(a) Domicile and legal form

Sunshine Holdings PLC (the Company) is a public limited liability Company incorporated and domiciled in Sri Lanka. The ordinary shares of the Company are listed on the Colombo Stock Exchange of Sri Lanka. The registered office and principal place of business of the Company is located at No. 60, Dharmapala Mawatha, Colombo 3.

The Group primarily is involved in the importing and selling of pharmaceuticals, managing portfolio of investments, cultivation and marketing of tea, rubber, palm oil and related products such as dairy farming, leasing out properties and generation of power.

The Group structure is given on page 106.

There were no significant changes in the nature of the principle activities of the Company.

(b) Consolidated Financial Statements

The consolidated financial statements of Sunshine Holdings PLC as at and for the year ended 31 March 2019 comprise the financial information of Company and its subsidiaries (together referred to as “the Group” and encompass the Company and its subsidiaries (together referred to as the “Group”).

Sunshine Holdings PLC does not have an identifiable parent of its own. The financial statements of all Companies in the Group are prepared for a common financial year, which ends on 31 March.

2.1 Statement of compliance

These consolidated financial statements have been prepared and presented in accordance with the Sri Lanka Accounting Standards (SLFRS’s and LKAS’s) laid down by the Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) and in compliance with the requirements of the Companies Act No. 07 of 2007.

The Board of Directors is responsible for the preparation and presentation of the Financial Statements of the Company and its Subsidiaries as per provisions of Companies Act No. 07 of 2007 and the Sri Lanka Accounting Standards (SLFRSs/LKASs).

The Board of Directors acknowledges this responsibility as set out in the “Statement of Directors’ Responsibility for Financial Statements”, “Annual Report of the Board of Directors” and in the statement appearing with the Statement of Financial Position of this Annual Report.

The financial statements were authorised for issue by the directors on 30 May 2019.

These consolidated financial statements are presented in Sri Lankan Rupees (LKR), which is the Group’s functional currency, except for the foreign subsidiary whose functional currency is different as it operates in a different economic environment.

In preparing these consolidated financial statements, management has made judgements and estimates that affect the application of the Group's accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to estimates are recognised prospectively.

(a) Judgements

Information about judgements made in applying accounting policies that have the most significant effects on the amounts recognised in the financial statements is included in the following notes:

• Note 9 – revenue recognition: whether revenue is recognised over time or at a point in time;
• Note 24 – consolidation: whether the Group has the control over an investee; and
• Note 25 – equity-accounted investees: whether the Group has significant influence over an investee.

(b) Assumptions and estimation uncertainties

Information about assumptions and estimation uncertainties at 31 March 2019 that have a significant risk of resulting in a material adjustment to the carrying amounts of assets and liabilities in the next financial year is included in the
following notes:

• Note 36 – measurement of defined benefit obligations: key actuarial assumptions;
• Note 13 – recognition of current tax expense;
• Note 27 – recognition of deferred tax assets: availability of future taxable profit against which deductible temporary differences and tax losses carried forward can be utilised;
• Note 22 – determining the fair value of biological assets on the basis of significant unobservable inputs;
• Note 38 – Provisions and contingencies;
• Note 6 – Impairment of financial and non-financial assets; and
• Note 33 – determining the fair value less costs to sell of the assets held for sale on the basis of significant unobservable inputs.

The consolidated financial statements have been prepared on the historical cost basis and applied consistently which no adjustments being made for inflationary factors affecting the financial statements except for the following material items in the Statement of Financial Positions.

The Group has consistently applied the following accounting policies to all periods presented in these consolidated financial statements except if mentioned otherwise:

6.1 Basis of consolidation

Business combinations

The Group accounts for business combinations using the acquisition method when control is transferred to the Group. The consideration transferred in the acquisition is generally measured at fair value, as are the identifiable net assets acquired. Any goodwill that arises is tested annually for impairment. Any gain on a bargain purchase is recognised in profit or loss immediately. Transaction costs are expensed as incurred, except if related to the issue of debt or equity securities. The consideration transferred does not include amounts related to the settlement of pre-existing relationships. Such amounts are generally recognised in profit or loss. Any contingent consideration is measured at fair value at the date of acquisition. If an obligation to pay contingent consideration that meets the definition of a financial instrument is classified as equity, then it is not remeasured and settlement is accounted for within equity. Otherwise, other contingent consideration is remeasured at fair value at each reporting date and subsequent changes in the fair value of the contingent consideration are recognised in profit or loss.

Non-controlling interests

NCI are measured initially at their proportionate share of the acquiree’s identifiable net assets at the date of acquisition. Changes in the Group’s interest in a subsidiary that do not result in a loss of control are accounted for as equity transactions.

Loss of control

When the Group loses control over a subsidiary, it derecognises the assets and liabilities of the subsidiary, and any related NCI and other components of equity. Any resulting gain or loss is recognised in profit or loss. Any interest retained in the former subsidiary is measured at fair value when control is lost.

Transactions eliminated on consolidation

Intra-group balances and transactions and any unrealised income and expenses arising from intra-group transactions, are eliminated. Unrealised gains arising from transactions with equity accounted investees are eliminated against the investment to the extent of the Group’s interest in the investee. Unrealised losses are eliminated in the same way as unrealised gains, but only to the extent that there is no evidence of impairment.

6.2 Foreign currency

Foreign currency transactions

Transactions in foreign currencies are translated into the respective functional currencies of Group companies at the exchange rates at the dates of the transactions.

Monetary assets and liabilities denominated in foreign currencies are translated into the functional currency at the exchange rate at the reporting date. Non-monetary assets and liabilities that are measured at fair value in a foreign currency are translated into the functional currency at the exchange rate when the fair value was determined. Non-monetary items that are measured based on historical cost in a foreign currency are translated at the exchange rate at the date of the transaction. Foreign currency differences are generally recognised in profit or loss and presented within finance costs.

The assets and liabilities of foreign operations, including goodwill and fair value adjustments arising on acquisition, are translated at the exchange rates at the reporting date. The income and expenses of foreign operations are translated at the exchange rates at the dates of the transactions. Foreign currency differences are recognised in OCI and accumulated in the translation reserve, except to the extent that the translation difference is allocated to NCI.

6.3 Impairment of Assets

6.3.1 Financial instruments and contract assets

(a) POLICY APPLICABLE FROM 1 APRIL 2018

The Group recognises loss allowances for ECLs on financial assets measured at amortised cost.

Loss allowances for trade receivables is always measured at an amount equal to lifetime Expected Credit Loss (ECL).

When determining whether the credit risk of a financial asset has increased significantly since initial recognition and when estimating ECLs, the Group considers reasonable and supportable information that is relevant and available without undue cost or effort. This includes both quantitative and qualitative information and analysis, based on the Group’s historical experience and informed credit assessment and including forward-looking information.

Measurement of ECLs

ECLs are a probability-weighted estimate of credit losses. Credit losses are measured as the present value of all cash shortfalls (i.e. the difference between the cash flows due to the entity in accordance with the contract and the cash flows that the Group expects to receive). ECLs are discounted at the effective interest rate of the financial asset.

(B) POLICY APPLICABLE PRIOR TO 1 APRIL 2018

A financial asset not carried at fair value through profit or loss is assessed at each reporting date to determine whether there is objective evidence that it is impaired. A financial asset is impaired if objective evidence indicates that a loss event has occurred after the initial recognition of the asset, and that the loss event had a negative effect on the estimated future cash flows of that asset that can be estimated reliably. Objective evidence that financial assets (including equity securities) are impaired can include default or delinquency by a debtor, restructuring of an amount due to the Group on terms that the Group would not consider otherwise, indications that a debtor or issuer will enter bankruptcy, or the disappearance of an active market for a security.

Financial assets measured at amortised cost

The Group considered evidence of impairment for these assets at both an individual asset and a collective level. All individually significant assets were individually assessed for impairment. Those found not to be impaired were then collectively assessed for any impairment that had been incurred but not yet individually identified. Assets that were not individually significant were collectively assessed for impairment. Collective assessment was carried out by grouping together assets with similar risk characteristics.

In assessing collective impairment, the Group used historical information on the timing of recoveries and the amount of loss incurred, and made an adjustment if current economic and credit conditions were such that the actual losses were likely to be greater or lesser than suggested by historical trends.

An impairment loss was calculated as the difference between an asset's carrying amount and the present value of the estimated future cash flows discounted at the asset's original effective interest rate. Losses were recognised in profit or loss and reflected in an allowance account. When the Group considered that there were no realistic prospects of recovery of the asset, the relevant amounts were written off. If the amount of impairment loss subsequently decreased and the decrease was related objectively to an event occurring after the impairment was recognised, then the previously recognised impairment loss was reversed through profit or loss.

Available-for-sale financial assets

Impairment losses on available-for-sale financial assets were recognised by reclassifying the losses accumulated in the fair value reserve to profit or loss. The amount reclassified was the difference between the acquisition cost (net of any principal repayment and amortisation) and the current fair value, less any impairment loss previously recognised in profit or loss. If the fair value of an impaired available-for-sale debt security subsequently increased and the increase was related objectively to an event occurring after the impairment loss was recognised, then the impairment loss was reversed through profit or loss. Impairment losses recognised in profit or loss for an investment in an equity instrument classified as available-for-sale were not reversed through profit or loss.

6.3.2 Non-financial assets

At each reporting date, the Group reviews the carrying amounts of its non-financial assets (other than biological assets, investment property, inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. Goodwill is tested annually for impairment. For impairment testing, assets 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 CGUs. Goodwill arising from a business combination is allocated to CGUs or groups of CGUs that are expected to benefit from the synergies of the combination. The recoverable amount of an asset or CGU is the greater of its value in use and its fair value less costs to sell. Value in use is based on the estimated future cash flows, discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and the risks specific to the asset or CGU. An impairment loss is recognised if the carrying amount of an asset or CGU exceeds its recoverable amount. Impairment losses are recognised in profit or loss. They are allocated first to reduce the carrying amount of any goodwill allocated to the CGU, and then to reduce the carrying amounts of the other assets in the CGU on a pro rata basis.

An impairment loss in respect of goodwill is not reversed. For other assets, 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.

6.4 Provisions

A provision is recognised if, as a result of a past event, the Group has a present legal or constructive obligation that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the obligation. Provisions are determined by discounting the expected future cash flows at a pre-tax rate that reflects current market assessments of the time value of money and, where appropriate, the risks specific to the liability.

6.5 Leases

Determining whether an arrangement contains a lease

At inception of an arrangement, the Group determines whether the arrangement is or contains a lease.

At inception or on reassessment of an arrangement that contains a lease, the Group separates payments and other consideration required by the arrangement into those for the lease and those for other elements on the basis of their relative fair values. If the Group concludes for a finance lease that it is impracticable to separate the payments reliably, then an asset and a liability are recognised at an amount equal to the fair value of the underlying asset; subsequently, the liability is reduced as payments are made and an imputed finance cost on the liability is recognised using the Group’s incremental borrowing rate.

Leased assets

Leases of property, plant and equipment that transfer to the Group substantially all of the risks and rewards of ownership are classified as finance leases. The leased assets are measured initially at an amount equal to the lower of their fair value and the present value of the minimum lease payments. Subsequent to initial recognition, the assets are accounted for in accordance with the accounting policy applicable to that asset. Assets held under other leases are classified as operating leases and are not recognised in the Group’s statement of financial position.

Lease payments

Payments made under operating leases are recognised in profit or loss on a straight-line basis over the term of the lease. Lease incentives received are recognised as an integral part of the total lease expense, over the term of the lease. Minimum lease payments made under finance leases are apportioned between the finance expense and the reduction of the outstanding liability. The finance expense is allocated to each period during the lease term so as to produce a constant periodic rate of interest on the remaining balance of the liability.

6.6 New accounting standards issued but not effective as at reporting date

SLFRS 16 Leases

The Group is required to adopt “SLFRS 16 Leases” from 1 April 2019.

SLFRS 16 introduces a single, on-balance sheet lease accounting model for lessees. A lessee recognises a right-of-use asset representing its right to use the underlying asset and a lease liability representing its obligation to make lease payments. There are recognition exemptions for short-term leases and leases of low-value items. Lessor accounting remains similar to the current standard – i.e. lessors continue to classify leases as finance or operating leases.

SLFRS 16 replaces existing leases guidance, including LKAS 17 Leases, IFRIC 4 Determining whether an Arrangement contains a Lease, SIC-15 Operating Leases - Incentives and SIC-27 Evaluating the Substance of Transactions Involving the Legal Form of a Lease.

Leases in which the Group is a lessee

The Group will recognise new assets and liabilities for its operating leases of office buildings. The nature of expenses related to those leases will now change because the Group will recognise a depreciation charge for right-of-use assets and interest expense on lease liabilities.

Previously, the Group recognised operating lease expense on a straight-line basis over the term of the lease, and recognised assets and liabilities only to the extent that there was a timing difference between actual lease payments and the expense recognised.

In addition, the Group will no longer recognise provisions for operating leases that it assesses to be onerous. Instead, the Group will include the payments due under the lease in its lease liability.

Leases in which the Group is a lessor

The Group will reassess the classification of sub-leases in which the Group is a lessor. Based on the information currently available. No significant impact is expected for other leases in which the Group is a lessor.

The Group is in the process of assessing the potential impact on its Financial Statements that could result on application of SLFRS 16.

The Group has initially applied SLFRS 15 (7.1) and SLFRS 9 (7.2) from 1 April 2018.

Due to the transition methods chosen by the Group in applying these standards, comparative information throughout these financial statements have not been restated to reflect the requirements of the new standards.

7.1 SLFRS 15 Revenue from Contracts with Customers

SLFRS 15 establishes a comprehensive framework for determining whether, how much and when revenue is recognised. It replaced LKAS 18 Revenue, LKAS 11 Construction Contract and related interpretations. Under SLFRS 15, revenue is recognised when a customer obtains control of the goods or services. Determining the timing of the transfer of control- at a point in time or over time-requires judgement.

The Group has adopted SLFRS 15 from 1 April 2018 using the cumulative effect method (without practical expedients), with the effect of initially applying this standard recognised at the date of initial application (i.e. 1 April 2018). Accordingly, the information presented for 2017 has not been restated – i.e. it is presented, as previously reported, under LKAS 18, LKAS 11 and related interpretations. Additionally, the disclosure requirements in SLFRS 15 have not generally been applied to comparative information.

There was no material impact on transition to SLFRS 15 on retained earnings and reserves as at 1 April 2018.

The following table summarises the impacts of adopting SLFRS 15 on the Group’s statement of profit or loss and OCI for the year ended 31 March 2019 for each of the line items affected. There was no material impact on the Group's financial statements except for reclassification of items.

Based on the requirements of SLFRS 15, some expenses which would have been reported under cost of sales have now been directly netted off against revenue.

7.2 SLFRS 9 Financial Instruments

SLFRS 9 sets out requirements for recognising and measuring financial assets, financial liabilities and some contracts to buy or sell non-financial items. The standard replaces LKAS 39 Financial Instruments: Recognition and Measurement.

SLFRS 9 contains three principal classification category for financial assets: measured at amortised cost, FVOCI and FVTPL. The classification of financial asset under SLFRS 9 is generally based on the business model in which a financial asset is managed and its contractual cash flow characteristics. SLFRS 9 eliminates the previous LKAS 39 categories of held to maturity, loans and receivables and available for sale. Under SLFRS 9, derivatives embedded in contracts where the host is a financial asset in the scope of the standard are never separated. Instead, the hybrid financial instrument as a whole is assessed for classification.

The adoption of SLFRS 9 has not had a significant effect on the Group‘s accounting policies related to financial liabilities and derivative financial instruments.

There was no material impact of transition to SLFRS 9 on retained earnings and reserves at 1 April 2018.

The following table and the accompanying notes below explain the original measurement categories under LKAS 39 and the new measurement categories under SLFRS 9 for each class of the Group's financial assets and financial liabilities as at 1 April 2018.

The following table and the accompanying notes below explain the original measurement categories under LKAS 39 and the new measurement categories under SLFRS 9 for each class of the Group’s financial assets and financial liabilities as at 1 April 2018.

Impairment of financial assets

SLFRS 9 replaces the “incurred loss” model in LKAS 39 with an “expected credit loss” (ECL) model. The new impairment model applies to financial assets measured at amortised cost. Under SLFRS 9, credit losses are recognised earlier than under LKAS 39.

The Group has determined that the application of SLFRS 9 as at 1 April 2018 did not have a material impact to the financial statements.

8.1 Basis of segmentation

The Group has the following seven strategic divisions, which are its reportable segments. These divisions offer different products and services, and are managed separately because they require different technology and marketing strategies.

The following summary describes the operations of each reportable segment:

The Company’s Group Managing Director reviews the internal management reports of each division at least quarterly.

Inter-segment pricing for any transactions between segments is determined on an arm’s length basis.

8.2 Information about reportable segments

Information related to each reportable segment is set out below. Segment profit (loss) before tax is used to measure performance because management believes that this information is the most relevant in evaluating the results of the respective segments relative to other entities that operate in the same industries.

8.3 Reconciliations of information on reportable segments to IFRS measures

Accounting policy

A. Revenue streams

The Group generates revenue primarily from investment, healthcare, plantation, consumer goods, energy and other sectors.

B. Disaggregation of revenue from contracts with customers

In the following table, revenue from contacts with customers is disaggregated by primary geographical market, major products and service lines and timing of revenue recognition. The table also includes a reconciliation of the disaggregated revenue with the Group’s reportable segments (see Note 8).

C. Contract balances

These refer to the Group’s rights to consideration for work completed but not billed at the reporting date. There were no contract balances as at the reporting date.

D. Performance obligations and revenue recognition policies

Revenue is measured based on the consideration specified in a contract with a customer. The Group recognises revenue when it transfers control over a good or service to a customer.

The following table provides information about the nature and timing of the satisfaction of performance obligation in contacts with customers, including significant payment terms and related revenue recognition policies:

Accounting policy

10.1 Profit on sale of trees of Watawala Plantation PLC, a subsidiary of the Company, represents the gain on disposal of trees recognised as consumable biological assets and bears biological assets at the reporting date.

10.2 The gain/(loss) on fair value of trees in Watawala Plantation PLC, a subsidiary of the Company, represents the unrealised gain from valuation of trees/timber at the reporting date.

10.3 Sundry income mainly includes commission income received from foreign suppliers for securing contracts with Government to Sunshine Healthcare Lanka Limited amounting to Rs. 75.4 Mn. (2018 – Rs. 79.9 Mn.).

Accounting policy

11.1 Staff costs

Accounting policy

Accounting policy

13.i Amount recognised in profit or loss

Tax expense on continuing operations excludes the Group’s share of the tax expenses of equity-accounted investee of Rs. Nil (2018 – Rs. Nil), which has been included in “share of profit of equity-accounted investee, net of tax”.

13.i.a Current Taxes

Company

In terms of the Inland Revenue Act No. 24 of 2017 and subsequent gazette notifications thereto, the Company is liable for income tax at 28% (2018 – 28%) on its taxable income.

Group

In accordance with the provision of the Inland Revenue Act No. 24 of 2017 and subsequent gazette notifications thereto, the subsidiary companies of the Company are liable for income tax at the following rates:

Watawala Tea Australia Pty Ltd., is liable for Income Tax at 30% as per the Tax regulation in Australia.

Waltrim Hydropower (Private) Limited

Persuant to the agreement entered into with the Board of Investments (BOI) of Sri Lanka, profit of the subsidiary was exempted from income tax for a period of five years reckoned from the year of assessment as may be determined by the Board in which the subsidiary commenced to make profits or any year of assessment not later than two years from the date of commencement of operations of the subsidiary whichever was earlier. Accordingly, the subsidiary was exempt from February 2014.

After the expiration of the aforesaid tax exemption period, the profit of the Company is taxed at the rate of 10% for a period of two years and at 20% thereafter. Accordingly, the Company has become liable for income tax at a rate of 10% from the year 2019.

Upper Waltrim Hydropower (Private) Limited and Elgin Hydropower (Private) Ltd.

Pursuant to the agreement entered into with the Board of Investments (BOI) of Sri Lanka, profit of the Upper Waltrim Hydropower (Private) Limited and Elgin Hydropower (Private) Ltd., shall qualify for tax exemption period of seven years as stipulated in the
Inland Revenue Act No. 10 of 2006 as amended by Inland Revenue (Amendment) Act No. 8 of 2012 (Section 17A) based on proposed investment of more than Sri Lankan Rupees Five Hundred Million (Rs. 500 Mn.) in fixed assets in the Project.

For the above purpose, the “year of assessment” shall be reckoned from the year in which the enterprise commences to make profits or any year of assessment not later than two years reckoned from the date of commencement of commercial operations whichever is earlier as such.

The exemption period for Upper Waltrim Hydropower (Private) Limited commenced from financial year 2017/18.

The exemption period for Elgin Hydropower (Private) Ltd., commenced from financial year 2017/18.

Waltrim Energy Limited

Pursuant to the agreement entered into with the Board of Investments (BOI) of Sri Lanka, profit of the Company is exempt from income tax for a period of five years reckoned from the year of assessment as may be determined by the Board in which the Company commences to make profits or any year of assessment not later than two years from the date of commencement of operations of the Company whichever is earlier. Accordingly, the Company is exempt from February 2014.

After expiration of the aforesaid tax exemption period, the profit of the Company is taxed at the rate of 10% for a period of two years and 20% thereafter. Accordingly, the Company is liable for income tax at a rate of 10% from the year 2019.

Watawala Tea Ceylon Limited

Watawala Tea Ceylon Limited claims tax relief under Section 16 of the Inland Revenue Act No. 10 of 2006.

Watawala Dairy Limited

Watawala Dairy Limited enjoys a tax exemption period of five years from the year in which the enterprise commences to make profits or any year of assessment not later than two years reckoned from the date of commencement of commercial operations whichever is earlier, under Section 17 (2) of the Board of Investment of Sri Lanka Law No. 4 of 1978 and in accordance with the provisions of the Inland Revenue Act No. 10 of 2006.

After the expiration of the tax exemption period, the profit and income of the Company shall be charged at the rate of twenty percent (20%) for any year of assessment immediately succeeding the last date of the tax exemption period during which the profit and income of the entity is exempted from income tax.

13.ii Amount recognised in OCI

13.iii Amounts recognised directly in equity

There were no items recognised directly in equity during the year ended 31 March 2019.

13.iv Reconciliation of effective tax rate

Group

Company

13.v Tax losses carried forward

The tax losses for which no deferred tax asset was recognised are as follows:

Management has presented the performance measure adjusted EBITDA because it monitors this performance measure at a consolidated level and it believes that this measure is relevant to an understanding of the Group’s financial performance. Adjusted EBITDA is calculated by adjusting profit from continuing operations to exclude the impact of taxation, net financier costs, depreciation, amortisation, impairment losses/reversals related to goodwill, intangible assets, property, plant and equipment and the premeasurement of disposal groups and share of profit of equity-accounted investees.

Adjusted EBITDA is not a defined performance measure in SLFRS. The Group’s definition of adjusted EBITDA may not be comparable with similarly titled performance measures and disclosers by other entities.

Reconciliation of adjusted EBITDA to profit from continuing operations – Group

Accounting policy

15.1 Results of discontinued operation

In August 2017, the Sunshine Packaging Lanka Limited (Subsidiary) discontinued its entire operation of manufacturing and selling metal cans and allied products for the food canning industry.

Subsequent to discontinuation of the operation, the Subsidiary changed its business model and is engaged in the business of renting premises and earning rent income. Accordingly, the Subsidiary eliminated the results of the discontinued operations as follows:

The loss from the discontinued operation of Rs. 211 Mn. for the year ended 31 March 2018 is attributable entirely to the owners of the Group.

Accounting policy

16.1 Basic Earnings Per Share

The earnings per share is computed on the profit attributable to ordinary shareholders after tax and non-controlling interest divided by the weighted average number of ordinary shares during the year.

16.1.2 Weighted average number of ordinary shares

16.2 Diluted Earnings Per Share

There was no dilution of ordinary shares outstanding at any time during the year. Therefore, diluted earnings per share is the same as basic earning per share as shown in Note 16.1.

Accounting policy

Compliance with Sections 56 and 57 of Companies Act No. 07 of 2007

As required by Section 56 of the Companies Act No. 07 of 2007, the Board of Directors of the Company satisfied the solvency test in accordance with Section 57, prior to declaring the final dividend. A statement of solvency duly completed and signed by the Directors on 30 May 2019 has been audited by Messrs KPMG.

17.1 Dividend paid during the year

Financial Assets

a. Policy applicable from 1 April 2018

Recognition and initial measurement

Trade receivables and debt securities issued are initially recognised when they are originated. All other financial assets and financial liabilities are initially recognised when the Group becomes a party to the contractual provisions of the instrument.

A financial asset (unless it is a trade receivable without a significant financing component) or financial liability is initially measured at fair value plus, for an item not at FVTPL, transaction costs that are directly attributable to its acquisition or issue. A trade receivable without a significant financing component is initially measured at the transaction price.

Classification and subsequent measurement of financial assets

On initial recognition, a financial asset is classified as measured at: amortised cost; FVOCI (Fair value through OCI) – debt investment; FVOCI – equity investment; or FVTPL (Fair value through profit or loss).

Financial assets are not reclassified subsequent to their initial recognition unless the Group changes its business model for managing financial assets, in which case all affected financial assets are reclassified on the first day of the first reporting period following the change in the business model.

A financial asset is measured at amortised cost if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is to hold assets to collect contractual cash flows; and
• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

A debt investment is measured at FVOCI if it meets both of the following conditions and is not designated as at FVTPL:

• it is held within a business model whose objective is achieved by both collecting contractual cash flows and selling financial assets; and
• its contractual terms give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding.

On initial recognition of an equity investment that is not held for trading, the Group may irrevocably elect to present subsequent changes in the investment's fair value in OCI. This election is made on an investment-by-investment basis.

All financial assets not classified as measured at amortised cost or FVOCI as described above are measured at FVTPL. This includes all derivative financial assets. On initial recognition, the Group may irrevocably designate a financial asset that otherwise meets the requirements to be measured at amortised cost or at FVOCI as at FVTPL if doing so eliminates or significantly reduces an accounting mismatch that would otherwise arise.

Financial assets – Business model assessment

The Group makes an assessment of the objective of the business model in which a financial asset is held at a portfolio level because this best reflects the way the business is managed and information is provided to Management.

Transfers of financial assets to third parties in transactions that do not qualify for derecognition are not considered sales for this purpose, consistent with the Group’s continuing recognition of the assets.

Financial assets that are held for trading or are managed and whose performance is evaluated on a fair value basis are measured at FVTPL.

Financial assets – Assessment whether contractual cash flows are solely payments of principal and interest

For the purposes of this assessment, “principal” is defined as the fair value of the financial asset on initial recognition. “Interest” is defined as consideration for the time value of money and for the credit risk associated with the principal amount outstanding during a particular period of time and for other basic lending risks and costs (e.g. liquidity risk and administrative costs), as well as a profit margin.

In assessing whether the contractual cash flows are solely payments of principal and interest, the Group considers the contractual terms of the instrument.

Financial assets – Subsequent measurement and gains and losses

Financial Asset Classification Change

b. Policy applicable before 1 April 2018

Initial Recognition, Classification and Subsequent Measurement based on LKAS 39.

Date of Recognition

All financial assets and liabilities were initially recognised on the trade date, i.e., the date the Group becomes a party to the contractual provisions of the instrument.

Initial Measurement of Financial Instruments

The classification of Financial Instruments at initial recognition depends on their purpose and characteristics and the Management’s intention in acquiring them.

Financial Instruments were 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.

Transaction cost in relation to financial assets and financial liabilities at fair value through profit or loss were dealt with through the Profit or Loss.

Classification and Subsequent Measurement of Financial Assets

The Group classified its financial assets into the following categories:

Loans and receivables;

The subsequent measurement of financial assets depends on their classification.

Financial Assets Classified as Loans and Receivables

Financial Assets classified as “Loans and Receivables” include Deposits Receivable, Trade and Other Receivables, Amounts due from related parties and Cash and Cash Equivalents. After initial measurement, these were subsequently measured at amortised cost using the EIR, less provision for impairment. Amortised cost was calculated by taking into account any discount or premium on acquisition and fees and costs that are an integral part of the EIR. The amortisation was included in “Interest Income” in the Profit or Loss. The losses arising from impairment were recognised in the Income Statement in “impairment charges for loans and other losses”.

Classification and Subsequent Measurement of Financial Liabilities

At inception, a financial liability was classified at amortised cost.

The subsequent measurement of financial liabilities depends on their classification.

Reclassification of Financial Instruments

In certain circumstances, the Group was permitted to reclassify Financial Instruments out of the “available-for-sale” category and into the “loans and receivables” category. Reclassifications were recorded at fair value at the date of reclassification, which becomes the new amortised cost.

For a financial asset with a fixed maturity reclassified out of the “available-for-sale” category, any previous gain or loss on that asset that has been recognised in Equity is amortised to profit or loss over the remaining life of the asset using the EIR. Any difference between the new amortised cost and the expected cash flows was also amortised over the remaining life of the asset using the EIR. In the case of a financial asset that does not have a fixed maturity, the gain or loss was recognised in the profit or loss when such financial asset was sold or disposed. If the financial asset is subsequently determined to be impaired, then the amount recorded in Equity was recycled to the Profit or Loss.

Reclassification was at the election of management, and was determined on an instrument-by-instrument basis.

The Group did not reclassify any Financial Instrument into the fair value through profit or loss category after initial recognition.

Non-derivative financial liabilities

The Group initially recognises debt securities issued and subordinated liabilities on the date that they are originated. All other financial liabilities (including liabilities designated at fair value through profit or loss) are recognised initially on the trade date at which the Group becomes a party to the contractual provisions of the instrument.

The Group derecognises a financial liability when its contractual obligations are discharged or cancelled or expire.

Financial assets and liabilities are offset and the net amount presented in the Statement of Financial Position when, and only when, the Group has a legal right to offset the amounts and intends either to settle on a net basis or to realise the asset and settle the liability simultaneously.

The Group has the following non-derivative financial liabilities: trade and other payables, amounts due to related parties and bank overdrafts.

Such financial liabilities are recognised initially at fair value plus any directly attributable transaction costs. Subsequent to initial recognition these financial liabilities are measured at amortised cost using the effective interest method.

Derecognition

a. Financial assets

The Group derecognised a financial asset when the contractual rights to the cash flows from the financial asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred or in which the Group neither transfers nor retains substantially all of the risks and rewards of ownership and it does not retain control of the financial asset.

The Group entered into transactions whereby it transfers assets recognised in its Statement of Financial Position, but retains either all or substantially all of the risks and rewards of the transferred assets. In these cases, the transferred assets were not derecognised.

b. Financial liabilities

The Group derecognised a financial liability when its contractual obligations are discharged or cancelled, or expire. The Group also derecognised a financial liability when its terms are modified and the cash flows of the modified liability were substantially different, in which case a new financial liability based on the modified terms was recognised at fair value.

On derecognition of a financial liability, the difference between the carrying amount extinguished and the consideration paid (including any non-cash assets transferred or liabilities assumed) was recognised in profit or loss.

Offsetting

Financial assets and financial liabilities were offset and the net amount presented in the Statement of Financial Position when, and only when, the Group currently has a legally enforceable right to setoff the amounts and it intends either to settle them on a net basis or to realise the asset and settle the liability simultaneously.

Classification of financial assets and financial liabilities

The following table provides a reconciliation between line item in the Statement of Financial Position and categories of financial instruments:

Accounting policy

Accounting policy

The estimated useful lives for the current and comparative periods are as follows:

Depreciation methods, useful life and residual values are re-assessed at the reporting date. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount.

Impairment of Non-financial assets

The carrying amount to Groups non-financial assets are reviewed at each reporting date to determine if there is any indication of impairment. If any such indication exists, then the asset's recoverable amount is estimated. For goodwill and intangible assets that have indefinite lives or that are not yet available for use, the recoverable amount is estimated at each reporting date or more frequently, if events or changes in circumstances indicate that they might be impaired.

Calculation of recoverable amount

The recoverable amount of an asset or cash-generating unit is the great of its value in use and its fair value less costs to sell. In assessing value in use, estimated future cash flows are discounted to their present value using a pre-tax discount rate that reflects current market assessments of the time value of money and other risk specific to the asset. A cash generating unit is the smallest identifiable assets group that generates cash flows that are largely independent from other assets and groups.

Provision for/reversal of impairment

The carrying value of property, plant and equipment is reviewed for impairment when events or changes in circumstances indicate the carrying value may not be recoverable. If any such indication exists and where the carrying value exceed the estimated recoverable amount the assets are written down to their recoverable amount. Impairment losses are recognised in the Statement of Comprehensive Income unless it reverses a previous revaluation surplus for the same asset.

19.1 Reconciliation of carrying amount

a. Group

Cost

Accumulated depreciation

* Assets in estates that are held under leasehold right to use have been taken into books of the Group retrospective from 18 June 1992. For this purpose, the Board of Directors of Watawala Plantation PLC is decided at its meeting on 8 March 1995 that those assets would be taken at their book value as they appeared in the books of the JEDB/SLSPC, on the date immediately preceding the date of formation of Watawala Plantation PLC.

* The assets shown above includes assets vested in the Watawala Plantation PLC and Hatton Plantation PLC the subsidiaries of the Company, by Gazetted notification on the date of formation of the subsidiary (18 June 1992) and all the investments made in the fixed assets by subsidiary since its formation.

* Investment by the Group on mature and immature plantations are shown separately under biological assets – mature/immature explanations.

* The transfer of immature plantation to mature plantations commences at the time the plantation is ready for commercial harvesting.

b. Company

Cost

Accumulated depreciation

19.2 Title restriction on property, plant and equipment

There are no restrictions that existed on the title of the property, plant and equipment of the Group as at the reporting date.

19.3 Acquisition of property, plant and equipment during the year

During the financial year, the Company acquired property, plant and equipment to the aggregate value of Rs. 858 Mn. (2018 – Rs. 1,440 Mn.). Cash payments amounting to Rs. 858 Mn. (2018 – Rs. 1,440 Mn.). were made during the year for purchase of property plant and equipment.

19.4 Capitalisation of borrowing costs

Borrowing cost amounting to Rs. 92 Mn. was capitalised as borrowing costs relating to the acquisition of property, plant and equipment by the Group during the year (2018 – Rs.16 Mn.).

19.5 Amount of contractual commitments for the acquisition of property, plant and equipment

The Group had no contractual commitments for the acquisition of property, plant and equipment as at the reporting date. (2018: Nil) .

19.6 The details of freehold land and buildings which are stated at valuation – Group

19.7 Impairment of property, plant and equipment

The Board of Directors has assessed the potential impairment loss of property, plant and equipment as at 31 March 2019. Based on the assessment, no impairment provision is required to be made in the Financial Statements as at the reporting date in respect of property, plant and equipment.

19.8 Property, plant and equipment pledged as security

None of the property, plant and equipment have been pledged as securities as at the reporting date.

19.9 Temporarily idle property, plant and equipment

There are no temporarily idle property, plant and equipment as at the reporting date.

19.10 Compensation from third parties for items of property, plant and equipment

There were no compensation received/receivable from third parties for items of property, plant and equipment that were impaired, lost or given up.

Accounting policy

Accounting policy

20.1 Reconciliation of carrying amount

20.1.1 Brand acquisition

The Group has recognised the brand "HEALTHGUARD" upon the acquisition of Healthguard Pharmacy Limited, on 19 December 2010 and the brand has been valued by an independent valuer, Quasar Capital Advisors (Pvt) Ltd. The value of the brand is tested for impairment on every reporting date. The Board of Directors has decided to amortise the brand for 20 years beginning from the year 2014/15.

Leasehold right to land of JEDB/SLSPC estates

The lease of JEDB/SLSPC estates handed over to the subsidiary, Watawala Plantation PLC for the period of 53 years are all executed. The leasehold rights to the land on all these estates are taken into the books of the subsidiary as at 18 June 1992 immediately after formation of the subsidiary Watawla Plantation PLC in terms of a ruling obtained from the Urgent Task Force (UTIF) of The Institute of Chartered Accountants of Sri Lanka. The bare land are revalued at the value established for this land by valuation specialists, Dr Wickramasinghe, just prior to the formation of the subsidiary.

The leasehold rights to land is recorded in accordance with the Statement of Recommended Practice for the Right-to-Use of land on lease with corresponding liability is shown as a lease payable to JEDB/SLSPC.

Accounting policy

The cost of areas coming into bearing are transferred to mature plantations and depreciated over their useful lives as follows:

Timber plantation is measured at fair value on initial recognition and at the end of each reporting period at fair value less cost to sell which includes all the cost that would be necessary to sell the assets including transportation costs.

Gain or loss arising on initial recognition of timber plantations at fair value less costs to sell and from the change in fair values less costs of plantations at each reporting date are included in the Statement of Profit or Loss for the period in which they arise. All costs incurred in maintaining the assets are included in Statement of Profit or Loss in the year in which they are incurred.

22.1 Biological assets – Bearer

Investments in biological assets – plantations since the formation of the Company have been classified as shown above and includes bearer biological assets comprising mainly tea and palm plantations. Bearer biological assets together with any unmanaged biological assets are stated at cost.

The requirement of recognition of bearer biological assets at its fair value less cost to sell under LKAS 41 was superseded by the ruling issued on 2 March 2012, by the Institute of Chartered Accountants of Sri Lanka. Accordingly, Watawala
Plantations PLC, a subsidiary of the Company has elected to measure the bearer biological assets at cost using LKAS 16 – "Property, Plant and Equipment".

22.2 Biological assets – Consumables

The mature consumer biological assets are stated at fair value determined based on an independent valuation of timber/tree reserves performed by Messrs S Sivakantha, Bsc Estate Management and Valuation. The key assumptions and judgements include the following:

– Expected rate of return p.a. 14.5% [2017 – 13.5%]

– Maturity for harvesting – 25 years [2016 – 25 years]

– No. of trees valued – 28,798

Immature consumer biological assets comprising trees under 5 years old are carried at cost less accumulated impairment losses.

Sensitivity analysis

The financial impact on the value appearing in the Statement of Financial Position due to change of selling price and variation of discount rate is given below:

Sensitivity variation sales price (using 10% estimated variation)

Simulations made for the timber show that a rise or decrease by 10% of the estimated future selling price has the following effect on the net present value of biological assets:

Sensitivity variation discount rate (using 1.0% variation)

Simulations made for the timber trees show that a rise or decrease by 1.0% of the discount rate has the following effect on the net present value of biological assets:

22.3 Biological assets – Livestock

LKAS 41-Amended-Valuation of growing crops on bearer plants

The amendment became effective for the period beginning on or after 1 January 2016. The growing crops on bearer plants should be fairvalued and recognised in the financial statements.

The volume of produce growing on bearer plants are measured considering the estimated crop of the last harvesting cycle of the year as follows:

Tea-Three days crop (50% of 6 days cycle), Oil palm-five days crop(50% of 10 days cycle) and Rubber-One day’s crop

Produce that grows on mature bearer plantations are measured at fair value less cost to sell. The value of the unharvested green leaves is measured using the bought leaf formula recommended by the Sri Lanka Tea Board and the value of unharvested fresh fruit bunches(FFB) of oil palm is measured using the actual price used to purchase FFB from outgrowers. The rubber crop is fair valued using RSS prices.

Measurement of fair values

a. Fair value hierarchy

The fair value measurements for the timber have been categorised as Level 3 fair values based on the inputs to the valuation techniques used. The fair value measurements of live stock have been categorised as Level 2 fair values based on observable market sales data.

b. Level 3 fair values

The following table shows a breakdown of the total gains (losses) recognised in respect of Level 3 fair values (Timber):

C. Valuation techniques and significant unobservable inputs

The following table shows the valuation techniques used in measuring Level 2 and Level 3 fair values, as well as the significant unobservable inputs used:

Risk management strategy related to agricultural activities

Regulatory and environmental risks

The Group is subject to laws and regulations in various countries in which it operates. The Group has established environmental policies and procedures aimed at compliance with local environmental and other laws.

Supply and demand risk

The Group is exposed to risks arising from fluctuations in the price and sales volume. When possible, the Group manages this risk by aligning its harvest volume to market supply and demand. Management performs regular industry trend analyses for projected harvest volumes and pricing.

Climate and other risks

The Group's plantations are exposed to the risk of damage from climatic changes, diseases, forest fires and other natural forces. The Group has extensive processes in place aimed at monitoring and mitigating those risks, including regular forest health inspections and industry pest and disease surveys.

Accounting policy

23.1 Reconciliation of carrying amount

Changes in fair values are recognised as gains in profit or loss and included in “other income”. All gains are unrealised.

23.1.1 Investment property as at 1 April 2018 comprises a commercial property that is leased to Abans Electricals PLC. This Lease contains an initial period of 3-5 years from 2018 to 2023. Subsequent renewals are negotiated with the lessee and no contingent rents are charged.

23.1.2 Details of land and building under Investment Property

The land and building at Ratmalana were revalued as at 3 October 2017, by Mr S Sivaskantha, B.Sc. Est, Mgt & Val (SL), Diploma in Valuation a professional valuer in Sri Lanka. The fair value is determined based on an open market value using existing use basis.

23.2 Measurement of fair values

Fair value hierarchy

The fair value of investment property was determined by external, independent property valuers, having appropriate recognised professional qualifications and recent experience in the location and category of the property being valued. The independent valuers provide the fair value of the Group's investment property portfolio every 3 years.

The fair value measurement of all of the investment properties has been categorised as a Level 3 fair value based on the inputs to the valuation techniques used.

Valuation techniques and significant unobservable inputs

The table below sets out the significant unobservable inputs used in measuring land and building categorised as Level 3 in the fair value hierarchy as at 31 March 2019:

23.3 Income from Investment Property situated at Ratmalana

Accounting policy

24.1 The Board of Directors of Sunshine Packaging Lanka Limited, fully owned subsidiary of Sunshine Holdings PLC, decided to discontinue the manufacture and sell metal cans and allied products for the food canning industry with effect from 31 August 2017. Subsequent to the discontinue the operation, the Company is engaged in renting out premises and earn rental income. However, considering the net asset position and future cash flows of the subsidiary the Board has decided to make a further provision for probable impairment of investment during the year amounting to Rs. 87.8Mn.

24.2 Sunshine Holdings International (Pte) Ltd, fully owned subsidiary of Sunshine Holdings PLC, has been liquidated during the year and accordingly, the investment has been written off.

24.3 Group's Indirect Holdings

24.3.1 Waltrim Energy Limited was previously known as Sunshine Energy Limited.

24.3.2 Waltrim Hydropower (Pvt) Limited was previously known as Sunshine Power (Private) Limited.

Accounting policy

25.1 Associate – Company

25.2 Associate – Group

The Group has a stake of 20% (900,000 shares) in Strategic Business Innovator (Pvt) Ltd.

Strategic Business Innovator (Pvt) Ltd is the only Associate which the group owns. The associate was formed through the partnership of Sunshine Holdings PLC and SBI Ven Holdings Pte. Ltd. (Head Office: Singapore), a subsidiary company of SBI Holdings (Japan). The SBI Group is a key player in the Japanese securities industry and has keen interests in the financial services sector in Japan.

Value of the Equity accounted associate

The following table summarises the financial information of Strategic Business Innovators (Pvt) Ltd as included in its own financial statements, adjusted for fair value adjustments at acquisition and differences in accounting policies. The table also reconcile the summarised financial information to the carrying amount of the Group’s interest in Strategic Business Innovation (Pvt) Ltd.:

The following table analyses, in aggregate, the carrying amount and share of profit and OCI of these associates:

25.2.a Profit from continuing operations

See accounting policies in Note 18.

The effect of initially applying IFRS 9 in the Group's financial instruments is described in Note 7. Due to the transition method chosen in applying IFRS 9, comparative information has not been restated to reflect the new requirements.

The Group’s financial instruments are summarised as follows:

Information about the Group's exposure to credit and market risk, and fair value measurement, is included in Note 40 and 41.

26.1 Fair Value through Profit or Loss – FVTPL

26.1.1 Investment in Quoted Shares

26.1.2 Investment in Unit Trusts

26.1.3 Investment fund

The fund managed by Guardian Fund Management Limited, comprises mainly listed debentures and fixed term deposits. The average yield for the year was 12.80% (2018 – 11.72%).

The carrying value of the investment fund represents the following:

26.2 Fair Value through Other Comprehensive Income – FVOCI

26.2.1 Investment in Unquoted Shares

In the year 2016, Watawala Plantations PLC, a subsidiary of the Company received Rs. 10,763,000.00 worth of investment from Unit Energy Lanka (Pvt) Limited against their land rights. In September 2017, this investment was vested from Watawala Plantations PLC to Hatton Plantations PLC (between two subsidiaries). This investment represents 5% of investment in Unit Energy Lanka (Private) Limited. The Group has changed the measurement of the investment to the fair value method during the year. Accordingly, the investment was carried at fair value as at 31 March 2019.

Equity securities designated as at FVOCI*

As at 1 April 2018, the Group designated the investment shown below as equity securities at FVOCI because these equity securities represent investment that the Group intends to hold for the long term for strategic purposes. In 2018, these investments were classified as available for sale (Note 34).

No strategic investments were disposed during the year 2019, and there were no transfer of any cumulative gain or loss within equity relating to these investments.

26.3 Derivative instruments

During the year, Group had entered into a derivative agreement for fixed interest rate and fixed exchange rate with Standard Chartered Bank of Sri Lanka for the loan obtained from Standard Chartered Bank Mauritius of Rs. 1.4 Bn. (USD 9.15 Mn.) in April 2018.

Accounting policy

27.1 Composition of net deferred tax asset/(liability)

27.2 Deferred tax asset (gross)

27.3 Deferred tax liability (gross)

27.4 Reconciliation of Deferred Tax Liabilities and Deferred Tax Assets

Unrecognised deferred tax assets on tax losses:

The deferred tax assets and liabilities are arrived by applying the relevant tax rate applicable for the sources of income of the Company and its subsidiaries.

With the introduction of the Inland Revenue Act No. 24 of 2017 which became effective from 1 April 2018, the Group will have taxable income from the year ended 31 March 2019. As such, the Group will be eligible to claim its brought forward tax losses against its future taxable income within a period of 6 years.

Accordingly, during the year ended 31 March 2019, the Group recognised a deferred tax asset amounting to Rs.196 Mn. (2018 – Rs. 70 Mn.) arising from brought forward tax losses as at 31 March 2019 after assessing the availability of future taxable profits for utilisation based on the 5 year profit projection approved by the Board. The deferred tax asset recognised will be tested for impairment on an annual basis and deferred tax asset recognised may written off if required. Accordingly, unrecognised deferred tax asset as at reporting date was Rs. 243 Mn. (2018 – Rs. 342 Mn.).

Deferred tax liability arising from revaluation gain

Deferred tax recognised in profit or loss for Sunshine Packaging Lanka Limited amounted to Rs. 12,508,771 includes deferred tax on revaluation surplus of Rs. 44,674,182 relating the revaluation of the Buildings as at reporting date.

Due to uncertainties that exist on the interpretation of the new tax law relating to freehold land for tax purposes, significant judgement was exercised to determine the provision required for deferred taxes on capital gains applicable to freehold land.

Having discussed internally and based on market practices, Sunshine Packaging Lanka Limited is of the view that the freehold land used in the business falls under the category “Investment Assets” and accordingly Sunshine Packaging Lanka Limited will be liable for capital gain tax at a rate of 10% on the revaluation surplus in excess of the deemed cost of investment assets as at 30 September 2017. However, there was no significant variation in the fair value as at 31 March 2019. Accordingly, no deferred tax liability is recognised in the financial statements. In the event it is deemed that freehold land be considered as “Capital Assets used in the business”, Sunshine Packaging Lanka Limited would have to make an additional deferred tax charge in the statement of profit or loss for the year ended 31 March 2019 amounting to Rs. 23,077,075 with a consequential increase in the deferred tax liability on the statement of financial position.

Accounting policy

28.1 Provision for impairment of inventories

The accounting policy for trade and other receivables has been given in Note 18. The effect of initially applying SLFRS 15 and SLFRS 9 is described in Note 7.

30.1 Provision for impairment of trade receivables

30.2 Provision for impairment of other receivables

Provision for impairment of other receivables include provisions made against irrecoverable VAT receivable amounting to Rs. 26 Mn, irrecoverable ESC receivables of Rs. 18 Mn and other receivables amounting to Rs. 8 Mn. The provision for impairment on ESC receivables amounting to Rs.18 Mn. was included under income tax expenses.

B. Credit and market risks, and impairment losses

Information about the Group's exposure to credit and market risks, and impairment losses for trade receivables is included in Note 41.

The accounting policy for amount due from related parties has been given in Note 18.

Credit and market risks, and impairment losses

Information about the Group’s exposure to credit and market risks, and impairment losses for amount due from related parties is included in Note 41.

Accounting policy

For cash flow purposes, cash and cash equivalents are presented net of bank overdrafts.

32.1 BANK OVERDRAFTS

Accounting policy

33.1 Reconciliation of carrying amount

The Board of Directors of Sunshine Packaging Lanka Limited, fully-owned subsidiary of Sunshine Holdings PLC, decided to discontinue the manufacturing operations with effect from 31 August 2017, and to classify its plant and machineries as a non-current assets held for sale.

During the year, the Company had written off Rs.15 Mn. and has made a provision of Rs. 25 Mn. due to unavailability of active market for assets classified as held for sale.

33.2 Assets and liabilities of disposal group held for sale

As at 31 March 2019, the disposal group was stated at fair value less costs to sell and comprised the following assets and liabilities:

33.3 Cumulative income or expenses included in OCI

There are no cumulative income or expenses included in OCI relating to the disposal group.

Accounting policy

34.1 Stated capital

The holders of ordinary shares are entitled to receive dividends as declared from time to time and are entitled to one vote per individual present at meetings of the shareholders or one vote per share in the case of a poll.

Issue of ordinary shares

34.1.A On 28 June 2018, an ordinary resolution was passed at the annual general meeting of shareholders to approve the issue of ordinary shares of 1,138,746 in the form of scrip dividends for a value of Rs. 68,210,885.

34.1.B On 28 June 2018, a special resolution was passed at extraordinary general meeting of the shareholders to approve the issue of ordinary shares of 11,923,077 in the form of a private placement to SBI Ven Holdings Pte Ltd. for a value of Rs. 775,000,005.

34.2 Nature and purpose of reserves

Reserve on exchange gain or loss

The translation reserve comprises all foreign currency differences arising from the translation of the financial statements of foreign operations, as well as the effective portion of any foreign currency differences arising from hedges of a net investment in a foreign operation.

Fair value reserve

The fair value reserve (2017 – fair value gain or loss reserve on AFS) comprises:

– the cumulative net change in the fair value of equity securities designated at FVOCI (2017 – available-for-sale financial assets); and

– the cumulative net change in fair value of debt securities at FVOCI (2017 – available-for-sale financial assets) until the assets are derecognised or reclassified. This amount is reduced by the amount of loss allowance.

General reserve

This reserve has been allocated for the purpose of future distribution.

34.3 Non-controlling interests

See accounting policies in Note 6.

The following table summarises the information relating to each of the Group’s subsidiaries that has material NCI, before any intra-group eliminations: