at cost. 3.3.5.4 Investment Properties Investment properties are properties held either to earn rental income or for capital appreciation or both but not for sale in the ordinary course of business, used in the production or supply of goods or services or for administrative purposes. Investment property is recognised if it is probable that future economic benefits that are associated with the investment property will flow to the Group and cost of the investment property can be reliably measured. An investment property is measured initially at its cost. The cost of a purchased investment property comprises of its purchase price and any directly attributable expenditure. The cost of a self-constructed investment property is its cost at the date when the construction or development is completed. The Bank applies the cost model for investment properties in accordance with Sri Lanka Accounting Standard 40 - ‘Investment Property’ (Revised 2005). Accordingly, land classified as investment properties are stated at cost and buildings classified as investment properties are stated at cost, less any accumulated depreciation and any accumulated impairment losses. Fair values of these properties are disclosed in Note 27 to the Financial Statements. Seylan Developments PLC, the subsidiary of the Bank, applies the fair value model in accordance with the above standard. Accordingly, investment properties are stated at fair value and an external independent valuation company having an appropriate recognised professional qualification values the portfolio every three-year period. Any gain or loss arising from a change in fair value is recognised in profit or loss. Adjustment for non-uniform accounting policy is reported in Note 50. Investment properties are derecognised when disposed of, or permanently withdrawn from use because no future economic benefits are expected. When an item of Property, Plant & Equipment is transferred to investment property following a change in its use, any differences arising at the date of transfer between the carrying amount of the item immediately prior to transfer and its fair value are recognised directly in equity if it is a gain. Upon disposal of the item the gain is transferred to retained earnings. Any loss arising in this manner is recognised in profit or loss immediately. If an investment property becomes owner-occupied, it is reclassified as Property, Plant & Equipment and its fair value at the date of reclassification becomes its deemed cost for subsequent accounting. When the Company begins to redevelop an existing investment property for continued future use as investment property, the property remains an investment property, which is measured, based on fair value model, and is not reclassified as Property, Plant & Equipment during the redevelopment. A property interest under an operating lease is classified and accounted for as an investment property on a property-by-property basis when the Company holds it to earn rentals or for capital appreciation or both. Any such property interest under an operating lease classified as an investment property is carried at fair value. Lease payments are accounted for as described in accounting policy 3.5.11 below. Any property leased out to parent or subsidiary is considered as owner-occupied from the perspective of the Group and adjustments are made for consolidated purposes and changes are disclosed in Notes 29 and 30 to the Financial Statements.
North Bound > Seylan Bank Annual Report 2011 277 3.3.5.5 Other Investments Where the Bank's interest in equity is less than 20% and/or in companies where the Bank does not exercise significant influence and/or control over the financial and operating policies, any such long-term investments are valued at cost. 3.3.6 Property, Plant & Equipment Property, Plant & Equipment are tangible items that are held for servicing, or for administrative purposes and are expected to be used during more than one period. Recognition and Measurement Items of Property & Equipment are measured at cost or revaluation, less accumulated depreciation and accumulated impairment losses except for land and building. Cost includes expenditures that are directly attributable to the acquisition of the asset. The cost of self-constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the assets to a working condition for their intended use, the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of that equipment. When parts of an item of Property or Equipment have different useful lives, they are accounted for as separate items (Major components) of Property and Equipment. The gain or loss on disposal of an item of property and equipment is determined by comparing the proceeds from disposal with the carrying amount of the item of property and equipment and are recognised net within other income in profit or loss. Cost Model The Bank applies cost model to Property, Plant & Equipment except for freehold land and buildings and records at cost of purchase or construction together with any incidental expenses thereon, less accumulated depreciation and any accumulated impairment losses. Revaluation Model The Bank applies the revaluation model for the entire class of freehold land and buildings. Such properties are carried at a revalued amount, being their fair value at the date of revaluation, less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Freehold land and buildings of the Bank are revalued every five years on a roll over basis to ensure that the carrying amounts do not differ materially from the fair values at the Balance Sheet date. On revaluation of an asset, any increase in the carrying amount is credited directly to equity, under revaluation reserve or used to reverse a previous revaluation decrease relating to the same asset, which was debited to the Income Statement. In this circumstance, the increase is recognised as income to the extent of the previous write down. Any decrease in the carrying amount is recognised as an expense in the Income Statement or debited directly to equity under revaluation reserve to the extent of any credit balance existing in the revaluation reserve in respect of that asset.
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Notes to the Consolidated Financial Statements - Seylan Bank

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