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COMMERCIAL LEASING & FINANCE PLC
FINANCIAL STATEMENTS
FOR THE YEAR ENDED 31 MARCH 2018
Commercial Leasing & Finance PLC
Statement of Profit or Loss and Other Comprehensive Income
For the year ended 31st March 2018 2017 2018 2017
Note Rs. Rs. Rs. Rs.
Interest income 4 13,320,336,074 10,752,920,918 13,347,777,718 10,898,203,064
Interest expense 5 (6,994,794,629) (6,125,875,979) (6,994,794,629) (6,125,875,979)
Net interest income 6,325,541,445 4,627,044,939 6,352,983,089 4,772,327,085
Other income 6 2,234,424,249 2,331,372,193 2,477,072,059 2,331,372,193
Operating expenses
Direct expenses (585,305,241) (469,700,616) (585,305,241) (469,700,617)
Premises, equipment & establishment expenses (398,438,042) (346,377,030) (398,438,042) (346,377,030)
Personnel expenses 9.1 (1,387,268,219) (1,103,658,073) (1,387,268,219) (1,103,658,073)
Allowance for impairment & write offs 7 (1,055,991,702) (712,077,237) (1,055,991,702) (712,077,237)
Depreciation and amortization 8 (113,660,958) (109,605,722) (113,660,958) (109,605,722)
Other operating expenses (1,926,668,688) (1,709,840,997) (1,926,668,688) (1,709,840,997)
Results from operating activities before value added tax on financial
services and NBT 9 3,092,632,844 2,507,157,457 3,362,722,298 2,652,439,602
Value added tax on financial services and NBT 10 (610,955,235) (457,910,846) (610,955,235) (457,910,846)
Results from operating activities 2,481,677,609 2,049,246,611 2,751,767,063 2,194,528,756
Share of profit of equity accounted investee (net of tax) 23 153,267,666 10,245,454 153,267,666 10,245,454
Profit before Tax 2,634,945,275 2,059,492,065 2,905,034,729 2,204,774,210
Income tax expense 11 (760,711,882) (518,470,888) (760,711,882) (518,470,888)
Profit for the period from continuing operations 1,874,233,393 1,541,021,177 2,144,322,847 1,686,303,322
Discontinued operations
Profit/ (loss) for the period from discontinued operations 12 (81,495,104) 365,209,154 - -
Proft for the year 1,792,738,289 1,906,230,331 2,144,322,847 1,686,303,322
Other comprehensive income
Revaluation of property, plant and equipment 28.2 77,008,499 747,892,179 77,008,499 747,892,179
Actuarial losses on defined benefit plan 36.2 (6,094,101) (5,625,892) (6,094,101) (8,591,135)
Net change in fair value of available for sale finance assets 150,432,262 (42,068,926) 149,781,387 (40,107,127)
Effective portion of changes in fair value of cash flow hedges (114,212,830) 18,493,043 (114,212,830) 18,493,043 Share of other comprehensive income from equity accounted investee 11,933,238 199,410 11,933,238 199,410
Income tax recognised in other comprehensive income 35.3.1 67,750,875 (26,911,978) 67,750,875 (26,081,710)
Other comprehensive income for the year, net of tax 186,817,943 691,977,836 186,167,068 691,804,660
Total comprehensive income for the year 1,979,556,232 2,598,208,167 2,330,489,915 2,378,107,982
Profit attributable to;
Equity holders of the company 1,792,638,207 1,896,644,018 2,144,322,847 1,686,303,322
Non controlling interest 100,082 9,586,313 - -
1,792,738,289 1,906,230,331 2,144,322,847 1,686,303,322
Total comprehensive income attributable to;
Equity holders of the company 1,979,454,588 2,588,623,451 2,330,489,915 2,378,107,982
Non controlling interest 101,644 9,584,716 - -
1,979,556,232 2,598,208,167 2,330,489,915 2,378,107,982
Basic and diluted earnings per share 13.1 0.28 0.30 0.34 0.26
Earnings per share from continuing operation 13.2 0.29 0.24 0.34 0.26
Figures in brackets indicate deductions
Group Company
The notes form an integral part of these financial statements.
Commercial Leasing & Finance PLCStatement of Financial Position
As at 31st March 2017 2018 2017
Note Rs. Rs. Rs.
ASSETS
Cash and cash equivalents 14.1 2,150,419,980 2,377,557,530 1,487,849,203
Financial assets held for trading 15 2,715,175,089 153,996,501 2,715,175,089
Other investments 16 16,650,125,114 6,505,214,249 15,753,953,997
Rentals receivable on leases & hire purchases 17 14,081,274,833 14,983,512,091 13,972,747,976
Loans and advances 18 43,810,290,091 41,208,800,160 33,795,065,806
Factoring receivables 19 6,167,657,168 3,584,916,333 6,167,657,168
Amount due from related companies 20 4,189,200 370 -
Value added tax (VAT) recoverable 264,968,562 94,646,134 264,968,560
Current tax assets 21 85,864,450 89,836,635 77,088,006
Other current assets 22 452,484,209 139,629,894 392,503,024
Equity accounted investees 23 83,059,004 1,506,849,622 83,059,004
Investment properties 24 46,000,000 1,632,000,000 46,000,000
Investments in subsidiaries 25 - - 1,023,301,966
Goodwill 26 253,210,966 - -
Intangible assets 27 5,943,388 3,910,108 5,943,388
Property, plant and equipment 28 2,120,039,018 1,227,575,523 1,975,784,096
Total assets 88,890,701,072 73,508,445,150 77,761,097,283
LIABILITIES AND EQUITY
Liabilities
Bank overdraft 14.2 1,805,044,333 1,353,451,358 1,390,806,997
Derivative Liabilities 29 15,562,267 271,625,120 15,562,267
Deposits from customers 30 18,749,264,785 23,485,108,879 15,935,942,434
Loans and borrowings-current 31.2 20,028,639,204 9,619,669,022 17,978,500,029
Loans and borrowings- non current 31.2 26,288,430,792 19,312,993,198 26,288,430,792
Current tax liabilities 32 520,757,787 519,857,489 413,645,436
Amount due to related companies 33 5,360,025,600 158,747,591 84,598,219
Trade and other payables 34 1,149,909,607 1,714,303,031 1,068,731,735
Deferred tax liabilities 35.1.1 347,866,851 477,339,023 337,045,278
Employee benefits 36 95,895,277 89,326,490 72,300,062
Total liabilities 74,361,396,503 57,002,421,201 63,585,563,249
Equity
Stated capital 37 1,425,946,629 1,425,946,629 1,425,946,629
Reserves 38 1,682,756,039 1,995,771,184 1,709,933,458
Retained earnings 39 11,417,907,696 13,084,306,136 11,039,653,947
Equity attributable to equity holding of the parent 14,526,610,364 16,506,023,949 14,175,534,034
Non-controlling interests 2,694,205 - -
Total equity 14,529,304,569 16,506,023,949 14,175,534,034
Total liabilities & equity 88,890,701,072 73,508,445,150 77,761,097,283
Net assets value per share 2.28 2.59 2.22
Figures in brackets indicate deduction.
Sgd
Mrs. N.P. Kariyawasam
Head of Finance
The board of directors is responsible for the preparation and presentation of these financial statements.
Approved and signed for and on behalf of the Board by;
Sgd Sgd
Mr.U.H.Ebert Silva Mr.T.Sanakan
Director Director
Colombo,
18th June 2018
Group Company
The notes form an integral part of these financial statements.
These financial statements are prepared and presented in compliance with the requirements of companies Act No. 7 of 2007.
Commercial Leasing & Finance PLC
Statement of Changes in Equity
For the year ended 31st March 2018
Group Stated capital Revaluation
reserve
Hedging
reserve
Available-for-
sale reserve
General
reserve
Statutory
reserve fund
Retained
earnings Total
Non-controlling
interest Total equity
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Balance as at 31st March 2016 1,425,946,629 135,980,246 46,270,286 (87,474,653) 231,779,789 565,537,505 9,617,451,437 11,935,491,239 51,044,611 11,986,535,850
1,425,946,629 135,980,246 46,270,286 (87,474,653) 231,779,789 565,537,505 9,617,451,437 11,935,491,239 51,044,611 11,986,535,850
Total comprehensive income for the year
Profit for the year - - - - - - 1,896,644,018 1,896,644,018 9,586,313 1,906,230,331
Other comprehensive income - 747,892,179 18,493,043 (42,067,329) - - (5,625,892) 718,692,001 (1,597) 718,690,404
Share of other comprehensive income from equity accounted investee - - - - - - 199,410 199,410 - 199,410
Tax impact on other complrehensive income - (11,490,828) (16,996,400) - - - 1,575,250 (26,911,978) - (26,911,978)
Total comprehensive income for the period - 736,401,351 1,496,643 (42,067,329) - - 1,892,792,786 2,588,623,451 9,584,716 2,598,208,167
Transactions with owners directly recorded in the equity
Acquisition of NCI - - - - - - 2,495,674 2,495,674 (57,935,122) (55,439,448)
Transferred to/(from) during the year - - - - - 94,832,201 (94,832,201) - - -
- - - - - 94,832,201 (92,336,527) 2,495,674 (57,935,122) (55,439,448)
Balance as at 31st March 2017 1,425,946,629 872,381,597 47,766,929 (129,541,982) 231,779,789 660,369,706 11,417,907,696 14,526,610,364 2,694,205 14,529,304,569
The notes form an integral part of these financial statements.
Figures in brackets indicate deductions.
Commercial Leasing & Finance PLC
Statement of Changes in Equity
For the year ended 31st March 2018
Company Stated capital Revaluation
reserve
Hedging
reserve
Available-for-
sale reserve
General
reserve
Statutory
reserve fund
Retained
earnings
Total
equity
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Balance as at 01st April 2016 1,425,946,629 135,980,245 46,270,290 (87,107,180) 288,079,789 544,604,281 9,443,651,998 11,797,426,052
Total comprehensive income for the year
Profit for the year - - - - - - 1,686,303,322 1,686,303,322
Revaluation of property, plant and equipment - 747,892,179 - - - - - 747,892,179
Other comprehensive income - - 18,493,043 (40,107,127) - - (8,591,135) (30,205,219)
Share of other comprehensive income from equity accounted investee - - - - - - 199,410 199,410
Tax Impact on Other Comprehensive Income - (11,490,828) (16,996,400) - - - 2,405,518 (26,081,710)
Total comprehensive income for the period - 736,401,351 1,496,643 (40,107,127) - - 1,680,317,115 2,378,107,982
Transactions with owners directly recorded in the equity
Transferred to/(from) during the year - - - - - 84,315,166 (84,315,166) -
Balance as at 31st March 2017 1,425,946,629 872,381,596 47,766,933 (127,214,307) 288,079,789 628,919,447 11,039,653,947 14,175,534,034
Total comprehensive income for the year
Profit for the year - - - - - - 2,144,322,847 2,144,322,847
Revaluation of property, plant and equipment - 77,008,499 - - - - - 77,008,499
Other comprehensive income - - (114,212,830) 149,781,387 - - (6,094,101) 29,474,456
Share of other comprehensive income from equity accounted investee - - - - - - 11,933,238 11,933,238
Tax on other comprehensive income - (1,507,493) 67,552,021 - - - 1,706,347 67,750,875
Total comprehensive income for the period - 75,501,006 (46,660,809) 149,781,387 - - 2,151,868,331 2,330,489,915
Transactions with owners directly recorded in the equity
Transferred to/(from) during the year - - - - - 107,216,142 (107,216,142) -
Balance as at 31st March 2018 1,425,946,629 947,882,602 1,106,124 22,567,080 288,079,789 736,135,589 13,084,306,136 16,506,023,949
The notes form an integral part of these financial statements.
Figures in brackets indicate deductions.
Commercial Leasing & Finance PLC - - -
Statement of Cash Flows
For the year ended 31st March 2017 2018 2017
Note Rs. Rs. Rs.
OPERATING ACTIVITIES
Profit before income tax 2,059,492,065 2,905,034,729 2,204,774,210
Adjustment for:
Profit on disposal of property, plant and equipment 6 (5,434,017) (10,646,161) (5,434,017)
Depreciation 8 109,605,722 113,660,958 109,605,722
Provision for employee benefits 36.1 15,378,201 17,865,691 15,378,201
Net impairment loss on financial assets 7 712,077,237 1,055,991,702 712,077,237
Change in fair value of investments 15.1 (13,049,452) (47,242,344) (13,049,452)
Dividend income 6 (46,650,781) (6,199,403) (46,650,781)
Interest expense 5 6,125,875,979 6,994,794,629 6,125,875,979
Investment income (1,266,912,404) (950,953,503) (1,266,912,404)
Adjustment for unamortized finance cost - long term borrowings 99,495,912 91,509,210 99,495,912
FV gain on investment property 24 (4,000,000) (59,882,000) (4,000,000)
Share of equity accounted investee 23 (10,245,454) (153,267,666) (10,245,454)
Profit on deemed disposal of BRAC - (242,647,810) -
Cash flows from operating activities before working capital changes 7,775,633,008 9,708,018,032 7,920,915,153
Changes in :
Leases, hire purchase receivables 482,356,863 257,613,523 482,356,863
Advances and other loans receivable (6,812,760,209) (7,745,503,369) (6,812,760,207)
Factoring receivable (1,532,626,826) 2,039,390,136 (1,532,626,826)
Other receivables and related party receivables (94,865,221) (1,204,292,284) (94,865,221)
Trade and other payables and related party payable (405,587,476) 1,057,974,975 (405,587,476)
Customer deposits 3,588,295,981 7,549,166,445 3,588,295,981
Cash Generated from operations 3,000,446,120 11,662,367,458 3,145,728,267
Finance cost paid (6,018,678,763) (6,602,891,628) (6,018,678,763)
Income tax paid 32 (616,248,373) (282,413,797) (616,248,373)
Employee benefits paid 36 (2,011,238) (6,933,364) (2,011,238)
Net cash from /(used in) operating activities of continuining operations (3,636,492,254) 4,770,128,669 (3,491,210,107)
Net cash from operating activities from discontinuing opearations 749,956,844 - -
(2,886,535,410) 4,770,128,669 (3,491,210,107)
INVESTING ACTIVITIES
Net cash and cash equivalents on acquisition of subsidiary (55,439,448) - (55,439,448)
Acquisition of property, plant and equipment (276,330,327) (328,093,981) (276,330,327)
Acquisition of intangible assets (6,341,400) - (6,341,400)
Net additions to financial Instruments 15,479,445,915 11,636,255,118 15,479,445,915
Acquisition / (disposal)of investment properties - (483,118,000) -
Proceeds from the sale of property, plant and equipment 6,972,873 10,777,352 6,972,873
Dividend received from investments 43,410,781 13,597,365 43,410,781
Interest received 1,266,912,404 1,125,198,256 1,266,912,404
Net cash flow from investing activities from continuing Operations 16,458,630,798 11,974,616,110 16,458,630,798
Net cash flow from investing activities from discontinuing Operations (925,118,908) - -
15,533,511,890 11,974,616,110 16,458,630,798
FINANCING ACTIVITIES
Net cash proceeds from short-term interest bearing loans and borrowings (10,964,931,756) (15,817,680,813) (10,964,931,756)
Repayments of long-term interest bearing loans and borrowings (1,570,741,911) - (1,570,741,911)
Net cashflows used in financing activities from continuing operations (12,535,673,667) (15,817,680,813) (12,535,673,667)
Net cash flows used in financing activities from discontinuing operations (451,351,075) - -
(12,987,024,742) (15,817,680,813) (12,535,673,667)
Net (decrease) / increase in cash and cash equivalents (340,048,262) 927,063,966 431,747,024
Cash and cash equivalents at the beginning of the year 685,423,909 97,042,206 (334,704,818)
Cash and cash equivalents at the end of the year (Note A) 345,375,647 1,024,106,172 97,042,206
Note A
Cash in hand and favorable bank balances 14.1 2,150,419,980 2,377,557,530 1,487,849,203
Unfavorable bank balances used for cash management purposes 14.2 (1,805,044,333) (1,353,451,358) (1,390,806,997)
Cash and cash equivalents at the end of the year 345,375,647 1,024,106,172 97,042,206
Figures in brackets indicate deductions.
Group Company
The notes form an integral part of these financial statements.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
Corporate Information
1.1 General
Commercial Leasing & Finance PLC was incorporated as a Private Limited Company in April 1988 and
domiciled in Sri Lanka, in 1992 converted into a Public Limited Company and listed in the Colombo Stock
Exchange. In 2008 with the acquisition by Lanka Orix Leasing Company PLC, the company submitted an
application to delist from Colombo Stock Exchange and it was treated as de-listed with effect from July 01,
2009.
Further to Finance Leasing Act No 56 of 2000, on 07th December 2011, the Company has obtained the
License to carry on Finance Business under the Finance Business Act No 42 of 2011. Company has relisted
in Colombo Stock Exchange in June 2012 in compliance with the CBSL Directions with the divestment of
10% of the stated capital.
Ordinary shares of the Company are listed on the Diri savi board of the Colombo Stock Exchange (CSE).
The Consolidated Financial Statements of the Company as at and for the year ended 31st March 2018 comprise
of the Company and its subsidiary (together referred to as the “Group” and individually as “Group entities”)
and the Group’s interest in associates.
The registered office and the principal place of business of the Company is located at No.68, Bauddhaloka
Mawatha, Colombo 04.
1.2 Parent entity and Ultimate Parent Company
Lanka ORIX Leasing Company PLC is the holding company of the Group and therefore, it does not have an
identifiable immediate or ultimate parent of its own.
1.3 Principal Activities and Nature of Operations
The principal activities of the Company comprised of leasing, loans, factoring, Islamic financing, micro
financing and mobilization of public deposits.
Description of the nature of operations and principal activities of the subsidiary company and associate
company are given on note 23 and 25 respectively to these Financial Statements with any changes to the
principal activities during the financial year under review.
1.4 Number of Employees
The staff strength of the Company as at 31st March 2018 was 1,327 (31.03.2017 – 1,099).
2. Basis of Preparation
2.1 Statement of Compliance
The Financial Statements of the Company and those consolidated with such are prepared in accordance with
the Sri Lanka Accounting Standards (LKASs/SLFRSs) laid down by the Institute of Chartered Accountants
of Sri Lanka (ICASL) and the requirements of the Companies Act No.7 of 2007. These SLFRSs and LKASs
are available at www.casrilanka.com.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
The presentation of these Financial Statements is also in compliance with the requirements of the Finance
Business Act no 42 of 2011 and the listing rules of the Colombo Stock Exchange. These Financial Statements,
except for information on cash flows have been prepared following the accrual basis of accounting.
The Group did not adopt any inappropriate accounting treatments, which are not in compliance with the
requirements of the SLFRSs and LKASs, regulations governing the preparation and presentation of the
Financial Statements.
2.2 Presentation of Financial Statements
The assets and liabilities of the Group presented in the Statement of Financial Position are grouped by nature
and listed in-order to reflect their relative liquidity and maturity pattern. An analysis regarding recovery or
settlement within twelve months after the reporting date (current) and more than twelve months after the
reporting date (non-current) is presented in note 40 (Maturity analysis)).
Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial
Position only when there is a legally enforceable right to off-set the recognized amounts and there is an
intention to settle on a net basis, or to realize the assets and settle the liability simultaneously. Income and
expenses are not offset in the Statement of Profit or Loss unless required or permitted by an accounting
standard or an interpretation, and as specially disclosed in the accounting policies of the Group.
2.3 Basis of Measurement
The Financial Statements of the Group and the Company have been prepared on the historical cost basis and
applied consistently with no adjustments being made for inflationary factors affecting the financial
Statements, except for the following material items in the Statement of Financial Position;
Items Basis of measurement Note No/s
Held-for-trading
financial instruments
Fair value 15
Derivative financial
instruments
Fair value 16.3
Available for sale –
financial instruments
Fair value 16.1
The liability for defined
benefit obligations
Net liability for defined
benefit obligations are
recognised as the present
value of the defined
benefit obligation, plus
unrecognised actuarial
gains, less unrecognised
past service cost, and
unrecognised actuarial
losses
36
Lands and buildings Measured at cost at the
time of acquisition and
subsequently at revalued
amounts which are the fair
values at the date of
revaluation
28
Investment properties Fair value 24
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
2.4 Functional and presentation currency
The functional currency is the currency of the primary economic environment in which the entities of the
Group operates. These Financial Statements are presented in Sri Lankan Rupees (LKR), which is the Group’s
functional currency and the presentation currency. All financial information has been rounded to the nearest
Rupee unless stated otherwise.
2.5 Use of Significant Judgments, Estimates and Assumptions
The preparation of the financial statements in conformity with SLFRSs/LKASs requires management to make
judgments, estimates and assumptions that affect the application of accounting policies and the reported
amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
Estimates and underlying assumptions are based on historical experience and various other factors that are
believed to be reasonable under the circumstances, the results which form the basis of making the judgments
about the carrying amount of assets and liabilities that are not readily apparent from other sources.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognized in the period in which the estimates are revised and in any future periods affected.
Information about critical judgments, estimates and assumptions in applying accounting policies that have
the most significant effect on the amounts recognized in the financial statements are included in the following
notes to these Financial Statements.
Critical accounting estimate/judgment
Disclosure
reference
Note
Classification of financial assets and liabilities 2.13
Fair Value of financial instruments 3.3.3.6
Financial Instruments – fair value disclosure 3.3.3.5
Impairment of financial investments – available for sale 3.3.4.2
Revaluation of property, plant and equipment 3.6.1.4
Determination in fair value of Investment properties 3.4
Useful lives of intangible assets 3.5
Useful lives of property, plant and equipment 3.6.1.7
Defined benefit obligation 3.11
Deferred tax on undistributed profits of equity accounted investees 3.8.2
Write-off policy 3.3.4.4
Allowance for impairment 17.3 , 18.1.1,
19.1
Impairment of non-financial assets 3.3.8
Provisions for liabilities, commitments and contingencies 3.22
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
2.6 Comparative Information
Comparative information including quantitative, narrative and descriptive information is disclosed in respect
of the previous period in the Financial Statements in order to enhance the understanding of the current period’s
Financial Statements and to enhance the inter period comparability. The presentation and classification of the
Financial Statements of the previous year are amended, where relevant for better presentation and to be
comparable with those of the current year.
The share of results of equity accounted investees in the income statement and other comprehensive income
statement are shown net of all related taxes.
2.7 Materiality, Presentation and Aggregation
As per LKAS – 01 “Presentation of Financial Statements”, each material class of similar items is presented
separately in the Financial Statements. Items of dissimilar nature or function are presented separately unless
they are immaterial.
Notes to the Financial Statements are presented in a systematic manner which ensures the understandability
and comparability of Financial Statements of the Group and the Company. Understandability of the Financial
Statements is not compromised by obscuring material information with immaterial information or by
aggregating material items that have different natures or functions.
The assets and liabilities of the Group presented in the Statement of Financial Position are grouped by nature
and listed in an order that reflects their relative liquidity and maturity pattern.
2.8 Offsetting
Financial assets and financial liabilities are offset and the net amount reported in the Statement of Financial
Position, only when there is a legally enforceable right to offset the recognised amounts and there is an
intention to settle on a net basis or to realise the assets and settle the liabilities simultaneously. Income and
expenses are not offset in the Income Statement, unless required or permitted by an Accounting Standard or
Interpretation (issued by the International Financial Reporting Interpretations Committee and Standard
Interpretations Committee) and as specifically disclosed in the Significant Accounting Policies of the Group.
2.9 Going Concern
The Board of Directors is satisfied that the Group has adequate resources to continue its operations in the
foreseeable future and management is not aware of any material uncertainties that may cast significant doubt
upon the Group’s ability to continue as a going concern. Therefore, going-concern basis has been adopted in
preparing these Financial Statements.
2.10 Directors’ Responsibility for the Financial Statements
The Board of Directors is responsible for the preparation and fair presentation of these Financial Statements
in accordance with Sri Lanka Accounting Standards and as per the provisions of the Companies Act No. 07
of 2007. This responsibility includes: designing, implementing and maintaining internal controls relevant to
the preparation and fair presentation of Financial Statements that are free from material misstatement, whether
due to fraud or error; selecting and applying appropriate accounting policies; and making accounting
estimates that are reasonable in the circumstances.
The Board of Directors acknowledges their responsibility as set out in the “Annual Report of the Board of
Directors on the Affairs of the Company” and “Director’s Responsibility for Financial Reporting”.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
These Financial Statements include the following components;
A Statement of Financial Position providing the information on the financial position of the Group
and the Company as at the yearend;
A Statement of Profit or Loss providing the information on the financial performance of the Group
and the Company for the year under review;
A Statement of Other Comprehensive Income providing the information of the other comprehensive
income of the Group and the Company;
A Statement of Changes in Equity depicting all changes in shareholders’ funds during the year under
review of the Group and the Company;
A Statement of Cash Flows providing the information to the users, on the ability of the Group and
the Company to generate cash and cash equivalents and the needs of entities to utilize those cash
flows, and
Notes to the Financial Statements comprising Accounting Policies and other explanatory information.
2.11 Approval of Financial Statements by the Board of Directors
The Financial Statements of the Group and the Company for the year ended 31 March 2018 (including
comparatives) were approved and authorized for issue by the Board of Directors on 18 June 2018.
2.12 Changes in Accounting Policies
The Group and the Company has consistently applied the accounting policies as set out in Note 3 to all
periods presented in these consolidated financial statements.
2.13 New Accounting Standards Issued But Not Effective at Reporting Date
The Accounting standards issued but not effective at the reporting date is given below with expected impact
on Group financial statements. The Group will apply the accounting standards when they become effective.
SLFRS 9 – ‘Financial Instruments’
SLFRS 09, issued in July 2014, is effective for annual periods beginning on or after 1 January 2018, with
early adoption permitted. It replaces LKAS 39 – “Financial Instruments: Recognition and Measurement”.
The Group will apply SLFRS 9 as issued in July 2014 with effect from 1 January 2018 based on the
transitional provisions.
The Group has assessed the impact on transition based on gap analysis and quantifications performed on its
Financial Statements as at 31 March 2017 on adoption of SLFRS 9 with the assistance of an external
consultant.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
The Group is now in the process of testing and refining the data and models used for the calculation of initial
impact assessment.
SLFRS 9 include three major sections, i.e.
• Classification and measurement of financial assets and financial liabilities
• Impairment of financial assets
• Hedge accounting
The summary of the impact to the Company is presented in the table below:
Area LKAS 39 requirement SLFRS 9 requirement Impact to the Group
Financial asset
classification and
measurement
Four categories (HTM,
L&R, FVTPL and
AFS)
Classification is based
on ability and intention
to hold and the
marketability of the
instrument.
Three categories
(Amortised cost, FV
through profit or loss
and FV through OCI)
Classification is based
on characteristics of
financial instruments
and the business model
of the portfolio.
No significant impact
If equity instrument is classified
as FV through OCI, no fair value
gain/loss is recognised in profit
or loss.
Financial liabilities Two categories – FV
through profit or loss
and amortised cost.
Two categories – FV
through profit or loss
and amortised cost.
No change.
Impairment Incurred loss approach. Expected loss
approach.
1. Provisions for all claims
including SLDB and
corporate debentures.
2. Life time ECL for watch list
(30-90days outstanding
category).
3. Provisions for undrawn and
unutilised exposures.
4. Incorporation of forward
looking information/
macroeconomic factors.
Hedge accounting The result of
retrospective
effectiveness should be
within the range of 80-
125%.
Elimination of the 80-
125% qualitative
threshold for
recognising
effectiveness.
No impact to the Group’s
presently designated hedge
relationship.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
• Classification and measurement of financial assets and financial liabilities
SLFRS 9 contains a new classification and measurement approach for financial assets that reflects the
business model in which assets are managed and their cash flow characteristics.
SLFRS 9 includes three principal classification categories for financial assets: measured at amortised cost,
FVOCI (Fair Value through Other Comprehensive Income) and FVTPL (Fair Value Through Profit or Loss).
It eliminates the existing LKAS 39 categories of held for trading, held to maturity, loans and receivables and
available for sale.
All equity instruments should be fair valued either through profit or loss or OCI. Fair value through Other
Comprehensive Income (OCI) is an irrecoverable option without recycling (i.e. the amount recognised in
OCI/Reserves cannot be transferred to P&L at the time of disposal).
The standard will affect the classification and measurement of financial assets held as at 1 January 2018 as
follows:
Trading assets and derivative assets held for risk management, which are classified as held for trading
and measured at FVTPL under LKAS 39, will also be measured at FVTPL under SLFRS 9.
Loans and advances to banks and to customers that are classified as loans and receivables and
measured at amortised cost under LKAS 39 will in general also be measured at amortised cost under
SLFRS 9.
Held-to-maturity investment securities measured at amortised cost under LKAS 39 will in general
also be measured at amortised cost under SLFRS 9.
Debt investment securities that are classified as available for sale under LKAS 39 may, under SLFRS
9, be measured at amortised cost, FVOCI or FVTPL, depending on the particular circumstances.
The equity investment securities that are classified as available for sale under LKAS 39 will be
designated as FVOCI on 1 January 2018.
SLFRS 9 does not change the measurement rules of financial liabilities.
• Impairment of financial assets
SLFRS 9 brings out the concept of expected loss against the incurred loss principle used in LKAS 39.
Accordingly,
a) Life Time Expected Credit Loss (ECL) to be provided for all loans. However, if loans credit
risk has not increased significantly from the grant date, the expected loss should be restricted
only to 12 months’ period.
b) The provision should be based on Exposure At Default (EAD) instead of outstanding balance
used under LKAS 39. As a result, undrawn loan commitments/unutilised credit facilities
would attract provisions.
c) Expected loss to be measured by internal estimates of following loss statistics:
• Probability of Default (PD) derived through age bucket transition matrix
• Loss Given Default (LGD)-based on historical recoveries of defaulted loans.
b) Incorporate forward looking information to adjust loss statistics calculated by the Bank.
These forward looking information include macroeconomic factors such as gross domestic
production, inflation etc.
c) SLFRS 9 requires provision to be made for all financial assets including foreign currency
denominated Government Securities and corporate debentures.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
• Hedge accounting
Hedge accounting guidelines prescribed by SLFRS 9 do not have any impact on cash flow hedge
accounting currently in place in the Group.
SLFRS 15 – ‘Revenue from Contracts with Customers’
SLFRS 15 establishes a comprehensive framework for determining whether, how much and when
revenue is recognised. New qualitative and quantitative disclosure requirements aim to enable
Financial Statements users to understand the nature, amount, timing and uncertainty of revenue and
cash flows arising from contracts with customers. It replaces existing revenue recognition guidance,
including LKAS 18 on ‘Revenue’ and LKAS 11 on ‘Construction Contracts’ and IFRIC 13 on
‘Customer Loyalty Programmes’.
Entities will apply five-step model to determine when to recognize revenue and at what amount. The
model specified that revenue is recognised when or as an entity transfers control of goods and services
to a customer at the amount to which the entity expects to be entitled. Depending on whether certain
criteria are met, revenue is recognized.
SLFRS 15 is effective for annual reporting periods beginning on or after January 01, 2018, with early
adoption permitted.
The Group does not expect significant impact on its Financial Statements resulting from the
application of SLFRS 15 and pending the completion of detailed review, the financial impact is not
reasonably estimable as at the date of publication of these Financial Statements.
SLFRS 16 – ‘Leases’
SLFRS 16 requires lessees to recognise all leases on their Statement of Financial Position as lease
liabilities, with the corresponding right of use assets.
The profit or loss recognition pattern for recognised leases will be similar to existing finance lease
accounting, with interest and depreciation expense recognised separately in the Profit or Loss.
SLFRS 16 is effective for annual periods beginning on or after 1 January 2019.
Based on the high level impact assessment performed, the Group is not expecting a significant impact
on SLFRS 16 adoption except for the capitalisation of operating lease commitments.
The following amendments and improvements are not expected to have a significant impact on the
Group's financial statements
• Annual Improvements to SLFRSs (2014–2016) Cycle - various standards
• Amendments to LKAS 28 – Long-term interests in associates and joint ventures
• Amendments to SLFRS 10 and LKAS 28 – Sale or Contribution of Assets between an
Investor and its Associate or Joint Venture
• Amendments to SLFRS 2 – Classification and Measurement of Share-Based Payment
Transactions
• Amendments to IFRS 9 – Financial assets with a prepayment feature with negative
compensation
• Supplementary information on IFRIC 22 – Foreign Currency Transactions and Advance
Consideration
• IFRIC 23 – Uncertainty over Income Tax Treatments
• Annual Improvements to SLFRSs 2015–2017 Cycle – various standards
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
3. SIGNIFICANT ACCOUNTING POLICIES
The accounting policies set out below have been applied consistently to all periods presented in these
Consolidated Financial Statements unless otherwise indicated.
These accounting policies have been applied consistently by entities within the Group.
3.1 Basis of Consolidation
3.1.1 Business combinations
The Group’s Financial Statements comprise, Consolidated Financial Statements of the Company and its
Subsidiaries in terms of the Sri Lanka Accounting Standard – SLFRS 10 on ‘Consolidated Financial
Statements’ and the proportionate share of the profit or loss and net assets of its Associates in terms of the Sri
Lanka Accounting Standard – LKAS 28 on ‘Investments in Associates and Joint Ventures’.
The Group measures goodwill as the fair value of the consideration transferred including the recognized
amount of any non-controlling interest in the acquiree, less the net recognized amount (generally fair value)
of the identifiable assets acquired and liabilities assumed, all measured as of the acquisition date. When the
excess is negative, a bargain purchase gain is recognized immediately in Profit or Loss.
The Group elects on a transaction-by-transaction basis whether to measure non-controlling interest at its fair
value, or at its proportionate share of the recognized amount of the identifiable net assets, at the acquisition
date.
Transaction costs, other than those associated with the issue of debt or equity securities, that the Group incurs
in connection with a business combination are expensed as incurred.
3.1.2 Subsidiaries
Subsidiaries are entities controlled by the Group. Control exists when the Company has the power, directly
or indirectly, to govern the financial and operational policies of an entity so as to obtain benefits from its
activities. In assessing control, potential voting rights that presently are exercisable or convertible are taken
into account.
Control over an investee is achieved when the Group is exposed, or has rights, to variable returns from its
involvement with the investee and has the ability to affect those returns through its power over the investee.
Specifically, the Group controls an investee if, and only if, the Group has:
Power over the investee (i.e., existing rights that give it the current ability to direct the relevant
activities of the investee) ;
Exposure, or rights, to variable returns from its involvement with the investee;
The ability to use its power over the investee to affect its returns.
When the Group has less than a majority of the voting or similar rights of an investee, the Group considers
all relevant facts and circumstances in assessing whether it has power over an investee, including:
The contractual arrangement with the other vote holders of the investee;
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
Rights arising from other contractual arrangements; and
The Group’s voting rights and potential voting rights
The Financial Statements of subsidiaries are included in the consolidated Financial Statements from the date
that control commences until the date that control ceases. Acquisition of subsidiaries is accounted for using
the acquisition method of accounting.
The accounting policies of subsidiaries have been changed where necessary to align them with the policies
adopted by the Group. If a member of the group uses accounting policies other than those adopted in the
consolidated Financial Statements for similar transactions and events in similar circumstances, appropriate
adjustments are made to its Financial Statements in preparing the consolidated Financial Statements.
Any goodwill arising on the acquisition of a foreign operation and any fair value adjustments to the carrying
amounts of assets and liabilities arising on the acquisition are treated as assets and liabilities of the foreign
operation and translated at the closing rate.
3.1.3 Non-Controlling Interests
Non-controlling Interests is the equity in a subsidiary not attributable, directly or indirectly, to the parent are
presented in the Statement of Financial Position within Equity, separately from the Equity attributable to
Shareholders Holders of the Parent (Company).
3.1.4 Acquisition of Non-Controlling interests
Subsequent to the acquisition of control, any further acquisition of net assets from non-controlling interest is
accounted for as transactions with owners in their capacity as owners. Therefore, no goodwill or gain on
bargain purchase is recognized as a result of such transactions.
Any difference between the amount by which the non-controlling interests is adjusted and the fair value of
the consideration paid or received shall be recognized directly in equity and attributed to the owners of the
parent.
3.1.5 Transactions do not result a change in control
Changes in the Group’s interest in a subsidiary that do not result in a loss of control status are accounted for
as transactions with owners in their capacity as owners. Adjustments to non-controlling interests and parent’s
equity are based on a proportionate amount of the net assets of the subsidiary. No adjustments are made to
goodwill recognized and no gain or loss is recognized in Profit or Loss.
3.1.6 Common control transactions
A business combination involving entities or businesses under common control is a business combination in
which all of the combining entities or businesses ultimately are controlled by the same party or parties both
before and after the combination, and that control is not transitory.
The acquirer of the common control transaction applies book value accounting for all common control
transactions.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
In applying book value accounting, no entries are recognized in Profit or Loss; instead, the result of the
transaction is recognized in equity as arising from a transaction with shareholders.
3.1.7 Loss of Control
The parent can lose control of a subsidiary with or without a change in absolute or relative ownership levels.
Upon the loss of control, the Group derecognizes the assets and liabilities of the subsidiary, any minority
interests and the other components of equity related to the subsidiary. Any surplus or deficit arising on the
loss of control is recognized in the Statement of Profit or Loss.
If the Group retains any interest in the previous subsidiary, then such interest is measured at fair value at the
date that control is lost. Subsequently it is accounted for as an equity-accounted investee or as other financial
asset depending on the level of influence retained.
3.1.8. Equity accounted Investees - Associates
Associates are those entities in which the Group has significant influence, but not control, over the financial
and operating activities. Significant influence is presumed to exist when the Group holds between twenty and
fifty percent of the voting power of another entity.
Associates are accounted for using the equity method (equity accounted investees) and are initially recognized
at cost in the terms of Sri Lanka Accounting Standards – LKAS 28 on “Investment in Associates”. The
Group’s investment in associate includes goodwill identified on acquisition, net of any accumulated
impairment losses.
The Consolidated Financial Statements include the Group’s share of the income and expenses and equity
movements of equity accounted investees, after adjustments to align the accounting policies with those of the
Group, from the date that significant influence commences until the date that significant influence ceases.
Acquisitions of additional stakes of equity accounted investees, until the control is established, are accounted
as goodwill within the equity accounted investment if consideration paid is more than the net asset acquired
or taken into to profit or loss as gain on bargain purchase if the net asset acquired is more than the
consideration paid.
When the Group’s share of losses exceeds its interest in an equity accounted investee, the carrying amount of
that interest (including any long-term investments) is reduced to zero and the recognition of further losses is
discontinued except to the extent that the Group has an obligation or has made payments on behalf of the
investee. Associate Companies of the Group which have been accounted for under the equity method of
accounting are disclosed under Note 23 to these Financial Statements.
3.1.9 Reporting Date
The Group’s Subsidiary Company has a common financial year end which ends on 31st March. The financial
year of Commercial Insurance Brokers Limited, an associate company of the Group ends on 31st December.
The difference between the reporting date of the above companies and that of the parent does not exceed three
months.
However, for the Group financial reporting purposes; the Financial Statements ending 31 March of the above
mentioned subsidiaries and associates are considered.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
3.1.10 Balances and Transactions Eliminated on Consolidation
Intragroup balances and transactions, including income, expenses and dividends, are eliminated in full. Profits
and losses resulting from intragroup transactions that are recognized in assets, such as inventory and fixed
assets, are eliminated in full.
Unrealized gains arising from transactions with equity-accounted investees are eliminated against the
investment to the extent of the Group’s interest in the investee.
3.1.11 Business Combinations
All business combinations have been accounted for by applying the acquisition method in accordance with
the SLFRS 3 - Business Combinations. Applying this method involves the entity that obtains control over the
other entity to recognize the fair value of assets acquired and liabilities and contingent liabilities assumed,
including those not previously recognized.
3.1.12 Cost of Acquisition
The cost of an acquisition is measured as the fair value of the assets given, equity instruments issued and
liabilities incurred or assumed at the date of exchange. This excludes any transaction costs incurred.
3.1.13 Goodwill on Acquisition
Goodwill represents the excess of the cost of any acquisition of a subsidiary or an associate over the Group’s
interest in the net fair value of the identifiable assets, liabilities and contingent liabilities acquired.
The Group tests the goodwill for impairment annually and assess for any indication of impairment to ensure
that its carrying amount does not exceed the recoverable amount. If an impairment loss is identified, it is
recognized immediately to the Statement of Profit or Loss. For the purpose of impairment testing, goodwill
acquired in a business combination is, from the acquisition date, allocated to groups of cash-generating units
that are expected to benefit from the synergies of the combination.
The impairment loss is allocated first to reduce the carrying amount of any goodwill allocated to the unit and
then to the other assets pro-rata to the carrying amount of each asset in the unit. Where goodwill forms part
of a cash-generating unit and part of the operation within that unit is disposed of, the goodwill associated with
the operation disposed of is included in the carrying amount of the operation when determining the gain or
loss on disposal of the operation.
Carrying amount of the goodwill arising on acquisition of subsidiaries and joint ventures is presented as an
intangible and the goodwill on an acquisition of an equity accounted investment is included in the carrying
value of the investment.
3.1.14 Gain on Bargain Purchase (negative goodwill)
If the Group’s interest in the net fair value of the identifiable assets, liabilities and contingent liabilities
exceeds the cost of the acquisition of the entity, the Group will reassess the measurement of the acquiree’s
identifiable assets and liabilities and the measurement of the cost and recognize the difference immediately
in the Consolidated Statement of Profit or Loss.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
3.2 Foreign currency
3.2.1 Foreign Currency Transactions
Transactions in foreign currencies are translated to the respective functional currency (Sri Lankan Rupees-
LKR) at exchange rates at the dates of the transactions.
Monetary assets and liabilities denominated in foreign currencies at the reporting date are retranslated to the
functional currency at the exchange rate at that date. The foreign currency gain or loss on monetary items are
the difference between amortized cost in the functional currency at the beginning of the year, adjusted for
effective interest and payments during the year, and the amortized cost in foreign currency translated at the
exchange rate at the end of the year.
Non-monetary assets and liabilities denominated in foreign currencies that are measured at fair value are
retranslated to the functional currency at the exchange rate at the date that the fair value was determined. Non-
monetary items in a foreign currency that are measured in terms of historical cost are translated using the
exchange rate at the date of the transaction.
Foreign currency differences arising on retranslation are recognized in Statement of Profit or Loss.
3.3 Fair Value Measurement - SLFRS 13
SLFRS 13 Fair Value Measurement applies to SLFRSs that require or permit fair value measurement or
disclosures and provides a single SLFRS framework for measuring fair value and disclosures on fair value
measurement. The Standard defines fair value on the basis of an 'exit price' notion and uses a 'fair value
hierarchy', which results in a market-based, rather than entity-specific, measurement.
SLFRS 13, defines fair value, sets out in a single SLFRS a framework for measuring fair value disclosures
on fair value measurements.
Financial Instruments
3.3.1 Financial Assets
Financial assets are within the scope of LKAS 39 are classified appropriately as fair value through Profit or
Loss (FVTPL), loans and receivables (L & R), held to maturity (HTM), available-for-sale (AFS) at its initial
recognition.
All the financial assets are recognized at fair value at its initial recognition.
3.3.1.1 Financial Assets at Fair Value through Profit or Loss (FVTPL)
A financial asset is classified at fair value through Profit or Loss if it is classified as held for trading or is
designated as such upon initial recognition. Financial assets are designated at fair value through Profit or Loss
if the Group manages such investments and makes purchase and sale decisions based on their fair value in
accordance with the Group’s documented risk management or investment strategy. Upon initial recognition,
transaction costs are recognized in Profit or Loss as incurred.
Financial assets at fair value through Profit or Loss are measured at fair value, and subsequent therein are
recognized in Profit or Loss.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
The Group’s investments in certain equity securities and derivative instruments which are not accounted
under hedge accounting are classified under fair value through Profit or Loss.
3.3.1.2. Loans and Receivables (L&R)
Loans and receivables are financial assets with fixed or determinable payments that are not quoted in an active
market. Such assets are recognized initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition, loans and receivables are measured at amortized cost using the effective
interest method, less any impairment losses.
Loans and receivables of the Group comprise of the following,
3.3.1.2.1 Rental receivables on Finance Leases and Hire purchases
Assets leased to customers which transfer substantially all the risks and rewards associated with ownership
other than legal title, are classified as finance leases. Amounts receivable under finance leases are included
under “Lease Rentals Receivable”. Leasing balances are stated in the Statement of Financial Position after
deduction of initial rentals received, unearned lease income and the provision for impairment.
Assets sold to customers under fixed rate hire agreements, which transfer all risk and rewards as well as the
legal title at the end of such contractual period are classified as ‘Hire Purchase Receivable’. Such assets are
accounted for in a similar manner as finance leases.
3.3.1.2.2 Rental receivables on Operating Leases
Leases where the Company as the lessor effectively retains substantially all the risk and rewards incidental to
the ownership are classified as operating leases. Lease rentals from operating leases are recognized as income
on a straight-line basis over the lease term.
3.3.1.2.3 Advances and Other Loans to Customers
Advances and other loans to customers comprised of revolving loans, loans with fixed installments.
Revolving loans to customers are reflected in the statement of financial position at amounts disbursed less
repayments and allowance for impairment losses. Loans to customers with fixed installments are stated in the
statement of financial position net of possible loan losses and net of interest, which is not accrued to revenue.
After initial measurement, ‘loans and advances’ are subsequently measured at amortised cost using the EIR,
less allowance for impairment except when the Company recognises loans and receivables at fair value
through profit or loss. Amortised cost is calculated by taking into account any discount or premium on
acquisition and fees and costs that are an integral part of the EIR. The amortisation is included in ‘Interest
Income’ in the Statement of Profit or Loss. The losses arising from impairment are recognised in the Statement
of Profit or Loss.
3.3.1.2.4 Trade Receivables
Trade receivables are stated at the amounts they are estimated to realize, net of provisions for impairment.
An allowance for impairment losses is made where there is objective evidence that the Group will not be able
to recover all amounts due according to the original terms of receivables. Impaired receivables are written-
off when identified.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
3.3.1.3 Held-to-Maturity Financial Assets
If the company has the positive intent and ability to hold debt securities to maturity, then such financial assets
are classified as held-to-maturity. Held-to-maturity financial assets are recognized initially at fair value plus
any directly attributable transaction costs. Subsequent to initial recognition held-to-maturity financial assets
are measured at amortized cost using the effective interest method, less any impairment losses.
Any sale or reclassification of a more than an insignificant amount of held-to-maturity investments not close
to their maturity would result in the reclassification of all held-to-maturity investments as available-for-sale,
and prevent the company from classifying investment securities as held-to-maturity for the current and the
following two financial years.
The Group does not have any financial assets designated as “held to maturity” as at the reporting date of
financial assets.
3.3.1.4 Available-for-Sale Financial Assets
Available-for-sale financial assets are non-derivative financial assets that are designated as available for- sale
and that are not classified in any of the previous categories of financial assets. Available-for-sale financial
assets are recognised initially at fair value plus any directly attributable transaction costs.
Subsequent to initial recognition, these are measured at fair value and changes therein, other than impairment
losses are recognized in other comprehensive income and presented within equity in the fair value reserve.
When an investment is derecognized, the cumulative gain or loss in other comprehensive income is
transferred to Profit or Loss.
Available-for-sale financial assets comprise of Treasury Bonds.
3.3.1.5 Cash and Cash Equivalents
Cash and cash equivalents comprise of cash in hand and cash at banks and other highly liquid financial assets
which are held for the purpose of meeting short-term cash commitments with original maturities of less than
three months which are subject to insignificant risk of changes in their fair value.
Bank overdrafts that are repayable on demand and form an integral part of the Company cash management
are included as a component of cash and cash equivalents for the purpose of the Statement of Cash Flows.
3.3.2 Financial Liabilities
The Group initially recognizes debt securities, deposits from customers and loans & borrowings on the date
that they are originated. All other financial liabilities are recognized at initially on the trade date, which is the
date that the Group becomes party to the contractual provisions of the instruments.
The Group derecognizes a financial liability when its contractual obligations are discharged, cancelled or
expired.
The Group classifies non-derivative financial liabilities into the other financial liabilities category. Such
financial liabilities are recognized initially at fair value plus any directly attributable transaction cost.
Subsequent to initial recognition, these financial liabilities are measured at amortized cost using effective
interest rate method.
Other financial liabilities comprise of loans & borrowings, debenture issued, bank overdraft, customer
deposits and trade and other payables.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
3.3.3 Accounting for Non-derivative Financial Instruments
3.3.3.1 Recognition
The Group initially recognizes loans and advances, deposits, debt securities and subordinated liabilities on
the date at which they are originated. All the financial assets and liabilities other than regular purchases and
sales are recognized on the date the Group becomes a party to the contractual provisions of the instrument.
3.3.3.2 De-recognition
The Group derecognizes a financial asset when the contractual rights to the cash flows from the financial
asset expires, or when it transfers the financial asset in a transaction in which substantially all the risks and
rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains
substantially all the risks and rewards of ownership and it does not retain control of the financial asset. Any
interest in transferred financial assets that qualify for de-recognition that is created or retained by the Group
is recognized as a separate asset or liability in the statement of financial position. On de-recognition of a
financial asset, the difference between the carrying amount of the asset (or the carrying amount allocated to
the portion of the asset transferred), and the sum of :
(i) the consideration received (including any new asset obtained less any new liability assumed) and
(ii) any cumulative gain or loss that had been recognized in other comprehensive income is recognized
in Profit or Loss.
The Group enters into transactions whereby it transfers assets recognized on its statement of financial
position, but retains either all or substantially all of the risks and rewards of the transferred assets or a portion
of them. If all or substantially all risks and rewards are retained, then the transferred assets are not
derecognized.
Transactions in which the Group neither retains nor transfers substantially all the risks and rewards of
ownership of a financial asset and it retains control over the asset, the Group continues to recognize the asset
to the extent of its continuing involvement, determined by the extent to which it is exposed to changes in the
value of the transferred asset.
3.3.3.3 Offsetting
Financial assets and liabilities are offset and the net amount presented in the statement of financial position
when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net
basis or to realize the asset and settle the liability simultaneously.
Income and expenses are not offset in the statement of profit or loss unless required or permitted by an
accounting standard or interpretation and as specifically disclosed in the accounting policies of the company.
3.3.3.4 Amortized cost measurement
The amortized cost of a financial asset or liability is the amount at which the financial asset or liability is
measured at initial recognition, minus principal repayments, plus or minus the cumulative amortization using
the effective interest method of any difference between the initial amount recognized and the maturity
amount, minus any reduction for impairment.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
3.3.3.5 Fair value measurement
SLFRS 13 Fair Value Measurement applies to SLFRSs that require or permit fair value measurement or
disclosures and provides a single SLFRS framework for measuring fair value and disclosures on fair value
measurement. The Standard defines fair value on the basis of an 'exit price' notion and uses a 'fair value
hierarchy', which results in a market-based, rather than entity-specific, measurement.
SLFRS 13, defines fair value, sets out in a single SLFRS a framework for measuring fair value disclosures
on fair value measurements.
Fair value is the amount for which an asset could be exchanged, or a liability settled, between knowledgeable,
willing parties in an arm's length transaction on the measurement date.
When available, the Group measures the fair value of an instrument using quoted prices in an active market
for that instrument. A market is regarded as active if quoted prices are readily and regularly available and
represent actual and regularly occurring market transactions on an arm's length basis.
If a market for a financial instrument is not active, the Group establishes fair value using valuation techniques.
Valuation techniques include using recent arm's length transactions between knowledgeable, willing parties
(if available), reference to the current fair value of other instruments that are substantially the same,
discounted cash flow analysis and other equity pricing models.
The chosen valuation technique makes maximum use of market inputs, relies as little as possible on estimates
specific to the Group, incorporates all factors that market participants would consider in setting a price, and
is consistent with accepted economic methodologies for pricing financial instruments.
The best evidence of the fair value of a financial instrument at initial recognition is the transaction price, i.e.
the fair value of the consideration given or received, unless the fair value of that instrument is evidenced by
comparison with other observable current market transactions in the same instrument or based on a valuation
technique whose variables include only data from observable markets. When transaction price provides the
best evidence of fair value at initial recognition, the financial instrument is initially measured at the transaction
price and any difference between this price and the value initially obtained from a valuation model is
subsequently recognized in Statement of Financial position.
3.3.3.6 Valuation of Financial Instruments
The Group measures the fair values using the following fair value hierarchy that reflects the significance of
the inputs used in making the measurements.
Level 1 – Quoted market price (unadjusted) in an active market of an identical instrument.
Level 2 – Valuation techniques based on observable inputs, either directly (i.e., as prices) or indirectly (i.e.,
derived from prices), this category included instruments valued using: quoted market prices in active markets
similar instruments; quoted prices for identical or similar instruments in markets are considered less than
active: or other valuation techniques where all significant inputs are directly observable from market data.
Level 3 – Valuation techniques use significant unobservable inputs. This category includes all instruments
where the valuation technique includes inputs not based on observable data and the unobservable inputs have
a significant effect on the instrument’s valuation.
This category includes instruments that are valued based on quoted prices for similar instruments where
significant unobservable adjustments or assumptions are required to reflect differences between the
instruments.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
Fair values of financial assets and financial liabilities that are traded in active markets are based on quoted
market prices or dealer price quotations. For all other financial instruments the Company determines fair
values using valuation techniques.
Valuation techniques include comparison to similar instruments for which market observable prices exist,
other equity pricing models and other valuation models.
The objective of valuation techniques is to arrive at a fair value determination that reflects the price of the
financial instruments at the reporting date that would have been determined by market participants acting at
arm’s length.
The Group widely recognized valuation models for determining the fair value of common and simpler
financial instruments. Observable prices and model inputs are usually available in the market for listed debt
and equity securities. Availability of observable market inputs reduces the need of management judgment and
estimation and also reduces the uncertainty associated with determination of fair values. Availability of
observable market prices and inputs varies depending on the products and markets are prone to changes based
on specific events and general conditions in the financial markets.
3.3.4. Impairment of Financial Instruments
At each reporting date the Company assesses whether there is objective evidence that financial assets not
carried at fair value through Profit or Loss are impaired. A financial asset or a group of financial assets is
(are) impaired when objective evidence demonstrates that a loss event has occurred after the initial recognition
of the asset(s), and that the loss event has an impact on the future cash flows of the asset(s) that can be
estimated reliably.
Objective evidence that financial assets (including equity securities) are impaired can include:
significant financial difficulty of the borrower or issuer;
default or delinquency by a borrower ;
restructuring of a loan or advance by the Group on terms that the Group would not otherwise consider
indications that a borrower or issuer will enter bankruptcy;
the disappearance of an active market for a security;
other observable data relating to a group of assets such as adverse changes in the payment status of
borrowers or issuers in the group of economic conditions that correlate with defaults in the group.
In addition, for an investment in an equity security, a significant or prolonged decline in its fair value below
its cost is objective evidence of impairment.
3.3.4.1 Impairment of Financial Assets carried at Amortized Cost
The Group considers evidence of impairment for loans and advances at both a specific and non - specific
basis. All individually significant loans and advances and held-to-maturity investment securities are assessed
for specific impairment. All individually significant loans and advances and held-to-maturity investment
securities found not to be specifically impaired are then assessed for any impairment separately by grouping
them.
Loans and advances that are not individually significant are assessed for impairment by grouping them
together with similar risk characteristics based on product types.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
In assessing non-significant impairment the Group uses statistical modeling of historical trends of the
probability of default, timing of recoveries and the amount of loss incurred, adjusted for management's
judgment as to whether current economic and credit conditions are such that the actual losses are likely to be
greater or less than suggested by historical modeling, default rates, loss rates and the expected timing of future
recoveries are regularly taken into account to ensure that they remain appropriate.
Impairment losses on assets carried at amortized cost are measured as the difference between the carrying
amount of the financial asset and the present value of estimated future cash flows discounted at the asset's
original effective interest rate. Impairment losses are recognized in Profit or Loss and reflected in an
allowance account against loans and advances. Interest on impaired assets continues to be recognized through
the unwinding of the discount. When a subsequent event causes the amount of impairment loss to decrease,
the decrease in impairment loss is reversed through Profit or Loss.
3.3.4.2 Impairment of Available for Sale Investment Securities
Impairment losses on available for sale investment securities are recognized by transferring the cumulative
loss that has been recognized in other comprehensive income to Profit or Loss as a reclassification adjustment.
The cumulative loss that is reclassified from other comprehensive income to Profit or Loss is the difference
between the acquisition cost, net of any principal repayment and amortization, and the current fair value, less
any impairment loss previously recognized in Profit or Loss. Changes in impairment provisions attributable
to time value are reflected as a component of interest income. If, in a subsequent period, the fair value of an
impaired available-for-sale debt security increases and the increase can be related objectively to an event
occurring after the impairment loss was recognised, then the impairment loss is reversed, with the amount of
the reversal recognised in profit or loss. However, any subsequent recovery in the fair value of an impaired
available-for-sale equity security is recognised in other comprehensive income.
In the case of equity investments classified as available for sale, objective evidence would also include a
‘significant’ or ‘prolonged’ decline in the fair value of the investment below its cost. Where there is evidence
of impairment, the cumulative loss measured as the difference between the acquisition cost and the current
fair value, less any impairment loss on that investment previously recognized in the Statement of Profit or
Loss is removed from equity and recognised in the Statement of Profit or Loss Income. However, any
subsequent recovery in the fair value of an impaired available-for-sale equity security is recognized in Other
Comprehensive Income.
3.3.4.3 Reversal of Impairment Loss
If, in a subsequent period, the fair value of an impaired available-for-sale debt security increases and the
increase can be objectively related to an event occurring after the impairment loss was recognized in Profit
or Loss, the impairment loss is reversed, with the amount of the reversal recognized in Profit or Loss.
However, any subsequent recovery in the fair value of an impaired available-for-sale equity security is
recognized in Other Comprehensive Income. The Group writes off certain loans and advances and investment
securities when they are determined to be uncollectible.
3.3.4.4 Write-off of Financial Assets carried at amortized cost
The Company writes off a loan or an investment debt security balance, and any related allowances for
impairment losses, when the Board of Directors determines that the loan or security is uncollectible. This
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
determination is made after considering information such as occurrence of significant changes in the
borrower’s/issuer’s financial position such that the borrower/issuer can no longer pay the obligation, or that
proceeds from collateral will not be sufficient to pay back the entire exposure. For smaller balance
standardized loans, write-off decisions generally are based on a product-specific past due status. The
Company generally writes off balances on its past due status reaching 12 months and if no collateral is
available.
The Company holds collateral against loans and advances to customers in the form of mortgage interests
over property, other registered securities over assets, and guarantees. Estimates of fair value are based on the
value of collateral assessed at the time of borrowing, and generally are not updated except when a loan is
individually assessed as impaired. Collateral usually is not held against investment securities, and no such
collateral was held at 31 March 2018 (2017: no collateral held).
3.3.4.5 De-recognition of Financial Assets and Financial Liabilities
Financial Assets
Financial assets (or, where applicable or a part of a financial asset or part of a group of similar financial assets)
is derecognized when;
The rights to receive cash flows from the asset have expired; or
The Group has transferred its rights to cash flows from the asset or has assumed an obligation to pay
the received cash flows in full without material delay to a third party under a ‘passthrough’ arrangement; and
either:
the Group has transferred substantially all the risks and rewards of the assets, or
the Group has neither transferred nor retained substantially all the risks and rewards of the asset, but
has transferred control of the asset.
When the Group has transferred its rights to receive cash flow from an asset or has entered in to a pass through
arrangement, and has neither transferred nor retained substantially all of the risks and rewards of the assets
nor transferred control of it, the asset is recognised to the extent of the Group’s continuing involvement in it.
In that case, the Group also recognises an associated liability. The transferred assets and the associated
liabilities are measured on a basis that reflects the right and obligation that the Group has retained.
Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lower
of the original carrying amount of the asset and the maximum amount of consideration that the Company
could be required to repay.
Financial Liabilities
A financial liability is derecognised when the obligation under liability is discharged or cancelled or expired.
Where an existing financial liability is replaced by another from the same lender on substantially different
terms, or the terms of an existing liability are substantially modified, such an exchange or modification is
treated as a derecognition of the original liability and the recognition of a new liability, and the difference in
the respective carrying amounts are recognised in the profit or loss.
3.3.5 Accounting for Derivative Financial Instruments
Derivatives are initially recognized at fair value on the date on which a derivative contract is entered into and
are subsequently re-measured at their fair value. Fair values are obtained from quoted market prices in active
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
markets, or using valuation techniques. All derivatives are carried as assets when the fair value is positive and
as liabilities when the fair value is negative.
3.3.5.1 Hedge accounting
The Group holds derivative financial instruments to hedge its foreign currency risk exposure. On initial
designation of the derivative as the hedge instrument, the company formally documents the relationship
between the hedging instrument and hedged item, its risk management objective and its strategy in
undertaking the hedge.
Central treasury documents the assessment, both at hedge inception and on an on-going basis, of whether or
not the hedging instruments, primarily forward rate contracts, that are used in hedging transactions are highly
effective in offsetting the changes attributable to the hedged risks in the fair values or cash flows of the hedged
items.
Derivatives are recognised initially at fair value; any attributable transaction costs are recognised in profit or
loss as incurred. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein
are accounted for as described below.
3.3.5.1.1 Cash flow hedge
When a derivative is designated as the hedging instrument in a hedge of the variability in cash flows
attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast
transaction that could affect profit or loss, the effective portion of changes in the fair value of the derivative
is recognized in other comprehensive income and presented in the hedging reserve in equity. Any ineffective
portion of changes in the fair value of the derivative is recognized immediately in profit or loss.
When the hedged item is a non-financial asset, the amount accumulated in equity is retained in other
comprehensive income and reclassified to profit or loss in the same period or periods during which the non-
financial item affects profit or loss. In other cases as well, the amount accumulated in equity is reclassified to
profit or loss in the same period that the hedged item affects profit or loss.
If the hedging instrument no longer meets the criteria for hedge accounting, expires or is sold, terminated or
exercised, or the designation is revoked, then hedge accounting is discontinued prospectively. If the forecast
transaction is no longer expected to occur, then the balance in equity is reclassified to profit or loss.
3.3.5.1.2 Hedge Effectiveness Testing
To qualify for hedge accounting, at the inception of the hedge and throughout its life, each hedge must be
expected to be highly effective and demonstrate actual effectiveness on an on-going basis. The documentation
of each hedging relationship sets out how the effectiveness of the hedge is assessed.
The method adopted by the Company to assess hedge effectiveness is based on its risk management strategy.
For expected effectiveness, the hedging instrument must be expected to be highly effective in offsetting
changes in cash flows attributable to the hedged risk during the period for which the hedge is designated. For
actual effectiveness to be achieved, the changes in fair value or cash flows must offset each other in the range
of 80% to 125%. The ineffective portion will be recognised immediately in income statement. In measuring
the effectiveness, the forecasted transaction of entering into another forward contract is also taken into
consideration.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
3.3.6 Other non-trading derivatives (Derivatives that do not qualify for Hedge Accounting)
When a derivative financial instrument is not designated in a hedge relationship that qualifies for hedge
accounting, all changes in its fair value are recognised immediately in profit or loss.
3.3.7 Reclassification of Financial Instruments
The Group reclassifies non-derivative financial assets out of the ‘held for trading’ category and into the
‘available-for-sale’, ‘loans and receivables’ or ‘held to maturity’ categories as permitted by LKAS 39.
Further, in certain circumstances, the Group is permitted to reclassify financial instruments out of the
‘available-for-sale’ category and into the ‘loans and receivables’ category. Reclassifications are recorded at
fair value at the date of reclassification, which becomes the new amortised cost.
For a financial asset with a fixed maturity reclassified out of the ‘available-for-sale’ category, any previous
gain or loss on that asset that has been recognized in equity is amortised to Profit or Loss over the remaining
life of the investment using the EIR. Any difference between the new amortised cost and the expected cash
flows is also amortised over the remaining life of the asset using EIR. In the case of a financial asset does not
have a fixed maturity, the gain or loss is recognized in the Profit or Loss when such a financial asset is sold
or disposed of. If the financial asset is subsequently determined to be impaired, then the amount recorded in
equity is recycled to the Statement of Profit or Loss.
The group may reclassify a non-derivative trading asset out of the ‘held for trading’ category and into the
‘loans and receivables’ category if it meets the definition of loans and receivables and the Group has the
intention and ability to hold the financial asset for the foreseeable future or until maturity. If a financial asset
is reclassified, and if the Group subsequently increases its estimates of future cash receipts as a result of
increased recoverability of those cash receipts, the effect of that increase is recognized as an adjustment to
the EIR from the date of the change in estimate. Reclassification is at the election of management, and is
determined on an instrument-by-instrument basis.
3.3.8 Non-Financial Receivables
Other receivable balances are stated at estimated amounts receivable after providing for impairment.
3.4 Investment Properties
3.4.1 Basis of Recognition
Investment property is the property held either to earn rental income or for capital appreciation or for both,
but not for sale in the ordinary course of business, use in the production or supply of goods or services or for
administrative purposes.
3.4.2 Basis of Measurement
3.4.2.1 Fair value Model
Investment properties are initially recognized at cost. Subsequent to initial recognition the investment
properties are stated at fair values, which reflect market conditions at the reporting date. Gains or losses
arising from changes in fair value are included in the Statement of Profit or Loss in the year in which they
arise.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
Where Group companies occupy a significant portion of the investment property of a subsidiary, such
investment properties are treated as property, plant and equipment in the Consolidated Financial Statements,
and accounted for as per LKAS 16- Property, Plant and Equipment.
3.4.2.2 De-recognition
Investment properties are de-recognized when either they have been disposed of or when the investment
property is permanently withdrawn from use and no future economic benefit is expected from its disposal.
Any gains or losses on the retirement or disposal of an investment property are recognized in the Statement
of Profit or Loss in the year of retirement or disposal.
3.4.2.3 Subsequent Transfers to/from Investment Property
Transfers are made to investment property when, and only when, there is a change in use, evidenced by the
end of owner occupation, commencement of an operating lease to another party or completion of construction
or development.
Transfers are made from investment property when, and only when, there is a change in use, evidenced by
commencement of owner occupation or commencement of development with a view to sale.
For a transfer from investment property to owner occupied property or inventories, the deemed cost of
property for subsequent accounting is its fair value at the date of change in use. If the property occupied by
the Company as an owner occupied property becomes an investment property, the Company, accounts for
such property in accordance with the policy stated under property, plant and equipment up to the date of
change in use.
For a transfer from inventories to investment property, any difference between the fair value of the property
at that date and its previous carrying amount is recognized in the Statement of Profit or Loss. When the
Company completes the construction or development of a self-constructed investment property, any
difference between the fair value of the property at that date and its previous carrying amount is recognized
in the Statement of Profit or Loss.
3.4.2.4 Determining Fair Value
External and independent valuers, having appropriate recognized professional qualifications and recent
experience in the location and category of property being valued, values the investment property portfolio as
at each reporting date. In financial periods within that period the fair value is determined by the Board of
Directors.
The fair values are based on market values, being the estimated amount for which a property could be
exchanged on the date of the valuation between a willing buyer and a willing seller in an arm’s length
transaction after proper marketing wherein the parties had each acted knowledgeably.
3.5 Intangible Assets
3.5.1 Basis of Recognition
An intangible asset is recognized if it is probable that future economic benefits that are attributable to the
assets will flow to the entity and the cost of the assets can be measured reliably.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
3.5.2 Basis of Measurement
Intangible assets acquired separately are measured as initial recognition at cost. Following initial recognition
intangible assets are carried at cost less any accumulated amortization and any accumulated impairment
losses. The useful life of intangible assets are assessed to be either finite or indefinite. Intangible assets with
finite useful life are amortized over the useful economic life and assessed for impairment whenever there is
an indication that the intangible asset may be impaired. The amortization period and the method for an
intangible asset with a definite useful life is reviewed at least at each financial year end. Intangible assets with
indefinite useful lives are tested for impairment annually either individually or at the cash generating unit
level.
3.5.3 Subsequent Expenditure
Subsequent expenditure on intangible assets are capitalized only when it increases the future economic
benefits embodied these assets. All other expenditure are expensed when incurred.
3.5.4 De-recognition
Intangible assets are de-recognized on disposal or when no future economic benefits are expected from its
use. The gain or loss arising from de-recognition of intangible assets are measured as the difference between
the net disposal proceeds and the carrying amount of the asset.
3.5.5 Amortization
Amortization is recognized in the Statement of statement of profit or loss on a straight-line basis over the
estimated useful life of intangible assets, other than goodwill, from the date that they are available for use.
The estimated useful life of each intangible asset is as follows;
Computer Software 5 years
License and Fees 20 years
Amortization methods, useful lives and residual values are reviewed at each reporting date and are adjusted
as appropriate.
3.6 Property, Plant and Equipment
3.6.1 Freehold Property, Plant & Equipment
3.6.1.1 Basis of Recognition
Property, plant and equipment are recognized if it is probable that future economic benefits associated with
the asset will flow to the Company and cost of the asset can be reliably measured.
3.6.1.2 Basis of Measurement
Items of property, plant and equipment are measured at cost/revaluation less accumulated depreciation and
accumulated impairment losses.
Cost includes expenditure that is directly attributable to the acquisition of the asset. The cost of self-
constructed assets includes the cost of materials and direct labor, any other costs directly attributable to
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
bringing the assets to a working condition for their intended use, the costs of dismantling and removing the
items and restoring the site at which they are located and capitalized borrowing costs.
Purchased software that is integral to the functionality of the related equipment is capitalized as part of that
equipment.
When parts of an item of property, plant and equipment have different useful lives, they are accounted for as
separate items of property, plant and equipment.
3.6.1.3 Cost Model
The Company applies the cost model to all property, plant and equipment except freehold land and buildings;
which records at cost of purchase together with any incidental expenses thereon less any accumulated
depreciation and accumulated impairment losses if any.
3.6.1.4 Revaluation Model
The Company revalues its land and buildings which are measured at its fair value at the date of revaluation
less any subsequent accumulated depreciation and accumulated impairment losses. Revaluations are made
with sufficient regularity to ensure that the carrying amount does not differ materially from that which would
be determined using fair value at the reporting date.
On revaluation of lands and buildings, any increase in the revaluation amount is credited to the revaluation
reserve through other comprehensive income in shareholder’s equity unless it off sets a previous decrease in
value of the same asset that was recognized in the Statement of Profit or Loss. A decrease in value is
recognized in the Statement of Profit or Loss where it exceeds the increase previously recognized in the
revaluation reserve. Upon disposal, any related revaluation reserve is transferred from the revaluation reserve
to retained earnings and is not taken into account in arriving at the gain or loss on disposal.
3.6.1.5 Subsequent Cost
Subsequent expenditure is capitalized only when it is probable that the future economic benefits associated
with the expenditure will flow to the Company. Ongoing repairs and maintenance are expensed as incurred.
3.6.1.6 Reclassification to investment property
When the use of a property changes from owner-occupied to investment property, the property is re-measured
to fair value and reclassified as investment property. Any gain arising on re-measurement is recognized in
Profit or Loss to the extent that it reverses a previous impairment loss on the specific property, with any
remaining gain recognized and presented in the revaluation reserve in equity. Any loss is recognized
immediately in Profit or Loss.
3.6.1.7 Depreciation
Depreciation is based on the cost of an asset less its residual value. Significant components of individual
assets are assessed and if a component has a useful life that is different from the remainder of that asset, that
component is depreciated separately.
Depreciation is recognized in Profit or Loss on a straight-line basis over the estimated useful life of each
component of an item of property, plant and equipment. Leased assets are depreciated over the shorter of the
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
lease term and their useful lives unless it is reasonably certain that the Company will obtain ownership by the
end of the lease term. Lands are not depreciated.
Depreciation of an asset begins when it is available for use and ceases at the earlier of the date that the asset
is classified as held for sale and the date that the asset is de-recognized.
Depreciation methods, useful life values are assessed at the reporting date. The estimated useful lives for the
current year are as follows:
Free-hold building 40 years
Fixtures 05 years
Office Furniture 05 years
Office Equipment 05 years
Free-hold motor Vehicles 04 years
Computer Equipment 05 years
Communication Equipment 01 years
3.6.1.8 De-recognition
An item of property, plant and equipment is de-recognized upon disposal or when no future economic are
expected from its use or disposal.
The gain or loss on disposal of an item of property, plant and equipment is determined by comparing the
proceeds from disposal with the carrying amount of the property, plant and equipment, and is recognized net
within other income/other expenses in the Statement of Profit or Loss. When revalued assets are sold, the
amounts included in the revaluation surplus reserve are transferred to retained earnings.
3.6.2 Operating Lease Assets
When acting as lessor, the Company includes the assets subject to operating leases in ‘Property, Plant and
Equipment’ and accounts for them accordingly. Impairment losses are recognised to the extent that residual
values are not fully recoverable and the carrying value of the assets is thereby impaired.
3.6.3 Capital Work-in-Progress
Capital work-in-progress represents the accumulated cost of materials and other costs directly related to the
construction of an asset. Capital work in progress is transferred to the respective asset accounts at the time it
is substantially completed and ready for its intended use.
3.7 Impairment of Non-financial Assets
The carrying amounts of the Company’s non-financial assets are reviewed at each reporting date to determine
whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable
amount is estimated. An impairment loss is recognized if the carrying amount of an asset or its related Cash-
Generating Unit (CGU) exceeds its estimated recoverable amount.
The Company’s corporate assets do not generate separate cash inflows and are utilized by more than one
CGU. Corporate assets are allocated to CGUs on a reasonable and consistent basis and tested for impairment
as part of the testing of the CGU to which the corporate asset is allocated.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
Impairment losses are recognized in Profit or Loss. Impairment losses recognized in respect of CGUs are
allocated first to reduce the carrying amount of any goodwill allocated to the CGU (group of CGUs), and then
to reduce the carrying amounts of the other assets in the CGU (group of CGUs) on a pro rata basis.
An impairment losses recognized in prior periods are assessed at each reporting date for any indications that
the loss has decreased or no longer exists. An impairment loss is reversed if there has been a change in the
estimates used to determine the recoverable amount. An impairment loss is reversed only to the extent that
the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of
depreciation, if no impairment loss had been recognized.
3.8 Tax expense
Tax expense comprises current, deferred tax and other statutory taxes. Income tax and deferred tax expense
is recognized in Statement of Profit or Loss except to the extent that it relates to items recognized in the
Statement of Other Comprehensive Income or Statement of Changes in in equity.
3.8.1 Current tax expense
Current tax is the expected tax payable or recoverable on the taxable income or loss for the year, using tax
rates enacted or substantively enacted at the reporting date, and any adjustment to tax payable in respect of
previous years. Current tax payable also includes any tax liability arising from the tax on dividend income.
The provision for income tax is based on the elements of income and expenditure as reported in the Financial
Statements and computed in accordance with the provisions of the Inland Revenue Act. No 10 of 2006 and
subsequent amendments thereto.
Current tax assets and liabilities for the current and prior periods are measured at the amount expected to be
recovered from or paid to the Commissioner General of Inland Revenue.
3.8.2 Deferred tax
Deferred tax is recognized in respect of temporary differences between the carrying amounts of assets and
liabilities for financial reporting purposes and the amounts used for taxation purposes. Deferred tax is not
recognized for:
Temporary differences on the initial recognition of assets or liabilities in a transaction that is not a
business combination and that affects neither accounting nor taxable profit or loss;
Temporary differences related to investments in subsidiaries and jointly controlled entities to the
extent that it is probable that they will not reverse in the foreseeable future; and
Taxable temporary differences arising on the initial recognition of goodwill.
Taxable temporary differences arising on subsidiaries, associates or joint ventures who have not
distributed their entire profits to the parent or investor.
Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they
reverse, based on the laws that have been enacted or substantively enacted by the reporting date.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities
and assets, and they relate to income taxes levied by the same tax authority on the same taxable entity, or on
different tax entities, but they intend to settle current tax liabilities and assets on a net basis or their tax assets
and liabilities will be realized simultaneously.
A deferred tax asset is recognized for unused tax losses, tax credits and deductible temporary differences, to
the extent that it is probable that future taxable profits will be available against which they can be utilized.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no longer
probable that the related tax benefit will be realized.
Deferred tax assets and liabilities are not discounted.
The net increase in the carrying amount of deferred tax liability net of deferred tax asset is recognized as
deferred tax expense and conversely any net decrease is recognized as reversal to deferred tax expense, in the
Statement of Profit or Loss.
3.8.2 Deferred Tax on Undistributed Profits of Equity Accounted Investees
The Group does not control its equity accounted investees. It is therefore generally not in a position to control
the timing of the reversal of a possible taxable temporary difference relating to the undistributed profits of
the equity accounted investees.
The Group calculates deferred tax based on the most likely manner of reversal, taking into account
management's intent and the tax jurisdiction applicable to relevant equity accounted investees.
The management intends to recover the carrying amount of the investment primarily through sale of the
investment rather than through dividends. The deferred tax implications are evaluated based on the tax
consequences on the sale of investments.
Since the carrying amount is expected to be recovered through a sale transactions which has no tax
consequences, no temporary difference arise on the equity accounted investees and no deferred tax is
provided.
3.8.3 Withholding Tax on Dividends
Dividend distributed out of taxable profit of the local companies attracts a 10% deduction at source and is not
available for set off against the tax liability of the Company. Withholding tax that arises from the distribution
of dividends by the Company is recognized at the same time as the liability to pay the related dividend is
recognized.
3.8.4 Economic Service Charge (ESC)
As per the provisions of Economic Service Charge Act No. 13 of 2006 and subsequent amendments thereto,
ESC is payable on the liable turnover at specified rates. ESC is deductible from the income tax liability. Any
unclaimed amount can be carried forward and set off against the income tax payable in the five subsequent
years as per the relevant provision in the Act.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
3.8.5 Nation Building Tax (NBT)
As per the provisions of the Nation Building Tax Act, No. 9 of 2009 and the subsequent amendments thereto,
Nation Building Tax should be payable at the rate of 2% with effect from 1 January 2011 on the liable turnover
as per the relevant provisions of the Act.
3.8.6 Value Added Tax on Financial Services (VAT on FS)
VAT on Financial Services is calculated in accordance with the amended VAT Act No. 7 of 2003 and
subsequent amendments thereto. The base for the computation of VAT on Financial Services is the accounting
profit before income tax adjusted for the economic depreciation and emoluments of employees. VAT on
financial services is computed on the prescribed rate of 15%.
The VAT on Financial service is recognized as expense in the period it becomes due.
3.8.7 Crop Insurance Levy (CIL)
As per the provisions of the Section 14 of the Finance Act No. 12 of 2013, the CIL was introduced with
effect from April 01, 2013 and is payable to the National Insurance Trust Fund. Currently, the CIL is
payable at 1% of the profit after tax.
3.8.8 Borrowing Costs
Borrowing costs that are directly attributable to the acquisition, construction or production of qualifying assets
that take a substantial period of time to get ready for its intended use or sale, are capitalized as part of the
assets.
Borrowing costs that are not directly attributable to the acquisition, construction or production of a qualifying
asset are recognized in Profit or Loss using the effective interest method.
Other Non-Financial Liabilities and Provisions
Liabilities are recognized in the Statement of Financial Position when there is a present obligation as a result
of a past event, the settlement of which is expected to result in an outflow of resources embodying economic
benefits. Obligations payable at the demand of the creditor within one year of the reporting date are treated
as current liabilities. Liabilities payable after one year from the reporting date are treated as non-current
liabilities.
3.8.9 Deposits due to Customers
Deposits include term deposits and certificates of deposits. They are stated in the Statement of Financial
Position at amount payable. Interest paid / payable on these deposits based on effective interest rate is
charged to the Statement of Profit or Loss.
3.8.10 Deposit Insurance Scheme
In terms of the Finance Companies Direction No 2 of 2010 “Insurance of Deposit Liabilities” issued on 27th
September 2010, all Registered Finance Companies are required to insure their deposit liabilities in the
Deposit Insurance Scheme operated by the Monetary Board in terms of Sri Lanka Deposit Insurance Scheme
Regulations No 1 of 2010 issued under Sections 32A to 32E of the Monetary Law Act with effect from 1st
October 2010.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
Deposits to be insured include time and savings deposit liabilities and exclude the following.
Deposit liabilities to member institutions
Deposit liabilities to Government of Sri Lanka
Deposit liabilities to shareholders, directors, key management personnel and other related parties as defined
in Finance Companies Act Direction No 03 of 2008 on Corporate Governance of Registered Finance
Companies
Deposit liabilities held as collateral against any accommodation granted
Deposit liabilities falling within the meaning of dormant deposits in terms of the Finance Companies Act,
funds of which have been transferred to Central Bank of Sri Lanka
Registered Finance Companies are required to pay a premium of 0.15% on eligible deposit liabilities as at
end of the month to be payable within a period of 15 days from the end of the respective month.
3.9. Debt Securities Issued
These represent the funds borrowed by the Group for long-term funding requirements. Subsequent to initial
recognition debt securities issued are measured at their amortised cost using the effective interest method,
except where the Group designates debt securities issued at fair value through profit or loss. Interest
paid/payable is recognised in profit or loss.
3.10. Other Liabilities
Other liabilities are recorded at amounts expected to be payable at the Reporting date.
3.11 Employee Benefits
3.11.1 Defined Contribution Plans
A Defined Contribution Plan is a post-employment benefit plan under which an entity pays fixed contributions
into a separate entity and will have no legal or constructive obligation to pay further amounts. Obligations for
contributions to Defined Contribution Plans are recognized as an employee benefit expense in the Statement
of Profit or Loss in the periods during which services are rendered by employees.
3.11.1.1 Employees’ Provident Fund (EPF)
The Company and employees contribute 12% and 8% respectively on the salary of each employee to the
above mentioned funds.
3.11.1.2 Employees’ Trust Fund (ETF)
The Company contributes 3% of the salary of each employee to the Employees’ Trust Fund.
3.11.2 Defined Benefits Plans
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The Group's
net obligation in respect of defined benefit pension plans is calculated by estimating the amount of future
benefit that employees have earned in return for their service in the current and prior periods; that benefit is
discounted to determine its present value. Any unrecognized past service costs are deducted.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
The calculation is performed every three years by a qualified actuary using the projected unit credit method.
For the purpose of determining the charge for any period before the next regular actuarial valuation falls due,
an approximate estimate provided by the qualified actuary is used.
When the benefits of a plan are improved, the portion of the increased benefit related to past service by
employees is recognized in Profit or Loss on a straight-line basis over the average period until the benefits
become vested. To the extent that the benefits vest immediately, the expense is recognized immediately in
Profit or Loss.
The Group recognizes all actuarial gains and losses arising from the defined benefit plan in other
comprehensive income (OCI) and all other expenses related to defined benefit plans are recognize as
personnel expenses in Statement of Profit or Loss. This retirement benefit obligation is not externally funded.
However, according to the Payment of Gratuity Act No.12 of 1983, the liability for the gratuity payment to
an employee arises only on the completion of 5 years of continued service with the Company.
3.11.3 Short-term Employee Benefits
Short-term employee benefit obligations are measured on an undiscounted basis and are expensed as the
related service is provided. A liability is recognized for the amount expected to be paid under short-term cash
bonus if the company has a present legal or constructive obligation to pay this amount as a result of past
service provided by the employee, and the obligation can be estimated reliably.
3.12 Provisions, Contingent Assets and Contingent Liabilities
Provisions are made for all obligations (legal or constructive) existing as at the reporting date when it is
probable that such an obligation will result in an outflow of resources and a reliable estimate can be made of
the quantum of the outflow. The amount recognized is the best estimate of the consideration required to settle
the present obligation at the reporting date, taking into account the risks and uncertainties surrounding the
obligation at that date.
All contingent liabilities are disclosed as a note to the Financial Statements unless the outflow of resources is
remote. Contingent assets are disclosed, where inflow of economic benefit is probable.
Statement of Profit or Loss and Other Comprehensive Income
3.13 Revenue Recognition
Revenue is recognized to the extent that it is probable that the economic benefits will flow to the Group, and
the revenue and associated costs incurred or to be incurred can be reliably measured. Revenue is measured at
the fair value of the consideration received or receivable, taking into account contractually defined terms of
payment.
3.13.1 Interest Income on Leases, Hire Purchases, Loans and Advances
Interest income and expense are recognized in Profit or Loss using the effective interest method. The effective
interest rate is the rate that exactly discounts the estimated future cash payments and receipts through the
expected life of the financial asset or liability (or, where appropriate, a shorter period) to the carrying amount
of the financial asset or liability. When calculating the effective interest rate, the Group estimates future cash
flows considering all contractual terms of the financial instrument, but not future credit losses.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
The calculation of the effective interest rate includes all transaction costs and fees paid or received that are
an integral part of the effective interest rate. Transaction costs include incremental costs that are directly
attributable to the acquisition or issue of a financial asset or liability.
Interest income and expense presented in the Statement of Profit or Loss includes,
interest on financial assets and financial liabilities measured at amortized cost calculated on an
effective interest basis
interest on available for sale investment securities calculated on an effective interest basis
Interest income and expense on all trading assets and liabilities are considered to be incidental to the
Company's trading operations and are presented together with all other changes in the fair value of trading
assets and liabilities in net trading income.
Fair value changes on other derivatives held for risk management purposes, and other financial assets and
liabilities carried at fair value through Profit or Loss, are presented in net income from other financial
instruments at fair value through Profit or Loss in the Statement of Profit or Loss.
The excess of aggregated contract receivable over the cost of the assets constitutes the total unearned income
at the commencement of a contract. The unearned income is recognized as income over the term of the
facility commencing with the month that the facility is executed in proportion to the declining receivable
balance, so as to produce a constant periodic rate of return on the net investment.
3.13.2 Service charge and facility fee from micro finance facilities
Collection on service charge and facility fee from micro finance facilities are accounted on cash basis.
3.13.3 Fees and Other Income
Fees and commission income and expense that are integral to the effective interest rate on a financial asset or
liability are included in the measurement of the effective interest rate.
Other fees and commission income, including account servicing fees are recognized as the related services
are performed.
Profit or loss on contracts terminated, collections on contracts written off, interest on overdue rentals, interest
earned on property sale and buy back agreements are accounted for on cash basis.
3.13.4 Net income from other financial instruments at fair value through Profit or Loss
Net income from other financial instruments at fair value through Profit or Loss relates to non-trading
derivatives held for risk management purposes that do not form part of qualifying hedge relationships and
financial assets and liabilities designated at fair value through Profit or Loss, and include all realized and
unrealized fair value changes, interest, dividends and foreign exchange differences.
3.13.5 Factoring Income
Revenue is derived from two sources, Funding and providing Sales Ledger Related Services.
Funding - Discount income relating to factoring transactions is recognized at the end of a given accounting
month. In computing this discount, a fixed rate agreed upon at the commencement of the factoring agreement
is applied on the daily balance in the client’s current account.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
Sales Ledger Related Services - A service charge is levied as stipulated in the factoring agreement.
Income is accounted for on an accrual basis and deemed earned on disbursement of advances for invoices
factored.
The above revenue components are accounted on an accrual basis and deemed earned on disbursement of
advances for invoices factored.
3.13.6 Other Income
Rent income and non-operational interest income are accounted for on accrual basis.
Dividend income is recognized when the right to receive payment is established.
Gain on disposal of property, plant and equipment and other non-current assets, including investments held
by the Group have been accounted for in the Statement of Profit or Loss Income, after deducting from the net
sales proceeds on disposal of the carrying amount of such assets.
3.13.7 Rental Income
Rental income from investment property is recognized in Profit or Loss on a straight-line basis over the term
of the lease. Lease incentives granted are recognized as an integral part of the total rental income, over the
term of the lease. Rental income from subleased property is recognized as other income.
3.14 Expenses Recognition
Expenses are recognized in the Statement of Profit or Loss on the basis of a direct association between the
cost incurred and the earning of specific items of income. All expenditure incurred in the running of the
business and in maintaining the property, plant & equipment in a state of efficiency has been charged to
income in arriving at the profit for the year.
For the presentation of the Statement of Profit or Loss the Directors are of the opinion that the nature of the
expenses method present fairly the element of the Company’s performance, and hence such presentation
method is adopted.
3.15 Earnings per Share
The Group presents basic earnings per share data for its ordinary shares. Basic earnings per share is calculated
by dividing the Profit or Loss attributable to ordinary shareholders of the Group by the weighted average
number of ordinary shares outstanding during the year.
3.16 Statement of Cash Flows
The Cash Flow Statement has been prepared using the 'Indirect Method' of preparing Cash Flows in
accordance with the Sri Lanka Accounting Standard 7 'Cash Flow Statements.' Cash and cash equivalents
comprise short term, highly liquid investments that are readily convertible to known amounts of cash and are
subject to an insignificant risk of changes in value.
Cash and cash equivalents comprise of cash in hand and cash at banks and other highly liquid financial assets
which are held for the purpose of meeting short-term cash commitments with original maturities of less than
three months which are subject to insignificant risk of changes in their fair value.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
3.17 Movement of Reserves
Movement of Reserves is disclosed in the Statement of Changes in Equity.
3.18 Related Party Transactions
Transactions with related parties are conducted on normal business terms. The relevant disclosures are given
in Note 39 to the Financial Statements.
3.19 Transactions with Related Parties
The Company carries out transactions in the ordinary course of its business with parties who are defined as
related parties in Sri Lanka Accounting Standard 24.
3.19.1 Transactions with Key Management Personnel
According to Sri Lanka Accounting Standard 24 “Related Party Disclosures”, Key management personnel,
are those having authority and responsibility for planning, directing and controlling the activities of the entity.
Accordingly, the company has pre-defined approved list of key management personal.
3.20 Operating Segments
An operating segment is a component of the Company that engages in business activities from which it may
earn revenues and incur expenses, including revenues and expenses that relate to transactions with any of the
Company’s other components. All operating segments operating results are reviewed regularly by Board of
Directors of the Company to make decisions about resources to be allocated to the segment and to assess its
performance, and for which discrete financial information is available.
Accordingly, the segment comprises of financial services are described in Note 46.
Segment results, assets and liabilities include items directly attributable to a segment as well as those that can
be allocated on a reasonable basis. Segment capital expenditure is the total cost incurred during the period to
acquire segment assets that are expected to be used for more than one period.
Expenses that cannot be directly identified to a particular segment are allocated on bases decided by the
management and applied consistently throughout the year.
3.21 Subsequent Events
All material subsequent events have been considered and where appropriate adjustments or disclosures have
been made in the respective Notes to the Financial Statements.
3.22 Commitments and Contingencies
All discernible risks are accounted for in determining the amount of all known liabilities. Contingent
Liabilities are possible obligations whose existence will be confirmed only by uncertain future events or
present obligations where the transfer of economic benefit is not probable or cannot be reliably measured.
Contingent Liabilities are not recognized in the statement of financial position but are disclosed unless they
are remote.
Commercial Leasing & Finance PLC
NOTES TO THE FINANCIAL STATEMENTS Year ended 31 March 2018
3.23 Capital Management
The Board of Directors monitor the return on capital investment on a month basis. This review is mainly
carried out through return on investment analysis prepared on a quarterly basis. The plan forecasts are also
reviewed on a monthly basis to ensure that targets are met in order to manage the capital invested on the
Group Companies.
The Board of Directors also decides and monitors the level of dividends to ordinary shareholders. The
Company does not subject to any externally impose capital requirements. However, companies within the
group have such requirement based on the industry in which such company established. The group companies
which require externally imposed capital will monitor such requirement on a regular basis and report to
respective legal authority in order to ensure compliance with such regulatory requirement.
Commercial Leasing & Finance PLC
Notes to the Financial Statements
For the year ended 31st March 2018 2017 2018 2017
Rs. Rs. Rs. Rs.
4 Interest income
Interest income on;
Finance lease 2,855,538,892 2,752,713,098 2,855,538,892 2,752,713,098
Hire purchase - 809,424 - 809,424
Loans and advances 8,194,815,090 5,685,379,988 8,222,256,734 5,830,662,134
Hire rentals 17,967,053 16,517,838 17,967,053 16,517,838
Overdue rental 791,410,853 763,979,957 791,410,853 763,979,957
Factoring 1,295,537,680 1,303,970,860 1,295,537,680 1,303,970,860
Rentals & sales proceeds - contracts written off 165,066,506 229,549,753 165,066,506 229,549,753
13,320,336,074 10,752,920,918 13,347,777,718 10,898,203,064
5 Interest expense
Interest on other financial liabilities due to customers 2,863,023,326 1,428,276,406 2,863,023,326 1,428,276,406
Interest on bank overdrafts and other short-term borrowings 665,978,828 2,238,959,144 665,978,828 2,238,959,144
Interest on long term borrowings 1,571,046,631 1,597,328,655 1,571,046,631 1,597,328,655
Debenture interests 478,944,034 481,974,113 478,944,034 481,974,113
Charges on forward rate contracts 1,415,801,810 379,337,661 1,415,801,810 379,337,661
6,994,794,629 6,125,875,979 6,994,794,629 6,125,875,979
6 Other income
Dividend Income 6,199,403 46,650,781 6,199,403 46,650,781
Interest received from government securities 648,007,388 587,232,980 648,007,388 587,232,980
Interest income on commercial papers and fixed deposits 302,946,115 679,679,425 302,946,115 679,679,425
Profit on disposal of property, plant and equipment 10,646,161 5,434,017 10,646,161 5,434,017
Appreciation/ (loss) in market value of quoted investments - shares (47,242,344) 12,225,668 (47,242,344) 12,225,668
Appreciation in market value of quoted investments - unit trust 188,314,563 84,349,868 188,314,563 84,349,868
Documentation fees 297,701,251 203,742,960 297,701,251 203,742,960
Staff loan interest - 13,862 - 13,862
Commission Income 56,764,342 48,202,500 56,764,342 48,202,500
Sundry income 77,557,370 74,876,121 77,557,370 74,876,121
Foreign exchange gain / (loss) 18,505,196 18,280,679 18,505,196 18,280,679
Change in fair value of investment properties 59,882,000 4,000,000 59,882,000 4,000,000
Transfer fees and profit/(loss) on termination 615,142,804 566,683,332 615,142,804 566,683,332
Profit on deemed disposal on BRAC Lanka Finance PLC - - 242,647,810 -
2,234,424,249 2,331,372,193 2,477,072,059 2,331,372,193
7 Allowance for impairment and write offs
Lease receivables (Note 17.1.4) 212,256,723 180,823,308 212,256,723 180,823,308
Hire purchases (Note 17.2.4) 508,059 57,553,990 508,059 57,553,990
Advances & loans (Note 18.1.2) 299,876,221 149,013,173 299,876,221 149,013,173
Factoring (Note 19.1.1) 543,350,699 324,686,766 543,350,699 324,686,766
1,055,991,702 712,077,237 1,055,991,702 712,077,237
Group Company
Commercial Leasing & Finance PLC
Notes to the Financial Statements
For the year ended 31st March 2018 2017 2018 2017
Rs. Rs. Rs. Rs.
8 Depreciation and amortization
Depreciation of property, plant and equipment (Note 28) 111,627,678 105,921,514 111,627,678 105,921,514
Amortization off of intangible assets (Note 27) 2,033,280 3,684,208 2,033,280 3,684,208
113,660,958 109,605,722 113,660,958 109,605,722
9 Result from operating activities
Directors' fees & other Emoluments 16,092,126 20,980,883 16,092,126 20,980,883
Auditors' remuneration - statutory audit 1,185,000 1,300,000 1,185,000 1,300,000
Auditors' remuneration - audit related services 2,274,632 1,285,000 2,274,632 1,285,000
Depreciation & amortization 113,660,958 109,605,722 113,660,958 109,605,722
Legal and professional expenses 45,751,010 22,452,074 45,751,010 22,452,074
Personnel expenses (Note 9.1) 1,387,268,219 1,103,658,073 1,387,268,219 1,103,658,073
9.1 Personnel expenses
Salaries and other benefits 1,285,522,724 1,019,199,804 1,285,522,724 1,019,199,804
Defined contribution plan cost - EPF 67,103,843 55,270,191 67,103,843 55,270,191
Defined contribution plan cost - ETF 16,775,961 13,809,877 16,775,961 13,809,877
Defined benefit plan costs - Employee benefits 17,865,691 15,378,201 17,865,691 15,378,201
1,387,268,219 1,103,658,073 1,387,268,219 1,103,658,073
10 Value added tax on financial services and NBT
2018 2016 2018 2017
Rs. Rs. Rs. Rs.
Value added tax on financial services 535,606,180 375,691,226 535,606,180 375,691,226
Nation building tax on financial services 75,349,055 82,219,620 75,349,055 82,219,620
610,955,235 457,910,846 610,955,235 457,910,846
Group Company
Profit from ordinary activities before VAT on financial services, NBT and tax stated after charging all expenses including the following:
Group Company
Commercial Leasing & Finance PLC
Notes to the Financial Statements
For the year ended 31st March 2018 2017 2018 2017
Rs. Rs. Rs. Rs.
11 Income tax expense
Current tax expense (Note 11.1) 552,667,262 565,438,978 552,667,262 565,438,978
Deferred tax (reversal) / charge (Note 35.3.1) 208,044,620 (46,968,090) 208,044,620 (46,968,090)
Current income tax expense 760,711,882 518,470,888 760,711,882 518,470,888
Tax expense on discontinued operations 16,216,944 120,825,721 - -
Consolidated Current tax expense 568,884,206 686,264,699 552,667,262 565,438,978
11.1 Current tax expense
Current year income tax expense on ordinary activities (Note 11.2) 513,957,006 565,438,978 513,957,006 565,438,978
Under provision of taxes in respect of previous years 38,710,256 - 38,710,256 -
552,667,262 565,438,978 552,667,262 565,438,978
11.2 Numerical reconciliation of accounting profits to income tax expense,
Accounting profit before income tax 2,634,945,275 2,059,492,065 2,905,034,729 2,204,774,210
Aggregate disallowable expenses 8,944,828,348 9,264,447,079 8,944,828,348 9,264,447,079
Aggregate tax deductible expenses (5,428,766,931) (4,942,644,275) (5,428,766,931) (4,942,644,275)
Tax exempt income (4,394,347,708) (4,352,838,279) (4,394,347,708) (4,352,838,279)
(-) Allowable tax credits (838,642,856) (750,281,780) (838,642,856) (750,281,780)
(+/-) Other adjustments 917,544,607 741,250,117 647,455,154 595,967,971
Taxable profit 1,835,560,735 2,019,424,926 1,835,560,736 2,019,424,927
Income tax at 28 % 513,957,006 565,438,978 513,957,006 565,438,978
Current income tax expense 513,957,006 565,438,978 513,957,006 565,438,978
11.3 Deferred tax has been computed using the enacted tax rate of 28%
12 Discontinued Operations
12.1 Profit/ (loss) for the period from discontinued operations
2 months ended
31st May 2017
Year ended
31st Mar 2017
Interest income 621,834,234 3,385,929,993
Interest expense (184,961,256) (1,138,296,317)
Net interest income 436,872,978 2,247,633,676
Other income 28,180,508 9,083,471
Allowance for impairment & write offs (148,009,821) (338,894,294)
Expenses (231,684,370) (1,419,748,313)
Profit before tax 85,359,295 498,074,540
Income tax expense (16,216,944) (132,865,385)
Profit after tax 69,142,351 365,209,154
Results on divestment of group investments (Note 12.2) (150,637,455) -
Profit/ (Loss) for the period from discontinued operations (81,495,104) 365,209,154
Earnings/(loss) per share from discontinued operation (0.01) 0.06
Net cash from operating activities from discontinuing opearations (51,620,975) 749,956,846
Net cash used in investing activities from discontinuing opearions #REF! (925,118,908)
Net cash used in financing activities from discontinuing opearions (925,118,908) (451,351,075)
Group Company
The company is liable for tax at the rate of 28% on its taxable income in accordance with the inland revenue Act No 10 of 2006 and subsequent amendments made thereon.
The company held 99.76% of the issued share capital of BRAC Lanka Finance (BRAC) and it's holding diluted to 44.33% in May 2017 with the non subscription of rights
issued by BRAC, parent company, Lanka Orix Leasing Company PLC purchased all unsubscribed shares in order to maintain group control and to ensure that BRAC meets
the requirement for increased capital.
Commercial Leasing & Finance PLC
Notes to the Financial Statements
For the year ended 31st March 2018 2017 2018 2017
Rs. Rs. Rs. Rs.
Group Company
12.2 Effect of the disposal on the financial position of the Group
Property, plant and equipment (149,863,455)
(11,037,439,340)
Investment securities (1,220,413,497)
Investment in term deposits (1,374,516,382)
Cash and cash equivalents (216,458,574)
Trade and other current assets (198,856,704)
Bank overdrafts 410,138,019
Deposits from customers 3,396,330,685
Interest bearing loans & borrowings 4,398,438,955
Provision for taxation 118,329,295
Deferred tax liability 10,821,573
Trade and other payables 3,350,599,441
Retirement benefit obligations 24,769,828
Net Assets and Liabilities (2,488,120,156)
Less - Share Capital increased due to right issue 1,321,907,080
Net Assets disposed (1,166,213,076)
12.3 Results on divestment of group investments2 months ended
31st May 2018
Year ended
31st Mar 2017
Fair value of BRAC Lanka Finance PLC 1,265,987,676 Not Applicable
Less - Net Assets disposed (1,166,213,076) Not Applicable
Less - Goodwill on acquisition (253,210,966) Not Applicable
Add - Non controling interest 2,798,911 Not Applicable
(150,637,455)
13 Earnings per share
13.1 Amount used as the numerator
Net profit attributable to equity holders of the Company 1,792,638,207 1,896,644,018 2,144,322,847 1,686,303,322
Number of ordinary shares used as the denominator
Weighted average number of ordinary shares in issue (shares) 6,377,711,170 6,377,711,170 6,377,711,170 6,377,711,170
Earnings per Share 0.28 0.30 0.34 0.26
13.2 Earnings per share from continuing operations
Profit for the year from continuing operations 1,874,233,393 1,541,021,177 2,144,322,847 1,686,303,322
Weighted average number of ordinary shares in issue (shares) 6,377,711,170 6,377,711,170 6,377,711,170 6,377,711,170
Earnings per Share from continuing Operations 0.29 0.24 0.34 0.26
13.3 Earnings / (loss) per share from discontinuing operations
Profit/ (loss) attributable to equity holders of the company (81,299,516) 364,332,652
Weighted average number of ordinary shares in issue (shares) 6,377,711,170 6,377,711,170
Earnings per Share from discontinuing Operations (0.01) 0.06
14 Cash and cash equivalents Group
Components of cash equivalents 2017 2018 2017
Rs. Rs. Rs.
14.1 Favourable cash & cash equivalent balances
Cash in hand 170,515,473 171,636,959 158,027,247
Investment in REPO 575,000,000 - -
Balances with banks 1,404,904,507 2,205,920,571 1,329,821,956
2,150,419,980 2,377,557,530 1,487,849,203
14.2 Unfavourable cash & cash equivalent balances
Bank overdraft (1,805,044,333) (1,353,451,358) (1,390,806,997)
Total cash and cash equivalents in the cash flow statement 345,375,647 1,024,106,172 97,042,206
Company
Rentals receivable on lease assets, hire purchases ,operating leases advances and
other loans
Basic earnings per share is calculated by dividing the net profit for the year attributable to the ordinary shareholders by the weighted average number of ordinary shares
outstanding during the year.
Commercial Leasing & Finance PLC
Notes to the Financial Statements
Group
2017 2018 2017
Rs. Rs. Rs.
15 Financial assets held for trading
Equity shares (Note 15.1) 201,238,845 153,996,501 201,238,845
Unit trust (Note 15.2) 2,513,936,244 - 2,513,936,244
2,715,175,089 153,996,501 2,715,175,089
15.1 Equity shares
Balance as at beginning of the year 228,344,666 201,238,845 188,189,393
Marked to market adjustments (40,155,273) (47,242,344) 13,049,452
Balance at end of the year (Note 15.1.1) 201,238,845 153,996,501 201,238,845
15.1.1 Equity shares - Portfolio
2018
No. of Cost Fair Value No. of Cost Fair Value No. of Cost Fair Value
Shares Rs. Rs Shares Rs. Rs Shares Rs. Rs
Colombo Drydocks PLC 4,315 85,997 327,940 4,315 85,997 358,145 4,315 85,997 327,940
DFCC Bank PLC 38 380 4,332 38 380 4,438 38 380 4,332
Overseas Realty Ceylon PLC 113,680 1,664,891 2,296,336 113,680 1,664,891 2,057,608 113,680 1,664,891 2,296,336
Seylan Bank PLC 74,261 1,104,210 4,062,077 74,261 1,104,210 4,233,609 74,261 1,104,210 4,062,077
Hayleys Limited 734,144 216,803,911 194,548,160 734,144 216,803,911 147,342,701 734,144 216,803,911 194,548,160
219,659,389 201,238,845 219,659,389 153,996,501 219,659,389 201,238,845
15.2 Unit trust
2018
No. of Cost Fair Value No. of Cost Fair Value No. of Cost Fair Value
Units Rs. Rs Units Rs. Rs Units Rs. Rs
CAL High Yield Fund 101,735,645 1,700,000,000 1,710,450,880 - - - 101,735,645 1,700,000,000 1,710,450,880
CAL Investment Grade Fund 23,496,609 300,000,000 302,431,899 - - - 23,496,609 300,000,000 302,431,899
Invest trust Money market fund 39,603,960 500,000,000 501,053,465 - - - 39,603,960 500,000,000 501,053,465
2,500,000,000 2,513,936,244 - - 2,500,000,000 2,513,936,244
2017 2017
2017 2017
Group Company
As at 31st March As at 31st March As at 31st March
Company
As at 31st March
Group Company
As at 31st March As at 31st March As at 31st March
Commercial Leasing & Finance PLC
Notes to the Financial Statements
Group
As at 31st March 2017 2018 2017
Rs. Rs. Rs.
16 Other investments
Financial investments - Available-for-sale (Note 16.1) 2,033,067,488 1,900,074,031 1,491,486,089
Loans and receivables (Note 16.2) 14,556,356,196 4,605,140,218 14,201,766,478
Derivative assets held for risk management (Note 16.3) 60,701,430 - 60,701,430
16,650,125,114 6,505,214,249 15,753,953,997
16.1 Financial investments - Available-for-sale
Investments in treasury bonds (Note 16.1.1) 1,872,958,045 40,182,554 1,424,507,339
Treasury bills (16.1.2) 93,119,693 1,792,912,727 -
Unquoted shares (Note 16.1.3) 67,189,750 66,978,750 66,978,750
(-) Specific allowances for impairment (16.1.4) (200,000) - -
2,033,067,488 1,900,074,031 1,491,486,089
16.1.1 Investments in treasury bonds
Cost Fair Value Cost Fair Value Cost Fair Value
Rs. Rs. Rs. Rs. Rs. Rs.
Softlogic Finance PLC 39,740,200 39,635,275 39,740,200 40,182,554 39,740,200 39,635,275
Entrust Securities PLC 21,367,125 24,723,263 - - 21,367,125 24,723,263
First Capital Treasuries Limited 502,413,529 497,454,983 - - 61,553,779 52,180,595
Capital Alliance 223,216,820 211,928,844 - - 223,216,820 211,928,844
Seylan Bank PLC 1,159,354,332 1,096,039,362 - - 1,158,450,150 1,096,039,362
Wealth Trust Securities Limited 3,078,818 3,176,318 - - - -
1,949,170,824 1,872,958,045 39,740,200 40,182,554 1,504,328,074 1,424,507,339
16.1.2 Treasury bills
Cost Fair Value Cost Fair Value Cost Fair Value
Rs. Rs. Rs. Rs. Rs. Rs.
First Capital Treasures Limited 93,119,693 93,119,693 1,763,311,300 1,792,912,727 - -
93,119,693 93,119,693 1,763,311,300 1,792,912,727 - -
16.1.3 Unquoted shares
No. of Cost Fair Value No. of Cost Fair Value No. of Cost Fair Value
Shares Rs. Rs. Shares Rs. Rs. Shares Rs. Rs.
Equity Investments Lanka Ltd 16,875 168,750 168,750 16,875 168,750 168,750 16,875 168,750 168,750
Credit Information Bureau 210 21,000 21,000 100 10,000 10,000 100 10,000 10,000
Finance Houses Consortium (Pvt) Ltd. 20,000 200,000 200,000 - - - - - -
LOLC Myanmar Micro-Finance Company Limited 519,520 66,800,000 66,800,000 519,520 66,800,000 66,800,000 519,520 66,800,000 66,800,000
67,189,750 66,978,750 66,978,750
As at 31st March 2017 As at 31st March 2018 As at 31st March 2017
As at 31st March 2017 As at 31st March 2018 As at 31st March 2017
Group Company
Company
Group Company
As at 31st March 2017 As at 31st March 2018 As at 31st March 2017
Commercial Leasing & Finance PLC
Notes to the Financial Statements
16.1.4 Specific allowances for impairment Group
2017 2018 2017
Rs. Rs. Rs.
As at 01 April 2016 200,000 - -
Impairement loss for the period
Charge / (reversal) for the year - - -
200,000 - -
Balance as at 31st March 200,000 - -
Group
16.2 Loans and receivables As at 31st March As at 31st March As at 31st March
2017 2018 2017
Rs. Rs. Rs.
Repos 3,758,141,452 3,654,437,478 3,754,956,245
Investments in term deposits 9,091,563,770 950,702,740 8,740,159,259
Commercial papers 1,706,650,974 - 1,706,650,974
14,556,356,196 4,605,140,218 14,201,766,478
16.3 Derivative assets held for risk management Group
As at 31st March As at 31st March As at 31st March
2017 2018 2017
Rs. Rs. Rs.
Forward rate contracts (Note.16.3.1) 60,701,430 - 60,701,430
16.3.1 Forward rate contracts
The fair value of the derivatives designated as cash flow hedges are as follows; Group
Assets Liabilities Assets Liabilities Assets Liabilities
Rs. Rs. Rs. Rs. Rs. Rs.
60,701,430 15,562,267 - 271,625,120 60,701,430 15,562,267
The time periods in which the hedged cash flows are expected to occur and affect the statement of comprehensive income are as follows;
Within 1 Year 1-5 Years Over 5 Years Within 1 Year 1-5 Years Over 5 Years Within 1 Year 1-5 Years Over 5 Years
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
22,173,892,831 - - 22,173,892,831 - - 9,492,089,194 7,873,209,130 -
For the year ended 31 March 2018 net loss of Rs.114.2 Mn (2017: Net gain of Rs. 18.5Mn) relating to the effective portion of cash flow hedges were recognised in other comprehensive income.
As at 31st March 2017 As at 31st March 2018 As at 31st March 2017
Group Company
As at 31st March 2017 As at 31st March 2018 As at 31st March 2017
Company
Company
Company
The company uses a mixture of forward foreign exchange contracts to hedge the foreign currency translation risk on its foreign borrowings.
Company
Commercial Leasing & Finance PLC
Notes to the Financial Statements
Group
As at 31st March 2017 2018 2017
Rs. Rs. Rs.
17 Rentals receivable on leases and hire purchases
Finance lease receivables (Note 17.1) 14,070,619,329 14,983,134,443 13,971,615,347
Hire purchase receivables (Note 17.2) 10,655,504 377,648 1,132,629
14,081,274,833 14,983,512,091 13,972,747,976
Rentals receivable on leases and hire purchases
Gross rental receivables 18,789,600,326 20,592,152,868 18,597,917,018
Unearned income (4,460,605,297) (5,422,000,302) (4,405,457,287)
Total rentals receivable ( Note 17.4) 14,328,995,029 15,170,152,566 14,192,459,731
Allowance for impairment (Note 17.3) (247,720,196) (186,640,475) (219,711,755)
Net receivables 14,081,274,833 14,983,512,091 13,972,747,976
17.1 Finance lease receivables
Gross rentals receivable 18,705,852,395 20,589,929,519 18,534,203,245
Unearned income (4,458,959,695) (5,422,000,302) (4,405,457,287)
14,246,892,700 15,167,929,217 14,128,745,958
Allowance for impairment (Note 17.1.3) (176,273,371) (184,794,774) (157,130,611)
14,070,619,329 14,983,134,443 13,971,615,347
Finance lease receivables
Receivables within one year (Note 17.1.1) 3,931,468,053 4,232,355,256 3,864,304,726
Receivable from one to five years (Note 17.1.2) 9,834,788,964 10,439,425,477 9,794,573,627
Overdue rental receivable 480,635,683 496,148,484 469,867,605
(-) Allowance for impairment (Note 17.1.3) (176,273,371) (184,794,774) (157,130,611)
14,070,619,329 14,983,134,443 13,971,615,347
17.1.1 Receivables within one year
Gross rentals receivable 6,186,934,031 6,902,317,678 6,090,997,332
Unearned income (2,255,465,978) (2,669,962,422) (2,226,692,606)
3,931,468,053 4,232,355,256 3,864,304,726
17.1.2 Receivable from one to five years
Gross rentals receivable 12,038,282,681 13,191,463,357 11,973,338,308
Unearned income (2,203,493,717) (2,752,037,880) (2,178,764,681)
9,834,788,964 10,439,425,477 9,794,573,627
17.1.3 Allowance for impairment
Allowance for individually significant impairment
Balance as at 1st April 75,083,077 64,040,405 75,083,078
Charge for the year (Note 17.1.4) 75,982,428 185,540,483 75,982,428
Write offs (87,025,101) (104,773,683) (87,025,101)
Balance as at 31st March 64,040,404 144,807,205 64,040,405
Allowance for individually non-significant impairment
Balance as at 1st April 83,273,359 93,090,206 61,284,176
Charge for the year (Note 17.1.4) 101,994,458 26,716,240 104,840,880
Write offs (73,034,850) (79,818,877) (73,034,850)
Balance as at 31st March 112,232,967 39,987,569 93,090,206
Total allowances for impairment 176,273,371 184,794,774 157,130,611
17.1.4 Impairment provision for the year
Allowance for individually significant impairment 75,982,428 185,540,483 75,982,428
Allowance for individually non-significant Impairment 101,994,458 26,716,240 104,840,880
177,976,886 212,256,723 180,823,308
Company
Commercial Leasing & Finance PLC
Notes to the Financial Statements
Group
As at 31st March 2017 2018 2017
Rs. Rs. Rs.
17.2 Hire purchases receivables
Gross rentals receivable 83,747,931 2,223,347 63,713,773
Unearned income (1,645,602) - -
82,102,329 2,223,347 63,713,773
Allowance for impairment (Note 17.2.3) (71,446,825) (1,845,699) (62,581,144)
Net receivables 10,655,504 377,648 1,132,629
Hire purchase receivables
Receivables within one year (Note 17.2.1) 40,248,794 1,264,401 29,180,217
Receivables from one to five years (Note 17.2.2) 1,784,652 - -
Overdue rental receivable 40,068,883 958,946 34,533,556
(-) Allowance for impairment (Note 17.2.3) (71,446,825) (1,845,699) (62,581,144)
10,655,504 377,648 1,132,629
17.2.1 Receivables within one year
Gross rentals receivable 41,661,230 1,264,401 29,180,217
Unearned income (1,412,436) - -
40,248,794 1,264,401 29,180,217
17.2.2 Receivables from one to five years
Gross rentals receivable 2,017,818 - -
Unearned income (233,166) - -
1,784,652 - -
17.2.3 Allowance for impairment
Allowance for individually significant impairment
Balance as at 1st April 31,238,213 31,114,524 31,238,212
Charge for the year 25,540,985 1,244,186 25,540,985
Write offs (25,664,673) (30,554,429) (25,664,673)
Balance as at 31st March 31,114,525 1,804,281 31,114,524
Allowance for individually non-significant impairment
Balance as at 1st April 21,211,705 31,466,620 825,597
Charge / (reversal) for the year 20,492,577 (736,127) 32,013,005
Write offs (1,371,983) (30,689,075) (1,371,983)
Balance as at 31st March 40,332,299 41,418 31,466,620
Total allowances for impairment 71,446,825 1,845,699 62,581,144
17.2.4 Impairment charge / (reversal) for the year
Allowance for individually significant impairment 25,540,985 1,244,186 25,540,985
Allowance for individually non-significant Impairment 20,492,577 (736,127) 32,013,005
46,033,562 508,059 57,553,990
17.3 Allowance for impairment for leases and hire purchases receivables
Balance as at 1st April 210,806,354 219,711,755 168,431,063
Charge / (reversal) for the year 224,010,448 212,764,783 238,377,298
Write offs (187,096,606) (245,836,063) (187,096,606)
Balance as at 31st March 247,720,196 186,640,475 219,711,755
17.4 Concentration by sector
Gross amount Gross amount Gross amount %
2017 2018 2017
Manufacturing 1,036,708,997 7% 1,110,152,936 7% 1,026,186,898 7%
Agriculture 3,078,078,237 21% 3,620,113,104 24% 2,928,306,460 21%
Trade 2,656,323,207 19% 2,370,425,536 16% 2,650,895,646 19%
Transport 2,061,388,588 14% 2,084,796,934 14% 2,038,345,742 14%
Construction 851,706,794 6% 468,029,016 3% 851,199,229 6%
Services 2,311,801,596 16% 4,506,119,524 30% 2,575,590,617 18%
Micro and others 2,332,987,610 16% 1,010,515,516 7% 2,121,935,140 15%
14,328,995,029 15,170,152,566 14,192,459,731
Lease & hire purchase receivables amounting to Rs 11,251,780,305/- assigned under funding arrangement (2017- Rs..11,156,271,501 /-) also included
under lease and hire purchase receivebles.
Company
Group Company
% %
Commercial Leasing & Finance PLC
Notes to the Financial Statements
Group
2017 2018 2017
Rs. Rs. Rs.
18 Loans and advances
Advances and loans (Note 18.1) 43,810,290,091 41,208,800,160 33,795,065,806
43,810,290,091 41,208,800,160 33,795,065,806
18.1 Rentals receivable on loans to customers
Rentals receivable on loans to customers 43,319,653,715 40,374,967,327 33,319,861,208
Overdue loan installments 963,486,860 1,248,907,876 767,481,222
Total rentals receivable (Note 18.2) 44,283,140,575 41,623,875,203 34,087,342,430
Allowance for impairment (Note 18.1.1) (472,850,484) (415,075,043) (292,276,624)
43,810,290,091 41,208,800,160 33,795,065,806
18.1.1 Allowance for impairment
Allowance for individually significant impairment
Balance as at 1st April 144,026,345 198,572,460 142,728,571
Charge for the year (Note 18.1.2) 174,855,266 134,452,602 96,215,340
Write off (40,371,451) (45,634,582) (40,371,451)
Balance as at 31st March 278,510,159 287,390,480 198,572,460
Allowance for individually non-significant Impairment
Balance as at 1st April 143,342,680 93,704,164 88,843,764
Charge for the year (Note 18.1.2) 98,935,077 165,423,619 52,797,833
Write off (47,937,433) (131,443,220) (47,937,433)
Balance as at 31st March 194,340,324 127,684,563 93,704,164
Total allowances for impairment 472,850,484 415,075,043 292,276,624
18.1.2 Impairment provision for the year
Allowance for individually significant impairment 174,855,266 134,452,602 96,215,340
Allowance for individually non-significant Impairment 98,935,077 165,423,619 52,797,833
273,790,343 299,876,221 149,013,173
18.2 Concentration by sector
Gross Amount as at
31.03.2017
Rs.
% %
Gross Amount as at
31.03.2018
Rs.
%
Gross Amount as
at 31.03.2017
Rs.
%
Manufacturing 7,268,604,505 16% 4,291,009,445 10% 2,508,977,549 7%
Agriculture 4,403,141,621 10% 2,754,191,081 7% 1,982,210,004 6%
Trade 10,707,219,175 24% 9,757,546,278 23% 8,138,979,996 24%
Transport 3,740,470,801 8% 3,901,268,927 9% 3,693,626,003 11%
Construction 1,761,569,560 4% 1,951,862,823 5% 1,692,140,310 5%
Services 9,222,130,468 21% 15,140,838,424 36% 8,274,454,391 24%
Micro and Others 7,180,004,445 16% 3,827,158,225 9% 7,796,954,178 23%
44,283,140,575 41,623,875,203 34,087,342,430
Group
2018 2018 2017
Rs. Rs. Rs.
19 Factoring receivables
Factoring receivables (Note 19.2) 6,546,928,552 4,016,678,708 6,546,928,552
Allowance for impairment (Note 19.1) (379,271,384) (431,762,375) (379,271,384)
Balance as at 31 March 6,167,657,168 3,584,916,333 6,167,657,168
19.1 Allowance for impairment
Allowance for individually significant impairment
Balance as at 1st April 69,947,881 356,104,191 69,947,881
Charge for the year (Note 19.1.1) 357,119,559 533,931,531 357,119,559
Overdue interest adjustement - (58,873,863) -
Write off (70,963,249) (431,985,845) (70,963,249)
Balance as at 31st March 356,104,191 399,176,014 356,104,191
Allowance for individually non-significant impairment
Balance as at 1st April 55,599,986 23,167,193 55,599,986
Charge / (reversal) for the year (Note 19.1.1) (32,432,793) 9,419,168 (32,432,793)
Balance as at 31st March 23,167,193 32,586,361 23,167,193
Total allowances for impairment 379,271,384 431,762,375 379,271,384
19.1.1 Impairment charge / (reversal) for the year
Allowance for individually significant impairment 357,119,559 533,931,531 357,119,559
Allowance for individually non-significant Impairment (32,432,793) 9,419,168 (32,432,793)
324,686,766 543,350,699 324,686,766
As at 31st March
Company
As at 31st March
Group Company
Loan receivables amounting to Rs 9,024,633,560/- assigned under funding arrangement (2017- Rs.10,774,897,266/-) also included under loan receivables.
Company
Commercial Leasing & Finance PLC
Notes to the Financial Statements
19.2 Concentration by sector
% % %
Agriculture 656,027,660 10% 563,753,230 14% 656,027,660 10%
Manufacturing 1,797,795,989 27% 851,490,240 21% 1,797,795,989 27%
Services 488,297,765 7% 218,829,016 5% 488,297,765 7%
Trading 978,286,361 15% 828,349,903 21% 978,286,361 15%
Transport 2,031,521,028 31% 1,202,785,530 30% 2,031,521,028 31%
Micro and Others 594,999,748 9% 351,470,789 9% 594,999,748 9%
6,546,928,552 4,016,678,708 6,546,928,552
Group
As at 31st March 2017 2018 2017
Rs. Rs. Rs.
20 Due from related parties
Dikwella Resort (Private) Limited - 370 -
Brown & Company PLC 4,189,200 - -
4,189,200 370 -
21 Current tax assets
With-holding tax recoverable 85,013,013 89,836,635 77,088,006
Other tax recoverable 851,437 - -
85,864,450 89,836,635 77,088,006
22 Other current assets
Financial assets
Loans to employess (Note 22.1) 1,275,545 1,196,787 1,275,545
1,275,545 1,196,787 1,275,545
Non-financial Assets
Prepayments and advances 263,401,107 126,926,465 203,490,152
Other non-financial receivables 187,807,557 7,628,042 187,737,327
Inventories - 3,878,600 -
451,208,664 138,433,107 391,227,479
Total other current assets 452,484,209 139,629,894 392,503,024
22.1 Loans to employees
Balance at the beginning of the year 1,339,513 1,275,545 1,339,513
Loans granted during the year 4,809,000 7,893,253 4,809,000
Loans recovered during the year (4,872,968) (7,972,011) (4,872,968)
Balance at end of the year 1,275,545 1,196,787 1,275,545
Company
As at 31st March
Group Company
Gross Amount 2017
Rs.
Gross Amount
2018
Rs.
Gross Amount
2017
Rs.
Commercial Leasing & Finance PLC
Notes to the Financial Statements
23 Equity accounted investee Principle Activity Holding % No. of Shares Balance (Rs.) Holding % No. of Shares Balance (Rs.) Holding % No. of Shares Balance (Rs.) Holding % No. of Shares Balance (Rs.)
Commercial Insurance Brokers Limited Insurance Brokering 40% 240,000 800,000 40% 240,000 800,000 40% 240,000 800,000 40% 240,000 800,000
Add : share of profits applicable to the company
Balance at the beginning of the year 82,259,004 75,054,139 82,259,004 75,054,139
Current year's share of profits before taxation 17,639,361 15,081,296 17,639,361 15,081,296
Taxation (6,221,388) (4,835,843) (6,221,388) (4,835,843)
Current year's share of profits after taxation 11,417,973 10,245,454 11,417,973 10,245,454
Actuarial loss (92,455) 276,959 (92,455) 276,959
Income tax on other comphrehensive income 25,888 (77,548) 25,888 (77,548)
Dividends received during the year (3,600,000) (3,240,000) (3,600,000) (3,240,000)
Sub total 90,010,410 82,259,004 90,010,410 82,259,004
Balance at the end of the year 90,810,410 83,059,004 90,810,410 83,059,004
BRAC Lanka Finance PLC Insurance Brokering 44% 105,499,048 1,265,987,676 - - - 44.33% 105,499,048 1,265,987,676 - - -
Add : share of profits applicable to the Company
Balance at the beginning of the year - - - -
Current year's share of profits before taxation 227,326,133 - 227,326,133 -
Taxation (85,476,441) - (85,476,441) -
Current year's share of profits after taxation 141,849,693 - 141,849,693 -
Actuarial loss 553,069 - 553,069 -
Fair value gains/(losses) that arose during the year 11,601,596 - 11,601,596 -
Income tax on other comphrehensive income (154,859) (154,859)
Dividends received during the year (3,797,962) - (3,797,962) -
Sub total 150,051,536 - 150,051,536 -
Balance at the end of the year 1,416,039,212 - 1,416,039,212 -
Total 1,506,849,622 83,059,004 1,506,849,622 83,059,004
23.1 Current year's share of profit
The Share of equity accounted investee profit is based on the audited financial statements of respective companies.
Summarized financial data as at financial year end of Commercial Insurance Brokers (Pvt) Ltd is stated below.
For the year ended 31st December 2017 2016
Rs. Rs.
Revenue 251,923,383 232,301,704
Profit before tax 44,329,541 37,703,241
Profit after tax 28,711,353 25,613,634
Total assets 303,563,966 273,855,907
Total liabilities 70,557,469 60,394,343
Summarized financial data as at financial year end of BRAC Lanka Finance PLC is stated below.
For the year ended 31st March 2018 2017
Rs. Rs.
Revenue 3,690,624,940 Not Applicable
Profit before tax 512,804,271 Not Applicable
Profit after tax 319,636,439 Not Applicable
Total assets 16,493,680,720 Not Applicable
Total liabilities 13,668,023,252 Not Applicable
Company
Group Company
As at 31st March 2018 As at 31st March 2017 As at 31st March 2018 As at 31st March 2017
Commercial Leasing & Finance PLC
Notes to the Financial Statements
24 Investment properties Group
As at 31 March 2017 2018 2017
Rs. Rs. Rs.
Balance at the beginning of the year - 46,000,000 -
Additions during the year 42,000,000 483,118,000 42,000,000
Transfers (to)/from property plant and equipment - 1,043,000,000 -
Change in fair value during the year 4,000,000 59,882,000 4,000,000
Balance at the end of the year 46,000,000 1,632,000,000 46,000,000
24.1 Valuation of investment properties
Group
Property & location Land extent Building
extent Historical cost
2017 2018 2017
Rs. Rs. Rs.
No 10,Third Lane,Pita kotte,Kotte 0A- 0R- 35.18P 1,647 42,000,000 46,000,000 52,000,000 46,000,000
No 156 & 122,Kolonnawa Road,Gothatuwa 1A- 1R- 33.71P 39,940 374,519,000 - 416,000,000 -
No 28A, Badulla Road Nuwara- Eliya Market approach 21.03P 5,426 108,599,000 - 107,000,000
No 305/5.Rajagiriya Road,Nawala 0A-3R-19.14P N/A 1,043,000,000 - 1,057,000,000
46,000,000 1,632,000,000 46,000,000
24.2 In 2016, folloing Investment property at Imaduwa, Galle amounted to Rs. 13.5 had been provided fully. Legal action has already been taken to secure the title from a third party .
25 Investment on subsidiaries
As at 31 March
No. of Shares Holding % Cost (Rs.) No. of Shares Holding % Cost (Rs.)
BRAC Lanka Finance PLC - - - 105,499,048 99.76% 1,023,301,966
- - 105,499,048 1,023,301,966
26 Goodwill Group
Rs. Rs. Rs.
2017 2018 2017
Goodwill on acquisition 253,210,966 - -
26.1 Goodwill is attribute to the acquition of BRAC Lanka Finance PLC.
Goodwill on acquisition is recognized as follows; Rs. Rs. Rs.
2017 2018 2017
Fair value of consideration paid 608,635,308 - -
Acquisition of NCI 243,611,315 - -
Identifiable assets acquired (599,035,657) - -
Goodwill 253,210,966 - -
Company
Company
Principle activity 2018 2017
Leasing, Hire purchase, Secured
Loans,Micro finance,Property mortgaged
loans and mobilization of public deposits.
Market approach
Market approach
Market approach
Company
The fair value of the investment properties were determined as at 31st March 2018, by Mr.W.M Chandrasena , R.I.C.S an independent valuers who hold recognized and relevant professional qualification and have recent experience in the location and category of the
investments properties.
Company
Method of valuation Fair value
Commercial Leasing & Finance PLC
Notes to the Financial Statements
27 Intangible assets
Group
Computer
softwares
Licence and
fees2018
Rs' Rs' Rs'
Carrying amount
As at 31st March 2017 2,505,330 3,438,059 5,943,388
Company
Computer
Softwares
Licence and
feesTotal
Rs' Rs' Rs'
Cost
Balance as at 1st April 2017 3,825,000 6,341,400 10,166,400
Balance as at 31 st March 2018 3,825,000 6,341,400 10,166,400
Accumulated amortization and impairement losses
Balance as at 1st April 2017 1,319,671 2,903,341 4,223,012
Amortisation charged 765,000 1,268,280 2,033,280
Balance as at 31st March 2018 2,084,671 4,171,621 6,256,292
Carrying amount
As at 31st March 2018 1,740,329 2,169,779 3,910,108
As at 31st March 2017 2,505,330 3,438,059 5,943,388
Commercial Leasing & Finance PLC
Notes to the Financial Statements
28 Property, Plant and Equipment
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Carrying value
As at 31 March 2017 1,507,500,000 211,500,000 9,380,796 82,718,857 182,263,492 87,658,324 30,362,848 8,654,701 2,120,039,018
Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Cost/valuation
Balance as at 1st April 2017 1,507,500,000 211,500,000 93,197,377 152,385,292 207,134,019 226,342,837 108,223,956 - 2,506,283,481
Additions 120,180,000 2,057,977 8,982,500 57,709,054 78,927,868 60,236,582 - - 328,093,981
Revaluations 66,625,000 1,927,223 - - - - - - 68,552,223
Disposals - - (19,086,732) (3,291,120) (3,362,662) (1,153,670) (4,000,000) - (30,894,184)
Transfers / other adjustments - 389,800 - - 761,380 - (51,781,361) - (50,630,181)
Reclassification (1,043,000,000) - - 346,469 2,724,477 (3,070,946) (1,043,000,000)
-
Balance as at 31 st March 2018 651,305,000 215,875,000 83,093,145 207,149,695 286,185,082 282,354,803 52,442,595 - 1,778,405,320
Accumulated depreciation
Balance as at 31 March 2017 - - 86,120,941 89,164,350 138,668,473 138,684,513 77,861,108 - 530,499,385
Charge for the year - 8,456,276 6,809,131 25,694,305 32,146,673 30,693,753 7,827,540 - 111,627,678
Revaluations - (8,456,276) - - - - - - (8,456,276)
Disposals - - (18,955,541) (3,291,120) (3,362,662) (1,153,670) (4,000,000) - (30,762,993)
Transfers / other adjustments - - - - (296,636) - (51,781,361) - (52,077,997)
Balance as at 31 st March 2018 - - 73,974,531 111,567,535 167,155,848 168,224,596 29,907,287 - 550,829,797
Carrying value
As at 31 March 2018 651,305,000 215,875,000 9,118,614 95,582,160 119,029,234 114,130,207 22,535,308 - 1,227,575,523
As at 31 March 2017 1,507,500,000 211,500,000 7,076,436 63,220,942 68,465,546 87,658,324 30,362,848 - 1,975,784,096
ComputersAssets for Operating
Leases
Computer
SoftwareTotalCompany Freehold Lands
Freehold
Buildings
Freehold Motor
Vehicles
Furniture &
Fittings
Office
Equipment
ComputersAssets for Operating
Leases
Plant &
MachineryTotalGroup Freehold Lands
Freehold
Buildings
Freehold Motor
Vehicles
Furniture &
Fittings
Office
Equipment
Commercial Leasing & Finance PLC
Notes to the Financial Statements
28.1 Property, plant & equipment included fully depreciated assets that are still in use having a gross amount of Rs.349,324,832/- as at 31st March 2018 (2016/17- Rs. 273,651,405 )
28.2 Land & buildings of the company are stated based on a valuation performed by W.M Chandrasena, R I C S ( Sri Lanka) an Independent Chartered Valuer, as at 31st March 2018. The Details of which are as follows,
Information on freehold land and building of the company
Revaluation Extent Extent Accommodation
Land Building Total Land Building Surplus Land Building (Sq.Ft)
Rs. Rs. Rs. Rs. Rs. Rs.
No.68, Bauddhaloka Mawatha,Colombo-04 342,000,000 208,000,000 550,000,000 313,500,000 197,687,296 38,812,704 0A- 0R- 19.00P 25,240 Head Office
No.04,UC Houses,New Town Anuradhapura. 75,280,000 - 75,280,000 - - 0A- 0R- 14.03P Anuradhapura
No 24,Abhaya Place,Anuradhapura. 44,900,000 - 44,900,000 - - 0A- 0R- 14.17P Anuradhapura
No 74,Colombo Road,Negombo 189,125,000 7,875,000 197,000,000 151,000,000 7,804,205 38,195,795 0A- 1R- 33.65P 3,740 Negambo 651,305,000 215,875,000 867,180,000 464,500,000 205,491,501 77,008,499
28.3
Class of Asset Cost
Accumulated
Depreciation Net Book Value Cost
Accumulated
Depreciation Net Book Value
Rs. Rs. Rs. Rs. Rs. Rs.
Freehold lands 332,946,000 - 332,946,000 212,766,000 - 212,766,000
Freehold buildings 20,432,000 (12,770,000) 7,662,000 20,432,000 (12,259,200) 32,691,200
353,378,000 (12,770,000) 340,608,000 233,198,000 (12,259,200) 245,457,200
28.4 There were no restrictions on the title of the property plant and equipment as at the reporting date. Further there were no items pledged as securities for liabilities.
Company
2018 2017
If land and buildings were measured using the cost model,the carrying amounts would be as follows:
LocationValuation of Net Book Value of
Commercial Leasing & Finance PLC
Notes to the Financial Statements
Group
2017 2018 2017
Rs. Rs. Rs.
29 Derivative liabilities
Derivative liabilities held for risk management (Note 16.3.1) 15,562,267 271,625,120 15,562,267
15,562,267 271,625,120 15,562,267
30 Deposits from customers
Fixed and savings deposits at amortised cost
Fixed deposits 16,962,824,891 21,921,908,118 15,219,894,669
Saving deposits 1,446,192,999 788,591,008 386,997,426
Interest payable on customer deposits 340,246,895 774,609,753 329,050,339
18,749,264,785 23,485,108,879 15,935,942,434
31 Loans and borrowings
Short-term loans and others 13,134,044,966 2,004,131,506 13,134,044,966
Debentures (Note 31.3) 5,121,541,096 5,112,985,130 5,121,541,096
Long-term borrowings (Note 31.1) 28,061,483,934 21,815,545,583 26,011,344,759
46,317,069,996 28,932,662,219 44,266,930,821
31.1 Long-term borrowings
Balance at the beginning of the year 29,740,006,791 26,340,684,137 27,804,228,832
Repayments (2,022,091,986) (4,284,357,313) (1,570,741,911)
Amortized interest 674,221,240 (2,951,074) 107,197,216
Balance at the end of the year - Gross 28,392,136,045 22,053,375,750 26,340,684,137
Unamortized finance cost (330,652,111) (237,830,167) (329,339,378)
Balance at the end of the year 28,061,483,934 21,815,545,583 26,011,344,759
31.2 Loans and borrowings
Loans and borrowings- Current 20,028,639,204 9,619,669,022 17,978,500,029
Loans and borrowings- Non current 26,288,430,792 19,312,993,198 26,288,430,792
Total loans and borrowings 46,317,069,996 28,932,662,219 44,266,930,821
31.3 DebenturesYear of Issue
Year of
Redemption Type of Issue
Fixed Rate Semi
Annually
Rated, Senior, Unsecured, Redeemable debenture 2015 2020
Senior - Unsecured -
Redeemable 9.75%
Highest Price Lowest Price Last Traded Price Last Traded Date
Market summary
101.58 100.67 100.67 13-Oct-17
Interest rate of comparable government security
Buying and selling prices of treasury bond as at 31st March 2018.
5 Year Bond Price (Rs.) Yield (%)
Buying 103.82 10.26
Selling 104.59 10.07
Price (Rs.) Yield (%)
5 Year Bond 104.20 10.17
2018 2017
Debt to equity ratio 3.25 times 4.35 times
Quick asset ratio 1 times 1.118 times
Interest cover 1.42 times 1.36 times
Company
As at 31st March
Market prices and yield during the period
Company
Commercial Leasing & Finance PLC
Notes to the Financial Statements
As at 31st March Group
2017 2018 2017
Rs. Rs. Rs.
32 Current tax liabilities
Tax payable as at 1st April 588,902,778 413,645,436 464,454,831
Current tax expense for the year (Note 11) 686,264,699 552,667,262 565,438,978
Under/ (Over) Provision in respect of previouse year - (164,041,412) -
Tax paid during the year (754,409,690) (282,413,797) (616,248,373)
Tax payable as at 31st March 520,757,787 519,857,489 413,645,436
33 Amount due to related companies
Lanka Orix Leasing Company PLC 1,777,939,720 142,002,355 63,597,182
LOLC Motors Limited 1,984,497 3,002,161 1,939,271
LOLC Finance PLC 32,987,297 - 102,340
Lanka ORIX Information Technology Services Limited 306,478,406 10,831,909 16,047,729
LOLC Factors Limited 3,224,240,314 - -
Prosper Realty Ltd. 1,584,184 1,584,184 1,584,184
LOLC Micro Credit Limited 955,276 762,755 763,286
LOLC Corporate Services (Private) Limited 1,615,562 564,227 564,227
LOLC Life Insurance Limited 12,240,344 - -
5,360,025,600 158,747,591 84,598,219
34 Trade and other payables
Financial liabilities
Accrued Expenses 567,079,810 361,857,648 520,471,289
Creditors for cost of equipment 273,357,743 686,308,175 273,357,743
Other payable 169,184,348 337,459,353 165,708,934
Total financial liabilities 1,009,621,901 1,385,625,176 959,537,966
Non-financial liabilities
Other payable 140,287,706 328,677,855 109,193,769
Total non-financial liabilities 140,287,706 328,677,855 109,193,769
Total trade and other payables 1,149,909,607 1,714,303,031 1,068,731,735
35 Deferred tax assets & liabilities
35.1 Recognised deferred tax liabilities
Rs. Rs. Rs. Rs. Rs. Rs.
Property, Plant & Equipment 327,618,515 91,733,185 169,774,776 47,536,938 267,198,627 74,815,616
Lease receivables 838,630,293 234,816,482 1,694,273,222 474,396,504 836,806,489 234,305,817
Employee benefits (95,895,278) (26,850,678) (95,420,547) (26,717,753) (72,300,061) (20,244,017)
Revaluation of Property, plant and equipment 111,326,650 31,171,462 116,710,553 32,678,955 111,326,650 31,171,462
Derivative Asset / (Liability) 60,701,430 16,996,400 (180,555,790) (50,555,621) 60,701,430 16,996,400
1,242,381,610 347,866,851 1,704,782,214 477,339,023 1,203,733,135 337,045,278
35.1.1 Movement in recognised deferred tax liabilities Group
2017 2018 2017
Rs. Rs. Rs.
Balance as at the beginning of the period 357,931,658 337,045,278 357,931,658
Reversal of deferred tax asset opening balance (2,048,360) - -
Originations / (Reversal) during the year (Note 35.3.1) (8,016,448) 140,293,745 (20,886,380)
Balance as at 31st March 347,866,851 477,339,023 337,045,278
Temporary Difference Tax Effect
Company
Temporary
Difference Tax Effect
Temporary
Difference Tax Effect
Group Company
As at 31st March 2017 As at 31st March 2018 As at 31st March 2017
Company
Commercial Leasing & Finance PLC
Notes to the Financial Statements
As at 31st March Group
2017 2018 2017
Rs. Rs. Rs.
Company
35.2 Deferred tax expense
Deferred tax liabilities
Originations / reversal during the period (Note 35.3.1) (8,016,448) 140,293,745 (20,886,380)
(8,016,448) 140,293,745 (20,886,380)
Group
35.3.1 Amount originating / (reversing) during the year 2017 2018 2017
Rs. Rs. Rs.
Recognised in profit and loss - Continuing Operating (46,968,090) 208,044,620 (46,968,090)
Recognised in profit and loss - Discontinued Operations 12,039,664 - -
Total Recognised in profit and loss (34,928,426) 208,044,620 (46,968,090)
Recognised in other comprehensive income - Continuing Operations 26,081,710 (67,750,875) 26,081,710
Recognised in other comprehensive income - Discontinuing Operations 830,269 - -
Total Recognised in other comprehensive income 26,911,978 (67,750,875) 26,081,710
(8,016,448) 140,293,745 (20,886,380)
Group
36 Employee benefits 2017 2018 2017
Present value of unfunded gratuity Rs. Rs. Rs.
Balance as at the beginning of the year 71,097,067 72,300,062 50,341,964
Benefit paid during the year (2,260,942) (6,933,364) (2,011,238)
Expense recognised in the income statement (Note 36.1) 21,433,260 17,865,691 15,378,201
Expense recognised in the other comprehensive income (Note 36.2) 5,625,892 6,094,101 8,591,135
95,895,277 89,326,490 72,300,062
36.1 Expense recognised in the income statement
Current service cost 12,019,721 9,189,684 8,247,722
Interest on obligation 9,413,539 8,676,007 7,130,479
21,433,260 17,865,691 15,378,201
36.2 Expenses recognized in other comprehensive income
Acturial loss / (gain) 5,625,892 8,227,464 8,591,135
Adjustment - (2,133,363) -
5,625,892 6,094,101 8,591,135
Company
Company
Commercial Leasing & Finance PLC
Notes to the Financial Statements
Group
2017 2018 2017
Actuarial assumptions
Rate of discount 12% 11.0% 12.0%
Salary increment rates 9% 9.0% 9.0%
Retirement age 55 years 55 years 55 years
36.3 Sesivitity of the actuarial assumptions
Assumption Rate change
Financial Position -
Liability Rate change
Financial Position -
Liability
Rs. Rs.
Discount rate +1 99,673,153 +1 77,572,906
-1 82,891,111 -1 67,655,514
Future salary increases +1 82,335,746 +1 67,608,702
-1 97,196,376 -1 77,539,170
There are no material issues pertaining to employees and industrial relations of the company.
37 Stated capital Group
2017 2018 2017
Rs. Rs. Rs.
Issued and fully paid (Note 37.1) 1,425,946,629 1,425,946,629 1,425,946,629
Number of shares (Note 37.2) 6,377,711,170 6,377,711,170 6,377,711,170
Group
37.1 Movement in stated capital 2017 2018 2017
Rs. Rs. Rs.
Balance at the beginning of the year 1,425,946,629 1,425,946,629 1,425,946,629
Balance at the end of the year 1,425,946,629 1,425,946,629 1,425,946,629
37.2 Movement in number of ordinary shares
No of shares at the beginning of the year 6,377,711,170 6,377,711,170 6,377,711,170
No of shares at the end of the year 6,377,711,170 6,377,711,170 6,377,711,170
Company
Sensitivity analysis on discounting rate and salary increment rate to statement of financial position and statement of profit and Loss.
Company
2018 2017
Company
All shares rank equally with regard to the company’s residual assets. The holders of ordinary shares are entitled to receive dividends as declared from time to
time, and are entitled to one vote per share at meetings of the company.
The employee benefit liability was actuarial valued under the projected unit credit (PUC) method by professionally qualified actuary firm Messers Piyal S.
Goonethilake and Associates on 31st March 2018.
The principle fnancial assumptions used in the valuation for the current and comparative years are as follows;
Company
Commercial Leasing & Finance PLC
Notes to the Financial Statements
Group
2017 2018 2017
Rs. Rs. Rs.
38 Reserves
Statutory reserve (Note 38.1) 660,369,706 736,135,589 628,919,447
Revaluation reserve (Note 38.2) 872,381,597 947,882,602 872,381,596
General reserve (Note 38.3) 231,779,789 288,079,789 288,079,789
Fair value reserve on AFS (Note 38.4) (129,541,981) 22,567,080 (127,214,307)
Hedging reserve (Note 38.5) 47,766,929 1,106,124 47,766,933
Total 1,682,756,039 1,995,771,184 1,709,933,458
38.1 Statutory reserve
38.2 Revaluation reserve
38.3 General reserve
38.4 Fair value reserve on available for sale
38.5 Hedging reserve
Group
As at 31st March 2017 2018 2017
Rs. Rs. Rs.
39 Retained earnings
Balance brought forward 9,617,451,437 11,039,653,947 9,443,651,998
Net profit for the year 1,896,644,018 2,144,322,847 1,686,303,322
Other comprehensive income (5,625,892) (6,094,101) (8,591,135)
Share of other comprehensive income from equity accounted investee 199,410 11,933,238 199,410
Transferred to/(from) during the year (94,832,201) (107,216,142) (84,315,166)
Tax on other comprehensive income (excluding tax on revaluation) 1,575,250 1,706,347 2,405,518
Acquisition of NCI 2,495,674 - -
Balance at the end of the year 11,417,907,696 13,084,306,136 11,039,653,947
This reserve is maintained to recognize the fair value changes of avalable for sale financial assets.
The hedging reserve comprises of the effective portion of the cumulative net change in fair value of cash flow hedging instruments related to hedge
transactions that have not yet affected the profit or loss.
Company
The carrying amount of the retained earnings represents the undistributed earnings held by the company. This could be used to absorb future losses
and dividend declaration.
Company
As at 31st March
The reserve is created according to Direction No.1 of 2003 issued under the Finance Business Act No.42 of 2011. The company transfers 5% of its
annual net profit after tax to this reserve in compliance with this direction.
The revaluation reserve relates to the revaluation surplus of Property, Plant and Equipments and the long term investments. Once the respective
revalued items have been disposed, the relevant portion of revaluation surplus is transferred to retained earnings.
General reserves are the retained earnings of a company which are kept aside out of company’s profits to meet future (known or unknown) obligations
Commercial Leasing & Finance PLC
Notes to the Financial Statements
40 Maturity analysis of financial assets and financial liabilities
40.1 Company
Carrying amount
31st March 2018 Less than 1 month 1-3 months 4 - 12 months 13 - 60 months
More than
60 months
Carrying amount
31st March 2017
Maturity analysis of financial assets Rs. Rs. Rs. Rs. Rs. Rs. Rs.
Interest earning assets
Cash and cash equivalents 2,377,557,530 2,377,557,530 - - - - 1,487,849,203
Financials assets held for trading
Equity securities 153,996,501 153,996,501 - - - - 201,238,845
Unit Trust - - - - - - 2,513,936,244
Investment securities
Available-for-sale investment securities 1,900,074,031 1,900,074,031 - - - - 1,491,486,089
Loans and receivables 4,605,140,218 4,605,140,218 - - 14,201,766,478
Derivative assets held for risk management - - - - - - 60,701,430
Finance lease receivables, hire purchases and
operating leases
Finance lease receivables (Net) 14,983,134,443 349,987,371 847,560,460 3,319,351,556 10,255,312,659 210,922,398 13,971,615,347
Hire purchase receivables (Net) 377,648 377,648 - - - - 1,132,629
Advances and other loans
Loans and advances (Net) 41,208,800,160 2,176,089,782 4,253,493,018 14,263,493,624 20,476,862,009 38,861,729 33,795,065,806
Factoring receivables (Net) 3,584,916,333 289,968,529 44,811,017 87,938,741 3,162,198,046 - 6,167,657,168
Trade and other current assets
Loans to staff 1,196,787 1,196,787 - - - - 1,275,545
68,815,193,651 11,854,388,397 5,145,864,495 17,670,783,921 33,894,372,714 249,784,127 73,893,724,784
Maturity analysis of financial liabilities
Interest bearing liabilities
Non-derivative liabilities
Bank overdrafts 1,353,451,358 1,353,451,358 - - - - 1,390,806,997
Deposits liabilities
Deposits from customers 23,485,108,879 2,424,025,543 4,026,796,131 13,198,299,984 3,835,987,221 - 15,935,942,434
Interest bearing borrowings
Short term loans and others 2,004,131,506 - - 2,004,131,506 - - 13,134,044,966
Debentures 5,112,985,130 - - 112,985,130 5,000,000,000 - 5,121,541,096
Long-term borrowings 21,815,545,583 31,459,645 3,494,846,919 3,976,245,821 14,312,993,198 - 26,011,344,759
Other current liabilities 845,055,766 158,747,591 686,308,175 - - - 357,955,962
54,616,278,222 3,967,684,137 8,207,951,225 19,291,662,441 23,148,980,419 - 61,951,636,214
An analysis of the interest bearing assets and liabilities employed by the Company as at 31st March 2018, based on the remaining period at the balance sheet date to the respective contractual maturity date is given below.
Commercial Leasing & Finance PLC
Notes to the Financial Statements
41 Related party transactions
41.1 Identity of related parties
41.2 Transactions with key management personnel
(i) Loans to directors
No loans have been given to the directors of the company.
(ii) Compensation of key management personnel
Short-term employement benefits
2018 2017
Rs. Rs.
Directors fees and other emoluments 16,092,126 20,980,883
Other KMP emoluments 24,207,448 22,734,530
40,299,574 43,715,413
Long-term employment benefits
There are no long term employment benefits to key management personnel during the year.
(iii) Related party transactions
Accordingly, the value of all transactions carried out by the company with its related companies during the year ended 31 march 2018 are summarized bellow.
Company
Lanka ORIX Leasing Company PLC Parent Interest expense (15,605,133)
Transfer of funds (4,412,419,026)
Funds received 5,544,219,026
Handling fee (537,091,572)
Gurantee fees (9,750,000)
Asset hire expenses (21,821,997)
Show back Charge (50,312,810)
Settlement of expenses by LOLC (575,623,661) (142,002,355) (63,597,182)
BRAC Lanka Finance PLC Associate Loan given 700,000,000
Loan recovered (700,000,000)
Interest on loan 132,764,360 - -
Commercial Insurance Brokers (Pvt) Ltd Associate Insurance commission received 56,754,342 - -
LOLC Motors Limited Fellow SubsidiaryFund transfer settlement of valuation fee income 28,746,461
Settlement of expenses LOMO (2,610,700)
Valuation fee income of LOMO (27,198,651)
Interest income received 42,785,009 (3,002,161) (1,939,272)
Fellow SubsidiaryProvision for information services (125,519,451)
Payments 152,960,852
Expenses shared (22,225,581) (10,831,909) (16,047,729)
Browns & Company PLC Fellow SubsidiaryLease vehicle purchased 408,620,200 - -
Ishara Traders Other Related PartyLease vehicle purchased 4,900,000 - -
LOLC Micro Credit Ltd. Fellow SubsidiaryProvision for yard fee (7,800,000)
Expenses shared (1,618,050)
Fund transfer (Settlement of expenses by CLC) 9,418,581 (762,755) (763,286)
Prosper Realty Ltd. Fellow SubsidiaryProvision for rent Fee (16,200,000)
Fund transfer settlement of rent fee 19,010,200
Tax on shared rent fee (2,810,201) (1,584,184) (1,584,184)
LOLC Corporate Services (Pvt) Ltd Fellow SubsidiaryProvision for secretarial fees (5,769,840)
Tax on shared service (1,000,891)
Fund transfer (Settlement of expenses by CLC) 6,770,731 (564,227) (564,227)
Galoya Plantations Limited Fellow SubsidiaryInterest income received 30,253,045 - -
LOLC General Insurance Ltd. Fellow SubsidiaryInsurance premium paid 2,326,606 - -
There are no related party transactions other than those disclosed in Note 41 to the financial statements.
Amount due
from/(to) as at
31/3/2017
Rs.
Lanka ORIX Information Technology Services
Ltd
Name of the company Relationship Nature of the transaction
Transaction value
for the year ended
31st March 2018
Rs.
Amount due
from/(to) as at
31/3/2018
Rs.
The company carried out transactions in the ordinary course of it's business with parties who are defined as related parties in Sri Lanka Accounting Standard 24 (LKAS 24) ' Related Party
Disclosures', the details of which are reported below.
The company has related party transactions with, its equity accounted investee BRAC Lanka Finance PLC and Commercial Insurance Brokers (Pvt) Ltd and Lanka ORIX Leasing Company
PLC, the main shareholder of the Company and with its Directors.
According to Sri Lanka Accounting Standard (LKAS) 24 'Related Party Disclosures', key management personnel are those having authority and responsibility for planning, directing and
controlling the activities of the entity. Accordingly, the Board of Directors (including Executive and Non-Executive) and the heads of its core functions have been identified as key
management personnel of the company. Independent transaction with key management personnel, are disclosed as follows,
Company
Commercial Leasing & Finance PLC
Notes to the Financial Statements
41.3 Related party transactions exceeding 10%of the equity or 5% of the total assets of the entity as per audited financial statements, whichever is lower
There are no related party transactions those require specified disclosure in accordance with the continuing listing requirements of colombo stock exchange.
41.4
42 Contingent liabilities
2018 2017
Rs. Rs.
Guarantees issued to banks and other institutions 185,553,100 59,723,175
43 Capital commitments
2018 2017
Rs. Rs.
Forward exchange contracts 19,053,392,831 17,365,298,324
Facility limits not utilized 5,153,077,599 2,206,186,372
44 Litigation and claims
45 Events after reporting period
No circumstances have arisen subsequent to the reporting date which would require adjustments to or disclosure in the financial statements other than the following;
There were no significant capital commitments which have been approved or contracted for by the company as at the reporting date except for the following.
As at 31st March
Company
On this commitment the company will receive US $ 143,487,097 on conversion.
Litigation is a common occurrence in the finance industry due to the nature of the business undertaken. The group has formal controls and policies for managing legal claims. Once
professional advice has been obtained and the amount of loss reasonably estimated, the group makes adjustments to account for any adverse effects which the claims may have on its financial
standing.
The terms and conditions of the transactions with key management personnel and their related parties were no more favorable than those available, or which might reasonably be expected to
be available, on similar transactions to non-key management personnel related entities on an arm’s length basis.
As at 31st March
Company
Commercial Leasing & Finance PLC
Notes to the Financial Statements
46 Comparative information
The presentation and classifiaction of the following items in these financial statements are amended to ensure the comparability with the current year.
As at 31 March 2017
Other current assets
Loans and
Advances Other current assets
Loans and
Advances
Rs' Rs' Rs' Rs'
Insuarance premium receivables
As previously reported in the published financial statements for the year ended 31 March 2017 484,376,965 43,778,397,335 424,395,780 33,763,173,050
Adjustment made on insurance receivables (31,892,756) 31,892,756 (31,892,756) 31,892,756
Adjusted balance in the published financial statements for the year ended 31 March 2018 452,484,209 43,810,290,091 392,503,024 33,795,065,806
Trade & Other
payable
Trading liabilities -
fair value through
profit or loss
Trade & Other
payable
Trading liabilities -
fair value through
profit or loss
Trading liabilities - fair value through profit or loss Rs' Rs' Rs' Rs'
As previously reported in the published financial statements for the year ended 31 March 2017 1,165,471,874 - 1,084,294,002 -
Adjustment made on derivative liabilities (15,562,267) 15,562,267 (15,562,267) 15,562,267
Adjusted balance in the published financial statements for the year ended 31 March 2018 1,149,909,607 15,562,267 1,068,731,735 15,562,267
Group Company
Commercial Leasing & Finance PLC
Notes to the Financial Statements
47 Valuation of Financial Instruments
47.1 Fair Value Hierarchy
Group Note Carrying amount Level 1 Level 2 Level 3 Total
As at 31 March 2017 (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
Assets
Equity securities 15.1 201,238,845 201,238,845 - - 201,238,845
Unit trust 15.2 2,513,936,244 2,513,936,244 - - 2,513,936,244
2,715,175,089 2,715,175,089 - - 2,715,175,089
Other Investment
Corporate bonds 16.1.1 1,872,958,045 - 1,872,958,045 - 1,872,958,045
Treasury bills 16.1.2 93,119,693 - 93,119,693 93,119,693
Unquoted equity securities 15.1.3 67,189,750 - - 67,189,750 67,189,750
Derivative assets held for risk management 15.3 60,701,430 - 60,701,430 - 60,701,430
2,093,968,918 - 2,026,779,168 67,189,750 2,093,968,918
Investment properties 24 46,000,000 - - 46,000,000 46,000,000
Property, plant and equipment 28 2,120,039,018 - - 2,120,039,018 2,120,039,018
4,809,144,007 2,715,175,089 2,026,779,168 67,189,750 4,809,144,007
47.2 Financial instruments not measured at fair value
Group
As at 31 March 2017
Note Level 1 Level 2 Level 3 Total Fair Value
Total Carrying
amount
Assets (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
Investment securities
Loans & receivables
Repos 16.2 - 3,758,141,452 - 3,758,141,452 3,758,141,452
Investments in term deposits 16.2 - 9,091,563,770 - 9,091,563,770 9,091,563,770
Commercial papers 16.2 - 1,706,650,974 - 1,706,650,974 1,706,650,974
Others - - -
- 14,556,356,196 - 14,556,356,196 14,556,356,196
Finance lease receivables, hire purchases and operating leases
Finance lease receivables 17.1 - 13,001,477,374 - 14,070,619,329
Hire purchase receivables 17.2 - 14,591,712 - 10,655,504
Operating lease receivables - - - - -
- - 13,016,069,086 - 14,081,274,833
Advances and other loans
Advances and loans 18.1 - 43,698,128,964 43,698,128,964 43,810,290,091
Factoring receivables 19 - - 6,167,657,168 6,167,657,168 6,167,657,168
- - 49,865,786,132 49,865,786,132 49,977,947,259
- 14,556,356,196 62,881,855,218 64,422,142,328 78,615,578,288
Liabilities
Deposits liabilities 30 - - 16,559,337,762 16,559,337,762 18,749,264,785
Interest bearing borrowings
Short-term loans and others 31 - - 13,134,044,966 13,134,044,966 13,134,044,966
Debentures 31 - 4,321,647,595 - 4,321,647,595 5,121,541,096
Long-term borrowings 31.1 - 28,390,823,310 28,390,823,310 28,392,136,045
- 4,321,647,595 41,524,868,276 45,846,515,871 46,647,722,107
- 4,321,647,595 58,084,206,038 62,405,853,633 65,396,986,892
Company Note Carrying amount Level 1 Level 2 Level 3 Total
As at 31 March 2018 (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
Trading assets - fair value through profit or loss
Equity securities 15.1 153,996,501 153,996,501 - - 153,996,501
153,996,501 153,996,501 - - 153,996,501
Other Investment
Corporate bonds 16.1.1 40,182,554 40,182,554 - 40,182,554
Treasury bills 16.1.2 1,792,912,727 - 1,792,912,727 - 1,792,912,727
Unquoted equity securities 16.1.3 66,978,750 - - 66,978,750 66,978,750
Derivative assets held for risk management 16.3 - - - - -
1,900,074,031 - 1,833,095,281 66,978,750 1,900,074,031
Investment properties 24 1,632,000,000 - - 1,632,000,000 1,632,000,000
Property, plant and equipment 28 1,227,575,523 - - 1,227,575,523 1,227,575,523
2,054,070,532 153,996,501 1,833,095,281 66,978,750 2,054,070,532
The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy into which each fair value measurement is categorised. For cash and
cash equivivalants, short term receivables and payables, the fair value reasonably approximates its cost.
Commercial Leasing & Finance PLC
Notes to the Financial Statements
Company Note Carrying amount Level 1 Level 2 Level 3 Total
As at 31 March 2017 (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
Trading assets - fair value through profit or loss
Equity securities 15.1 201,238,845 201,238,845 - - 201,238,845
Unit trust 15.2 2,513,936,244 2,513,936,244 2,513,936,244
2,715,175,089 2,715,175,089 - - 2,715,175,089
Other Investment
Corporate bonds 16.1.1 1,424,507,339 1,424,507,339 - - 1,424,507,339
Unquoted equity securities 16.1.3 66,978,750 - - 66,978,750 66,978,750
Derivative assets held for risk management 16.3 60,701,430 - 60,701,430 - 60,701,430
1,552,187,519 1,424,507,339 60,701,430 66,978,750 1,552,187,519
Investment properties 24 46,000,000 - - 46,000,000 46,000,000
Property, plant and equipment 28 1,975,784,096 - - 1,975,784,096 1,975,784,096
4,267,362,608 4,139,682,428 60,701,430 66,978,750 4,267,362,608
47.3 Financial instruments not measured at fair value
As at 31 March 2018
Note Level 1 Level 2 Level 3 Total Fair Value
Total Carrying
amount
Assets (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
Investment securities
Repos 16.2 - - 3,654,437,478 3,654,437,478 3,654,437,478
Investments in term deposits 16.2 - - 950,702,740 950,702,740 950,702,740
- - 4,605,140,218 4,605,140,218 4,605,140,218
Finance lease receivables, hire purchases and operating leases
Finance lease receivables 17.1 - - 15,275,350,902 15,275,350,902 14,983,134,443
Hire purchase receivables 17.2 - - 377,646 377,646 377,648
- - 15,275,728,550 15,275,728,550 14,983,512,091
Advances and other loans
Advances and loans 18.1 - - 40,968,312,121 40,968,312,121 41,208,800,160
Factoring receivables 19 - - 3,584,916,333 3,584,916,333 3,584,916,333
- - 44,553,228,454 44,553,228,454 44,793,716,494
- - 64,434,097,220 64,434,097,220 64,382,368,802
Liabilities Level 1 Level 2 Level 3 Total Fair Value
Total Carrying
amount
(Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
Deposits liabilities 30 - - 18,498,534,190 18,498,534,190 23,485,108,879
Interest bearing borrowings
Debentures 31 - 4,561,097,843 - 4,561,097,843 5,112,985,130
Short-term loans and others 31 - - 2,004,131,507 2,004,131,507 2,004,131,506
Long-term borrowings 31.1 - - 21,815,545,583 21,815,545,583 21,815,545,583
- 4,561,097,843 23,819,677,091 28,380,774,933 28,932,662,219
- 4,561,097,843 42,318,211,280 46,879,309,124 52,417,771,098
As at 31 March 2017
Note Level 1 Level 2 Level 3 Total Fair Value
Total Carrying
amount
Assets (Rs.) (Rs.) (Rs.) (Rs.) (Rs.)
Investment securities
Repos 3,754,956,245 3,754,956,245 3,754,956,245
Investments in term deposits 16.2 - - 8,740,159,259 8,740,159,259 8,740,159,259
Commercial Papers 16.2 - - 1,706,650,974 1,706,650,974 1,706,650,974
- - 14,201,766,478 14,201,766,478 14,201,766,478
Finance lease receivables, hire purchases and operating leases
Finance lease receivables 17 - - 12,865,911,299 12,865,911,299 13,971,615,347
Hire purchase receivables 17 - - 1,132,629 1,132,629 1,132,629
- - 12,867,043,928 12,867,043,928 13,972,747,976
Advances and other loans
Advances and loans 18 - - 32,411,724,747 32,411,724,747 33,795,065,806
Factoring receivables 19 - - 6,167,657,168 6,167,657,168 6,167,657,168
- - 38,579,381,915 38,579,381,915 39,962,722,973
- - 65,648,192,322 65,648,192,322 68,137,237,426
Liabilities
Deposits liabilities 30 - - 13,746,015,410 13,746,015,410 15,935,942,434
Interest bearing borrowings
Short-term loans and others 31 - - 13,134,044,966 13,134,044,966 13,134,044,966
Debentures 31 - 4,321,647,595 - 4,321,647,595 5,121,541,096
Long-term borrowings 31.1 - 26,340,684,137 26,340,684,137 26,340,684,137
- 4,321,647,595 39,474,729,102 43,796,376,699 44,596,270,199
- 4,321,647,595 53,220,744,513 57,542,392,108 60,532,212,633
The following table sets out the fair values of financial instruments not measured at fair value and analyses them by the level in the fair value hierarchy into which each fair value measurement is categorised.
Commercial Leasing & Finance PLC
Notes to the Financial Statements
For the year ended 31 March 2018
48 Segment Information
Group
Conventional Financial
Services Islamic Financial Services Factoring Business Others/ Adjustments Total
For the year ended 31st March 2018
Continuing Operations
Total revenue 13,592,190,184 663,014,831 1,299,555,308 - 15,554,760,323
Net interest cost (6,485,667,636) (91,690,031) (417,436,962) - (6,994,794,629)
Profit before operating expenses 7,106,522,548 571,324,800 882,118,346 - 8,559,965,694
Operating expenses (4,386,009,915) (97,280,840) (984,042,095) - (5,467,332,850)
Value added tax on financial services and NBT (552,500,362) (21,815,112) (36,639,762) - (610,955,235)
Profit from operations 2,168,012,271 452,228,848 (138,563,510) - 2,481,677,609
Discontinued Operations
Profit from operations of discontinued operations (net
of Tax) (81,495,104) (81,495,104)
For the year ended 31st March 2017
Continuing Operations
Total revenue 11,419,532,246 355,845,395 1,308,915,470 - 13,084,293,111
Net interest cost (5,417,275,732) (10,729,231) (697,871,016) - (6,125,875,979)
Profit before operating expenses 6,002,256,513 345,116,164 611,044,454 - 6,958,417,132
Operating expenses (3,790,794,663) (54,544,671) (605,920,340) - (4,451,259,675)
Value added tax on financial services & NBT (392,976,292) (12,540,313) (52,394,242) - (457,910,846)
Profit from operations 1,818,485,559 278,031,180 (47,270,128) - 2,049,246,611
Discontinued Operations
Profit from operations of discontinued operations (net
of Tax) 365,209,154 365,209,154
For the year ended 31st March 2018
Capital expenditure - - - 318,764,443 318,764,443
Depreciation of property plant and equipment - - - 113,660,958 113,660,958
Provision for/(reversal of provision for)doubtful debts
and bad debts written off 487,874,892 24,766,111 543,350,699 - 1,055,991,702
For the year ended 31st March 2017
Capital expenditure - - - 276,330,327 276,330,327
Depreciation of property plant and equipment - - - 109,605,722 109,605,722
Provision for/(reversal of provision for)doubtful debts
and bad debts written off 381,946,123 5,444,348 324,686,766 - 712,077,237
As at 31st March 2017
Total assets 55,580,644,901 2,274,558,132 6,167,656,168 24,867,841,871 88,890,701,072
Total liabilities 64,296,599,213 2,055,906,136 7,044,371,241 964,519,913 74,361,396,503
Business Segment
Commercial Leasing & Finance PLC
Notes to the Financial Statements
For the year ended 31 March 2018
Company
Conventional Financial
Services Islamic Financial Services Factoring Business Others/ Adjustments Total
For the year ended 31 March 2018
Total revenue 13,862,279,638 663,014,831 1,299,555,308 - 15,824,849,777
Net interest cost (6,485,668,637) (91,690,030) (417,435,962) - (6,994,794,629)
Profit before operating expenses 7,376,611,001 571,324,801 882,119,346 - 8,830,055,148
Operating expenses (4,386,009,916) (97,280,840) (984,042,094) - (5,467,332,850)
Value added tax on financial services and NBT (552,500,362) (21,815,112) (36,639,762) - (610,955,235)
Profit from operations 2,438,100,723 452,228,849 (138,562,509) - 2,751,767,063
For the year ended 31st March 2017
Total revenue 11,564,814,390 355,845,397 1,308,915,470 - 13,229,575,257
Net interest cost (5,417,275,732) (10,729,231) (697,871,016) - (6,125,875,979)
Profit before operating expenses 6,147,538,658 345,116,166 611,044,454 - 7,103,699,278
Operating expenses (3,790,794,663) (54,544,671) (605,920,340) - (4,451,259,675)
Value added tax on financial services & NBT (392,976,292) (12,540,313) (52,394,242) - (457,910,846)
1,963,767,703 278,031,182 (47,270,128) - 2,194,528,757
Profit from operations
For the year ended 31st March 2018
Capital expenditure - - - 328,093,981 328,093,981
Depreciation of property plant and equipment - - - 113,660,958 113,660,958
Provision for/(reversal of provision for)doubtful debts
and bad debts written off 487,874,892 24,766,111 543,350,699 - 1,055,991,702
For the year ended 31st March 2017
Capital expenditure - - - 276,330,327 276,330,327
Depreciation of property plant and equipment - - - 109,605,722 109,605,722
Provision for/(reversal of provision for)doubtful debts
and bad debts written off 381,946,123 5,444,348 324,686,766 - 712,077,237
As at 31st March 2018
Total assets 52,383,673,626 3,808,507,424 3,584,916,332 13,731,347,768 73,508,445,150
Total liabilities 49,384,920,832 3,194,025,295 3,336,954,073 1,086,521,001 57,002,421,201
As at 31st March 2017
Total assets 45,493,254,649 2,274,558,132 6,167,656,168 23,825,628,334 77,761,097,283
Total liabilities 53,556,640,459 2,055,906,136 7,150,027,431 822,989,223 63,585,563,249
Business Segment
Commercial Leasing & finance PLC
Notes to the Financial Statements
49 Financial risk management
Overview
The company has exposure to the following risks from financial instruments:
1 Credit risk
2 Liquidity risk
3 Market risk
4 Operational risk
Risk management framework
Credit risk
Management of credit risk
Facilities granted to customers (Lease / Hire purchase / Loans)
1.
2.
3.
4.
5.
6.
7.
Allowances for impairment
Write-off policy
Regular audits of business units and company credit processes are undertaken by ERM.
The company establishes an allowance for impairment losses on assets carried at amortized cost that represents its estimate of incurred losses in its lease and
loan portfolio. The main components of this allowance are a specific loss component that relates to individually significant exposures, and, for assets
measured at amortised cost,individually non-significant impairment established for groups of homogeneous assets as well as for individually significant
exposures that were subject to individual assessment for impairment but not found to be individually impaired.
The company writes off a loan or an investment debt security balance, and any related allowances for impairment losses, when board of directors determines
that the loan or security is uncollectible. This determination is made after considering information such as the occurrence of significant changes in the
borrower’s/issuer’s financial position such that the borrower/issuer can no longer pay the obligation, or that proceeds from collateral will not be sufficient to
pay back the entire exposure. For smaller balance standardized loans, write-off decisions generally are based on a product-specific past due status.
Developing and maintaining the company’s risk grading in order to categorize exposures according to the degree of risk of financial loss faced and to focus
management on the attendant risks. The risk grading system is used in determining where impairment provisions may be required against specific credit
exposures. The current risk grading framework consists of eight grades reflecting varying degrees of risk of default and the availability of collateral or other
credit risk mitigation. The responsibility for setting risk grades lies with the final approving executive/committee as appropriate. Risk grades are subject to
regular reviews by company Risk.
Reviewing compliance of business units with agreed exposure limits, including those for selected industries, country risk and product types. Regular reports
on the credit quality of local portfolios are provided to company credit who may require appropriate corrective action to be taken.
Providing advice, guidance and specialist skills to business units to promote best practice throughout the company in the management of credit risk.
Each Branch and Regional Head is required to implement company credit policies and procedures, with credit approval authorities delegated from the
company credit committee. Each Branch and Regional Head is responsible for the quality and performance of its credit portfolio and for monitoring and
controlling all credit risks in its portfolios, including those subject to central approval.
Credit department has a Credit committee formed internally, is responsible for management of the company’s credit risk, including:
Formulating credit policies in consultation with Branch and Regional Heads, covering collateral requirements, credit assessment, risk grading and reporting,
documentary and legal procedures, and compliance with regulatory and statutory requirements.
Establishing the authorization structure for the approval and renewal of credit facilities. Authorization limits are allocated to branch and Regional Heads,
Senior Marketing Officers at Head Office. Larger facilities require approval by company/Group Credit, Head of company Credit, company Credit Committee
or the board of directors as appropriate.
Reviewing and assessing credit risk. company credit assesses all credit exposures in excess of designated limits, prior to facilities being committed to
customers by the business unit concerned. Renewals and reviews of facilities are subject to the same review process.
Limiting concentrations of exposure to counterparties, geographies and industries (for loans and advances), and by issuer, credit rating band and market
liquidity (for investment securities).
This note presents information about the company’s exposure to each of the above risks, the company’s objectives, policies and processes for measuring and
managing risk, and the company’s management of capital.
The board of directors has overall responsibility for the establishment and oversight of the company’s risk management framework. The board has
established the Integrated Risk Management Committee (IRMC), which are responsible for developing and monitoring company 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 company’s risk management policies are established to identify and analyse the risks faced by the company, 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 company, 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 company audit committee and the IRMC are responsible for monitoring compliance with the company’s risk management policies and procedures, and
for reviewing the adequacy of the risk management framework in relation to the risks faced by the company. The company audit committee is assisted in
these functions by Enterprise Risk Management division (ERM). ERM undertakes both regular and ad-hoc reviews of risk management controls and
procedures, the results of which are reported to the company audit committee.
Credit risk is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, and
arises principally from the company’s loans and advances to customers and other company's, and investment debt securities. For risk management purposes,
credit risk arising on trading assets is managed independently.
Commercial Leasing & Finance PLC
Notes to the Financial Statements
Exposure to credit risk
1. Lease and hire purchase portfolio
Note Finance lease Hire Purchase Total
Rs' Rs' Rs'
Carrying amount 17 14,983,134,443 377,648 14,983,512,091
Assets at amortized cost
individually significant impairment
Gross amount 144,807,205 1,804,281 146,611,486
Allowance for impairment (144,807,205) (1,804,281) (146,611,486)
Carrying amount - - -
for the rest of portfolio where individually non-significant Impairment is applicable
Gross amount 15,023,122,012 419,066 15,023,541,078
Allowance for impairment (39,987,569) (41,418) (40,028,988)
Carrying amount 14,983,134,443 377,647 14,983,512,090
14,983,134,443 377,647 14,983,512,090
2. Advances and other loans
Note Advances and loans Factoring
receivables
Total
Rs' Rs' Rs'
Carrying amount 17 & 18 41,208,800,160 3,584,916,333 44,793,716,493
Assets at amortized cost
individually significant impairment
Gross amount 287,390,480 768,566,787 1,055,957,267
Allowance for impairment (287,390,480) (399,176,014) (686,566,494)
Carrying amount - 369,390,773 369,390,773
for the rest of portfolio where individually non-significant Impairment is applicable
Gross amount 41,336,484,723 3,248,111,921 44,584,596,644
Allowance for impairment (127,684,563) (32,586,361) (160,270,924)
Carrying amount 41,208,800,159 3,215,525,559 44,424,325,720
41,208,800,159 3,584,916,333 44,793,716,493
3. Trade & Other Receivables
4. Cash and cash equivalents
5. Excessive risk concentration
Liquidity risk
Management of liquidity risk
The Company relies on bank borrowings and deposits from customers and Company's, as its primary sources of funding. While the Company's bank borrowings have maturities of
over one year, deposits from customers and Company's generally have shorter maturities and a large proportion of them are repayable on demand. The short-term nature of these
deposits increases the Company’s liquidity risk and the Company actively manages this risk through maintaining competitive pricing and constant monitoring of market trends.
In order to avoid excessive concentrations of risk, the Company’s policies and procedures include specific guidelines to focus on maintaining a diversified portfolio. Identified
concentrations of credit risks are controlled and managed accordingly. Selective hedging is used within the Company to manage risk concentrations at both the relationship and
industry levels.
Liquidity risk is the risk that the Company will encounter difficulty in meeting obligations associated with its financial liabilities that are settled by delivering cash or another financial
asset.
The Company’s approach to managing liquidity is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and
stressed conditions, without incurring unacceptable losses or risking damage to the Company’s reputation.
Company central Treasury receives information from other business units regarding the liquidity profile of their financial assets and liabilities and details of other projected cash
flows arising from projected future business. Company central Treasury then maintains a portfolio of short-term liquid assets, largely made up of short-term liquid investment
securities, loans and advances to Company's and other inter-Company facilities, to ensure that sufficient liquidity is maintained within the Company as a whole. The liquidity
requirements of business units and subsidiaries are met through short-term loans from Company central Treasury to cover any short-term fluctuations and longer term funding to
address any structural liquidity requirements.
The Company held cash and cash equivalents of Rs.2,377 million at 31 March 2018 (2017 : Rs.1,488 million) which represents its maximum credit exposure on these assets.
Concentrations arise when a number of counterparties are engaged in similar business activities, or activities in the same geographical region, or have economic features that would
cause their ability to meet contractual obligations to be similarly affected by changes in economic, political or other conditions. Concentrations indicate the relative sensitivity of the
Company’s performance to developments affecting a particular industry.
The Company’s exposure to credit risk is influenced mainly by the individual characteristics of each customer. However, management also considers the demographics of the
Company’s customer base, including the default risk of the industry in which customers operate, as these factors may have an influence on credit risk.
The Credit Committee has established a credit policy under which each new customer is analysed individually for creditworthiness before the Company’s standard payment and
delivery terms and conditions are offered. The Company’s review includes external ratings, when available, and in some cases Company references. Purchase limits are established
for each customer, which represents the maximum open amount without requiring approval from the Credit Committee ; these limits are reviewed quarterly. Customers that fail to
meet the Company’s benchmark creditworthiness may transact with the Company only on a prepayment basis.
More than 59 percent of the Company’s customers have been transacting with the Company for over one year. In monitoring customer credit risk, customers are Companied
according to their credit characteristics, including whether they are an individual or legal entity, whether they are a wholesale, retail or end-user customer, geographic location,
industry, aging profile, maturity and existence of previous financial difficulties.
Company
Commercial Leasing & finance PLC
Notes to the Financial Statements
Exposure to liquidity risk
Group
2017 2018 2017
At 31 March 86.04 37.54 98.45
Maturity analysis for financial assets and liabilities
Market Risk
Management of market risks
Rs. Rs.
Effect on Rate sensitive Assets 416,238,752 (416,238,752)
Effect on Rate sensitive Liabilities (216,702,057) 216,702,057
Sensitivity of profit or loss 199,536,695 (199,536,695)
Operational Risk
● requirements for the reconciliation and monitoring of transactions;
● compliance with regulatory and other legal requirements;
● documentation of controls and procedures;
●
● requirements for the reporting of operational losses and proposed remedial action;
● development of contingency plans;
● training and professional development;
● ethical and business standards; and
● risk mitigation, including insurance where this is effective.
50 Capital Management
The Company’s regulatory capital under the CBSL guidelines is as follows;
As at As at
31.03.2018 31.03.2017
Ordinary share capital 1,425,946,629 1,425,946,629
Statutory reserve 736,135,589 628,919,447
General reserve 288,079,789 288,079,789
Retained earnings (Excluding share of profits of equity accounted investee) 12,844,244,190 10,957,394,943
Tier I capital / Total Capital 15,294,406,197 13,300,340,808
The Company’s policy is to maintain a strong capital base so as to ensure investor, creditor and market confidence and to sustain future development of the business. The impact of
the level of capital on shareholders’ return is also recognized and the Company recognizes the need to maintain a balance between the higher returns that might be possible with
greater gearing and the advantages and security afforded by a sound capital position.
Capital Element
requirements for the periodic assessment of operational risks faced, and the adequacy of controls and procedures to address the risks identified;
Compliance with Company standards is supported by a programme of periodic reviews undertaken by ERM. The results of ERM reviews are discussed with the department heads to
which they relate, with summaries submitted to the Audit Committee and senior management of the Company.
The Company’s capital management is performed primarily considering regulatory capital.
The Company’s lead regulator, the Central Bank of Sri Lanka (CBSL) sets and monitors capital requirements for the Company.
The Company is required to comply with the provisions of the Finance Companies (Capital Funds) Direction No.01 of 2003, Finance Companies (Risk Weighted Capital Adequacy
Ratio) Direction No.02 of 2006 and Finance Companies (Minimum Core Capital) Direction No.01 of 2011 in respect of regulatory capital.
The Company’s regulatory capital consists primarily of tier 1 capital, which includes ordinary share capital, retained earnings and statutory reserves.
Operational risk is the risk of direct or indirect loss arising from a wide variety of causes associated with the Company’s involvement with financial instruments, including processes,
personnel, technology and infrastructure, and from external factors other than credit, market and liquidity risks such as those arising from legal and regulatory requirements and
generally accepted standards of corporate behaviour.
The Company’s objective is to manage operational risk so as to balance the avoidance of financial losses and damage to the Company’s reputation with overall cost effectiveness and
to avoid control procedures that restrict initiative and creativity.
The primary responsibility for the development and implementation of controls to address operational risk is assigned to senior management within each business unit. This
responsibility is supported by the development of overall Company standards for the management of operational risk in the following areas:
Requirements for appropriate segregation of duties, including the independent authorisation of transactions;
If Market rates
up by 1 % the
effect of the same
to the Interest
Income/(Expense
If Market rates
drop by 1 %
the effect of the
same to the
Interest
Interest rate risk arises from the possibility that changes in interest rates will affect future cash flows or the fair values of financial instruments. The company’s policy is to
continuously monitor positions on a daily basis and hedging strategies are used to ensure positions are maintained within prudential levels.
The following table demonstrates the sensitivity to a reasonable possible change in interest rates, with all other variables held constant, of the company’s income statement.
Company
Market risk is the risk that changes in market prices, such as interest rates, equity prices, foreign exchange rates and credit spreads (not relating to changes in the obligor’s/issuer’s
credit standing) will affect the Company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk
exposures within acceptable parameters, while optimising the return on risk.
The key measure used by the Company for managing liquidity risk is the ratio of net liquid assets to deposits from customers. For this purpose net liquid assets are considered as
including cash and cash equivalents and Treasury bills and Repos maturing with in next financial year. A similar, but not identical, calculation is used to measure the Company’s
compliance with the liquidity limit established by the Company’s lead regulator, [Central Bank of Sri Lanka - CBSL]. Details of the reported Company ratio of net liquid assets to
deposits from customers at the reporting date and during the year were as follows:
Company
Note no 38 of the financials statements summarises the maturity profile of the undiscounted cash flows of the company’s financial assets and liabilities as at 31 March 2018. The
Company’s expected cash flows on these instruments vary significantly from this analysis.