MEMBERS NEWSLETTER
MEMBERS NEWSLETTER MEMBERS NEWSLETTER
MEMBERS NEWSLETTERApril 2011TECHNICAL UPDATE 1Sri Lanka Accounting Standards Bound Volume - 2011The Institute of Chartered Accountants of Sri Lanka (ICASL) recently published the 2011Bound Volume of the Sri Lanka Accounting Standards which will be effective from 1stJanuary 2012 and is based on the corresponding International Financial Reporting Standards(IFRS) and International Accounting Standards (IAS) (2009 bound volume).Quality and reliability of financial reporting is one of the key elements in the successfuldevelopment of the capital market in any country. Successful financial reporting dependsupon, inter alia, the availability of an effective set of Financial Reporting Standards in linewith those prevailing internationally, promulgated by a recognized international StandardSetting body.The Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 empowers the Instituteof Chartered Accountants of Sri Lanka, from time to time, to adopt and promulgateaccounting standards as may be necessary for the purpose of maintaining uniformity andhigh quality in financial reporting of business enterprises. The Sri Lanka AccountingStandards are largely based on the corresponding International Accounting Standardspromulgated by the International Accounting Standards Board (IASB).However, before adoption, every International Accounting Standard undergoes a due reviewprocess by the Statutory Accounting Standards Committee set in motion by the Institute, toensure that the standard is relevant in the Sri Lankan context. Once a standard is adoptedby its council, it needs to be published in the government gazette for legal purposes. Thecommittee over the years has undertaken the task of reviewing the International AccountingStandards and International Financial Reporting Standards, as and when they are issued bythe IASB and recommending them for adoption by the council of ICASL.In late 2009, the committee together with the Council of ICASL made a vital decision toconverge fully with International Financial Reporting Standards and thereafter to adopt allpronouncements issued by the IASB.Accordingly, the Sri Lanka Accounting Standards in this edition which are effective from 1stJanuary 2012 are based on the corresponding International Financial Reporting Standards(IFRS) and International Accounting Standards (IAS) (2009 bound volume) formulated by theInternational Accounting Standards Board (IASB) and its predecessor InternationalAccounting Standards Committee (IASC) respectively.This latest edition includes all IFRS and IAS, of which the following are new to the Sri Lankanfinancial reporting framework.
MEMBERS NEWSLETTERApril 2011IFRS 1 – First-time Adoption of International Financial Reporting StandardsIFRS 4 – Insurance ContractsIFRS 6 – Exploration for and Evaluation of Mineral ResourcesIAS 29 – Financial Reporting in Hyperinflationary Economies, andIAS 41 - AgricultureAs an integral part of SLFRS and LKAS, an application guidance has been publishedseparately, which includes pronouncements of International Financial ReportingInterpretation Committee (IFRIC) and Standing Interpretations Committee (SICs).TECHNICAL UPDATE 2Banking Act Direction No. 11 of 2007 on Corporate GovernanceThe Central Bank of Sri Lanka issued the above direction on Corporate Governance forLicensed Commercial Banks in Sri Lanka.The direction requires;• The Board of such institutes to present a report on the bank’s internal control mechanismthat confirms that the financial reporting system has been designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes has been done in accordance with relevant accountingprinciples and regulatory requirements.• The external auditor of the bank to report on the Directors’ Statement on InternalControl.• The external auditor of the bank to report on the bank’s compliance with the corporategovernance directions in the corporate governance reports.In order to assist the bankers and practitioners to comply with this direction, at the requestof CBSL, the Institute of Chartered Accountants of Sri Lanka (ICASL) has issued the following.• Guidance for Directors of Banks on the Directors’ Statement on Internal ControlThis Guidance consists of the recognized principles for the assessment of internal controlsystems elaborated in the “Framework for Internal Control Systems in BankingOrganizations” issued by the Basel Committee on Banking Supervision as more relevant andappropriate for this specific requirement. This guidance further illustrates theresponsibilities of directors in fulfilling the requirements enunciated by the principles. Inaddition, an illustration of how to document control activities is annexed to this guidance,
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<strong>MEMBERS</strong> <strong>NEWSLETTER</strong>April 2011IFRS 1 – First-time Adoption of International Financial Reporting StandardsIFRS 4 – Insurance ContractsIFRS 6 – Exploration for and Evaluation of Mineral ResourcesIAS 29 – Financial Reporting in Hyperinflationary Economies, andIAS 41 - AgricultureAs an integral part of SLFRS and LKAS, an application guidance has been publishedseparately, which includes pronouncements of International Financial ReportingInterpretation Committee (IFRIC) and Standing Interpretations Committee (SICs).TECHNICAL UPDATE 2Banking Act Direction No. 11 of 2007 on Corporate GovernanceThe Central Bank of Sri Lanka issued the above direction on Corporate Governance forLicensed Commercial Banks in Sri Lanka.The direction requires;• The Board of such institutes to present a report on the bank’s internal control mechanismthat confirms that the financial reporting system has been designed to provide reasonableassurance regarding the reliability of financial reporting and the preparation of financialstatements for external purposes has been done in accordance with relevant accountingprinciples and regulatory requirements.• The external auditor of the bank to report on the Directors’ Statement on InternalControl.• The external auditor of the bank to report on the bank’s compliance with the corporategovernance directions in the corporate governance reports.In order to assist the bankers and practitioners to comply with this direction, at the requestof CBSL, the Institute of Chartered Accountants of Sri Lanka (ICASL) has issued the following.• Guidance for Directors of Banks on the Directors’ Statement on Internal ControlThis Guidance consists of the recognized principles for the assessment of internal controlsystems elaborated in the “Framework for Internal Control Systems in BankingOrganizations” issued by the Basel Committee on Banking Supervision as more relevant andappropriate for this specific requirement. This guidance further illustrates theresponsibilities of directors in fulfilling the requirements enunciated by the principles. Inaddition, an illustration of how to document control activities is annexed to this guidance,
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