We have audited the Financial Statements of Sunshine Holdings PLC (“the Company”) and the Consolidated Financial Statements of the Company and its subsidiaries (“the Group”), which comprise the Statement of Financial Position as at 31 March 2020, and the Statement of Profit or Loss and Other Comprehensive Income, Statement of Changes in Equity and Statement of Cash Flows for the year then ended, and Notes to the Financial Statements, including a summary of significant accounting policies as set out on pages 59 to 158 of this Annual Report.
In our opinion, the accompanying Financial Statements of the Company and the Group give a true and fair view of the financial position of the Company and the Group as at 31 March 2020, and of their financial performance and cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.
We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are independent of the Group in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics), and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide
a basis for our opinion.
Key audit matters are those matters that, in our professional judgement, were of most significance in our audit of the Company Financial Statements and the Consolidated Financial Statements of the current period. These matters were addressed in the context of our audit of the Company’s Financial Statements and the Consolidated Financial Statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters.
|Measurement of biological assets
Refer to Note 22 (accounting policy and Financial Statement disclosures) to these Financial Statements.
The Group has bearer biological assets of Rs. 2,764 Mn., and livestock biological assets of Rs. 696 Mn. carried at fair value as at 31 March 2020.
|Risks description Bearer biological assets mainly include mature and immature palm oil, tea, rubber and other trees in identified plantation fields. Inappropriate transfer from immature to mature plantations has a significant impact on the carrying value of the bearer plants and the reported profits as capitalization of costs will cease from the point of transfer and the mature plantations are depreciated over the useful lives of the plants. As per the industry practice, transfer of immature plantations to mature plantation fields happens at the point of commencement of commercial harvesting. The actual point of which commercial harvesting could start depends on the soil condition, weather patterns and plant breed.||Our responses – Our audit procedures included: Bearer biological assets
| The biological assets livestock include cattles which are measured at fair value less cost to sell. The management has used internally developed discounted cash flow method to calculate the fair value of the Group’s biological assets as at the reporting date. The calculation of the fair value of biological assets involves significant degree of judgments, particularly in respect of expected production, market prices of raw milk, expected costs and discounting factor.
We considered measurement of biological assets as a key audit matter due to the magnitude of the value of bearer biological assets and significant management judgment involved as explained above, which could be subject to errors or potential management bias.
|Valuation of unquoted investments classified as FVOCI
Refer to Note 18 (accounting policy), Note 26 (Financial Statement disclosures) to these Financial Statements.
Valuation of Unquoted Equity Instruments at Fair Value Through Other Comprehensive Income (FVOCI).
The Group’s portfolio of Investments comprised of financial assets classified at FVOCI as at 31 March 2020 which comprise investment in unquoted shares of Rs. 538 Mn. which have been valued using discounted cash flows.
|Risks description Unquoted investments – We focused on this area because of the degree of complexity involved in valuing these financial unquoted investment, and the level of judgements and estimates made by management. In particular, the determination of the valuation of these unquoted investments is more subjective given the lack of available market-based observable data of the unquoted equity instruments.||Our responses – Our audit procedures included:
|Recoverability of deferred tax assets
Refer to Note 27 (accounting policy and Financial Statement disclosures) to these Financial Statements.
The Group has recognised deferred tax assets amounting to Rs. 151 Mn. resulting from tax losses, as at 31 March 2020.
Deferred tax asset was recognised in respect of the deductible temporary differences arising from accumulated tax losses which the management considered would probably be utilized or recovered in the future through generation of future taxable profits by the Group entities or set off against deferred tax liabilities.
We considered this as key audit matter because of its significance to the Group financial statements and the recognition of deferred tax assets involves significant judgement and estimates made by management in respect of assessing the sufficiency of future taxable profits and the probability of such future taxable profits being generated by Group, which could be subject to potential management bias.
|Our responses – Our audit procedures included:
|The impact of estimate uncertainty related to COVID-19 disclosures
Refer to Note 46 to these Financial Statements.
Following the spread of global pandemic COVID-19 in the country, Group/Company was facing implications including, temporary restrictions in the level business operations and may have potential implications due to delays in settlements and credit risk.
Note 46 in the Financial Statements, describes the impact of COVID-19 outbreak to the current year financial statements and the preliminary assessment carried out by the Board of Directors on the potential future implications of COVID-19 outbreak on the Group’s future prospects, performance and liquidity position for financial year ending 31 March 2021.
The Board will continue to monitor the economic conditions and its impact on the business operations and take mitigation actions to minimize the potential impacts and business continuity.
We identified the disclosure of estimation uncertainty and implications of COVID-19 as a key audit matter because the assessment involves consideration of future events which are inherently uncertain, and effect of those difference may impact the resulting accounting estimates. Therefore, the assessment requires the exercise of significant management judgement in assessing future projections.
|Our responses – Our audit procedures included:
Management is responsible for the other information. The other information comprises the information included in the annual report, but does not include the financial statements and our auditor’s report thereon. The annual report is expected to be made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and we do not express any form of assurance conclusion thereon.
In connection with our audit of the Financial Statements, our responsibility is to read the other information and, in doing so, consider whether the other information is materially inconsistent with the Financial Statements or our knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on the work we have performed, we conclude that there is a material misstatement of this other information, we are required to report that fact. We have nothing to report in this regard.
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of Financial Statements that are free from material misstatement, whether due to fraud or error.
In preparing the Financial Statements, management is responsible for assessing the Group’s ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Group or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company’s and the Group’s financial reporting process.
Our objectives are to obtain reasonable assurance about whether the Financial Statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with SLAuSs will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these Financial Statements.
As part of an audit in accordance with SLAuSs, we exercise professional judgement and maintain professional skepticism throughout the audit. We also:
We are responsible for the direction, supervision and performance of the group audit. We remain solely responsible for our audit opinion.
We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit.
We also provide those charged with governance with a statement that we have complied with ethical requirements in accordance with the Code of Ethics regarding independence, and to communicate with them all relationships and other matters that may reasonably be thought to bear on our independence, and where applicable, related safeguards.
From the matters communicated with those charged with governance, we determine those matters that were of most significance in the audit of the financial statements of the current period and are therefore the key audit matters. We describe these matters in our auditor’s report unless law or regulation precludes public disclosure about the matter or when, in extremely rare circumstances, we determine that a matter should not be communicated in our report because the adverse consequences of doing so would reasonably be expected to outweigh the public interest benefits of such communication.
As required by Section 163 (2) of the Companies Act No. 07 of 2007, we have obtained all the information and explanations that were required for the audit and, as far as appears from our examination, proper accounting records have been kept by the Company.
CA Sri Lanka membership number of the engagement partner responsible for signing this Independent Auditor’s Report is FCA 2294.
Colombo, Sri Lanka
27 May 2020