Notes to the Financial Statements
1. Reporting Entity
1.1 Corporate Information
Citizens Development Business Finance PLC (‘CDB’) is a limited liability company listed on the main board of the Colombo Stock Exchange, incorporated on 7th September 1995 (Domiciled) in Sri Lanka. The registered office is situated at No. 18, Sri Sangaraja Mawatha, Colombo 10. The company was re-registered under the new Companies Act No. 07 of 2007.
CDB is licensed by the Monetary Board of the Central Bank of Sri Lanka under the Finance Business Act No. 42 of 2011, and also registered under the Finance Leasing Act No. 56 of 2000.
The staff strength of the Company as at 31st March 2014 is 1,109 (2013 - 825).
1.2 Principal Activities and Nature of Operation
| Entity | Principal Business Activities |
| Company | Company provides a vast range of Financial Services which includes accepting deposits, leasing, hire purchase and loan facilities, pawn brokering, foreign exchange, foreign remittances, issuance of international debit cards, Islamic finance products and other financial services. |
| Subsidiary
CDB Micro Finance Limited |
Financial Services |
There were no significant changes in the nature of the principal activities of the Company and the Group during the financial period under review.
2. Basis of Preparation
2.1 Consolidated Financial Statements
The Consolidated Financial Statements of the CDB for the year ended 31st March 2014 include the Company (Parent) and its fully-owned Subsidiary CDB Micro Finance Limited (together referred to as the Group). The individual Financial Statements of the companies in the Group have a common financial year which ends on 31st March.
CDB does not have an identifiable parent of its own.
2.2 Statement of Compliance
The Consolidated Financial Statements of the Group and the Financial Statements of the Company which comprise Statement of Financial Position, Statement of Comprehensive Income, Statement of Changes in Equity, Statement of Cash Flow and Notes have been prepared in accordance with the Sri Lanka accounting Standards (SLFRSs and LKASs) laid down by The Institute of Chartered Accountants of Sri Lanka and in compliance with the requirements of the Companies Act No. 07 of 2007 and Finance Business Act No. 42 of 2011 and amendments thereto and provide appropriate disclosures required by the Listing Rules of the Colombo Stock Exchange.
2.3 Basis of Measurement
The Financial Statements have been prepared on historical cost basis except where appropriate disclosures are made with regards to fair value under relevant notes. Assets and liabilities are grouped by nature and in an order that reflect their relative liquidity. The Financial Statements have been prepared on the assumption that the Company will continue as a going concern for the foreseeable future.
2.4 Functional and Presentation Currency
Items included in the Financial Statements of the Group and the Company are measured using the currency of the primary economic environment in which the Company operates. Financial Statements are presented in Sri Lankan Rupees, which is the Company and its Subsidiary‘s functional currency. There was no change in the Groups presentation and functional currency during the year under review.
2.5 Presentation of Financial Statements
The assets and liabilities of the Company presented in its Statement of Financial Position are grouped by nature and listed in an order that reflects their relative liquidity and maturity pattern. No adjustments have been made for inflationary factors affecting the Financial Statements.
Financial assets and financial liabilities are offset and the net amount reported in the Consolidated 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 liability simultaneously. Income and expenses are not offset in the Consolidated Statement of Comprehensive Income unless required or permitted by an Accounting Standard or interpretation, and as specifically disclosed in the Accounting Policies of the Company.
2.6 Materiality and Aggregation
Each material class of similar items is presented separately in the Financial Statement. Items which are dissimilar in nature or function are presented separately unless they are immaterial as permitted by the Sri Lanka Accounting Standard LKAS 1 ‘Presentation of Financial Statements’.
2.7 Use of Estimates and Judgments
The preparation of the Financial Statements in conformity with Sri Lanka Accounting Standards (SLFRS/LKAS) requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expense. Actual amount may defer from these estimates.
Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised and in any future periods affected.
Information about significant areas of estimation uncertainty and critical judgments in applying accounting policies that have the most significant effect on the amounts recognised in the Financial Statements are described in Notes below.
2.7.1 Going Concern
The management has made an assessment of its ability to continue as a going concern and is satisfied that it has the resources to continue in business for the foreseeable future. Furthermore, 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, the Financial Statements continue to be prepared on a going concern basis.
2.7.2 Fair Value of Financial Instruments
The determination of fair values of financial assets and financial liabilities recorded on the Statement of Financial
Position for which there is no observable market price are determined using a variety of valuation techniques that include the use of mathematical models. The inputs to these models are derived from observable market data where possible, but if this is not available, judgment is required to establish their fair values. The Company measures fair value using the fair value hierarchy that reflects the significance of input used in making measurements, as described in Note 3.4.4.
2.7.3 Impairment Losses on Loans and Advances
The Company reviews its individually significant loans and advances at each reporting date to assess whether an impairment loss should be provided for in the Statement of Comprehensive Income. In particular, management’s judgment is required in the estimation of the amount and timing of future cash flows when determining the impairment loss. These estimates are based on assumptions about a number of factors and actual results may differ, resulting in future changes to the allowance made.
Loans and advances that have been assessed individually if such loans and advances are considered individually significant and all other loans and advances are assessed collectively, by categorising them into groups of assets with similar risk characteristics, to determine whether a provision should be made due to incurred loss events for which there is objective evidence, but the effects of which are not yet evident. The collective assessment takes account of data from the loan portfolio and judgment on the effect of concentrations of risks and economic data.
2.7.4 Impairment Losses on Available-for-Sale Investment
The Company reviews its available-for-sale investments at the end of each reporting period to assess whether they are impaired.
The Company determines that there is an impairment charge on available-for-sale equity investments when there has been a significant or prolonged decline in the fair value below their cost. The determination of what is ‘significant’ or ‘prolonged’ requires judgment. In making this judgment, the Company evaluates, among other factors, historical share price movements and duration and extent to which the fair value of an investment is less than its cost.
2.7.5 Impairment on Other Assets
The Group assesses whether there are any indicators of impairment for an asset or a cash-generating unit at each reporting date or more frequently, if events or changes in circumstances necessitate to do so. This requires the estimation of the ‘value in use’ of such individual assets or the cash-generating units. Estimating value in use requires management to make an estimate of the expected future cash flows from the asset or the cash-generating unit and also to select a suitable discount rate which reflects the current market assessment of the rate of money and risk specific to the assets in order to calculate the present value of the relevant cash flows.
This valuation requires the Group to make estimates about expected future cash flows and discount rates, and hence, they are subject to uncertainty.
2.7.6 Deferred Tax
Deferred taxation is provided using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the tax base of assets and liabilities, which is the amount attributed to those assets and liabilities for tax purposes. Significant management judgments are required to determine the amount of deferred tax assets/liabilities that can be recognised, based upon the likely timing and level of future taxable profits together with future tax planning strategies.
2.7.7 Provision for Employee Defined Benefit Obligation
The provision for defined benefits obligations and the related charge for the year is determined using actuarial valuations. The actuarial valuation involves making assumptions about discount rate, future salary increase, mortality rate etc. Due to the long-term nature of such obligation, these estimates are subject to significant uncertainty.
3. Significant Accounting Policies
The accounting policies set out below have been applied consistently to all periods presented in these Financial Statements unless otherwise indicated.
3.1 Basis of Consolidation
The Financial Statements of the Group represent the consolidation of the Financial Statements of the Company and its subsidiary CDB Micro Finance Limited. Subsidiaries are entities that are controlled by the CDB.
Control exists when the CDB has the power, directly or indirectly, to govern the financial and operating policies of an entity so as to obtain benefits from its activities. In assessing control, potential voting rights that are presently exercisable are taken into account. The Financial Statements of Subsidiaries are included in the Consolidated Financial Statements from the date that control effectively commences until the date that control effectively ceases.
CDB Micro Finance Limited is a fully-owned Subsidiary of the CDB and therefore, the non-controlling interest of the shareholders do not exist. The Consolidated Financial Statements incorporating all subsidiaries in the Group are prepared to a common financial year ending 31st March, using uniform accounting policies for like transactions and events in similar circumstances are applied consistently.
There are no significant restrictions on the ability of subsidiaries to transfer funds to CDB (the parent) in the form of cash dividend or repayment of loans and advances. CDB does not own any Associate or Joint venture company as at the reporting date.
3.1.1 Transactions Eliminated on Consolidation
All Intra-group balances and transactions and any unrealised gains arising from intra-group transactions are eliminated in preparing the Consolidated Financial Statements.
Unrealised losses are eliminated in the same way as unrealised gains except that they are only eliminated to the extent that there is no evidence of impairment.
3.2 Foreign Currency Translations
Transactions in foreign currencies are translated into the respective functional currencies of the operations at the spot exchange rates at the dates of the transactions. All differences arising on non-trading activities are taken to ‘Other Operating Income’ in the Statement of Comprehensive Income. Monetary assets and liabilities denominated in foreign currencies at the reporting date are translated into the functional currency at the spot exchange rate at that date. Non-monetary assets and liabilities that are measured in terms of historical cost in a foreign currency are translated using the exchange rate at the date of the transaction.
Assets and Liabilities and Basis of Measurement
Financial Assets and Financial Liabilities
3.3 Cash and Cash Equivalents
Cash and Cash Equivalents include cash in hand and balance with banks.
Bank overdrafts that are repayable on demand and form an integral part of the Company’s cash resources are included as a component of cash equivalents for the purpose of the Cash Flow Statements.
3.4 Financial Instruments
3.4.1 Recognition and Initial Measurement
The Group initially recognises all financial assets and liabilities on becoming party to the contractual provisions of the instruments. However, for financial assets/liabilities held at fair value through profit or loss any changes in fair value from the trade date to settlement date is accounted in the Consolidated Statement of Income while for available-for-sale financial assets any changes in fair value from the trade date to settlement date is accounted in the Statement of Other Comprehensive Income.
A financial asset or a financial liability is measured initially at fair value plus, for an item not at fair value through profit or loss, transaction costs that are directly attributable to its acquisition or issue.
All financial assets and liabilities are initially recognised, except for regular way purchase, on the trade date and any regular way transactions are recognised on the settlement date which was established by the regulator or the market conventions.
The classification of financial instruments at initial recognition depends on their purpose and characteristics and the management intention in acquiring the same. At inception a financial asset is classified in one of the following categories:
- Loans and Receivables
- Held-to-Maturity Financial Assets
- Available-for-sale Financial Assets
Loans and Receivables to Customers
Loans and receivables are non-derivative financial assets with fixed or determinable payments that are not quoted in an active market and that the Group does not intend to sell immediately or in the near term. Loans and receivables are subsequently carried at amortised cost using the effective interest rate method.
Loans and advances, bills of exchange, commercial papers and lease receivables are classified as loans and receivables.
When the Company is the lessor in a lease agreement that transfers substantially all of the risk and rewards incidental to ownership of the assets to the lessee, the arrangement is classified as finance lease. Amount receivable under finance lease net of prepaid rentals, unearned lease income and provision for impairment are classified as lease receivable and are presented in the loans and receivable to customers.
After initial measurement loans and receivable to customers are subsequently measured at amortised cost using the effective interest rate (EIR) less provision for impairment. Amortised cost is calculated by taking into account any premium/discount on acquisition and any fee and cost that are integral part of EIR. The amortisation is included In interest income in the Statement of Comprehensive Income.
Loans and Receivable - Financial Investment
This includes sale and repurchase agreements entered into with the banks and financial institutions. After the initial measurement they are subsequently measured at amortised cost using the EIR. Amortised cost is calculated taking into consideration any discounts allowed or premium paid on acquisitions and any fee or cost that are integral part of EIR. The amortisation is included in interest income in the Statement of Comprehensive Income.
Held-to-Maturity Financial Assets
Held-to-maturity investments are non-derivative assets with fixed or determinable payments and fixed maturity that the Group has the positive intent and ability to hold to maturity. Held-to-maturity investments are carried at amortised cost using the effective interest method. A sale or reclassification of a more than insignificant amount of held-to-maturity investments would result in the reclassification of all held-to-maturity investments as available-for-sale and would prevent the Group from classifying investment securities as held-to-maturity for the current and the following two financial years. However, sales and reclassifications in any of the following circumstances would not trigger a reclassification:
- Sale or reclassification that are so close to maturity that changes in the market rate of interest would not have a significant effect on the financial asset’s fair value.
- Sale or reclassification after the Group has collected all the asset’s original principal.
- Sale or reclassification attributable to non-recurring isolated events beyond the Group’s control that could not have been reasonably anticipated.
Available-for-sale Financial Assets
Available-for-sale investments are non-derivative investments that were designated as available-for-sale or are not classified as another category of financial assets. Unquoted equity securities whose fair value cannot reliably be measured are carried at cost. All other available-for-sale investments are carried at fair value. Interest income on AFS financial assets is recognised in profit or loss using the effective interest method. Dividend income is recognised in profit or loss when the Group becomes entitled to the dividend. Foreign exchange gains or losses on available-for-sale debt security investments are recognised in Statement of Comprehensive Income.
Other fair value changes are recognised in other comprehensive income until the investment is sold or impaired, whereupon the cumulative gains and losses previously recognised in other comprehensive income are reclassified to Statement of Comprehensive Income as a reclassification adjustment.
Financial Liabilities
The Group initially recognises all financial liabilities on the date that they are originated and classifies its financial liabilities as measured at amortised cost.
Financial Liabilities at Amortised Cost
Financial instruments issued by the Bank that are not designated at fair value through profit or loss, are classified as liabilities under ‘Due to Banks’, ‘Due to Customers’ or ‘Other Debt Securities Issued’ as appropriate, where the substance of the contractual arrangement results in the Bank having an obligation either to deliver cash or another financial asset to the holder, or to satisfy the obligation other than by the exchange of a fixed amount of cash or another financial asset for a fixed number of own equity shares. After initial recognition, such financial liabilities are subsequently measured at amortised cost using the EIR method. Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortisation is included in ‘Interest Expenses’ in the Statement of Comprehensive Income. The details of the Company’s financial liabilities at amortised cost is disclosed in Note 16.
Due to Banks and Other Financial Institutions
These represent borrowings from financial institutions. Subsequent to initial recognition deposits are measured at their amortised cost using the effective interest method. Interest paid/payable on these borrowings is recognised in Comprehensive Income.
Due to Customers
These include savings deposits and term deposits. Subsequent to initial recognition deposits are measured at their amortised cost using the effective interest method, except where the Group designates liabilities at fair value through profit or loss. Interest paid/payable on these deposits is recognised in Comprehensive Income.
Financial Liabilities Measured at Cost
Financial liabilities not classified as fair value through profit or loss are classified as amortised cost instruments. Deposit liabilities including non-interest bearing deposits, savings deposits, term deposits, deposits redeemable at call and certificates of deposit and borrowings are classified as financial liabilities measured at amortised cost.
Amortised Cost Measurement
The amortised 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 amortisation using the effective interest method of any difference between the initial amount recognised and the maturity amount, minus any reduction for impairment.
3.4.2 Reclassification
Reclassifications of financial assets, other than as set out below, or of financial liabilities between measurements categories are not permitted subsequent to initial recognition.
Held-for-trading non-derivative financial assets are transferred out of the held for trading to fair value through profit or loss category in the following circumstances:
- To the available-for-sale category where in rare circumstances, they are no longer held for the purpose of selling or repurchasing in the near future.
- To the loans and receivable category where they are no longer held for the purpose of selling or repurchasing in the near term and they would have met the definition of a loan and receivable at the date of reclassification and the Group has the intent and ability to hold the assets for the foreseeable future or until maturity. Financial assets are transferred out of the available-for-sale category to the loans and receivables category where they would have met the definition of a loan and receivable at the date of reclassification and the Group has the intent and ability to hold the assets for the foreseeable future or until maturity.
Held-to-maturity assets are reclassified to the available-for-sale category if the portfolio becomes tainted following the sale of other than an insignificant amount of held-to-maturity assets prior to their maturity. Financial assets are reclassified at their fair value on the date of reclassification. For financial assets reclassified out of the available-for-sale category into loans and receivables, any gain or loss on those assets recognised in shareholders’ equity prior to the date of reclassification is amortised to the Statement of Comprehensive Income over the remaining life of the financial asset, using the effective interest method.
3.4.3 Derecognition
The Group derecognises 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 derecognition that is created or retained by the Group is recognised as a separate asset or liability in the Consolidated Statement of Financial Position.
On derecognition 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 consideration received (including any new asset obtained less any new liability assumed) is recognised in Statement of Comprehensive Income. The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.
3.4.4 Fair Value Measurement
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, then the Group establishes fair value using a valuation technique. 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 analyses and option 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.
Inputs to valuation techniques reasonably represent market expectations and measures of the risk-return factors inherent in the financial instrument. The Group calibrates valuation techniques and tests them for validity using prices from observable current market transactions in the same instrument or based on other available observable market data.
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, i.e. without modification or repackaging, 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 recognised in Statement of Comprehensive Income on an appropriate basis over the life of the instrument but not later than when the valuation is supported wholly by observable market data or the transaction is closed out. Any difference between the fair value at initial recognition and the amount that would be determined at that date using a valuation technique in a situation in which the valuation is dependent on unobservable parameters is not recognised in profit or loss immediately but is recognised over the life of the instrument on an appropriate basis or when the instrument is redeemed, transferred or sold, or the fair value becomes observable. Assets and long positions are measured at a bid price; liabilities and short positions are measured at an asking price.
Fair values reflect the credit risk of the instrument and include adjustments to take account of the credit risk of the Group entity and the counterparty where appropriate. Fair value estimates obtained from models are adjusted for any other factors, such as liquidity risk or model uncertainties, to the extent that the Group believes a third-party market participant would take them into account in pricing a transaction.
3.4.5 Offsetting
Financial assets and liabilities are offset and the net amount presented in the Consolidated Statement of Financial Position when, and only when, the Group has a legal right to set off the recognized amounts and it intends either to settle on a net basis or to realise the asset and settle the liability simultaneously. Income and expenses are presented on a net basis only when permitted under SLFRSs/LKASs, or for gains and losses arising from a group of similar transactions such as in the Group’s trading activity.
3.4.6 Identification, Measurement and Assessment of Impairment
At each reporting date the Group assesses whether there are 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 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, or other observable data relating to a group of assets such as adverse changes in the payment status of borrowers or issuers in the group, or 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 an objective evidence of impairment.
3.4.6.1 Financial Assets carried at Amortised Cost
The Group considers evidence of impairment for loans and advances and held-to-maturity investment securities at both a specific asset and collective level. 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 collectively assessed for any impairment that has been incurred but not yet identified. Loans and advances and held-to-maturity investment securities that are not individually significant are collectively assessed for impairment by grouping together loans and advances and held-to-maturity investment securities with similar risk characteristics.
In assessing collective impairment the Group uses historical trends of the probability of default, 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 data. Impairment losses on assets carried at amortised 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 recognised in Comprehensive Income and reflected in an allowance account against loans and advances. Interest on impaired assets continues to be recognised 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 Statement of Comprehensive Income.
3.4.6.2 Available-for-Sale Financial Assets
For available-for-sale financial investments, the Company assesses at each reporting date whether there is objective evidence that an investment is impaired.
In the case of debt instruments classified as available-for-sale, company assesses individually whether there is objective evidence of impairment based on the same criteria as other financial assets.
3.4.6.3 Rescheduled Loans
Loans whose original terms have been modified including those subject to forbearance strategies are considered rescheduled loans. If the renegotiations are on terms that are not consistent with those readily available on the market, this provides objective evidence of impairment and the loan is assessed accordingly.
3.5 Inventories
Inventories include new vehicles purchased for the purpose of lease out under finance leases and gift items purchased for the savings value added schemes. Those inventories are valued at cost or net realisable value whichever is lower. The cost of an inventory is the purchase price. Net realisable value is the estimated realisable value less estimated cost necessary to make the sale.
3.6 Intangible Assets
An intangible asset is an identifiable non-monetary asset without physical substance held for use in the production or supply of goods or services, for rental to others or for administrative purposes.
3.6.1 Basis of Recognition
An intangible asset is recognised if it is probable that the future economic benefits that are attributable to the asset will flow to the Group and the cost of the assets can be measured reliably. An intangible asset is initially measured at cost.
3.6.2 Software
All computer software costs incurred, licensed for use by the Group, which are not integrally related to associated hardware, which can be clearly identified, reliably measured and its probable that they will lead to future economic benefits, are included in the Statement of Financial Position under the category Intangible Assets and carried at cost less accumulated amortisation and any accumulated impairment losses.
3.6.3 Subsequent Expenditure
Expenditure incurred on software is capitalised only when it is probable that this expenditure will enable the asset to generate future economic benefits in excess of its originally assessed standard of performance and this expenditure can be measured and attributed to the asset reliably. All other expenditure is expensed as incurred.
3.6.4 Amortisation
Intangible assets are amortised on a straight line basis in the Statement of Comprehensive Income from the date when the asset is available for use, over the best estimate of its useful economic life based on a pattern in which the asset’s economic benefits are consumed by the Company. The estimated useful life of software is 8 years. Amortisation methods, useful lives and residual values are reviewed at each financial year-end and adjusted if appropriate.
3.6.5 Retirement and Disposal
An intangible asset is derecognised on disposal or when no future economic benefits are expected from its use and subsequent disposal.
3.7 Investment Properties
Investment properties are properties held either to earn rental income or for capital appreciation or both but not for sale in the ordinary course of business, used in the production or supply of goods or services or for administrative purposes.
3.7.1 Basis of Recognition
Investment property is recognised if it is probable that future economic benefits that are associated with the investment property will flow to the Group and cost of the investment property can be reliably measured.
3.7.2 Measurement
An investment property is measured initially at its cost. The cost of a purchased investment property comprises of its purchase price and any directly attributable expenditure. The cost of a self constructed investment property is its cost at the date when the construction or development is complete. The Group applies the cost model for investment properties in accordance with Sri Lanka Accounting Standard 40 (LKAS 40) Investment Property. Accordingly, land classified as investment properties is stated at cost less any accumulated impairment losses.
3.7.3 Depreciation
Depreciation is provided on a straight line basis over the estimated life of the class of asset from the date of purchase up to the date of disposal. The land is not depreciated.
3.7.4 Reclassification of Investment Property
When the use of property changes from owner-occupied to Investment Property, the property is remeasured to fair value and reclassified as Investment Property.
Any gain arising on remeasurement is recognised in Statement of Comprehensive Income to the extent that it reverses a previous impairment loss on the specific property, with any remaining gain recognised in other comprehensive income and presented in revaluation reserve in equity. Any loss is recognised immediately in the Statement of Comprehensive Income.
3.8 Property, Plant & Equipment
Property, Plant & equipment are tangible items that are held for use in the production or supply of goods or services, for rental to others or for administrative purposes and are expected to be used during more than one period.
3.8.1 Basis of Recognition
Property, Plant & Equipment are recognised if it is probable that future economic benefits associated with the assets will flow to the Group and cost of the asset can be reliably measured.
3.8.2 Measurement
An item of Property, Plant & Equipment that qualifies for recognition as an asset is initially measured at its cost. Cost includes expenditure that is directly attributable to the acquisition of the asset and cost incurred subsequently to add to, replace part of, or service it. The cost of self constructed assets includes the cost of materials and direct labour, any other costs directly attributable to bringing the asset to a working condition for its intended use and the costs of dismantling and removing the items and restoring the site on which they are located. Purchased software that is integral to the functionality of the related equipment is capitalised as part of computer equipment.
3.8.3 Cost Model
The Group applies cost model to Property, Plant & Equipment except for freehold land and records at cost
of purchase or construction together with any incidental expenses thereon less accumulated depreciation and any accumulated impairment losses.
3.8.4 Revaluation Model
The Group applies the revaluation model to the freehold land. Revaluation is performed annually and if material value difference is observed such difference is taken to revaluation reserve. Such properties are carried at a revalued amount, being their fair value at the date of revaluation less any subsequent accumulated depreciation and subsequent accumulated impairment losses. Freehold land of the Group are revalued to ensure that the carrying amounts do not differ materially from the fair values at the reporting date. On revaluation of an asset, any increase in the carrying amount is recognised in Other Comprehensive Income and accumulated in equity, under capital reserve or used to reverse a previous revaluation decrease relating to the same asset, which was charged to the Statement of Comprehensive Income. In this circumstance, the increase is recognised as income to the extent of the previous write down. Any decrease in the carrying amount is recognised as an expense in the Statement of Income or debited in the Other Comprehensive Income to the extent of any credit balance existing in the capital reserve in respect of that asset. The decrease recognised in Other Comprehensive Income reduces the amount accumulated in equity under capital reserves.
Any balance remaining in the revaluation reserve in respect of an asset is transferred directly to Retained Earnings on retirement or disposal of the asset.
3.8.5 Subsequent Cost
The subsequent cost of replacing a component of an item of Property, Plant & Equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within that part will flow to the Group and its cost can be reliably measured. The costs of day-to-day servicing of Property, Plant & Equipment are charged to the Statement of Comprehensive Income as incurred. Costs incurred in using or redeploying an item are not included under carrying amount of an item.
3.8.6 Derecognition
The carrying amount of an item of Property, Plant & Equipment is derecognised on disposal or when no future economic benefits are expected from its use or disposal. The gain or loss arising from the derecognition of an item of Property, Plant & Equipment is included in Statement of Comprehensive Income when the item is derecognised. When replacement costs are recognised in the carrying amount of an item of Property, Plant & Equipment, the remaining carrying amount of the replaced part is derecognised. Major inspection costs are capitalised. At each such capitalisation, the remaining carrying amount of the previous cost of inspections is derecognised.
3.8.7 Depreciation
The Group provides depreciation from the date the assets are available for use up to the date of disposal at the following rates on a straight line basis over the periods appropriate to the estimated useful lives based on the pattern in which the asset’s future economic benefits are expected to be consumed by the Company of the different types of assets. Depreciation is determined separately for each significant component of an item of Property, Plant & Equipment. Management reviews the assets residual value, useful life and depreciation method at each reporting date. Depreciation of an asset ceases at the earlier of the date that the asset is classified as held for sale or the date that the asset is derecognised. Depreciation does not cease when the assets become idle or is retired from active use unless the asset is fully-depreciated.
Companies within the Group use the same depreciation rates and policies.
| Freehold buildings | 2.5% |
| Motor vehicles | 20% |
| Computer equipment | 20% |
| Office equipment | 20% |
| Furniture and fittings | 20% |
Depreciation is not provided for freehold land.
3.8.8 Capital Work-in-Progress
Capital work-in-progress is stated at cost less any accumulated impairment losses. These are expenses of a capital nature directly incurred in the construction of buildings, major plant and machinery and system development, awaiting capitalisation. Capital work-in-progress would be transferred to the relevant asset when it is available for use i.e., when it is in the location and condition necessary for it to be capable of operating in the manner intended by management.
3.9 Borrowings
Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset have been capitalised as part of the cost of the asset in accordance with Sri Lanka Accounting Standard 23 (LKAS 23) ‘Borrowing Costs’. Capitalisation of borrowing costs ceases when substantially all the activities necessary to prepare the qualifying asset for its intended use are completed.
3.10 Impairment of Non-Financial Assets
The carrying amounts of the Group’s non-financial assets, other than investment property and deferred tax 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 recognised if the carrying amount of an asset or its Cash Generating Unit (CGU) exceeds its estimated recoverable amount.
The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. In assessing value in use, the estimated future cash flows are discounted to their present value using pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU.
For the purpose of impairment testing, assets that cannot be tested individually are grouped together into the smallest group of assets that generates cash inflows from continuing use that are largely independent of the cash inflows of other assets or CGU, subject to an operating segment ceiling test. The Group’s corporate assets do not generate separate cash inflows and are utilised 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. Impairment losses are recognised in Statement of Comprehensive Income. Impairment losses recognised 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 amount of the other assets in the CGU (group of CGUs) on a pro rata basis. Assets impairment losses recognised 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 or amortisation, if no impairment loss had been recognised.
Liabilities and Provisions
3.11 Employee Retirement Benefits
3.11.1 Defined Benefit Plans - Retiring Gratuity
A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The defined benefit obligation is calculated annually using the Projected Unit Credit Method as specified by the Sri Lanka Accounting Standard 19 (LKAS 19) ‘Employee Benefits’ and valuation of the defined benefit obligation is carried out by a qualified actuary. The key assumptions used in determining the defined benefit obligations are given in Note 32. Actuarial gains or losses are recognised in the Statement of Comprehensive Income in the period in which they arise. The defined benefit obligation recognised in the Statement of Financial Position represents the present value of the defined benefit obligation as adjusted for unrecognised actuarial gains and losses and unrecognised past service cost.
The Company adopted LKAS 19 - ‘Employee Benefits’ with effect from 1st April 2013 in accordance with the transitional provisions in the Standard and changed its basis for determining the income or expenses related to defined benefit plans.
As a result of the change, the Company now recognises all the remeasurements of the net defined benefit liability in Other Comprehensive Income. Remeasurement of the net defined benefit liability comprises an actuarial gain or loss. Previously, the Company recognised actuarial gain or loss in the Income Statement. The impact on change in the accounting policy has been applied retrospectively.
Funding Arrangement
The gratuity liabilities are not externally funded.
Gratuity payments are being made by the Group according to the Payment of Gratuity Act No. 12 of 1983.
As per the present policy of the Company the employees are entitled to payment of Gratuity as follows:
| 5 -10 years Service | - | ½ month basic salary for each year of service |
| 10 - 15 years Service | - | 1 month basic salary for each year of service |
| Over 15 years Service | - | 1 ½ months basic salary for each year of service |
3.11.2 Defined Contribution Plan
Employees’ Provident Fund
The Company and employees contribute 12% and 8% respectively on the salary of each employee to the approved Employees’ Provident Fund while the Group entities and their employees contribute the same percentages to Employees’ Provident Fund.
Employees’ Trust Fund
The Company/Group contribute 3% of the salary of each employee to the Employees’ Trust Fund.
3.12 Reverse Repurchase Agreements
Securities sold under agreements to repurchase at a specified future date are not derecognised from the Statement of Financial Position as the Bank retains substantially all of the risks and rewards of ownership. The corresponding cash received is recognised in the Consolidated Statement of Financial Position as an asset with a corresponding obligation to return it, including accrued interest as a liability under ‘securities sold under repurchase agreements’, reflecting the transaction’s economic substance as a loan to the Company.
3.13 Dividend Payable
Dividends on ordinary shares are recognised as a liability and deducted from equity when they are recommended and declared by the Board of Directors and approved by the shareholders. Interim dividends are deducted from equity when they are declared and no longer at the discretion of the Company.
Dividends for the year that are approved after the reporting date are disclosed as an Event after the reporting period in accordance with the Sri Lanka Accounting Standard - LKAS 10 on ‘Events after the Reporting Period’.
3.14 Other Liabilities
Other Liabilities include interest, fees and expenses and amounts payable to suppliers and other provisions. These liabilities are recorded at amounts expected to be payable at the Reporting date.
Income and Expense Recognition
3.15 Interest
Interest income and expense are recognised 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.
The calculation of the effective interest rate includes all transaction costs and fees 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 Comprehensive Income include Interest on financial assets and financial liabilities measured at amortised cost calculated on an effective interest basis. Interest income on available-for-sale investment securities calculated on an effective interest basis is also included in interest income. Once a financial asset or a group of similar financial assets has been written down as a result of an impairment loss, interest income is recognised using the rate of interest used to discount the future cash flows for the purpose of measuring the impairment loss.
3.16 Dividend Income
Dividend income is recognised in the Statement of Comprehensive Income on an accrual basis when the Company’s right to receive the dividend is established.
3.17 Fee and Commission Income
Fees and commission income, including commission, service fees are recognised as the related services are performed.
3.18 Profit/(Loss) on Sale of Investment Property
Any gains or losses on retirement or disposal of investment properties are recognised in the month of retirement or disposal.
3.19 Profit/(Loss) on Sale of Property, Plant & Equipment
Profit/loss from sale of Lease Assets is recognised in the period in which the sale occurs and is classified as other income/expense.
3.20 Expense Recognition
All the expenditure incurred in the running of the business and in maintaining the Property, Plant & Equipment in a state of efficiency has been charged to the income in arriving at the profit for the year.
3.20.1 Fee and Commission Expense
Fee and commission expenses are recognised on an accrual basis.
3.20.2 Income Tax Expense
Income tax expense comprises of current and deferred tax. Income tax expense is recognised in the Income Statement except to the extent that it relates to items recognised directly in equity, in which case it is recognised in equity.
Current Tax
Current tax is the expected tax payable on the taxable income for the year, using tax rates enacted or substantively enacted on the reporting date, and any adjustment to tax payable in respect of previous years.
Provision for taxation is based on the profit for the year adjusted for taxation purposes in accordance with the provisions of the Inland Revenue Act No. 10 of 2006 and the amendments thereto at the schedule specified in Note 13.
Deferred Tax
Deferred taxation is provided using the liability method, providing for temporary differences between the carrying amounts of assets and liabilities for financial reporting purposes and the tax base of assets and liabilities, which is the amount attributed to those assets and liabilities for tax purposes. The amount of deferred tax provided is based on the expected manner of realisation or settlement of the carrying amount of assets and liabilities, using tax rates enacted or substantively enacted as at the reporting date. Deferred tax liabilities are not recognised for the following temporary differences:
The initial recognition of assets and liabilities in a transaction that is not business combination and that affects neither accounting nor taxable profit nor differences relating to investments in subsidiaries to the extent that they probably will not reverse in the foreseeable future. Deferred tax assets, including those related to temporary tax effects of income tax losses and credits available to be carried forward, are recognised only to the extent that it is probable that future taxable profits will be available against which the asset can be utilised. 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 realised. Current and deferred tax assets and liabilities are offset only to the extent that they relate to income taxes imposed by the same taxation authority, there is a legal right and intention to settle on a net basis and it is allowed under the tax law of the relevant jurisdiction.
3.20.3 Value Added Tax on Financial Services
The base for the computation of Value Added Tax on Financial Services is the accounting profit before income tax adjusted for the economic depreciation and emoluments of employees computed on prescribed rate. The impact of value added tax charged in determining the profit or loss for the period.
3.20.4 Withholding tax on Dividend Distributed by the Company
Withholding tax that arises from the distribution of dividends by the Company is recognised at the time the liability to pay the related dividend is recognised.
3.20.5 Deposit Insurance Scheme
As per the Direction No. 01 of 2010, Sri Lanka Deposit Insurance Scheme, which was effected from 01st October 2010 all licensed finance companies are required to pay an Insurance Premium calculated at the rate of 0.15% per annum payable monthly for all eligible deposits as at the end of the month. Eligible deposits includes all the time deposits held by CDB except for -
- Deposit liabilities to Member Institutions
- Deposit liabilities to the Government of Sri Lanka inclusive of Ministries, Departments and Local Governments.
- Deposit liabilities to Shareholders, Directors, Key Management Personnel and other related parties as defined by the Finance Companies Act (Corporate Governance) Direction No. 3 of 2008.
- Deposit liabilities held as collateral against any accommodation granted.
- Deposits falling within the meaning of abandoned property in terms of the Finance Companies Act, Funds which have been transferred to the Central Bank of Sri Lanka in terms of the relevant Directions issued by the Monetary Board.
3.21 Investment Fund Account
As proposed in the budget proposals of 2011 every person or partnership who is in the business of banking or financial services is required to establish and operate an Investment Fund Account. As and when taxes are paid after 1st January 2011 Licensed Finance Companies are required to transfer the following funds to the Investment Fund Account and build a permanent fund in the Company.
- 8% of the value calculated for the payment of Value Added Tax on Financial Services on dates as specified in the VAT Act
- 5% of the profit before tax calculated for the payment of income tax purposes on dates specified in the Inland Revenue Act
- Invest in long-term Government Securities and/or bonds with maturities not less than seven years
- Lend on maturities not less than five years at interest rates not exceeding 5-year Treasury Bond rates plus 2%
- Lend only for the following purposes:
Licensed Finance Companies shall utilise the funds in the Investment Fund Account in the following manner.
- Long-term loans for cultivation of plantation crops/agriculture crops including fruits, vegetables, cocoa and spices and for livestock and fisheries
- Factory/mills modernisation/establishment/expansion
- Small and medium enterprises Loans up to Rs. 30 Mn or over Rs. 10 Mn to enterprises with annual turnover less than Rs. 300 Mn and employees less than 400
- Information technology related activities and business process outsourcing
- Infrastructure development
- Education - vocational training and tertiary education
- Restructuring of loans extended for the above purposes
3.22 Earnings per Share
The Group presents Basic Earnings per Share (EPS) data for its ordinary shares. Basic EPS is calculated by dividing the profit attributable to ordinary shareholders of the Company by the weighted average number of ordinary shares outstanding during the period. The details of the Earnings per Share are given in Note 14.
3.23 Segmental Reporting
A segment is a distinguishable component of the Group that is engaged either in providing related products or services (business segment), or in providing products and services within a particular economic environment (geographical segment), which is subject to risks and returns different from those of other business segments. For the purposes of segmental reporting disclosures, the information is presented in respect of the Group’s business segments, which is based on the Group’s management and internal reporting structure.
The Group comprises the following major operating segments: Leasing and Hire Purchase, Loans and Pawning. Intersegment pricing is determined on an arm’s length basis. Measurement of segment assets, liabilities, segment revenue and results is based on the accounting policies set out above. Segment revenue results, assets and liabilities include items directly attributable to segments as well as those that can be allocated on a reasonable basis.
3.24 Cash Flow Statement
The Cash Flow Statement has been prepared using the ‘Direct Method’ of preparing Cash Flows in accordance with the Sri Lanka Accounting Standard (LKAS) No. 7 ‘Statement of Cash Flows’. 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.
The cash and cash equivalent include cash in hand, balances with banks, placements with banks, money at call and short notice and money market funds.
3.25 Events Occurring after the Reporting Date
All material events after the reporting date have been considered and where appropriate adjustments to/or disclosures have been made in the respective Notes to the Financial Statements.
3.26 Commitments and Contingencies
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 recognised in the Balance Sheet but are disclosed unless its occurrence is remote. All discernible risks are accounted for in determining the amount of all known liabilities. The Company’s share of any contingencies and capital commitments of a Subsidiary for which the Company is also liable severally or otherwise are also included with appropriate disclosures.
3.27 Offsetting of Income and Expenses
Income and expenses are not offset unless required or permitted by accounting standards.
3.28 Offsetting of Assets and Liabilities
Assets and liabilities are offset and the net amount reported in the Statement of Financial Position only where there is legal right to set off the recognised amounts and intends either to settle on a net basis or to realise the assets and settle the liabilities simultaneously.
3.29 Comparative Information
Comparative information including quantitative, narrative and descriptive information is disclosed in respect of the previous periods for all the amounts reported in the Financial Statements to enhance the understanding of the current period’s Financial Statements and to enhance the inter period comparability.
4. New Accounting Standards Issued But Not Effective as at the Reporting Date
The Institute of Chartered Accountants of Sri Lanka has issued the following new Sri Lanka Accounting Standards which will become applicable for financial periods beginning and after the 1st January 2014 and 2015. Accordingly, these standards have not been applied in preparing these Financial Statements.
SLFRS 9 - Financial Instruments: Classification and Measurement
The objective of this SLFRS is to establish principles for the financial reporting of financial assets and financial liabilities that will present relevant and useful information to users of Financial Statements for their assessment of the amounts, timing and uncertainty of an entity’s future cash flows. SLFRS 9, as issued, reflects the first phase of work on replacement of Sri Lanka Accounting Standards (LKAS 39) - ‘Financial Instruments Recognition and Measurements’ and applies to classification and measurement of financial assets and liabilities. The application of this standard has been currently deferred by the The Institute of Chartered Accountants of Sri Lanka, consequently to the International Accounting Standard Board’s (IASB) decision to defer the mandatory effective date of IFRS 9, However SLFRS 9 will be available for early adoption.
SLFRS 13 - Fair Value Measurement
This SLFRS defines fair value, set out in a single SLFRS framework for measuring fair value and requires disclosures about fair value measurements. This SLFRS will become effective to the Company from 1st January 2014. Early adoption is permitted. This SLFRS shall be applied prospectively as of the beginning of the annual period in which it is initially applied. The disclosure requirements of this SLFRS need not be applied in comparative information provided for periods before initial application of this SLFRS.
SLFRS 10 - Consolidated Financial Statements
The objective of this SLFRS is to establish principles for the presentation and preparation of Consolidated Financial Statements when an entity controls one or more other entities. SLFRS 10 will become effective from 1st January 2014 for the Group with early adoption permitted. This SLFRS will supersede the requirements relating to Consolidated Financial Statements in LKAS 27 ‘Consolidated and Separate Financial Statements’.
5. Financial Risk Management
New business opportunities, deregulation and globalisation, new financial products and stiff competition in the industry illustrate the importance of having an effective risk management as a farsighted measure.
Company deployed Risk Mapping process in order to identify core risks that the Company is exposed to.
Core risks exposed by the Company with regard to financial instruments are:
- Credit risk
- Liquidity risk
- Operational risk
- Market risk
Risk Management Framework
In order to maintain the optimum balance between risk and return, as well as ensure the soundness of the Company, CDB has deployed an effective risk management framework, which encompasses the scope of risks to be managed, the process/systems and procedures to manage risk and the roles and responsibilities of individuals involved in risk management based on the Risk Management Strategy.
5.1 Credit Risk
Credit risk is the risk that arises due to inability or unwillingness to meet a financial obligation by borrower, which can lead an asset to lose value or become worthless.
5.1.1 Management of Credit Risk
The approach towards managing credit risk is to accept any credit risks which are within the boundary approved by the Board of Directors. The Group credit policy provides direction to deal with credit risks. Apart from the Group credit policy, Group conducts periodic credit risk stress testing analysis, portfolio monitoring, identifying problem facilities and maintaining exposure limits to manage the credit risk. Credit Risk Management approach adopted by CDB is described as follows:
- Credit appraisal
- Credit approval
- Credit administration
- Monitoring credit portfolio
- Managing problem facilities
5.1.2 Loans and Advances to Customers
The transition to fair value based accounting (LKAS 32 and 39) with effect from 1st April 2012 required to present age wise classification to be replaced with a cash flow based approach. The approach adopted was to classify loans into individually significant exposures and other loans into homogenous portfolios by segment/product for necessary computations as appropriate.
| As at 31st March | 2014 | 2013 |
| Rs. | Rs. | |
| Carrying Amounts at Amortised Cost | ||
| Individually Significant Loans and Receivable to Customers - Impaired | 827,543,707 | 285,910,634 |
| Not Individually Significant Customers and Individually Significant Unimpaired customers | 24,897,400,588 | 19,164,676,248 |
| 25,724,944,295 | 19,450,586,882 | |
| Individually Significant - Impaired | ||
| Gross Receivable | 1,056,973,814 | 379,520,155 |
| Less: Allowance for Impairment | 229,430,107 | 93,609,521 |
| 827,543,707 | 285,910,634 |
The Company holds collateral against loans and advances to customers in the form of mortgage interests over properties and other registered securities over assets and guarantees. Estimates of fair value are based on the value of collateral assessed at the time of borrowing.
Collateral wise analysis of individually impaired loans and receivables -
| 2013/14 | 2012/13 | |||||
| Gross Loans Rs. |
Impairment Provision Rs. |
Carrying Amount Rs. |
Gross Loans Rs. |
Impairment Provision Rs. |
Carrying Amount Rs. |
|
| Secured by Movable Assets | 980,464,051 | 187,205,541 | 793,258,510 | 307,820,652 | 54,660,517 | 253,160,135 |
| Secured by immovable Assets | 29,385,669 | 12,019,924 | 17,365,745 | 24,589,410 | 8,763,362 | 15,826,048 |
| Clean | 47,124,094 | 30,204,642 | 16,919,452 | 47,110,093 | 30,185,642 | 16,924,451 |
| 1,056,973,814 | 229,430,107 | 827,543,707 | 379,520,155 | 93,609,521 | 285,910,634 | |
| Individually Significant - Unimpaired and individually not significant loans | ||||||
| Gross Receivable | 25,326,931,992 | 19,405,388,103 | ||||
| Allowance for Impairment | 429,531,404 | 240,711,855 | ||||
| 24,897,400,588 | 19,164,676,248 | |||||
| 31st March 2014 | 31st March 2013 | |||
| Collectively Impaired Comprise | Gross Loans Rs. |
Impairment Provision Rs. |
Gross Loans Rs. |
Impairment Provision Rs. |
| 0 - 30 days | 14,731,232,726 | 32,550,477 | 11,781,922,962 | 21,434,794 |
| 31 - 60 days | 4,835,592,565 | 34,300,713 | 3,691,687,717 | 25,541,280 |
| 61 - 90 days | 2,703,488,829 | 37,993,645 | 2,009,697,815 | 30,110,801 |
| 91 - 120 days | 1,167,779,583 | 36,119,009 | 1,045,101,145 | 34,840,975 |
| 121 - 150 days | 595,283,662 | 38,176,078 | 393,368,748 | 27,444,788 |
| 151 - 180 days | 321,763,392 | 35,637,862 | 242,158,836 | 32,993,820 |
| Above 180 days | 971,791,235 | 214,753,621 | 241,450,880 | 68,345,397 |
| 25,326,931,992 | 429,531,404 | 19,405,388,103 | 240,711,855 | |
Allowances for Impairment
The Company established an allowance for impairment losses on assets carried at amortised cost/available-for-sale that represents its estimate of incurred losses in its loan and investment debt/equity security 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, a collective loan loss allowance 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. Assets carried at fair value through profit or loss is not subject to impairment testing as the measure of fair value reflects the credit quality of each asset.
Write-off Policy
The Company writes-off a loan or an investment debt/equity security balance, and any related allowances for impairment losses, when it 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 standardised loans, write-off decisions generally are based on a product-specific past due status. The Company’s policy is to pursue timely realisation of the collateral in an orderly manner. The Company generally does not use the non-cash collateral for its own operations.
5.1.3 Credit Concentration Risk
| As at 31st March | 2014 | 2013 | ||
| Rs. | % | Rs. | % | |
| Product Concentration | ||||
| Leasing | 14,055,564,983 | 53 | 10,908,899,044 | 55 |
| Hire Purchase | 5,853,826,003 | 22 | 4,018,443,248 | 20 |
| Vehicle Loan | 3,673,626,439 | 14 | 2,090,261,849 | 11 |
| Loans Against Deposits | 1,856,389,487 | 7 | 1,402,326,246 | 7 |
| Staff Loans | 219,952,491 | 1 | 187,650,008 | 1 |
| Pawning | 645,558,079 | 2 | 1,065,267,338 | 5 |
| Other | 78,988,323 | 0 | 112,060,525 | 1 |
| Gross loans and receivables | 26,383,905,806 | 19,784,908,258 | ||
| Geographical Concentration | ||||
| Central | 2,377,295,443 | 9 | 849,907,252 | 4 |
| Eastern | 414,998,043 | 2 | 241,066,933 | 1 |
| North | 371,628,400 | 1 | 401,055,515 | 2 |
| North-Central | 1,595,878,448 | 6 | 1,233,225,030 | 6 |
| North-Westrern | 2,945,505,268 | 11 | 1,525,404,266 | 8 |
| Sabaragamuwa | 2,517,948,049 | 10 | 1,432,628,007 | 7 |
| Southern | 1,661,085,055 | 6 | 805,959,111 | 4 |
| Uva | 901,616,453 | 3 | 213,431,455 | 1 |
| Western | 12,561,364,044 | 48 | 10,606,081,190 | 54 |
| Undefined | 1,036,586,602 | 4 | 2,476,149,499 | 13 |
| Gross loans and receivables | 26,383,905,806 | 19,784,908,258 | ||
5.1.4 Financial Investments
Deposits in Commercial Banks (Based on Credit Rating)
| As at 31st March | 2014 | 2013 |
| Rs. | Rs. | |
| Ratings | ||
| AA+(lka) | 377,954,315 | 111,822,835 |
| AA (lka) | 23,963,977 | 48,966,267 |
| A (lka) | 208,886,764 | 110,325,625 |
| AA-(lka) | 786,003,384 | 472,206,523 |
| A-(lka) | 1,010,496,171 | 512,405,741 |
| BBB (lka) | 250,000,000 | 79,544,772 |
| Total | 2,706,172,054 | 1,335,271,762 |
Investment in Securities Under Repurchase Agreements
| Ratings | ||
| AA+(lka) | 123,000,000 | 30,164,014 |
| AA (lka) | 70,000,000 | 34,000,000 |
| A (lka) | – | – |
| AA-(lka) | 39,999,991 | 26,000,000 |
| A-(lka) | – | 50,000,000 |
| BBB (lka) | – | – |
| Total | 227,999,991 | 140,164,014 |
Investments in Equity at Available-for-Sale Equity Instruments
| Unrated | 789,600,000 | 563,943,600 |
Investment in Government Securities at Amortised Cost
| Government of Sri Lanka Treasury Bills | 1,736,979,228 | 1,085,512,134 |
| Government of Sri Lanka Treasury Bonds | 92,637,637 | 60,034,848 |
| 1,829,616,865 | 1,145,546,982 |
Investment in Debt Securities at Amortised Cost
| A-(lka) | 5,074,177 | 5,043,269 |
5.2 Liquidity Risk
Liquidity risk arises due to mismatch between assets and liabilities of the Company; and as a result, inability to honour the liabilities when fallen due.
Managing the liquidity risk is utmost important to Company like CDB since the breach of liquidity requirements will expose to other risks such as reputation and compliance.
Hence, breach of liquidity requirements will directly affect on Company’s going concern and credibility among stakeholders.
The objective of liquidity risk management is to bridge the gap between asset-liability maturity mismatch and ultimately its important for Company to identify the correct combination of liquidity and profitability.
Treasury is responsible for the management of liquidity and it has been continuously monitored and reviewed at the ALCO. Further, the Integrated Risk Management reporting has been done on a quarterly basis to further evaluate the risks on liquidity.
Exposure to Liquidity Risk
| 2013/14 | 2012/13 | |
| % | % | |
| Net Loans/Total Assets | 76.18 | 79.91 |
| Gross Loans/Customer Deposits | 103.67 | 111.15 |
| Liquid Assets Ratio (LAR) | ||
| Average for the Year | 14.75 | 13.94 |
| Maximum for the Year | 19.69 | 14.69 |
| Minimum for the Year | 11.68 | 11.19 |
Contractual maturities of the assets and liabilities of the Company is givenin the Business Model section.
5.3 Operational Risk
Operational risk arises due to internal process failures, human capital losses, inadequate internal process, technological breakdowns and adverse impact from external events. Operational risk acts as a bottleneck for many companies, due to an inadequate awareness on companies, no operational risk indicators or insufficient internal controls.
Purpose of managing operational risk is to minimise the normal losses incurred due to internal activities, restoring any disruption without impacting the core business of the Company and mitigating recurrence of such events in the future.
Managing operational risk is prime responsibility of all CDB employees and Company has executed a well-defined operational risk policy framework. Internal controls and strict system audit functions are kept in order to enhance the operational risk mitigating process.
Management of Operational Risk
The Company has adopted following approaches in order to mitigate operational risk within its business context:
- Stringent operational policies and practices
- Effective HR policies and practices
- Promoting ethical business standards
- Training and development
- Contingent and back-up plans
- Stringent internal controls
5.4 Capital Management
The objectives of capital management at CDB can be identified as follows:
- Maintain sufficient capital to meet regulatory requirements
- To ensure the achievement of strategic objectives by allocating the required capital
- To hold sufficient capital to support the Company’s risk appetite
The Central Bank of Sri Lanka has introduced the Capital Adequacy Ratio (CAR) to protect the interest of the various stakeholders of the Company while ensuring the maintenance of confidence and stability of the financial system.
5.4.1 Capital Adequacy
Capital adequacy is a measure of financial institutions’ financial strength and stability of a company. This widely accepted concept tries to specify the limit up to which a business can expand in terms of its risk-weighted assets. Finance companies in pursuit of business expansion, could engage themselves in activities that regularly change their risk profile. In light of this, regulatory capital requirements have been established to avoid undue expansion beyond specified limits keeping a hold on companies’ exposure to risk. Capital serves as a comfort to absorb unexpected losses, providing a degree of security to depositors and other key stakeholders.
This measure has been introduced by the Central Bank of Sri Lanka to protect the interest of the various stakeholders of the Company while ensuring the maintenance of confidence and stability of the financial system.
The capital adequacy ratio is calculated as a percentage of Company’s capital to its risk-weighted assets as specified by the Direction No. 02 of 2006, Finance Companies (Risk-Weighted Capital Adequacy Ratio) and there are two measures to define the capital adequacy of the Company namely Core Capital to Risk Weighted Asset Ratio and Total Capital to Risk Weighted-Assets Ratio.
The minimum requirement for Core Capital Adequacy Ratio and Total Capital Adequacy Ratio are 5% and 10% respectively.
The core capital represents the permanent shareholders equity and reserves created or increased by appropriations of retained earnings or other surpluses and the total capital include in addition to the core capital the revaluation reserves, general provisions and other hybrid capital instruments and unsecured subordinated debts.
The Risk-Weighted Assets have been calculated by multiplying the value of each category of asset using the risk weights specified by the Central Bank of Sri Lanka.
Details of the computation and the resulting ratios are given below:
Total Risk Weighted Asset Computation
| Risk-Weighted Factor | Risk-Weighted Balances | ||||
| As at 31st March | 2014 | 2013 | 2014 | 2013 | |
| Rs. ’000 | Rs. ’000 | % | Rs. ’000 | Rs. ’000 | |
| Assets | |||||
| Cash and bank balances | 462,555 | 205,326 | 0 | – | – |
| Investment in Government Securities | 2,057,617 | 1,290,754 | 0 | – | – |
| Bank deposits | 2,706,172 | 1,335,272 | 20 | 541,234 | 267,054 |
| Loans against fixed deposits | 1,831,134 | 1,402,326 | 0 | – | – |
| Loans against gold and jewellery | 645,558 | 1,065,267 | 0 | – | – |
| Loans against Real Estate | – | – | 50 | – | – |
| Loans and advances | 23,248,252 | 16,982,993 | 100 | 23,248,252 | 16,982,993 |
| Other investments | 797,419 | 566,688 | 100 | 797,419 | 566,688 |
| Other assets | 917,382 | 858,272 | 100 | 917,382 | 858,272 |
| Fixed assets | 1,102,452 | 747,030 | 100 | 1,102,452 | 747,030 |
| Total Risk - Weighted Assets | 33,768,541 | 24,453,929 | 26,606,739 | 19,422,038 | |
Total Capital Base Computation
| As at 31st March | 2014 | 2013 |
| Rs. ’000 | Rs. ’000 | |
| Capital Base | ||
| Core Capital (Tier I capital) | ||
| Stated Capital | 1,185,062 | 1,185,062 |
| Reserve Fund | 497,954 | 385,712 |
| General & other free Reserves | 689,690 | 464,034 |
| Published Retained Earnings | 983,697 | 746,592 |
| Total Core Capital | 3,356,403 | 2,781,400 |
| Supplementary Capital (Tier II capital) | ||
| Eligible approved unsecured subordinated term debts | 900,230 | – |
| General Provisions | – | – |
| Total Supplementary Capital | 900,230 | – |
| Capital Base | 4,256,633 | 2,781,400 |
Capital Adequacy Ratio
| As at 31st March | 2014 | 2013 | |
| % | % | ||
| Core Capital ratio | Core Capital x 100 | 12.61 | 14.32 |
| Risk Weighted Assets | |||
| Total Capital Ratio | Capital Base x 100 | 16.00 | 14.32 |
| Risk Weighted Assets |
5.5 Market Risk
Market risk can be defined as the risk of losses in on and Off-Balance Sheet positions arising from adverse movements in market prices and stems from the two positions including interest rate risk and currency risk or foreign exchange positions.
5.5.1 Exposure to Interest Rate Risk
Interest rate risk exists in interest-bearing assets, due to the possibility of a change in the asset’s value resulting from the variability of interest rates. Since Interest rate risk management has become imperative, CDB takes proactive measures to manage the exposure by forecasting the rate fluctuations. We perform scenario analysis in the course of observing liquidity position, market movements and re-price products based thereon.
The following table exhibits the gap between the interest-earning financial assets and interest bearing financial liabilities of the Company:
| As at 31st March | 0-12 months | 1-2 years | 2-5 years | More than 5 years |
Non-rate Sensitive |
Total |
| Rs. | Rs. | Rs. | Rs. | Rs. | Rs. | |
| Assets | ||||||
| Cash and Cash Equivalents | – | – | – | – | 462,555,296 | 462,555,296 |
| Deposits in commercial banks and government securities | 4,676,185,239 | – | 15,747,945 | 71,855,725 | – | 4,763,788,910 |
| Net receivable from financing assets | 10,201,841,725 | 6,608,286,625 | 8,456,914,850 | 457,901,096 | – | 25,724,944,295 |
| Investment in equity shares/debentures | – | – | – | – | 794,674,177 | 794,674,177 |
| Other financial assets | – | – | – | – | 468,825,953 | 468,825,953 |
| 14,878,026,964 | 6,608,286,625 | 8,472,662,795 | 529,756,821 | 1,726,055,426 | 32,214,788,631 | |
| Liabilities | ||||||
| Customers accounts | 17,738,582,796 | 3,447,603,735 | 3,332,006,205 | – | – | 24,518,192,737 |
| Other borrowings | 1,517,911,102 | 790,600,581 | 734,601,532 | 98,892,435 | – | 3,142,005,650 |
| Debenture | 130,259,204 | – | 1,042,073,631 | – | – | 1,172,332,835 |
| Other financial liabilities | – | – | – | – | 1,213,713,656 | 1,213,713,656 |
| 19,386,753,102 | 4,238,204,317 | 5,108,681,368 | 98,892,435 | 1,213,713,656 | 30,046,244,878 | |
| Interest rate sensitivity Gap | (4,508,726,138) | 2,370,082,308 | 3,363,981,427 | 430,864,386 | 512,341,770 | 2,168,543,760 |
5.5.2 Exposure to Currency Risk
Currency risk is the risk that the value of financial instruments will fluctuate due to changes in foreign exchange rates and arises from financial instruments dominated in a foreign currency. Intention of managing currency risk is to curtail the currency losses incurred due to foreign currency transactions. CDB oversees the exposure by co-ordinating and being in line with the rates of forex dealing unit. We take initiatives to control the currency stocks in different currencies by exchanging and converting them in the best and a more profitable manner to compose a gain. Future Forex market movements and trends are considered when deciding rates to offer the customers and always intend to maintain in sequence with the Central Bank rate predictions to make the business more competitive.
Our exposure to foreign currency risk is as follows based on notional amounts:
| As at 31st March | 2014 | |||
| Currency | Amount | Market Rate Rs. |
Total Rs. |
Average Rate Rs. |
| USD | 5,607 | 130.05 | 729,228 | 127.94 |
| EUR | 6,736 | 179.00 | 1,205,821 | 174.20 |
| GBP | 240 | 216.20 | 51,916 | 200.37 |
| CAD | 380 | 117.30 | 44,586 | 120.47 |
| SGD | 351 | 103.00 | 36,162 | 101.29 |
| AUD | 211 | 119.80 | 25,241 | 118.51 |
| NOK | 50 | 21.52 | 1,076 | 21.10 |
| KWD | 16 | 447.00 | 7,152 | 418.13 |
| AED | 250 | 35.11 | 8,778 | 33.56 |
| Total amount | 2,109,959 | |||
Subsequent sensitivity analysis shows strength of the LKR, against the US$ and EUR as at 31st March which would have increased/(decreased) profit or loss amounts.
| As at 31st March | 2014 | ||
| Change % |
Strengthening | Weakening | |
| USD | 1 | (7,292) | 7,292 |
| EUR | 1 | (12,058) | 12,058 |
| USD | 3 | (21,877) | 21,877 |
| EUR | 3 | (36,175) | 36,175 |
| USD | 5 | (36,461) | 36,461 |
| EUR | 5 | (60,291) | 60,291 |
Reporting date average Spot Rate
| USD | Rs. 130.05 |
| EUR | Rs. 179.00 |
Company |
Group |
|||
| For the year ended 31st March | 2014 | 2013 | 2014 | 2013 |
| Rs. | Rs. | Rs. | Rs. | |
6. Income |
||||
| Interest income (7) | 5,895,603,537 | 4,087,387,160 | 5,895,603,537 | 4,087,387,160 |
| Non-interest income | 229,558,010 | 224,462,910 | 229,558,010 | 224,462,910 |
| 6,125,161,547 | 4,311,850,070 | 6,125,161,547 | 4,311,850,070 | |
7. Interest Income
| Government securities and placements with banks | 355,277,011 | 229,018,983 | 355,277,011 | 229,018,983 |
| Loans and receivables to other customers | ||||
| Loans | 1,072,719,758 | 705,652,516 | 1,072,719,758 | 705,652,516 |
| Finance leases | 3,408,315,277 | 2,458,237,821 | 3,408,315,277 | 2,458,237,821 |
| Hire purchases | 1,054,513,091 | 694,349,810 | 1,054,513,091 | 694,349,810 |
| Ijarah income | 3,015,678 | 128,030 | 3,015,678 | 128,030 |
| Murabahah | 1,762,722 | – | 1,762,722 | – |
| 5,895,603,537 | 4,087,387,160 | 5,895,603,537 | 4,087,387,160 |
8. Interest Expense
| Deposits from customers | 3,000,468,150 | 2,107,873,086 | 3,000,468,150 | 2,107,873,086 |
| Debentures | 68,507,299 | 31,237,363 | 68,507,299 | 31,237,363 |
| Borrowings | 483,342,254 | 247,436,298 | 483,342,254 | 247,436,298 |
| Mudharabah | 1,085,054 | 23,512 | 1,085,054 | 23,512 |
| 3,553,402,757 | 2,386,570,259 | 3,553,402,757 | 2,386,570,259 |
9. Fee and Commission Income
| Insurance commission | 158,323,649 | 119,231,286 | 158,323,649 | 119,231,286 |
| Guarantee commission income | 934,917 | 612,563 | 934,917 | 612,563 |
| Commission on money remittances | 136,292 | 71,511 | 136,292 | 71,511 |
| Commission on debit card transactions | 313,943 | – | 313,943 | – |
| 159,708,801 | 119,915,360 | 159,708,801 | 119,915,360 |
10. Other Operating Income
| Dividend income | 7,068,000 | 3,684,000 | 7,068,000 | 3,684,000 |
| Profit on disposal of leased assets | 25,961,106 | 41,065,375 | 25,961,106 | 41,065,375 |
| Foreign exchange gain/(losses) | (384,936) | – | (384,936) | – |
| Other operating income | 205,608,298 | 59,798,175 | 205,608,298 | 59,798,175 |
| 238,252,468 | 104,547,550 | 238,252,468 | 104,547,550 |
11. Impairment Charges for Loans and Advances and Other Losses |
||||
| Net charge against profit on loans and receivables to customers: | ||||
| Collective impairment charge/(release) | ||||
| Leases | 172,135,527 | 92,542,509 | 172,135,527 | 92,542,509 |
| Hire purchases | 13,088,367 | 14,789,891 | 13,088,367 | 14,789,891 |
| Loans and advances | 3,595,655 | 4,838,827 | 3,595,655 | 4,838,827 |
| Individual impairment charge | ||||
| Leases | 69,029,218 | 7,668,222 | 69,029,218 | 7,668,222 |
| Hire purchases | 12,323,091 | 7,716,984 | 12,323,091 | 7,716,984 |
| Loans and advances including pawning advances | 54,468,277 | 1,231,626 | 54,468,277 | 1,231,626 |
| Losses from liquidation of pawned articles | 168,403,259 | – | 168,403,259 | – |
| Provision for fall in value of gold stock | 14,346,840 | – | 14,346,840 | – |
| 507,390,234 | 128,788,059 | 507,390,234 | 128,788,059 |
12. Operating Expenses
| Operating expenses, among others, include the following: | ||||
| Depreciation of property, plant & equipment and amortisation of intangible assets | 112,836,749 | 83,541,045 | 112,836,749 | 83,541,045 |
| Legal expenses and professional fees | 9,125,313 | 16,784,890 | 9,125,313 | 16,784,890 |
| Personnel cost | 522,946,764 | 432,570,913 | 522,946,764 | 432,570,913 |
| Directors emoluments (12a) | 40,267,800 | 30,671,680 | 40,267,800 | 30,671,680 |
| Auditors remuneration (12b) | 3,909,075 | 2,390,000 | 4,009,075 | 2,390,000 |
| Advertising and communication | 195,244,242 | 146,711,283 | 195,244,242 | 146,711,283 |
| Contribution to deposit insurance scheme of cbsl | 27,353,124 | 18,077,415 | 27,353,124 | 18,077,415 |
| Activities on corporate social responsibility | 3,258,422 | 3,150,393 | 3,258,422 | 3,150,393 |
| Employees’ provident fund and trust fund expenses |
41,645,570 | 27,912,686 | 41,645,570 | 27,912,686 |
| Employees’ defined benefit plan service expenses | 31,191,489 | 81,854,216 | 31,191,489 | 81,854,216 |
| 12a. Directors Emoluments* | 40,267,800 | 30,671,680 | 40,267,800 | 30,671,680 |
| 12b. Auditors Remuneration | ||||
| Audit fees and expenses | 1,575,000 | 1,400,000 | 1,675,000 | 1,500,000 |
| Audit-related fees and expenses | 560,100 | 800,000 | 560,100 | 800,000 |
| Non-audit services | 1,773,975 | 190,000 | 1,773,975 | 190,000 |
* The details of the Directors emoluments and expenses related to the key management personnel are given under the Note 40.
| Company | Group | |||
| For the year ended 31st March | 31st March 2014 | 31st March 2013 | 31st March 2014 | 31st March 2013 |
| Rs. | Rs. | Rs. | Rs. | |
13. Income Tax Expense |
||||
| Current income tax expense | 79,924,706 | 70,318,896 | 79,924,706 | 70,318,896 |
| (Over)/under provision in respect of prior periods | (24,640,365) | 2,049,485 | (24,640,365) | 2,049,485 |
| Deferred tax expense | 113,470,937 | 62,750,103 | 113,470,937 | 62,750,103 |
| Income tax charge for the year | 168,755,278 | 135,118,484 | 168,755,278 | 135,118,484 |
Reconciliation between income tax expenses and the accounting profit.
| Accounting profit before tax | 729,968,049 | 624,282,545 | 729,968,049 | 624,182,545 |
| Tax expenses as per accounting profit | 204,391,054 | 174,799,113 | 204,391,054 | 174,771,113 |
| Tax effect of capital portion of lease rentals | 918,883,559 | 563,624,265 | 918,883,559 | 563,624,265 |
| Income from non-taxable sources | 6,616,570 | (21,421,018) | 6,616,570 | (21,421,018) |
| Tax effect of disallowed expenses | 99,765,337 | 65,897,586 | 99,765,337 | 65,925,586 |
| Tax effect of deductible expenses and tax losses | (1,149,731,813) | (879,554,965) | (1,149,731,813) | (879,554,965) |
| Tax effect of the business losses of leasing business | 159,178,638 | 159,178,638 | ||
| Tax on business profit | 79,924,706 | 62,523,618 | 79,924,706 | 62,523,618 |
| Tax on dividend | – | 7,795,277 | – | 7,795,277 |
| Deferred tax expenses | 113,470,937 | 62,750,103 | 113,470,937 | 62,750,103 |
| Prior period under/(over) provision | (24,640,365) | 2,049,485 | (24,640,365) | 2,049,485 |
| Income tax expenses reported in the Statement of Comprehensive Income at the effective tax rate | 168,755,278 | 135,118,483 | 168,755,278 | 135,118,483 |
A reconciliation between tax expense and the accounting profit based on the statutory tax Rate - 2013/14
| Company | Group | ||||||
| Leasing Business |
Other Business |
Total | Leasing Business |
Other Business |
Total | ||
| Rs. | Rs. | Rs. | Rs. | Rs. | Rs. | ||
| Accounting profit before tax | 395,176,805 | 334,791,244 | 729,968,049 | 395,176,805 | 334,791,244 | 729,868,049 | |
| Adjustments | |||||||
| Capital Portion of leasing rental due | 3,281,726,997 | – | 3,281,726,997 | 3,281,726,997 | – | 3,281,726,997 | |
| Non-taxable income/losses | 29,335,342 | (5,704,737) | 23,630,606 | 29,335,342 | (5,704,737) | 23,630,606 | |
| Disallowable expenses | 196,985,091 | 160,770,364 | 657,755,456 | 196,985,091 | 160,870,364 | 357,855,456 | |
| Allowable expenses | (3,765,978,677) | (50,710,136) | (3,816,688,813) | (3,765,978,677) | (50,710,136) | (3,816,688,813) | |
| Total statutory income | 137,245,559 | 439,146,736 | 576,392,295 | 137,245,559 | 439,146,736 | 576,392,295 | |
| Carried forward tax losses - Set-off | (137,245,559) | 153,701,358 | (29,094,917) | (137,245,559) | 153,701,358 | (290,946,917) | |
| Taxable income | – | 285,445,378 | 285,445,378 | – | 285,445,378 | 285,445,378 | |
| Income tax rate (%) | – | 28 | – | – | 28 | – | |
| Income tax | – | 79,924,706 | – | – | 79,924,706 | – | |
| Effective tax rate (%) | – | 24 | – | – | 24 | – | |
A reconciliation between tax expense and the accounting profit based on the statutory tax rate - 2012/13
| Company | Group | ||||||
| Leasing Business |
Other Business |
Total | Leasing Business |
Other Business |
Total | ||
| Rs. | Rs. | Rs. | Rs. | Rs. | Rs. | ||
| Accounting profit before tax | 376,933,189 | 247,349,356 | 624,282,545 | 376,933,189 | 247,349,356 | 624,182,545 | |
| Adjustments | |||||||
| Capital portion of leasing rental due | 2,012,943,804 | 2,012,943,804 | 2,012,943,804 | 2,012,943,804 | |||
| Non-taxable income | (59,233,503) | (9,109,195) | (68,342,698) | (59,233,503) | (9,109,195) | (68,342,698) | |
| Disallowable expenses | 82,893,615 | 152,454,718 | 235,348,333 | 82,893,615 | 152,454,718 | 235,448,333 | |
| Allowable expenses | (2,982,032,240) | (46,916,196) | (3,028,948,436) | (2,982,032,240) | (46,916,196) | (3,028,948,436) | |
| Total statutory income | (568,495,135) | 343,778,868 | (224,716,267) | (568,495,135) | 343,778,868 | (224,716,267) | |
| Carried forward tax losses - set off | (120,480,045) | (120,480,045) | |||||
| Taxable Income | 223,298,823 | 223,298,823 | |||||
| Income tax rate (%) | 28 | 28 | |||||
| Income tax | 62,523,670 | 62,523,670 | |||||
| Effective tax rate (%) | 25 | 25 | |||||
As at the reporting date, company has carried forward tax losses amounting to Rs. 1,088,520,883/-.
14. Earnings Per Share
Basic earnings per share is calculated by dividing the profit for the period attributable for the ordinary shareholders by the weighted average number of ordinary shares outstanding during the year and calculated as follows:
| Company | Group | |||
| For the year ended 31st March | 2014 | 2013 | 2014 | 2013 |
| Amount used as numerator | ||||
| Net profit attributable to equity holders of Parent (Rs.) | 561,212,771 | 489,164,061 | 561,212,771 | 489,164,061 |
| Amount used as denominator | ||||
| Weighted average number of ordinary shares | 54,305,207 | 54,305,207 | 54,305,207 | 54,305,207 |
| Basic earnings per ordinary share (Rs.) | 10.33 | 9.01 | 10.33 | 9.01 |
Diluted earnings per share is not calculated as potentially dilutive ordinary shares are not available.
| For the year ended 31st March | 2013/14 | 2012/13 |
| Rs. | Rs. | |
15. Dividend Per Share |
||
| Net dividend paid to ordinary shareholders | 146,624,059 | 134,405,387 |
| Withholding tax deducted at source | 16,291,562 | 14,933,932 |
| Gross dividend | 162,915,621 | 149,339,319 |
| Gross dividend per share | 3.00 | 2.75 |
In accordance with the provision of the Sri Lanka Accounting Standard 10 - ‘Events after the Reporting Period’,
this proposed first and final dividend has not been recognised as a liability as at the reporting date.
16. Classification of Financial Assets and Financial Liabilities
Financial instruments are measured on an ongoing basis either at fair value or at amortised cost. The summary of Significant Accounting Policies describes how each category of financial instruments is measured and how income and expenses, including fair value gains and losses, are recognised. The following table analyses the carrying amounts of the financial instruments by category as defined in Sri Lanka Accounting Standard - LKAS 39 ‘Financial Instruments: Recognition and Measurement’ under headings of the Statement of Financial Position:
16.1 Company
Assets at fair value |
Assets at amortised cost |
Total | |||
| Fair value through profit or loss Rs. |
Available-for-sale Rs. |
Loans and receivable Rs. |
Held-to-maturity Rs. |
Rs. |
|
| Assets | |||||
| As at 31st March 2014 | |||||
| Cash and cash equivalents | – | – | 462,555,296 | – | 462,555,296 |
| Deposits in commercial banks | – | – | 2,706,172,054 | – | 2,706,172,054 |
| Loans and receivables to customers | – | – | 25,724,944,295 | – | 25,724,944,295 |
| Investment in equity shares/debentures | – | 789,600,000 | – | 5,074,177 | 794,674,177 |
| Investment in Government securities | – | – | 227,999,991 | 1,829,616,865 | 2,057,616,856 |
| Other financial assets | – | 468,825,953 | – | 468,825,953 | |
| Total financial assets | – | 789,600,000 | 29,590,497,589 | 1,834,691,042 | 32,214,788,631 |
| Other non-financial assets | 1,553,753,654 | ||||
| Total assets | – | 789,600,000 | 29,590,497,589 | 1,834,691,042 | 33,768,542,285 |
| As at 31st March 2013 | |||||
| Cash and cash equivalents | – | – | 205,326,279 | – | 205,326,279 |
| Deposits in commercial banks | – | – | 1,335,271,762 | – | 1,335,271,762 |
| Loans and receivables to customers | – | – | 19,450,586,882 | – | 19,450,586,882 |
| Investment in equity shares/debentures | – | 563,943,600 | – | – | 563,943,600 |
| Investment in Government securities | – | – | 140,164,014 | 1,150,590,251 | 1,290,754,265 |
| Other financial assets | 479,741,119 | 479,741,119 | |||
| Total financial assets | – | 563,943,600 | 22,175,033,656 | 1,150,590,251 | 23,325,623,907 |
| Other non-financial assets | 1,128,307,533 | ||||
| Total assets | – | – | 22,175,033,656 | 1,150,590,251 | 24,453,931,440 |
| Fair value through profit or loss Rs. |
Liabilities at amortised cost Rs. |
Total Rs. |
|
| Liabilities | |||
| As at 31st March 2014 | |||
| Deposits from customers | – | 24,518,192,737 | 24,518,192,737 |
| Debentures | – | 1,172,332,835 | 1,172,332,835 |
| Other borrowings | – | 3,142,005,650 | 3,142,005,650 |
| Other financial liabilities | – | 1,213,713,656 | 1,213,713,656 |
| Total financial liabilities | – | 30,046,244,878 | 30,046,244,878 |
| Other non-financial liabilities | – | – | 145,383,295 |
| Total liabilities | – | 30,046,244,878 | 30,191,628,173 |
| As at 31st March 2013 | |||
| Deposits from customers | – | 17,771,172,664 | 17,771,172,664 |
| Debentures | – | 259,378,311 | 259,378,311 |
| Other borrowings | – | 2,503,704,580 | 2,503,704,580 |
| Other financial liabilities | – | 922,665,325 | 922,665,325 |
| Total financial liabilities | – | 21,456,920,880 | 21,456,920,880 |
| Other non-financial liabilities | – | – | 31,912,358 |
| Total liabilities | – | 21,456,920,880 | 21,488,833,238 |
16.2 Group
| Assets at fair value | Assets at amortised cost |
Total | |||
| Fair value through profit or loss Rs. |
Available-for-sale Rs. |
Loans and receivable Rs. |
Held-to-maturity Rs. |
Rs. |
|
| Assets | |||||
| As at 31st March 2014 | |||||
| Cash and cash equivalents | – | – | 465,890,822 | – | 465,890,822 |
| Deposits in commercial banks | – | – | 2,706,172,054 | – | 2,706,172,054 |
| Loans and receivables to customers | – | – | 25,724,944,295 | – | 25,724,944,295 |
| Investment in equity shares/debentures | – | 789,600,000 | – | 5,074,177 | 794,674,177 |
| Investment in Government securities | – | – | 227,999,991 | 1,829,616,865 | 2,057,616,856 |
| Other financial assets | – | – | – | – | – |
| Total financial assets | – | – | 468,825,953 | – | 468,825,953 |
| Other non-financial assets | – | 789,600,000 | 29,593,833,115 | 1,834,691,042 | 32,218,124,157 |
| 1,553,753,654 | |||||
| Total assets | – | 789,600,000 | 29,593,833,115 | 1,834,691,042 | 33,769,131,564 |
| As at 31st March 2013 | |||||
| Cash and cash equivalents | – | – | 208,661,805 | – | 208,661,805 |
| Deposits in commercial banks | – | – | 1,335,271,762 | – | 1,335,271,762 |
| Loans and receivables to customers | – | – | 19,450,586,882 | – | 19,450,586,882 |
| Investment in equity shares/debentures | – | 563,943,600 | – | 5,043,269 | 568,986,869 |
| Investment in government securities | – | – | 140,164,014 | 1,145,546,982 | 1,285,710,996 |
| Other financial assets | – | – | 479,741,119 | – | 479,741,119 |
| Total financial assets | – | 563,943,600 | 21,614,425,582 | 1,150,590,251 | 23,328,959,433 |
| Other non-financial assets | 1,125,562,086 | ||||
| Total assets | – | 563,943,600 | 21,614,425,582 | 1,150,590,251 | 24,454,521,519 |
| Fair value through profit or loss Rs. |
Liabilities at amortised cost Rs. |
Total Rs. |
|
| Liabilities | |||
| As at 31st March 2014 | |||
| Deposits from customers | – | 24,518,192,737 | 24,518,192,737 |
| Debentures | – | 1,172,332,835 | 1,172,332,835 |
| Other borrowings | – | 3,142,005,650 | 3,142,005,650 |
| Other financial liabilities | – | 1,055,262,081 | 1,055,262,081 |
| Total financial liabilities | – | 29,887,793,303 | 29,887,793,303 |
| Other non-financial liabilities | – | – | 290,766,590 |
| Total liabilities | – | 29,887,793,303 | 30,192,418,252 |
| As at 31st March 2013 | |||
| Deposits from customers | – | 17,771,172,664 | 17,771,172,664 |
| Debentures | – | 259,378,312 | 259,378,312 |
| Other borrowings | – | 2,503,704,580 | 2,503,704,580 |
| Other financial liabilities | – | 923,356,203 | 923,356,203 |
| Total financial liabilities | – | 21,457,611,759 | 21,457,611,759 |
| Other non-financial liabilities | – | – | 31,912,358 |
| Total liabilities | – | 21,457,611,759 | 21,489,524,117 |
16.3 Valuation of Financial Instruments
16.3.1 Financial Instruments Recorded at Fair Value
The following is a description of how fair values are determined for financial instruments that are recorded at fair value using valuation techniques. These incorporate the CDB’s estimate of assumptions that a market participant would make when valuing the instruments.
16.3.1.1 Financial Assets - Available-For-Sale
CDB has classified the investment in quoted ordinary shares of Ceylinco Insurance PLC under available-for-sale financial assets.
This investment is held by CDB as a strategic investment and this was not acquired for the trading purpose. Accordingly this investment was classified under the category of Available-for-Sale investment.
Fair value of the investment was obtained by reference to market prices in the active market as at the reporting date.
Determination of Fair Value and Fair Value Hierarchy
The CDB uses the following hierarchy for determining and disclosing the fair value of financial instruments by valuation technique:
Level 1: quoted (unadjusted) prices in active markets for identical assets or liabilities
Level 2: other techniques for which all inputs which have a significant effect on the recorded fair value are observable, either directly or indirectly
Level 3: techniques which use inputs that have a significant effect on the recorded fair value that are not based on observable market data
Available-for-sale financial assets of CDB has been valued using the Level 1 techniques of the valuation hierarchy and fair value as at 31st March 2014 is Rs. 789,600,000/- (2013: Rs. 563,943,600/-). Total gain recognised in the equity on this investment for the year ended 31st March 2014 is Rs. 225,656,400/- (2013: Rs. 105,750,000/-)
CDB has not valued any of its financial instruments at fair value using level 2 techniques or level 3 techniques of the valuation hierarchy.
16.3.2 Fair Value of Financial Assets not Carried at Fair Value
The following table summarises the carrying amounts and fair values of those financial assets and liabilities not presented on the Group’s Balance Sheet at fair value. The fair values in the table below are stated as at 31st March and may be different from the actual amount that will be received/paid on the settlement or maturity of the financial instrument:
| Company | ||
| 2014 | ||
| Carrying Value | Fair Value | |
| Rs. | Rs. | |
| Assets | ||
| Cash and cash equivalents | 462,555,296 | 462,555,296 |
| Deposits in commercial banks | 2,706,172,054 | 2,706,172,054 |
| Loans and receivables to customers | 25,724,944,295 | 25,633,809,304 |
| Investment in Government Securities | 2,057,616,856 | 2,057,616,856 |
| Other financial assets | 473,900,130 | 473,900,130 |
| Total financial assets | 31,425,188,631 | 31,334,053,640 |
| Liabilities | ||
| Deposits from customers | 24,518,192,737 | 24,492,190,140 |
| Debentures | 1,172,332,835 | 1,172,332,835 |
| Other borrowings | 3,142,005,650 | 3,142,005,650 |
| Other financial liabilities | 1,213,713,656 | 1,213,713,656 |
| Total financial liabilities | 30,046,244,878 | 30,020,242,281 |
16.3.3
Reclassification
There were no reclassifications during 2013/14 and 2012/13.
Company |
Group |
|||
| As at 31st March | 2014 | 2013 | 2014 | 2013 |
| Rs. | Rs. | Rs. | Rs. | |
17. Cash and Cash Equivalents |
||||
| Local currency in hand | 172,471,772 | 99,030,882 | 172,471,772 | 99,030,882 |
| Foreign currency in hand | 2,109,959 | 9,335,776 | 2,109,959 | 9,335,776 |
| Demand deposit balances with licensed commercial banks | 287,973,565 | 96,959,621 | 291,309,091 | 100,295,147 |
| 462,555,296 | 205,326,279 | 465,890,822 | 208,661,805 | |
All cash and cash equivalents held by the Group were available for use by the Group.
18. Deposits with Licensed Commercial Banks
| Fixed deposits with banks | 2,706,172,054 | 1,335,271,762 | 2,706,172,054 | 1,335,271,762 |
19. Loans and Receivables to Customers
| Gross loans and receivables | 26,383,905,806 | 19,784,908,258 | 26,383,905,806 | 19,784,908,258 |
| Less: Individual impairment [19 (a)] | 229,430,107 | 93,609,521 | 229,430,107 | 93,609,521 |
| Collective impairment [19 (b)] | 429,531,404 | 240,711,855 | 429,531,404 | 240,711,855 |
| 25,724,944,295 | 19,450,586,882 | 25,724,944,295 | 19,450,586,882 |
19 (a) Movement in Individual Impairment Charge for Loans and Receivables
| Balance as at 1st April | 93,609,521 | 199,103,490 | 93,609,521 | 199,103,490 |
| Less: Write-off during the year | – | 122,110,801 | – | 122,110,801 |
| Add: Impairment charge for the year | 135,820,586 | 16,616,832 | 135,820,586 | 16,616,832 |
| Balance as at 31st March | 229,430,107 | 93,609,521 | 229,430,107 | 93,609,521 |
19 (b) Movement in Collective Impairment Charge for Loans and Receivables
| Balance as at 1st April | 240,711,855 | 128,540,628 | 240,711,855 | 128,540,628 |
| Add: Impairment charge for the year | 188,819,549 | 112,171,227 | 188,819,549 | 112,171,227 |
| Balance as at 31st March | 429,531,404 | 240,711,855 | 429,531,404 | 240,711,855 |
19.i Product-wise Analysis of Loans and Receivables
| Loans [Note 19 (c)] | 6,387,813,280 | 4,828,928,358 | 6,387,813,280 | 4,828,928,358 |
| Lease rentals receivable [Note 19 (c)] | 13,542,198,495 | 10,636,697,301 | 13,542,198,495 | 10,636,697,301 |
| Net investment in hiring contracts [Note 19 (e)] | 5,794,932,520 | 3,984,961,223 | 5,794,932,520 | 3,984,961,223 |
| 25,724,944,295 | 19,450,586,882 | 25,724,944,295 | 19,450,586,882 |
19.ii Analysis of Loans and |
||||
| Transport | 22,571,703,420 | 16,877,136,974 | 22,571,7043,420 | 16,877,136,974 |
| Pawning | 631,211,238 | 1,065,267,338 | 631,211,238 | 1,065,267,338 |
| Others | 2,522,029,637 | 1,398,869,572 | 2,522,029,637 | 1,398,869,572 |
| 25,724,944,295 | 19,450,586,882 | 25,724,944,295 | 19,450,586,882 |
19 (c) Loans
| Short-term loans | 1,856,389,487 | 1,410,036,770 | 1,856,389,487 | 1,410,036,770 |
| Term and vehicle loans | 3,673,626,439 | 2,090,261,849 | 3,673,626,439 | 2,090,261,849 |
| Staff loans | 219,952,491 | 187,650,008 | 219,952,491 | 187,650,008 |
| Pawning advances | 645,558,079 | 1,065,267,338 | 645,558,079 | 1,065,267,338 |
| Loans given to employee share ownership trust | 78,988,323 | 104,350,000 | 78,988,323 | 104,350,000 |
| 6,474,514,819 | 4,857,565,965 | 6,474,514,819 | 4,857,565,965 | |
| Less: Impairment allowance for loans | ||||
| Individual [Note 19 (c) (i)] | 68,962,269 | 14,493,992 | 68,962,269 | 14,493,992 |
| Collective [Note 19 (c) (ii)] | 17,739,270 | 14,143,615 | 17,739,270 | 14,143,615 |
| Net loans and advances | 6,387,813,280 | 4,828,928,358 | 6,387,813,280 | 4,828,928,358 |
19 (c) (i) Movement in Individual Impairment Charge for Loans and Receivables
| Balance as at 1st April | 14,493,992 | 21,144,140 | 14,493,992 | 21,144,140 |
| Less: Write-off during the year | – | 7,881,774 | – | 7,881,774 |
| Add: Impairment charge for the year | 54,468,277 | 1,231,626 | 54,468,277 | 1,231,626 |
| Balance as at 31st March | 68,962,269 | 14,493,992 | 68,962,269 | 14,493,992 |
19 (c) (ii) Movement in Collective Impairment Charge for Loans and Receivables
| Balance as at 1st April | 14,143,615 | 9,304,788 | 14,143,615 | 9,304,788 |
| Add: Impairment charge for the year | 3,595,655 | 4,838,827 | 3,595,655 | 4,838,827 |
| Balance as at 31st March | 17,739,270 | 14,143,615 | 17,739,270 | 14,143,615 |
19 (d) Lease Rental Receivable
| Total lease rental receivable | 20,254,127,652 | 16,243,494,344 | 20,254,127,652 | 16,243,494,344 |
| Less: Unearned interest income | 6,198,562,669 | 5,334,595,300 | 6,198,562,669 | 5,334,595,300 |
| Lease rental receivable | 14,055,564,983 | 10,908,899,044 | 14,055,564,983 | 10,908,899,044 |
| Less: Impairment allowance for lease rental receivable | ||||
| Individual [Note 19 (d) (i)] | 137,693,157 | 68,663,939 | 137,693,157 | 68,663,939 |
| Collective [Note 19 (d) (ii)] | 375,673,331 | 203,537,804 | 375,673,331 | 203,537,804 |
| Net lease rental receivable | 13,542,198,495 | 10,636,697,301 | 13,542,198,495 | 10,636,697,301 |
19 (d) (i) Movement in Individual Impairment Charge for Lease Rental Receivable |
||||
| Balance as at 1st April | 68,663,939 | 144,750,430 | 68,663,939 | 144,750,430 |
| Less: Write-off during the year | – | 83,754,713 | – | 83,754,713 |
| Add: Impairment charge for the year | 69,029,218 | 7,668,222 | 69,029,218 | 7,668,222 |
| Balance as at 31st March | 137,693,157 | 68,663,939 | 137,693,157 | 68,663,939 |
19 (d) (ii) Movement in Collective Impairment Charge for Lease Rental Receivable
| Balance as at 1st April | 203,537,804 | 110,995,295 | 203,537,804 | 110,995,295 |
| Add: Impairment charge for the year | 172,135,527 | 92,542,509 | 172,135,527 | 92,542,509 |
| Balance as at 31st March | 375,673,331 | 203,537,804 | 375,673,331 | 203,537,804 |
19 (e) Hire Purchase Rental Receivable
| Gross hire purchase rental receivable | 5,853,826,003 | 4,018,443,248 | 5,853,826,003 | 4,018,443,248 |
| Less: Impairment allowance for hire purchase | ||||
| Individual [Note 19 (e) (i)] | 22,774,681 | 10,451,590 | 22,774,681 | 10,451,590 |
| Collective [Note 19 (e) (ii)] | 36,118,802 | 23,030,435 | 36,118,802 | 23,030,435 |
| Net lease rental receivable | 5,794,932,520 | 3,984,961,223 | 5,794,932,520 | 3,984,961,223 |
19 (e) (i) Movement in Individual Impairment Charge for Hire Purchase Receivable
| Balance as at 1st April | 10,451,590 | 33,208,920 | 10,451,590 | 33,208,920 |
| Less: Write-off during the year | – | 30,474,314 | 30,474,314 | |
| Add: Impairment charge for the year | 12,323,091 | 7,716,984 | 12,323,091 | 7,716,984 |
| Balance as at 31st March | 22,774,681 | 10,451,590 | 22,774,681 | 10,451,590 |
19 (e) (ii) Movement in Collective Impairment Charge for Hire Purchase Receivables
| Balance as at 1st April | 23,030,435 | 8,240,544 | 23,030,435 | 8,240,544 |
| Add: Impairment charge for the year | 13,088,367 | 14,789,891 | 13,088,367 | 14,789,891 |
| Balance as at 31st March | 36,118,802 | 23,030,435 | 36,118,802 | 23,030,435 |
19 (f) Maturity Analysis of Lease Receivables |
||||
| Lease rental receivable within one year | ||||
| Less: Total lease rental receivable within one year | 8,106,635,369 | 5,388,487,625 | 8,106,635,369 | 5,388,487,625 |
| Less: Unearned interest income | 2,183,272,197 | 2,502,774,088 | 2,183,272,198 | 2,502,774,088 |
| 5,923,363,172 | 2,885,713,537 | 5,923,363,172 | 2,885,713,537 | |
| Lease rental receivable after one year before five years | ||||
| Total lease rental receivable after one year before five years | 12,087,523,647 | 10,606,581,160 | 12,087,523,647 | 10,606,581,160 |
| Less: Unearned interest income | 3,996,311,775 | 2,796,869,271 | 3,996,311,775 | 2,796,869,271 |
| 8,091,211,872 | 7,809,711,889 | 8,091,211,872 | 7,809,711,889 | |
| Lease rental receivable after five years | ||||
| Total lease rental receivable after five years | 61,235,185 | 248,425,559 | 61,235,185 | 248,425,559 |
| Less: Unearned interest income | 20,245,246 | 35,051,941 | 20,245,246 | 35,051,941 |
| 40,989,939 | 213,373,618 | 40,989,939 | 213,373,618 | |
| 14,055,564,983 | 10,908,799,044 | 14,055,564,983 | 10,908,799,044 | |
19 (g) Operating Leases
There were no non-cancellable operating leases as at the reporting date.
19 (h) Loans given to Employee Share Ownership Trust
There were no shares issued to the Employee Share Ownership scheme during the financial year 2013/14.
There were no shares issued to employees from Employee Share Ownership scheme during the year.
The Company or any of its subsidiaries have not directly or indirectly provided funds to the Employee Share Ownership scheme during the financial year 2013/14.
20. Financial Investments - Available-For-Sale
Company |
Group |
|||
| As at 31st March | 2014 | 2013 | 2014 | 2013 |
| Rs. | Rs. | Rs. | Rs. | |
| Quoted shares [Note 20 (a)] | 789,600,000 | 563,943,600 | 789,600,000 | 563,943,600 |
| Investment in unquoted shares [Note 20 (b)] | – | – | – | – |
| 789,600,000 | 563,943,600 | 789,600,000 | 563,943,600 | |
| As at 31st March | 2014 | 2013 | ||||
| No. of Shares | Cost Rs. |
Market Value Rs. |
No. of Shares | Cost Rs. |
Market Value Rs. |
|
20 (a) Quoted Shares |
||||||
| Company | ||||||
| Ordinary shares of Ceylinco Insurance PLC |
564,000 | 99,909,075 | 789,600,000 | 564,000 | 99,909,075 | 563,943,600 |
| Group | ||||||
| Ordinary shares of Ceylinco Insurance PLC |
564,000 | 99,909,075 | 789,600,000 | 564,000 | 99,909,075 | 563,943,600 |
Sensitivity Analysis - Equity Price Risk
For investments classified as available-for-sale, a 1% decrease in the Colombo Stock Exchange price would cause a decrease in equity by Rs. 7,796,000/-.
| 31st March 2014 | 31st March 2013 | |||||
| No. of Shares | Cost Rs. |
Market Value Rs. |
No. of Shares | Cost Rs. |
Market Value Rs. |
|
20 (b) Unquoted Shares |
||||||
| Company | ||||||
| Ordinary shares of Middleway Limited | 416,455 | 4,164,550 | – | 416,455 | 4,164,550 | – |
| Preference shares of Middleway Limited | 2,050,000 | 20,500,000 | – | 2,050,000 | 20,500,000 | – |
| 24,664,550 | 24,664,550 | |||||
| Provision for impairment | (24,664,550) | (24,664,550) | ||||
| – | – | |||||
| Group | ||||||
| Ordinary shares of Middleway Limited | 416,455 | 4,164,550 | – | 416,455 | 4,164,550 | – |
| Preference shares of Middleway Limited | 2,050,000 | 20,500,000 | – | 2,050,000 | 20,500,000 | – |
| 24,664,550 | 24,664,550 | |||||
| Provision for Impairment | (24,664,550) | (24,664,550) | ||||
| – | – | |||||
Company |
Group |
|||
| As at 31st March | 2014 | 2013 | 2014 | 2013 |
| Rs. | Rs. | Rs. | Rs. | |
21. Financial Investments - Held-to-Maturity |
||||
| Government of Sri Lanka - Treasury bills | 1,736,979,228 | 1,085,512,134 | 1,736,979,228 | 1,085,512,134 |
| Government of Sri Lanka - Treasury bonds | 92,637,637 | 60,034,848 | 92,637,637 | 60,034,848 |
| Quoted debentures | 5,074,177 | 5,043,269 | 5,074,177 | 5,043,269 |
| 1,834,691,042 | 1,150,590,251 | 1,834,691,042 | 1,150,590,251 | |
22. Financial Investments - Loans and Receivable
Securities Purchased Under Resale Agreements
| Seylan Bank PLC | – | 50,000,000 | – | 50,000,000 |
| People’s Bank | 88,000,000 | 15,164,014 | 88,000,000 | 15,164,014 |
| Commercial Bank of Ceylon PLC | 70,000,000 | 34,000,000 | 70,000,000 | 34,000,000 |
| Bank of Ceylon | 35,000,000 | 15,000,000 | 35,000,000 | 15,000,000 |
| Hatton National Bank PLC | 34,999,991 | 26,000,000 | 34,991,991 | 26,000,000 |
| 227,999,991 | 140,164,014 | 227,999,991 | 140,164,014 |
23. Investment in Subsidiary
| 2014 | 2013 | |||
| Principal Activity | Holding | Cost Rs. |
Cost Rs. |
|
| CDB Micro Finance Limited | Micro lending | 100% | 2,745,447 | 2,745,447 |
| Cost at Acquisition | 5,000,000 | 5,000,000 | ||
| Less: Provision for Impairment | 2,254,553 | 2,254,553 | ||
| 2,745,447 | 2,745,447 |
24. Investment Property
| Company | Group | |||
| As at 31st March | 2014 | 2013 | 2014 | 2013 |
| Rs. | Rs. | Rs. | Rs. | |
| Cost | ||||
| Balance as at 1st April | 20,197,977 | 20,197,977 | 20,197,977 | 20,197,977 |
| Additions/disposals | – | – | – | – |
| Balance as at 31st March | 20,197,977 | 20,197,977 | 20,197,977 | 20,197,977 |
| Accumulated depreciation | ||||
| Balance as at 1st April | – | – | – | – |
| Additions/disposals | – | – | – | – |
| Balance as at 31st March | – | – | – | – |
| Net book value at the end of the year | 20,197,977 | 20,197,977 | 20,197,977 | 20,197,977 |
| Market Value of the property | 36,000,000 | 36,000,000 | 36,000,000 | 36,000,000 |
The fair value of the investment property is based on the market valuations carries out by Mr. D S N Perera, on 31st March 2013. Graduate member of the Institute of Values of Sri Lanka, who is an independent valuer.
The Company carries the investment properties at cost, since the fair value of the investment properties were above the carrying value the Board of Directors concluded there was no impairment in investment property.
Depreciation has not been recognised since land has an indefinite life.
Information on the Investment property [As required by the Rule No 7.6 (viii) of the Listing Rules of the Colombo Stock Exchange].
| Location | Type | Extent (perches) | Cost | Fair value |
| Biyagama | Land | 120 | Rs. 20,197,977 | Rs. 36,000,000 |
25. Property, Plant & Equipment
Company/Group
| 31st March 2013 | ||||||||
| Land Rs. |
Building Rs. |
Furniture and Fittings Rs. |
Computer Equipment Rs. |
Office Equipment Rs. |
Motor Vehicles Rs. |
Capital Work-in- Progress Rs. |
Total Rs. |
|
| Cost/Valuation | ||||||||
| Balance at 1st April 2013 | 374,121,022 | 5,961,989 | 141,941,334 | 157,621,692 | 97,063,538 | 79,685,449 | 19,859,872 | 876,254,896 |
| Add: Additions during the period | – | – | 113,763,080 | 23,225,399 | 6,714,801 | 13,843,557 | 292,936,559 | 450,483,396 |
| Less: Disposal during the period | – | – | – | – | – | 7,273,333 | – | 7,273,333 |
| Balance at 31st March 2014 | 374,121,022 | 5,961,989 | 255,704,414 | 180,847,091 | 103,778,339 | 86,255,673 | 312,796,429 | 1,319,464,959 |
| Accumulated Depreciation | ||||||||
| Balance at 01st April 2013 | – | 92,150 | 64,942,454 | 75,593,694 | 37,558,832 | 40,349,960 | – | 218,537,090 |
| Add: Charge for the period | – | 149,050 | 37,409,237 | 30,929,679 | 18,397,136 | 15,494,467 | – | 102,379,569 |
| Less: Disposal during the period | – | – | – | – | – | 5,922,509 | – | 5,922,509 |
| Balance at 31st March 2014 | – | 241,200 | 102,351,691 | 106,523,373 | 55,955,968 | 49,921,918 | – | 314,994,150 |
| Written down value 31st March 2014 | 374,121,022 | 5,720,789 | 153,352,723 | 74,323,718 | 47,822,371 | 36,333,755 | 312,796,429 | 1,004,470,809 |
| Written down value 31st March 2013 | 374,121,022 | 5,869,839 | 76,998,880 | 82,027,998 | 59,504,706 | 39,335,489 | 19,859,872 | 657,717,807 |
Borrowing cost capitalised on the term loan obtained for the purpose of construction of building is Rs. 14,946,925/-.
The Company has revalued its land on 31st March 2013 by Mr. D S N Perera (Graduate Member of the Institute of Valuers of Sri Lanka) who is an independent valuer. The fair value was arrived by referring to the Market Value of the lands situated in the respective area.
| Location | Type | Extent(perches) | Revalued Amount | Net Book Value |
| No. 123 and 121, Maradana Road, Colombo 10 | Land | 85.2 | 274,583,000 | 274,583,000 |
| No. 377/2, Kandy Road, Mahara, Kadawatha | Land | 39 | 58,500,000 | 58,500,000 |
| No. 79, Mihindu Mawatha, Mahara, Kadawatha | Land | 76 | 36,100,000 | 36,100,000 |
| Madapatha, Piliyandala | Land | 35 | 5,600,000 | 5,600,000 |
Company |
Group |
|||
| As at 31st March | 2014 | 2013 | 2014 | 2013 |
| Rs. | Rs. | Rs. | Rs. | |
26. Intangible Assets |
||||
| Cost | ||||
| Balance at 01st April | 75,288,486 | – | 75,288,486 | – |
| Additions during the period | 19,125,565 | 75,288,486 | 19,125,565 | 75,288,486 |
| Disposal during the period | – | - | – | – |
| Balance at 31st March | 94,414,051 | 75,288,486 | 94,414,051 | 75,288,486 |
| Accumulated Amortisation | ||||
| Balance at 01st April | 6,173,107 | – | 6,173,107 | – |
| Charge for the period | 10,457,183 | 6,173,107 | 10,457,183 | 6,173,107 |
| Disposal during the period | – | – | – | – |
| Balance at 31st March | 16,630,290 | 6,173,107 | 16,630,290 | 6,173,107 |
| Net Book Value | 77,783,761 | 69,115,379 | 77,783,761 | 69,115,379 |
There were no restrictions on the title of the intangible assets of the group as at the reporting date.
27. Other Assets
| Tax receivable | 106,086,367 | 207,065,061 | 106,086,367 | 207,065,061 |
| Insurance premium receivable | 349,746,398 | 254,058,633 | 349,746,398 | 254,058,633 |
| Insurance commission receivable | 12,993,188 | 18,617,425 | 12,993,188 | 18,617,425 |
| Unamortised cost on staff loans | 73,883,386 | 61,369,971 | 73,883,386 | 61,369,971 |
| Vehicle stock | 126,061,321 | 217,842,427 | 126,061,321 | 217,842,427 |
| Gift stock | 3,258,153 | 5,748,983 | 3,258,153 | 5,748,983 |
| Gold stock | 73,410,222 | 8,456,040 | 73,410,222 | 8,456,040 |
| Other stocks | 2,077,024 | – | 2,077,024 | – |
| Other receivables and advances | 169,865,554 | 85,113,502 | 169,864,754 | 85,113,502 |
| 917,381,613 | 858,272,042 | 917,380,813 | 858,272,042 |
28. Deposits from Customers
| Term deposits | 23,707,887,406 | 17,443,021,487 | 23,707,887,406 | 17,443,021,487 |
| Savings deposits | 788,584,946 | 327,601,177 | 788,584,946 | 327,601,177 |
| Mudharaba | 21,720,385 | 550,000 | 21,720,385 | 550,000 |
| 24,518,192,737 | 17,771,172,664 | 24,518,192,737 | 17,771,172,664 |
29. Debentures
| As at 31st March | Company | Group | ||||||
| Year of | Face Value | Term | Issue | Maturity | 2014 | 2013 | 2014 | 2013 |
| Issue | Date | Date | Rs. | Rs. | Rs. | Rs. | ||
| 2010 | 62,500,000 | 2.5 Years | 12/30/2010 | 6/30/2013 | – | 64,844,578 | – | 64,844,578 |
| 62,500,000 | 3 Years | 12/30/2010 | 12/30/2013 | – | 64,844,578 | – | 64,844,578 | |
| 62,500,000 | 3.5 Years | 12/30/2010 | 6/30/2014 | 64,474,588 | 64,844,578 | 64,474,588 | 64,844,578 | |
| 62,500,000 | 4 Years | 12/30/2010 | 12/30/2014 | 64,474,588 | 64,844,578 | 64,474,588 | 64,844,577 | |
| 2013 | 24,280,000 | 5 Years | 12/19/2013 | 12/19/2018 | 24,407,602 | – | 24,407,603 | – |
| 310,360,000 | 5 Years | 12/19/2013 | 12/19/2018 | 323,454,845 | – | 323,454,845 | – | |
| 665,360,000 | 5 Years | 12/19/2013 | 12/19/2018 | 695,521,212 | – | 695,521,212 | – | |
| 1,172,332,835 | 259,378,312 | 1,172,332,835 | 259,378,311 | |||||
Due within one year |
128,949,175 | 129,689,155 | 128,949,175 | 129,689,155 | ||||
Due after one year |
1,043,383,660 | 129,689,155 | 1,043,383,660 | 129,689,156 | ||||
| 1,172,332,835 | 259,378,310 | 1,172,332,835 | 259,378,311 | |||||
| Company | Group | |||
| 31st March 2014 | 31st March 2013 | 31st March 2014 | 31st March 2013 | |
| Rs. | Rs. | Rs. | Rs. | |
30. Other Interest Bearing Borrowings |
||||
| Due to Banks (Note 30.1) | 635,645,195 | 592,523,886 | 635,645,195 | 592,523,886 |
| Due to foreign institutional lenders (Note 30.2) | 836,308,064 | – | 836,308,064 | – |
| Securitisation (Note 30.3) | 1,229,874,118 | 1,299,045,585 | 1,229,874,118 | 1,299,045,585 |
| Commercial Papers | 303,624,521 | 365,343,734 | 303,624,521 | 365,343,734 |
| Other Borrowings | 136,553,752 | 246,791,375 | 136,553,752 | 246,791,375 |
| 3,142,005,650 | 2,503,704,580 | 3,142,005,650 | 2,503,704,580 | |
30.1 Due to Banks
| Lender | Loan Obtained | Term Months |
Company | Group | ||
| 31st March 2014 | 31st March 2013 | 31st March 2014 | 31st March 2013 | |||
| Rs. Mn | Rs. | Rs. | Rs. | Rs. | ||
| Seylan Bank - Term Loan 1 | 100 | 120 | 87,106,716 | 92,523,886 | 87,106,716 | 92,523,886 |
| Seylan Bank - Term Loan 2 | 300 | 36 | 216,119,346 | 300,000,000 | 216,119,346 | 300,000,000 |
| Seylan Bank - Term Loan 3 | 200 | 84 | 191,673,970 | – | 191,673,970 | – |
| Pan Asia Banking Corporation | 200 | 40 | 140,745,163 | 200,000,000 | 140,745,163 | 200,000,000 |
| 635,645,195 | 592,523,886 | 635,645,195 | 592,523,886 | |||
| Company | Group | ||||
| As at 31st March | 2014 | 2013 | 2014 | 2013 | |
| Term | Rs. | Rs. | Rs. | Rs. | |
30.2 Due to Foreign Institutional Lenders |
|||||
| Belgian Investment Company for developing countries | 4 Years | 836,308,064 | – | 836,308,064 | – |
The Company has obtained an unsecured loan of Rs. 786,780,000/- from Belgian Investment Company. The loan is repayable in 8 semi-annual instalments commencing from April 2014.
30.3 Securitisation
Securitisation Arrangements
Details of the securitisation outstanding as at 31st March 2014 is as follows:
| Issue No | Face value Rs. Mn |
Maximum Period Months |
Trustee | As at 31st March | Security |
| D4 | 200 | 36 | Deutsche Bank AG | 25,225,664 | Mortgage over Lease Receivables |
| D6 | 300 | 36 | Deutsche Bank AG | 97,397,480 | Mortgage over Lease/Hire Purchase Receivables |
| D7 | 400 | 36 | Deutsche Bank AG | 156,759,856 | Mortgage over Lease Receivables |
| D8 | 200 | 24 | Deutsche Bank AG | 47,539,103 | Mortgage over Lease Receivables |
| D9 | 300 | 36 | Deutsche Bank AG | 216,562,176 | Mortgage over Lease/Hire Purchase Receivables |
| D10 | 400 | 36 | Deutsche Bank AG | 341,799,560 | Mortgage over Lease/Hire Purchase Receivables |
| D11 | 400 | 36 | Deutsche Bank AG | 344,590,278 | Mortgage over Lease Receivables |
| 1,229,874,118 |
31. Deferred Tax Liability
| 2014 | 2013 | |
| Company/Group | Rs. | Rs. |
| Balance at 1st April | 31,912,358 | (30,837,745) |
| Charge for the year | 113,470,937 | 62,750,103 |
| Balance at 31st March | 145,383,295 | 31,912,358 |
The deferred tax liability is attributable for following:
| As at 31st March | 2014 | 2013 | ||
| Deferred Tax Liability | Temporary Difference Rs. |
Tax Effect Rs. |
Temporary Difference Rs. |
Tax Effect Rs. |
| Company/Group | ||||
| Deferred Tax liabilities on: | ||||
| Accelerated depreciation for | ||||
| Tax purpose - Own assets | 109,322,477 | 30,610,293 | 164,883,682 | 46,167,431 |
| Accelerated depreciation for Tax purpose - Leased assets |
1,657,666,114 | 464,146,512 | 1,522,585,899 | 426,324,052 |
| Unutilised tax losses | (1,088,520,883) | (304,785,847) | (1,470,332,774) | (411,693,177) |
| Defined benefit plans | (159,241,654) | (44,587,663) | (103,164,100) | (28,885,948) |
| 519,226,054 | 145,383,295 | 113,972,707 | 31,912,358 | |
| Company | Group | |||
| As at 31st March | 2014 | 2013 | 2014 | 2013 |
| Rs. | Rs. | Rs. | Rs. | |
| (Restated) | (Restated) | |||
32. Retirement Benefit Obligations |
||||
| Balance as at 1st April | 103,164,100 | 28,606,687 | 103,164,100 | 28,606,687 |
| Current service cost | 20,875,079 | 14,699,814 | 20,875,079 | 14,699,814 |
| Past service cost | – | 64,293,733 | – | 64,293,733 |
| Interest cost | 10,316,410 | 2,860,669 | 10,316,410 | 2,860,669 |
| Actuarial (gain)/loss | 25,713,942 | (6,803,343) | 25,713,942 | (6,803,343) |
| Payments made | (827,877) | (493,460) | (827,877) | (493,460) |
| Balance at 31st March | 159,241,654 | 103,164,100 | 159,241,654 | 103,164,100 |
| Amount Recognised in the Income Statement | ||||
| Current service cost | 20,875,079 | 14,699,814 | 20,875,079 | 14,699,814 |
| Interest cost | 10,316,410 | 2,860,669 | 10,316,410 | 2,860,669 |
| Past service cost | – | 64,293,733 | – | 64,293,733 |
| 31,191,489 | 81,854,216 | 31,191,489 | 81,854,216 | |
| Amount Recognised in the other Comprehensive Income | ||||
| Actuarial (gain)/loss | 25,713,942 | (6,803,343) | 25,713,942 | (6,803,343) |
An actuarial valuation of the gratuity liability was carried out as at 31st March 2014 by Mr. M. Poopalanathan. AIA, Messrs Actuarial and Management Consultants (Pvt) Limited, a company of professional actuaries. The valuation method used by the actuaries to value the fund is the ‘Projected Unit Credit Method’ the method recommended by the Sri Lanka Accounting Standard No. LKAS - 19 ‘Employee Benefits’ The Company does not fund the gratuity liability externally.
| Actuarial Assumptions | ||
| Normal retirement age | - | 55 years (2012/13 -55 years) |
| Rate of discount | - | 10% (2012/ 13 -10%) |
| Future Salary Increase | - | 10 % (2012/ 13 -10%) |
The Company applied, for the first time, Sri Lanka Accounting Standard LKAS 19 - ‘Employee Benefits’ and this necessitates restatement of previous Financial Statements. In accordance with the transitional provisions set out in LKAS 19, the Company applied the Standard with retrospective effect.
The opening Statement of Financial Position of the earliest comparative period is 31st March 2014 and therefore the comparative figures have been restated with effect from 31st March 2013.
As per the LKAS 19 - ‘Employee Benefits’ all past service costs are recognised at the earlier of when the amendment/curtailment occurs or when the related restructuring or termination costs are recognised. Hence the non-vested past services cost can no longer be deferred to be recognised over the future vesting period and any actuarial gain or losses to be recognised in the Other Comprehensive Income.
| Restated profit for the year ended 31st March 2013 | Rs. |
| Profit for the year ended 31st March 2013 as previously stated | 534,874,627 |
| Adjustment on the recognition of non-vested past service cost | (45,710,566) |
| Restated profit for the year ended 31st March 2013 | 489,164,061 |
| Other comprehensive income for the year ended 31st March 2013 as previously stated | 226,448,727 |
| Adjustment on the recognition of actuarial gain | 6,803,343 |
| Restated other comprehensive income for the year ended 31st March 2013 | 233,252,070 |
| Restated total comprehensive income for the year | 722,416,131 |
The Company recognised the Actuarial Gain arising from the Retirement Benefit obligation and non-vested past service cost in the profit or loss for the prior year. However, in accordance with LKAS 19 - ‘Employee Benefits’ the Company is required to recognise the actuarial gain/(loss) arising from the Retirement Benefit Obligation in the Statement of Comprehensive Income with effect from 1st April 2013. The change in policy was adjusted retrospectively in accordance with LKAS 8 - Accounting Policies, Changes in Accounting Estimates and Errors.
Sensitivity of Assumptions Employed in Actuarial Valuation
The following table demonstrates the sensitivity to a reasonably possible change in the key assumptions employed
with all other variables held constant in the employment benefit liability measurement.
The sensitivity of the Comprehensive Income Statement and the Statement of Financial Position is the effect of the assumed changes in discount rate and salary increment rate on the profit or loss and employment benefit obligation for the year.
Company/Group
| % Increase/(Decrease) in Increment Rate |
% Increase/(Decrease) in Interest Rate |
Present Value of Defined Benefit Obligation Rs. |
Effect on Comprehensive Income Rs. |
Effect on Present Value of the Obligation Rs. |
| 1 | 178,430,458 | (19,188,804) | 19,188,804 | |
| (1) | 142,581,181 | 16,660,473 | (16,660,473) | |
| 1 | 143,362,890 | 15,878,764 | (15,878,764) | |
| (1) | 177,811,124 | (18,569,470) | 18,569,470 |
| Company | Group | |||
| As at 31st March | 2014 | 2013 | 2014 | 2013 |
| Rs. | Rs. | Rs. | Rs. | |
33. Other Liabilities |
||||
| Accrued expenses | 36,522,088 | 18,699,118 | 36,807,090 | 18,984,920 |
| Supplier payables | 180,192,815 | 189,443,067 | 180,192,815 | 189,443,067 |
| Insurance premium payable | 246,655,413 | 202,687,408 | 246,655,413 | 202,687,408 |
| Bank overdraft | 263,468,437 | 144,400,549 | 263,468,437 | 144,400,549 |
| Advance lease rental received | 165,259,184 | 167,341,572 | 165,259,184 | 167,341,572 |
| Deferred transaction cost | 15,512,774 | 3,964,204 | 15,512,774 | 3,964,204 |
| Retention on building construction payments | 19,603,443 | – | 19,603,443 | – |
| Other liabilities | 78,924,638 | – | 79,024,639 | – |
| 1,006,138,792 | 726,535,918 | 1,006,523,795 | 726,821,720 | |
34. Stated Capital
| As at 31st March 2014 | 2014 | 2013 | ||
| No. of Shares Rs. |
Value Rs. |
No. of Shares Rs. |
Value Rs. |
|
| Ordinary Shares | ||||
| Balance as at 1st April | 54,305,207 | 1,185,061,645 | 51,968,516 | 1,114,960,915 |
| Issued during the year | ||||
| Voting | – | – | – | – |
| Non-Voting | – | – | 2,336,691 | 70,700,730 |
| 54,305,207 | 1,185,061,645 | 54,305,207 | 1,185,061,645 | |
| Composition of shares | ||||
| Voting | 46,299,223 | 46,299,223 | ||
| Non-Voting | 8,005,984 | 8,005,984 | ||
| 54,305,207 | 54,305,207 | |||
| Company | Group | |||
| As at 31st March | 2014 | 2013 | 2014 | 2013 |
| Rs. | Rs. | Rs. | Rs. | |
35. Statutory Reserve Fund |
||||
| Balance as at the 1st April | 385,711,809 | 278,736,884 | 385,711,809 | 278,736,884 |
| Transfers during the year | 112,242,554 | 106,974,925 | 112,242,554 | 106,974,925 |
| Balance as at 31st March | 497,954,363 | 385,711,809 | 497,954,363 | 385,711,809 |
The Reserve Fund is maintained in compliance with Direction No. 1 of 2003 Central Bank of Sri Lanka (Capital Funds) issued to Finance Companies.
As per the said Direction, every licenced finance company shall maintain a reserve fund and transfer to such reserve fund out of the net profits of each year after due provisions have been made for taxation and bad and doubtful debts on the following basis:
| Capital funds to deposit liabilities | % of transfer to reserve fund |
| Not less than 25% | 5% |
| Less than 25% and not less than 10% | 20% |
| Less than 50% | 50% |
Accordingly, the Company has transferred 20% of its net profit after taxation to the reserve fund as Company’s capital funds to deposit liabilities, belongs to less than 25% but not less than 10% category.
Company |
Group |
|||
| As at 31st March | 2014 | 2013 | 2014 | 2013 |
| Rs. | Rs. | Rs. | Rs. | |
36. Revaluation Reserve |
||||
| Balance as at the 1st April | 132,765,013 | 12,066,286 | 132,765,013 | 12,066,286 |
| Transfers during the year | – | 120,698,727 | – | 120,698,727 |
| Balance as at 31st March | 132,765,013 | 132,765,013 | 132,765,013 | 132,765,013 |
The Company has revalued its land on 31st March 2013 by Mr. D S N Perera (Graduate Member of the Institute of Valuers of Sri Lanka) who is an independent valuer. The fair value was arrived by referring to the market value of the lands situated in the respective area.
Company |
Group |
|||
| As at 31st March | 2014 | 2013 | 2014 | 2013 |
| Rs. | Rs. | Rs. | Rs. | |
37. Investment Fund Account |
||||
| Balance as at the 1st April | 50,933,191 | 21,102,344 | 50,933,191 | 21,102,344 |
| Transfers during the year | 36,812,258 | 29,830,847 | 36,812,258 | 29,830,847 |
| Balance as at 31st March | 87,745,449 | 50,933,191 | 87,745,449 | 50,933,191 |
The investment fund account is credited in accordance with the Central Bank Guidelines issued to create an investment fund account. 8% of the profit liable for VAT on Financial Service and 5% of the profit before tax calculated for payment of income tax purposes is transferred to the account when the payment is made on dates specified by the Act.
38. Capital Commitments and Contingencies
Contingent Liabilities
CDB jointly with Seylan Bank PLC has agreed to promote Seylan/CDB Visa international credit cards to CDB customers. The Company has undertaken to guarantee each card issued under this scheme and the total combined credit limits assigned to all card issued under this scheme will not exceed Rs. 10 Mn at any given time. The Company has given guarantees on behalf of its customers against the placement of investments with CDB by such customer. The maximum limit of the guarantee does not exceed the investment value of the customers.
A customer has filed a case in District Court against the Company regarding a disagreement in relation to the repayment period of a lease facility. The balance outstanding of the lease facility as at the reporting date is Rs. 250,000.
Other than the matters disclosed above there were no material contingent liabilities that require adjustment to or disclosure in the Financial Statements as at the reporting date.
Capital Commitments
Company is in the process of constructing the proposed head office building and the balance cost of the construction is estimated to be Rs. 300 Mn.
The Company has issued a purchasing order to purchase an inventory management software from Jinasena Infotec (Pvt) Limited at a cost of Rs. 4 Mn.
There were no material Capital Commitments other than above as at the reporting date.
39. Events Occurring after the Reporting Date
The Board of Directors has recommended a dividend of three Rupees. (Rs. 3.00) per share on both its 46,299,223 voting ordinary shares and 8,005,984 non-voting ordinary shares aggregating to a sum of Rupees Hundred and Sixty Two Million Nine Hundred Fifteen Thousand and Six Hundred and Twenty One as the first and final dividend for the financial year ended 31st March 2014.
There are no other events except the above occurring after the reporting date which require disclosure in/adjustments to the Financial Statements.
40. Transactions with Related Parties
40 (a) Transactions with Related Parties
| Name of the Related Party | Name of the Director/Trustee | Nature of the Transaction | Amount. Rs. 2014 |
Balance as at 31st March 2014 Due/(Payable) Rs. |
| Ceylinco Insurance PLC | Mr. D H J Gunswardena | Net investments in deposits | – | 68,000,00 |
| Mr. S R Abeynayake | Net investments in debentures | (25,230,000) | (224,770,000) | |
| Insurance Premium paid/payable | 357,667,115 | 100,251,726 | ||
| Insurance commission received/receivable | 37,952,328 | 11,159,031 | ||
| CDB ESOP Trust Fund (Pvt) Limited | Mr. P A Jayawardana (Trustee) | Loans given | Nil | 78,988,322 |
| Mr. R Renganathan (Trustee) | ||||
| Mr. E T L Ranasinghe (Trustee) |
40 (b) Transactions with Key Management Personnel and their Close Family Members
According to the LKAS 24 - ‘Related Party Disclosures’ Key Management Personnel are those having responsibility for planning, directing, and controlling the activities of the entity. Accordingly, the Board of Directors (Including Non-Executive and Executive Directors) has been classified as Key Management Personnel (KMP). Close members of the family of an individual are those family members who may be expected to influence, or be influenced by that individual in their dealings with the Company. They may include -
The individual’s domestic partner and children;
Children of the Individual’s domestic partner and dependants of the individual or the individual’s domestic partner;
Compensation of Key Management Personnel and other transactions of KMPs.
| Name of the Related Party | Non-Executive Independent Directors Rs. |
Non-Executive Directors Rs. |
Executive Directors Rs. |
Total 2013/14 Rs. |
Total 2012/13 Rs. |
| Short-term employment benefits | 2,880,000 | 2,520,000 | 34,867,800 | 40,267,800 | 30,671,680 |
| Post employment benefits | – | – | – | – | – |
| Other long-term benefits | – | – | – | – | – |
| Termination benefits | – | – | – | – | – |
| Share based payments | – | – | – | – | – |
| Total | 2,880,000 | 2,520,000 | 34,867,800 | 40,267,800 | 30,671,680 |
41. Maturity Analysis
| Statement of Maturity Analysis of Assets and Liabilities as at 31st March 2014 | ||||||
| Assets/Liabilities | Maturity Period | |||||
| Up to 1 Month Rs. |
2 - 3 Months Rs. |
3 - 12 Months Rs. |
12-60 Months Rs. |
More than 60 Months Rs. |
Total Rs. |
|
| Assets | ||||||
| Cash and cash equivalents | 462,555,296 | 462,555,296 | ||||
| Deposits in commercial banks | 1,049,434,887 | 691,450,025 | 965,287,142 | 2,706,172,054 | ||
| Loans and receivables to customers | 1,695,221,992 | 1,876,636,897 | 6,629,982,836 | 15,065,201,475 | 457,901,096 | 25,724,944,295 |
| Financial Investments - Available-for-sale | 789,600,000 | 789,600,000 | ||||
| Financial Investments - Held-to-maturity | 207,587,982 | 1,534,425,212 | 15,747,945 | 76,929,902 | 1,834,691,042 | |
| Financial investments - loans and receivable | 227,999,991 | 227,999,991 | ||||
| Investment in subsidiary | 2,745,447 | 2,745,447 | ||||
| Investment property | 20,197,977 | 20,197,977 | ||||
| Property, plant & Equipment | 301,341,243 | 703,129,566 | 1,004,470,809 | |||
| Intangible assets | 23,335,128 | 54,448,633 | 77,783,761 | |||
| Other assets | 161,056,871 | 385,826,831 | 285,628,818 | 63,651,820 | 21,217,273 | 917,381,613 |
| Total assets | 3,596,269,037 | 3,161,501,735 | 9,415,324,008 | 15,469,277,611 | 2,126,169,894 | 33,768,542,285 |
| Percentage of total assets | 11 | 9 | 28 | 46 | 6 | |
| Cumulative percentage | 11 | 20 | 48 | 94 | 100 | |
| Liabilities | ||||||
| Deposits from customers | 4,316,256,067 | 5,197,057,037 | 8,225,269,692 | 6,779,609,941 | 24,518,192,737 | |
| Debentures | 65,129,602 | 65,129,602 | 1,042,073,631 | 1,172,332,835 | ||
| Other interest bearing borrowings | 257,330,773 | 345,421,801 | 915,158,528 | 1,525,202,113 | 98,892,435 | 3,142,005,650 |
| Retirement benefit obligations | 159,241,654 | 159,241,654 | ||||
| Other liabilities | 693,775,734 | 325,580,051 | 48,680,102 | 102,742,751 | 29,076,659 | 1,199,855,297 |
| Shareholders’ Funds | ||||||
| Stated capital | 1,185,061,645 | 1,185,061,645 | ||||
| Reserve fund | 497,954,363 | 497,954,363 | ||||
| Revaluation reserve | 132,765,013 | 132,765,013 | ||||
| Investment fund account | 87,745,449 | 87,745,449 | ||||
| Available-for-Sale reserve | 689,690,925 | 689,690,925 | ||||
| Accumulated profit | 983,696,717 | 983,696,717 | ||||
| Total liabilities | 5,267,362,574 | 5,933,188,491 | 9,254,237,924 | 9,449,628,436 | 3,864,124,860 | 33,768,542,285 |
| Percentage of Total liabilities | 16 | 18 | 27 | 28 | 11 | |
| Cumulative Percentage | 16 | 34 | 61 | 89 | 100 | |
| Maturity gap | (1,671,093,537) | (2,771,686,757) | 161,086,085 | 6,019,649,175 | (1,737,954,966) | 0 |
| Cumulative gap | (1,671,093,537) | (4,442,780,294) | (4,281,694,209) | 1,737,954,966 | 0 | 0 |
42. Segmental Analysis
As per the SLFRS 8 ‘Operating Segments’ Company is required to disclose information to enable users of its financial statements to evaluate the nature and financial effects of the business activities in which it engages and the economic environments in which it operates. Accordingly, below information gives the segmental information on performance of the Company’s main business lines.
| Lease & Stock out on Hire | Loans | Others | Total | |||||
| As at 31st March | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
| Rs. | Rs. | Rs. | Rs. | Rs. | Rs. | Rs. | Rs. | |
Company |
||||||||
| Interest | 4,469,367,374 | 3,152,715,660 | 800,983,634 | 705,652,516 | 625,252,529 | 229,018,984 | 5,895,603,537 | 4,087,387,160 |
| Non-Interest Income | 159,708,801 | 119,915,360 | (168,403,259) | – | 238,252,468 | 104,547,550 | 229,558,010 | 224,462,910 |
| Total Revenue | 4,629,076,175 | 3,272,631,020 | 632,580,375 | 705,652,516 | 863,504,997 | 333,566,534 | 6,125,161,547 | 4,311,850,070 |
| Segmental Results | 4,629,076,175 | 3,272,631,020 | 632,580,375 | 705,652,516 | 863,504,997 | 333,566,534 | 6,125,161,547 | 4,311,850,070 |
| Interest Cost | 2,253,093,627 | 1,580,659,837 | 528,598,892 | 522,026,493 | 771,710,237 | 283,883,929 | 3,553,402,757 | 2,386,570,259 |
| Impairment charge for loans and other assets | 266,576,203 | 122,717,606 | 72,410,773 | 6,070,454 | – | – | 338,986,976 | 128,788,060 |
| Segment Contribution | 2,109,406,345 | 1,569,253,577 | 31,570,710 | 177,555,569 | 91,794,760 | 49,682,605 | 2,232,771,814 | 1,796,491,751 |
| Unallocated Expenses | 1,450,142,890 | 1,131,232,848 | ||||||
| Value added tax on financial services | 52,660,876 | 40,976,359 | ||||||
| Income tax expenses | 168,755,278 | 135,118,484 | ||||||
| Segmental result | 2,109,406,345 | 1,569,253,577 | 31,570,710 | 177,555,569 | 91,794,760 | 49,682,605 | 561,212,770 | 489,164,060 |
| Segment Assets | 19,335,101,529 | 14,621,658,524 | 4,536,213,290 | 4,828,928,359 | 6,622,492,563 | 2,626,026,026 | 30,493,807,382 | 22,076,612,909 |
| Unallocated Assets | 3,274,734,903 | 2,377,318,531 | ||||||
| Total Assets | 19,335,101,529 | 14,621,658,524 | 4,536,213,290 | 4,828,928,359 | 6,622,492,563 | 2,626,026,026 | 33,768,542,285 | 24,453,931,440 |
Group
| Lease & Stock out on Hire | Loans | Others | Total | |||||
| As at 31st March | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 | 2014 | 2013 |
| Rs. | Rs. | Rs. | Rs. | Rs. | Rs. | Rs. | Rs. | |
| Interest | 4,469,367,374 | 3,152,715,660 | 800,983,634 | 705,652,516 | 625,252,529 | 229,018,984 | 5,895,603,537 | 4,087,387,160 |
| Non-Interest Income | 159,708,801 | 119,915,360 | (168,403,259) | – | 238,252,468 | 104,547,550 | 229,558,010 | 224,462,910 |
| Total Revenue | 4,629,076,175 | 3,272,631,020 | 632,580,375 | 705,652,516 | 863,504,997 | 333,566,534 | 6,125,161,547 | 4,311,850,070 |
| Segmental results | 4,629,076,175 | 3,272,631,020 | 632,580,375 | 705,652,516 | 863,504,997 | 333,566,534 | 6,125,161,547 | 4,311,850,070 |
| Interest cost | 2,253,093,627 | 1,580,659,837 | 528,598,892 | 522,026,493 | 771,710,237 | 283,883,929 | 3,553,402,757 | 2,386,570,259 |
| Impairment charge for loans and other assets |
266,576,203 | 122,717,606 | 72,410,773 | 6,070,454 | – | – | 338,986,976 | 128,788,060 |
| Segment contribution | 2,109,406,345 | 1,569,253,577 | 31,570,710 | 177,555,569 | 91,794,760 | 49,682,605 | 2,232,771,814 | 1,796,491,751 |
| Unallocated expenses | 1,450,242,890 | 1,131,332,848 | ||||||
| Value added tax on financial services |
52,660,876 | 40,976,359 | ||||||
| Income tax expenses | 168,755,278 | 135,118,484 | ||||||
| Segmental result | 2,109,406,345 | 1,569,253,577 | 31,570,710 | 177,555,569 | 91,794,760 | 49,682,605 | 561,112,770 | 489,064,060 |
| Segment assets | 19,335,101,529 | 14,621,658,524 | 4,536,213,290 | 4,828,928,359 | 6,622,492,563 | 2,626,026,026 | 30,493,807,382 | 22,076,612,909 |
| Unallocated assets | 3,275,324,182 | 2,377,908,610 | ||||||
| Total assets | 19,335,101,529 | 14,621,658,524 | 4,536,213,290 | 4,828,928,359 | 6,622,492,563 | 2,626,026,026 | 33,769,131,564 | 24,454,521,519 |