Notes to the Financial Statements

1.1. 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 principle place of business of the Company is located at No. 60, Dharmapala Mawatha, Colombo 3.

Total staff strength of the Company and the Group on 31 March 2024 was as follow:
Group 1,703 (31 March 2023 – 1,660)
Company 29 (31 March 2023 – 24)

1.2 Consolidated and separate Financial Statements

The consolidated Financial Statements of Sunshine Holdings PLC as at and for the year ended 31 March 2024 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”)]. The subsidiaries are listed in Note 24.

The Financial Statements of all Companies in the Group are prepared for a common financial year, which ends on 31 March.

1.3 Parent entity and ultimate parent entity

The Ultimate parent of Sunshine Holdings PLC is Lamurep Investments Limited. The Company is the parent of the Group companies.

1.4 Principal business activities, nature of operations of the Group and ownership by the Company in its subsidiaries and associates

The Group structure is given on page 100.

There were no significant changes in the nature of the principal activities of the Group during the financial year under review.

Refer Note 24 for the changes in the group structure during the year.

2.1 Statement of compliance

These consolidated Financial Statements of the Group and the Separated Financial Statements of the Company 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. 7 of 2007. These provide appropriate disclosures as required by the listing rules of the Colombo Stock Exchange (CSE).

2.2 Responsibiity for Financial Statements

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 on pages 85 and 95 respectively.

2.3 Approval of Financial Statements by Directors

The Financial Statements of the Group and the Company were authorised for issue by the Board of Directors in accordance with the resolution of the directors on 30 May 2024.

These Financial Statements include the following components:

• a Statement of Profit or Loss and Other Comprehensive Income providing information on the financial performance of the Group and the Company for the year under review; (Refer pages 92 and 93).
• a Statement of Financial Position providing information on the financial position of the Group and the Company as at the year end; (Refer pages 94 and 94).
• a Statement of Changes in Equity depicting all changes in shareholders’ funds during the year under review of the Group and Company; (Refer pages 96 and 97).
• a Statement of Cash Flows providing information to the users, on the ability of the Group and Company to generate cash and cash equivalents and the needs of the entity to utilise those cash flows; (Refer pages 98 to 99).
• Notes to the Financial Statements comprising material accounting policies and other explanatory information.
  (Refer pages 101 to 204)

2.4 Materiality and aggregation

Each item which is similar in nature is presented separately if material. Items of dissimilar nature or function are presented separately unless they are immaterial as permitted by the Sri Lanka Accounting Standard LKAS 1 – Presentation of Financial Statements.

2.5 Going concern

The Group’s/Company’s Financial Statements have been prepared under the assumption of a going concern, as the Board of Directors is confident that the Group/Company possesses sufficient resources to continue its operations into the foreseeable future. This confidence is based on directors’ comprehensive assessment, which took account the uncertainities associated with the prevailing economic conditions, and their possible effects on the Group’s/Company’s business operations, profitability, liquidity and capital.

2.6 Rounding

All Financial information presented in Sri Lankan Rupees have been rounded to the nearest thousand (Rs ‘000), except where otherwise indicated, as permitted by the Sri Lanka Accounting Standard – LKAS 1 on “Presentation of Financial Statements”.

2.7 Comparative information

Comparative information including quantitative, narrative and descriptive information is disclosed in respect of the previous period in the Financial Statements in order to enhance the understanding of the current period’s Financial Statements and to enhance the inter period comparability.

As per LKAS 1 Presentation of Financial Statements, if the presentation or classification of items in the financial statements is changed, then the comparative amounts should be reclassified unless.

The Financial Statements of the group are presented in Sri Lankan Rupees (LKR), which is the Group’s functional currency.

These 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 Position.

The preparation of these Financial Statements requires management to make judgements, estimates and assumptions that affect the reported amount of revenues, expenses, assets, liabilities, and the accompanying disclosures, as well as the disclosure of contingent liabilities. Uncertainty about these assumptions and estimates could result in outcomes that require a material adjustment to the carrying amount of assets or liabilities affected in future periods. In the process of applying the Group’s accounting policies, management has made the following judgements and assumptions concerning the future and other key sources of estimation uncertainty at the reporting date, that have a significant risk of causing a material adjustment to the carrying amounts of assets and liabilities within the next financial year. Existing circumstances and assumptions about future developments may change due to circumstances beyond the Group’s control and are reflected in the assumptions if and when they occur. Estimates and underlining assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised prospectively. Items with the most significant effect on the amounts recognised in these Financial Statements with substantial management judgement and/or estimates are collated below with respect to judgement/estimates involved.

The significant accounting estimates impacted by these forecasts and associated uncertainties are predominantly related to expected credit losses, fair value measurement, and the assessment of the recoverable amount of non-financial assets.

• (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 10 – 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
• Note 25 – equity-accounted investees: whether the Group has significant influence over an investee
• Note 34.3 – lease term: whether the Group is reasonably certain to exercise extension options.

(b) Assumptions and estimation uncertainties
• Information about assumptions and estimation uncertainties at 31 March 2024 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:

Application of Accounting Policies

The Group/Company has consistently applied the material accounting policies for all periods presented in the Financial Statements, unless otherwise indicated excepted for those disclosed under Note 7.

The Group/Company has adopted the standards set out in Note 7 during the year. The changes in accounting policies due to adoption of new standards and interpretations or adoption of new accounting policies have been presented in Note 7 to the Financial Statements.

Apart from the general material accounting policies set out below, the specific material accounting policies pertaining to each item in the Financial Statements have been presented within the respective notes to the financial statements. The Group has not early adopted any other standard, interpretation or amendment that has been issued but not yet effective as given in Note 8.

6.1 Basis of consolidation

Business combinations

The Group accounts for business combinations using the acquisition method when control is transferred to the Group.

From 1 April 2020, in determining whether a particular set of activities and assets is a business, the Group assesses whether the set of assets and activities acquired includes, at a minimum, an input and substantive process and whether the acquired set has the ability to produce outputs. The Group has an option to apply a ‘concentration test’ that permits a simplified assessment of whether an acquired set of activities and assets is not a business. The optional concentration test is met if substantially all of the fair value of the gross assets acquired is concentrated in a single identifiable asset or group of similar identifiable assets.

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.

Subsidiaries

Subsidiaries are entities controlled by the Group. The Group ‘controls’ an entity when it is exposed to, or has rights to, variable returns from its involvement with the entity and has the ability to affect those returns through its power over the entity. The Financial Statements of subsidiaries are included in the consolidated Financial Statements from the date on which control commences until the date on which control ceases.

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.

Accounting period

The Financial Statements of all entities in the Group have a common financial year which ends on 31 March.

Consolidated Financial Statements/Separate Financial Statements

The net assets of the combining entities or businesses are consolidated using the existing book values from the controlling parties’ perspective. The assets and liabilities of the acquired entity or business should be recorded at the book values as stated in the Financial Statements of the controlling party.

No amount is recognised as consideration for goodwill or excess of acquirer’s interest in the net fair value of acquiree’s identifiable assets, liabilities and contingent liabilities over cost at the time of common control combination, to the extent of the continuation of the controlling party or parties’ interests; and

Comparative amounts in the Financial Statements are presented using the principles as set out above as if the entities or businesses had been combined at the previous balance sheet date unless the combining entities or businesses first came under common control at a later date.

The consolidated income statement includes the results of each of the combining entities or businesses from the earliest date presented (i.e. including the comparative period) or since the date when the combining entities or businesses first came under the control of the controlling party or parties, where this is a shorter period, regardless of the date of the common control combination. The consolidated income statement also takes into account the profit or loss attributable to the minority interest recorded in the consolidated Financial Statements of the controlling party.

Expenditure incurred in relation to a common control combination that is to be accounted for by using merger accounting is recognised as an expense in the period in which it is incurred. Such expenditure includes professional fees, registration fees, costs of furnishing information to shareholders, and salaries and other expenses involved in achieving the common control combination.

Consolidation is performed in accordance with LKAS 27 and SLFRS 10. The principal consolidation entries are as follows:

• the effects of all transactions between the combining entities or businesses, whether occurring before or after the common control combination, are eliminated; and
• since the combined entity will present one set of consolidated Financial Statements, a uniform set of accounting policies is adopted which may result in adjustments to the assets, liabilities and equity of the combining entities or businesses.

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

The Group/Company 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.

The Group/Company assumes that the credit risk on a financial asset has increased significantly if it is more than 90 days past due.

The Group/Company considers a financial asset to be in default when:

• the debtors is unlikely to pay its credit obligations to the Group in full, without recourse by the Group to actions such as realising security (if any held); or
• the financial asset is more than 90 days past due.

Lifetime ECLs are the ECLs that result from all possible default events over the expected life of a financial instrument.

12-months ECLs are the portion of ECLs that result from default events that are possible within the 12 months after the reporting date (or a shorter period if the expected life of the instrument is less than 12 months)

The maximum period considered when estimating ECLs is the maximum contractual period over which the Group is exposed to credit risk.

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.

Credit-impaired financial assets

At each reporting date, the Group/Company assesses whether financial assets carried at amortised cost and debt securities at FVOCI are credit-impaired. A financial asset is ‘credit-impaired’ when one or more events that have a detrimental impact on the estimated future cash flows of the financial asset have occurred.

Evidence that a financial asset is credit-impaired includes the following observable data:

• significant financial difficulty of the borrower or issuer;
• a breach of contract;
• it is probable that the borrower will enter bankruptcy or other financial reorganisation; or
• the disappearance of an active market for a security because of financial difficulties.

Presentation of allowance for ECL in the statement of financial position

Loss allowances for financial assets measured at amortised cost are deducted from the gross carrying amount of the assets.

For debt securities at FVOCI, the loss allowance is charged to profit or loss and is recognised in OCI.

Write-off

For individual customers, the Group has a policy of writing off the gross carrying amount as approved by the Board of Directors based on historical experience of recoveries of similar assets. For corporate customers, the Group individually makes an assessment with respect to the timing and amount of write-off based on whether there is a reasonable expectation of recovery.

The Group expects no significant recovery from the amount written off. However, financial assets that are written off could still be subject to enforcement activities in order to comply with the Group’s procedures for recovery of amounts due. Evidence of impairment included a significant or prolonged decline in its fair value below its cost.

6.3.2 Non-financial assets

At each reporting date, the Group/Company 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.

The Group/Company adopted the following new accounting standards/amendments to accounting standards during the year.

7.1 Deferred tax related to assets and liabilities arising from a single transaction

The Group/Company adopted Deferred Tax related to Assets and Liabilities arising from a Single Transaction (Amendments to LKAS 12) from 1 April 2023. The amendments narrow the scope of the initial recognition exemption to exclude transactions that give rise to equal and offsetting temporary differences – e.g. leases. For leases, the Group is required to recognise the associated deferred tax assets and liabilities from the beginning of the earliest comparative period presented, with any cumulative effect recognised as an adjustment to retained earnings or other components of equity at that date. For all other transactions, the Group applies the amendments to transactions that occur on or after the beginning of the earliest period presented. The Group previously accounted for deferred tax on leases by applying the ‘integrally linked’ approach, resulting in a similar outcome as under the amendments, except that the deferred tax asset or liability was recognised on a net basis.

Following the amendments, the Group has recognised a separate deferred tax asset in relation to its lease liabilities and a deferred tax liability in relation to its right-of-use assets. However, there was no impact on the statement of financial position because the balances qualify for offset under LKAS 12. There was also no impact on the opening retained earnings as at 1 January 2022 as a result of the change. The key impact for the Group relates to disclosure of the deferred tax assets and liabilities recognised.

7.2 Material accounting policy information

The Group/Company also adopted Disclosure of Accounting Policies (Amendments to LKAS 1) from 1 April 2023. Although the amendments did not result in any changes to the accounting policies themselves, they impacted the accounting policy information disclosed in the Financial Statements. The amendments require the disclosure of ‘material’, rather than ‘significant’, accounting policies. The amendments also provide guidance on the application of materiality to disclosure of accounting policies, assisting entities to provide useful, entity-specific accounting policy information that users need to understand other information in the financial statements. Management reviewed the accounting policies and made updates to the information disclosed regarding the Material accounting policies (2023 – significant accounting policies) in certain instances in line with the amendments.

The Institute of Chartered Accountants of Sri Lanka (CA Sri Lanka) has issued several new accounting standards and amendments/improvements to existing standards. These new standards are set to become effective in the coming years. Early application of these standards is allowed, but the Group/Company has not early adopted any of the new or amended standards in the preparation of these Financial Statements.

8.1 Classification of liabilities as current or non-current (Amendments to LKAS 1)

Amendments to LKAS 1 alter the classification of liabilities like convertible debt and introduce new disclosure requirements for liabilities subject to covenants. The Standard will become effective for the Group from
1 April 2024. No material impact is expected on adoption.

8.2 Lease liability in a sale and leased back (Amendment to SLFRS 16)

The amendments specifically affect seller-lessee accounting in sale and leaseback transactions that qualify as a sale under SLFRS 16, especially those involving variable lease payments not based on an index or rate. They modify how a seller-lessee accounts for these leasebacks, preventing recognition of gains on retained rights of use due to lease term modifications or changes, which previously could occur when variable payments not defined as ‘lease payments’ were excluded. The Standard will become effective for the Group from 1 April 2024.
No material impact is expected on adoption.

8.3 Sri Lanka Accounting Standard – SLFRS 17 “Insurance Contracts”

SLFRS 17 Liability Recognition: Presents future cash flows as present value with risk adjustment and Contractual Service Margin (CSM), groups contracts by risk and profitability, and recognises losses directly in the income statement.

New Insurance Revenue Measure: Shifts revenue measurement to service delivery, excluding investment-related premiums, and necessitates calculating deferred profit (CSM) at transition. The Standard will become effctive from 1 January 2026, however, it will not be applicable to the Group.

8.4 Supplier Finance – Amendments to LKAS 7 and SLFRS 7

This Standard amended LKAS 7. An entity shall apply that amendment when it applies the amendments to LKAS 7. The Standard will become effective for the Group from 1 April 2024. No material impact is expected on the Group. A 1 April 2024. No material impact is expected on the Group.

8.5 -SLFRS S1 General Requirements for Disclosure of Sustainability related Financial Information and SLFRS S2 Climate-related Disclosures

SLFRS S1 General Requirements for Disclosure of Sustainability related Financial Information requires an entity to disclose information about its sustainability-related risks and opportunities that is useful to primary users of general-purpose financial reports in making decisions relating to providing resources to the entity.

SLFRS S2 Climate-related Disclosures is to requires an entity to disclose information about its climate-related risks and opportunities that is useful to primary users of general-purpose financial reports in making decisions relating to providing resources to the entity.

These standards will become effective for the Group from 1 April 2025. No financial impact is expected on the Group except for additional disclosures.

9.1 Basis for segmentation

The Group has the following seven strategic divisions, which are reportable segments. These divisions offer different products and services, and are managed separately based on the Group’s management and internal reporting structure.

Segment performance is evaluated based on operating profits or losses which are measured differently from operating profits or losses in the consolidated Financial Statements. Income taxes are managed on a group basis and are not allocated to operating segments.

The Group’s Management Committee reviews internal management reports from each division at least monthly.

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.

9.2 Operating segments

Reconciliations of information on reportable segments to SLFRS measures

9.3 Geographic information

Consumer Goods segment is managed on a worldwide basis, but operate manufacturing facilities and sales offices primarily in Sri Lanka.

The geographic information analyses the Group’s revenue and assets by the Company’s country of domicile and other countries. In presenting the geographic information, segment revenue has been based on the geographic location of customers and segment assets were based on the geographic location of the assets.

A. Revenue streams

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

*Rent income included in revenue consists of the rent income received from third parties out of investment properties of Norris Cannel Properties Ltd. which is the primary business activity of the company.

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 9).

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, at a point in time or over the time as appropriate.

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.

11.1 Income from Telco Rebate of the Company, represents the rebate received from telecommunication institutes for the data usage.

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

11.3 Major part of the sundry income consist with tender commission. Tender commission income mainly includes commission income received from foreign suppliers for securing contracts with the government to Sunshine Healthcare Lanka Ltd. amounting to Rs. 129.6 Mn. (2023 – Rs. 81 Mn.).

11.4 The rent income primarily consists of property rent received from third parties, specifically from Watawala Plantations PLC and Sunshine Tea (Pvt) Ltd., alongside their core business operations.

12.1 Staff costs

Executive Directors’ emoluments are included under Salaries, wages and other staff cost in Note 12.1 and also disclosed under Key Management Personnel Note 41.1.a.

13.1 The exchange losses have been significantly increased due to the continuous devaluation of rupee during the financial year.

13.2 There are no any financial instruments for which the interest is not valued under effective interest method.

14.1 Amount recognised in profit or loss

A. Current Taxes

Company

As per the Inland Revenue (Amendment) Act No. 45 of 2022 (certified on 19 December 2022) income tax rates applicable to Company and Subsidiaries increased from 24% to 30% with effect from 1 October 2022. Accordingly, tax liability of the Company and Group was calculated and accounted for at 30% for the year of assessment 2023/24. However, the Company/Group has computed current tax payable on a pro rata basis for year of assessment 2022/23 since rate increase was at the mid year.

Watawala Dairy Ltd.

Watawala Dairy Ltd. 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.

14.2 Amount recognised in OCI

14.3 Amounts recognised directly in equity

There were no items recognised directly in equity during the year ended 31 March 2024.

14.4 Reconciliation between accounting profit and taxable profit

Group

Company

to N/M – Not meaningful

14.5 Tax losses carried forward

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

There is no significant impact to EBITDA due to the economic crisis prevailing in the country.

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.

16.1.1 Weighted average number of 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.

Compliance with section 56 and 57 of Companies Act No. 7 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 2024 will be audited by Messrs. KPMG.

17.1 Dividend paid during the year

Financial Assets

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

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 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.

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.

19.1 Reconciliation of carrying amount

a. Group

Cost

• 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 Plantations 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 Plantations PLC.
• The assets shown above includes assets vested in the Watawala Plantations PLC by Gazetted notification on the date of formation of the subsidiary
  (18 June 1992) and all the investments made in the fixed assets by the subsidiary since its formation.
• Investment by the Group on mature and immature plantations are shown separately under biological assets – mature/immature plantations.
• The transfer of immature plantation to mature plantations commences at the time the plantation is ready for commercial harvesting.
• As described in Note 24.4, the Group has acquired the Subsidiaries namely Sunshine Tea (Pvt) Ltd. during the financial year 2022/23. The net book value of the Property, plant and equipment acquired through business combination amounted to Rs. 824 Mn.
• Land and building classified as investment properties in the respective entity level and classified as PPE at consolidated level are carried at revalued amounts.

a. Company

Cost

Carrying Value

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 Group acquired property, plant and equipment to the aggregate value of Rs. 735.9 Mn. (2023- Rs. 1,465 Mn.).

19.4 Capitalisation of borrowing costs

There is no capitalisation of borrowing cost relating to the acquisition of property, plant and equipment by the Group during the year (2023 - Nil).

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

The commitments for the acquisition of property, plant and equipment as at the reporting date has been disclosed in Note 43. (2023 – Nil)

19.6 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 2024. 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.

19.7 Property, plant and equipment pledged as security

Assets pledged as at 31 March 2023 are disclosed in Note 34.5.

19.8 Temporarily idle property, plant and equipment

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

19.9 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.

Goodwill

Goodwill arising on an acquisition represents the excess of the cost of the acquisition over the Group’s interest in the net fair value of identifiable assets and liabilities of acquired entity.

Goodwill arising from business combinations is included in intangible assets whereas goodwill on acquisition of associate is included in investment in associates and is tested for impairment as part of the overall balance.

The excess of the purchase price over the carrying amount of non-controlling interest, when the Group increases its interest in an existing subsidiary, is recognised in equity.

Goodwill is tested annually for impairment, and is carried at cost less accumulated impairment losses. Impairment losses on goodwill are not reversed. Gains and losses on the disposal of an entity include the carrying amount of goodwill relating to the entity sold. Goodwill is allocated to cash-generating units for the purpose of impairment testing. The allocation is made to those cash-generating units or Groups that are expected to benefit from the business combination which the goodwill arose.

Research and development costs

The costs on research activities undertaken with the prospect of gaining new scientific or technical knowledge is expensed as incurred. Development expenditures on an individual project are recognised as an intangible asset when the Group can demonstrate:

• the technical feasibility of completing the intangible asset so that it will be available for use or sale.
• its intention to complete the intangible asset and use or sell it.
• its ability to use or sell the intangible asset.
• how the intangible asset will generate probable future economic benefits. Among other things, the entity can demonstrate the existence of a market for the output of the intangible asset or the intangible asset itself or, if it is to be used internally, the usefulness of the intangible asset.
• the availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset.
• its ability to measure reliably the expenditure attributable to the intangible asset during its development.

Following initial recognition of the development expenditure as an asset, the asset is carried at cost less any accumulated amortisation and accumulated impairment losses. Amortisation of the asset begins when development is complete and the asset is available for use. It is amortised over the period of expected future benefit. Amortisation is recorded in cost of sales. During the period of development, the asset is tested for impairment annually.

Brand name

Brands acquired as part of a business combination, are capitalised as part of a Brand Name if the Brand meets the definition of an intangible asset and the recognition criteria are satisfied. Brand Names are reviewed for impairment, annually or more frequently if events or changes in circumstances indicate that the carrying value may be impaired.

Computer software

Computer software licenses are capitalised on the basis of the costs incurred to acquire and bring to use the specific software. These costs are amortised over their estimated useful lives and carried at its cost less accumulated amortisation and accumulated impairment losses. Costs associated with maintaining computer software programs are recognised as expense incurred.

Development costs that are directly attributable to the production of identifiable and unique software products controlled by the Group and that will probably generate economic benefits exceeding costs beyond one year are recognised as intangible assets and amortised over the useful lives.

Directly attributable costs, capitalised as part of the software product include the software development employee cost and an appropriate portion of relevant overheads. Development costs previously recognised as an expense are not recognised as an asset in a subsequent period. When the computer software is an integral part of the related hardware which cannot operate without the specific software is treated as property, plant and equipment.

Subsequent expenditure

Subsequent expenditure is capitalised only when it increases the future economic benefits embodied in the specific asset to which it relates. All other expenditure, including expenditure on internally generated goodwill and brands, is recognised in Statement of Profit or Loss as incurred.

Amortisation

Amortisation is recognised in Statement of Profit or Loss on a straight-line basis over the estimated useful lives of intangible assets, other than goodwill and brand name, from the date on which they are available for use. The estimated useful lives are as follows;

Software license	02 – 06 years
Software development cost	02 – 05 years
Brand	20 years
Development cost	10 years

Amortisation methods, useful lives and residual values are reviewed at each reporting date and adjusted if appropriate.

20.1 Reconciliation of carrying amount – Group

Group

	Note	Software Rs. ’000	Brand Rs. ’000	Development Cost Rs. ’000	Capital Work in Progress Rs. ’000	Total Rs. ’000
Cost
Balance as at 1 April 2022		327,963	167,150	88,892	24,822	608,827
Acquisition through business combination	24.4	32,668	–	–	–	32,668
Acquisitions		21,222	–	–	26,864	48,087
Disposal/write-off		(110)	–	–	–	(110)
Transfer		1,800	–	–	(9,277)	(7,477)
Balance at 31 March 2023		383,543	167,150	88,892	42,409	681,995
Balance as at 1 April 2023		383,543	167,150	88,892	42,409	681,995
Acquisitions		59,906		3,209	12,349	75,463
Transfer		–	–	–	(54,458)	(54,458)
Balance at 31 March 2024		443,449	167,150	92,101	300	703,000

	Note	Software Rs. ’000	Brand Rs. ’000	Development Cost Rs. ’000	Capital Work in Progress Rs. ’000	Total Rs. ’000
Accumulated amortization
Balance as at 1 April 2022		135,566	85,222	2,586	–	223,374
Acquisition through business combination	24.4	23,027	–	–	–	23,027
Amortization		54,334	23,358	8,889	–	86,581
Transfers/Disposals		(95)	–	–	–	(95)
Balance at 31 March 2023		212,832	108,580	11,475	–	332,887
Balance as at 1 April 2023		212,832	108,580	11,475	–	332,887
Amortisation		61,134	21,697	9,380	–	92,210
Balance at 31 March 2024		273,965	130,277	20,855	–	425,097
Carrying value as at 31 March 2023		170,712	58,570	77,417	42,409	349,107
Carrying value as at 31 March 2024		169,484	36,873	71,246	300	277,903

20.1.1 Brand acquisition

The Group has recognised the brand “HEALTHGUARD” upon the acquisition of Healthguard Pharmacy Ltd., 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.

20.1.2. Reconciliation of Carrying amount – Company

Company

		Software Rs. ’000	2024 Rs. ’000	2023 Rs. ’000
Cost
Balance as at 1 April		29,358	29,358	29,358
Balance at 31 March		29,358	29,358	29,358
Accumulated amortisation and impairment losses
Balance as at 1 April		9,599	9,599	4,330
Amortisation		5,269	5,269	5,269
Balance at 31 March		14,868	14,868	9,599
Carrying value as at 31 March		14,489	14,490	19,759

Assessment of Impairment of Intangible Assets

The Board of Directors has assessed the potential impairment loss of intangible assets as at 31 March 2024. Based on the assessment, no impairment provision is required to be made in the financial statements as at the reporting date.

Title Restriction on Intangible Assets

There are no restrictions that existed on the title of the intangible assets of the Company/Group as at the reporting date.

Intangible Assets pledged as Security

None of the intangible assets have been pledged as security as at the reporting date.

Acquisition of Intangible Assets During the Year

During the financial year, the Group acquired intangible assets to the aggregate value of Rs. 75 Mn.
(2023 – Rs. 48 Mn.).

Amount of Contractual Commitments for the Acquisition of Intangible Assets

The contractual commitments for the acquisition of Intangible Assets as at the reporting date has been disclosed in Note 42.

Fully Amortised Intangible Assets in Use

Intangible assets include fully amortised computer software which are in use in the normal business activities to the gross carrying value of Rs. 16.5 Mn. (2023 – Rs. 45.1 Mn.).

Leasehold right to land of JEDB/SLSPC estates

The lease of JEDB/SLSPC estates handed over to the subsidiary, Watawala Plantations PLC for the period of 53 years are all executed. The leasehold rights to the land on all these estates are taken in to 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 Issue Task Force (UITF) 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 which was approved by the Council of the Institute of Chartered Accountants of Sri Lanka on 19 December 2012. Corresponding liability is shown as a lease payable to JEDB/SLSPC.

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

• Expected rate of return p.a. 17.6 (2023 – 24.5%)
• Maturity for harvesting – 25 years (2023 – 25 years)

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

22.2.1 Measurement of fair values

The valuation of consumable biological assets was carried by Mr Weerasinghe Chadrasena, an independent Incorporated Valuation Surveyor, using Discounted Cash Flows (DCF) methods. The Valuation Report dated 31 March 2024 has been prepared based on the physically verified timber statistics provided by the Group.

The future cash flows are determined by reference to current timber prices


• 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 livestock have been categorised as Level 2 fair values based on observable market sales data.
• Level 3 fair values

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

		Group
		2024 Rs. ’000	2023 Rs. ’000
Gain included in “other income”
Change in fair value (unrealised)		25,817	10,486

(c) Valuation techniques and significant unobservable inputs

Following table shows the valuation techniques used in measuring Level 3 fair value of consumable biological assets as well as the significant
unobservable inputs used for the valuation as at 31 March 2024.

Type	Valuation technique	Significant unobservable inputs	Inter-relationship between key unobservable inputs and fair value measurement
Standing timber Standing timber older than 4 years	Discounted cash flows The valuation model considers present value of future net cash flows expected to be generated by the plantation from the timber content of managed timber plantation on a tree-per-tree basis. Expected cash flows are discounted using a risk-adjusted discount rate of 24.5% (2023: 24.50%). Following factors have been considered in determining the risk premium; The illiquid nature of The plantations prior to maturity A lack of market evidence as to the value of biological assets through their life cycle Risk relations to diseases and fire affecting the biological assets Adoption of conservative valuation approach	Determination of timber content Timber trees in inter-crop areas and pure crop areas have been identified field-wise and spices were identified and harvestable trees were separated, according to their average girth and estimated age. Timber trees that have not come up to a harvestable size are valued working out the period that would take for those trees to grow up to a harvestable size. Determination of price of timber Trees have been valued as per the current timber prices per cubic metre based on the industry average prices logs sawn timber at the popular timber traders in Sri Lanka. In this exercise, following factors have been taken into consideration Cost of obtaining approval of felling. Cost of felling and cutting into logs. Cost of transportation. Sawing cost. Cost of sale. Exclusion of trees located in restricted area specialized in the circular No. 2019/01 dated on 6 November 2019 issued by the Ministry of Plantation Industries. Price range per cu.ft. is Rs. 350-/ to Rs. 1,000/- (2023 – Rs. 350/- to Rs. 1,000/-) Risk-adjusted discount rate. 2024 – 17.6% (2023 – 24.5%).	The estimated fair value at the time of harvesting each specific species is sensitive to the following variables: the estimated timber content (The higher the volume, the higher the fair value) the estimated selling related costs (Lower the selling related costs, the higher the fair value) the estimated maturity age (Lower the rotation period, the higher the fair value) the estimated maturity age the risk-adjusted discount rate. (The higher the discount rate, the lesser the fair value)

22.2.2 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:

		2024 Rs. ’000	2023 Rs. ’000
Value stand as now		70,086	44,269
Value stand as at 10% (2023 – 10%) positive variance		77,094	48,696
Value stand as at 10% (2023 – 10%) negative variance		63,077	39,842

Sensitivity variation discount rate (using 1% variation)

Simulations made for the timber trees show that a rise or decrease by 1% of the discount rate has the following effect on the net present value of biological assets:

		2024 Rs. ’000	2023 Rs. ’000
Value stand as now		70,086	44,269
Value stand as at 1% positive variance		67,419	42,573
Value stand as at 1% negative variance		72,956	46,083

22.3 Biological assets – Livestock

		Group
		2024 Rs. ’000	2023 Rs. ’000
Balance as at 1 April		893,067	943,201
Additions		306,209	165,176
Disposals during the year		(63,122)	(57,870)
Gain/(loss) arising from changes in fair value less costs to sell		29,431	(157,440)
Balance as at 31 March		1,165,585	893,067

22.3.1 Valuation techniques and significant unobservable inputs

Type	Valuation technique	Significant unobservable inputs	Inter-relationship between key unobservable inputs and fair value measurement
Livestock Livestock comprises cattle	Discounted cash flows The valuation model considers present value of future net cash flows expected to be generated by the cattle based on lactation-wise annual milking averages and costs incurred. Expected cash flows are discounted using a risk-adjusted discount rate of 18.75% (2023 – 26.34%).	Determination of selling price Selling price has been determined based on the market prices Determination of cost per cow Cost per cow has been determined based on the adjusted cost during the year. Determination of cost per cow Risk adjusted discount rate of 18.75% (2023 – 26.15%) has been use for the valuation. Determination of yield Yield has been determined based on the actual milk production in each lactation. Risk-adjusted discount rate. 2024 – 18.75% (2023 – 26.15%).	The estimated fair value would increase/(decrease): the estimated milking prices were higher/(lower) the estimated yield per cow were higher/(lower) the risk-adjusted discount rate were higher/(lower)

22.3.2. Sensitivity analysis

The fair value measurements of livestock have been categorised as Level 3 fair value based on assumptions used.

Sensitivity variation sales price (using 10% estimated variation)

Simulations made for livestock show that an increase or decrease by 10% of the estimated future selling price has the following effect on the fair value of biological assets:

		2024 Rs. ’000	2023 Rs. ’000
Value stand as now		1,165,585	893,067
Value stand as at 10% positive variance		1,807,588	910,936
Value stand as at 10% negative variance		523,589	875,783

Sensitivity variation Cost (using 10% variation)

Simulations made for livestock show that an increase or decrease by 10% of the estimated future cost has the following effect on the fair value of biological assets:

		2024 Rs. ’000	2023 Rs. ’000
Value stand as now		1,165,585	893,067
Value stand as at 10% positive variance		626,146	823,025
Value stand as at 10% negative variance		1,705,032	963,615

Sensitivity variation discount rate (using 1% variation)

Simulations made for livestock show that an increase or decrease by 1% of the estimated future discount rate has the following effect on the fair value of biological assets:

		2024 Rs. ’000	2023 Rs. ’000
Value stand as now		1,165,585	943,201
Value stand as at 1% positive variance		1,139,462	933,769
Value stand as at 1% negative variance		1,192,697	952,633

Sensitivity Variation on yield (using 1% variation)

		2024 Rs. ’000	2023 Rs. ’000
Value stand as now		1,165,585	943,201
Value stand as at 1% positive variance		1,260,156	952,633
Value stand as at 1% negative variance		1,071,628	933,769

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

The amendment became effective for the period beginning on or after 1 January 2016.T he growing crops on bearer plants should be fair valued and recognised in the Financial Statements.

		Group
		2024 Rs. ’000	2023 Rs. ’000
Balance as at 1 April		86,126	71,671
Change during the year		(15,259)	14,455
Balance as at 31 March		70,867	86,126

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)

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 Tea commissioner’s formula for bought leaf and the value of unharvested fresh fruit bunches (FFB) of oil palm is measured using the actual price used to purchase FFB from out growers.

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.

23.1 Reconciliation of carrying amount

Group

23.2 Details of land and building under Investment Property

Lands and buildings were revalued as at 31 March 2022, by Mr S Sivaskantha, B.Sc. Est, Mgt and 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.

The Group policy is to carry out independent valuation of the Investment Properties by an independent professional valuer every three (3) years period. During the three years the management carries out an internal Assessment annually to conclude no any significant changes to market value. The investment property were independently valued last on 31st March 2022. Accordingly the group has carried out an internal assessment as at 31 March 2024 and concluded that there is no significant change in the market value and no adjustment were made to the financial statements.

23.3 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 categorized as Level 3 in the fair value hierarchy as at 31 March 2024.

Method of Valuation

Direct Comparison Approach

When the rental value of a specific property is unavailable, but there is evidence of the sale price for comparable properties in the area, this approach can be applied. In such instances, the capitalised value of the property is determined by directly comparing it to the capitalized value of similar properties in the vicinity.

23.4 Income from Investment Property

Company

24.1 Group’s Indirect Holdings

24.2 Changes to the group structure during the year

24.2.1 Capital Infution for Sunshine Tea (Pvt) Ltd.

The board of directors of Company at the meeting held on 18 January 2024 resolved to infuse a sum of Sri Lanka Rupees Five Hundred Million (Rs. 500,000,000/-) into the capital of it’s subsidiary Sunshine Tea (Pvt) Ltd. Accordingly SST has capitalise such sum of Sri Lanka Rupees Five Hundred Million (Rs. 500,000,000/-) by the issue of fully paid ordinary shares to the Company.

24.2.2 Acquisition of NCI of Lina Spiro (Pvt) Ltd.

The subsidiary Lina Spiro (Pvt) Ltd. issued new shares valued at Rs. 93 Mn. to Celegon Lanka (Pvt) Ltd. in exchange for settling a Rs. 93 Mn. payables to Bion Healthcare (Pvt) Ltd. The issuance involved 46.5 million new shares vales at Rs. 2 each. the share value was determined based on the latest share transaction from the previous financial year.

Accordingly with the above transaction the shareholding in the subsidiary with Lina Manufacturing was reduced to 39%. However immediately after above transaction below transaction also occurred and , no changes were incurred in the control of the subsidiary during the year.

The company issued new shares valued at Rs. 307.3 Mn. to Celegon Lanka (Pvt) Ltd. in exchange for 153,686,250 shares of Lina Spiro (Pvt) Ltd. valued at a total of Rs. 307 Mn. The issuance involved 12,754,046 new shares vales at Rs. 24.10 each. The share value was determined based on the internal valuation carried out based on PER method. With the above transaction the ownership in Lina Spiro (Pvt) Ltd. with Lina Manufacturing increased to 100%.

On 3 August 2023, Lina Manufacturing Private Ltd. (“LMPL”), which is a subsidiary of Sunshine Healthcare Lanka Ltd., acquired the remaining Non-Controlling Interest of 49% thereby acquired 100% ownership of Lina Spiro Private Ltd. (LSPL). The consideration for this purchase was satisfied by the issuance of new ordinary (voting – removed) shares in Lina Manufacturing (Pvt) Ltd. to Celogen Lanka Private Ltd. for a consideration of Rs. 307 Mn. As a result of this transaction, the effective shareholding of SHL in LMPL was diluted from 90.62% to 71.6%.

24.2.3 Amalgamation of a Subsidiary

Gordon Frazer & Bosanquate Skrine Company Ltd. was amalgamated with Sunshine Tea (Pvt) Ltd., a fully owned subsidiary of Sunshine Tea (Pvt) Ltd. with effect from 27 September 2023. Accordingly, the book value of Gordon Frazer and Bosanquate Skrine Company Ltd. was amalgamated with Sunshine Tea (Pvt) Ltd. and Sunshine Tea (Pvt) Ltd. continues as the surviving entity.

24.3 Assessment of Impairment of Subsidiaries

The Board of Directors has assessed the potential impairment loss of investment in subsidiaries as at 31 March 2024. Based on the assessment, except for Sunshine Packaging Lanka Ltd., no impairment provision was required to be made in the financial statements as at the reporting date based on the losses the net asset value lower to cost of investment.

The Board of Directors of Sunshine Packaging Lanka Ltd., 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 provision for probable impairment of investment of Rs. 178.76 Mn. (2023 – Rs. 177.6 Mn.).

The Board of Directors of the Company carried out an internal assessment of the potential implications of prevailing economic condition on its subsidiaries and are of the view that there is no additional provision for impairment needed against its investments in subsidiaries as at reporting date

24.4 Goodwill

On 1 April 2022, Sunshine Holdings PLC, acquired 100% of the ordinary voting shares of Sunshine Tea (Pvt) Ltd. (“SST”). The consideration for this purchase was satisfied for a consideration of Rs. 1,440 Mn. (Net asset value as of 1 April 2022 – Rs. 1,226 Mn.)

The aggregate effects of acquisition of subsidiaries are as follows:

*Goodwill is annually assess for the impairment. Based on the detailed assessment carried out by the Board of Directors on potential impairment loss of the goodwill identified on consolidation and a provision amounting to Rs. 354 Mn. was made in previous financial years. Based on the impairment assessment carried out by the Board of Directors are as at reporting date, no further provision is was required for the identified goodwill.

The Company does not have any investment in equity accounted in Investee as of 31 March 2024.

See accounting policies in Note 18.

Derivative financial instruments

The Group holds derivative financial instruments to hedge its foreign currency and interest rate risk exposures. Embedded derivatives are separated from the host contract and accounted for separately if the host contract is not a financial asset and certain criteria are met.

Derivatives are initially measured at fair value. Subsequent to initial recognition, derivatives are measured at fair value, and changes therein are generally recognised in profit or loss.

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 39 and 40.

26.1 Fair Value through Profit or Loss – FVTPL

26.1.1 Investment in Quoted Shares

Group and Company

26.1.2 Investment in Unit Trusts

The Investment in Unit Trusts comprises investments made in Capital Alliance Investments Ltd. and NDB Wealth Management Ltd., a Hatton National Bank Custody Trustee Services. The average annual yield of the two investments are as follows;

26.1.3 Investment fund

The fund comprises Hatton National Bank Custody Trustee Services. The average yeild for the year was 13.20%. (HNB 2023 – 12.67%). The Net asset value of the investment fund comprise of following instruments as at 31 March.

26.1.4 Investment in Treasury bonds

26.2 Fair Value through Other Comprehensive Income – FVOCI

26.2.1 Investment in Unquoted Shares

Group and Company

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.

*No Strategic investments were disposed during 2023/24, and there were no transfer of any cumulative gain or loss within equity relating to these investments.

26.2.2 Basis of Computation and Unobservable Input

The Free Cash flow method was used to determine the fair value of the unquoted share investments. The fair value measurement was categorised as a Level 3 fair value based on the inputs in the valuation technique used.

The key assumptions used in the estimation of the fair value are set out below. Key assumptions are determined based on management experience, expectation of future outcome taking into account past experience adjusted for anticipated growth, historical data and industry norms.

26.3 Investments measured at Amortised Cost

26.3.a Debentures

Company/Group has invested Rs. 100 Mn. in listed rated unsecured redeemable Type A+ 5 years debentures issued by National Development Bank with fixed Interest Rate of 11.9% per annum payable semi-annually.

26.4.b Other Short Term Investments

Financial Instruments at amortised cost include Short term investments made in money market instruments with the intention of withdrawing after 3 months period.

27.1 Composition of net and gross 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

Group

Company

27.5 Reconciliation of Deferred Tax Liabilities and Deferred Tax Assets included under Asset Held for Sale and Liability held for sale

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 Company will have taxable income from the year ended 31 March 2020. As such, the Company 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 2024, the Group recognised a deferred tax asset amounting to Rs. 420 Mn. (2023 – Rs. 320 Mn.) arising from brought forward tax losses as at 31 March 2024 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. 156 Mn. (2023 – Rs. 20 Mn.).

Deferred tax liability arising from revaluation gain

Deferred tax recognised in profit and loss for Sunshine Packaging Lanka Ltd. amounted to Rs. 21,471 (2023 – Rs. 63 Mn.). FY 2022/23 deferred tax recognised in profit and loss includes deferred tax recognised on revaluation surplus of Rs. 35 Mn. relating the revaluation of the Buildings at the rate of 30% and on the capital gain on land amounting to Rs. 51.6 Mn. at the tax rate of 30% 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.

27.6 Recoverability of Deferred Tax assets

During the year ended 31 March 2024, the Group has recognised a deferred tax asset amounting to Rs. 420 Mn. (2023 – Rs. 320 Mn.), arising from tax losses as at 31 March 2024 after assessing the availability of future taxable profits for utilization based on the 5 years profit projection approved by the Board. The Board of Directors of Company/Group had revised the business plan and approved by incorporating the potential implications of prevaling economic condition on business operations. Based on the profit projections, the Board is confident on the availability future taxable profits against which Deferred Tax asset of Rs. 420 Mn. could be utilised. The deferred tax asset recognised will be tested for impairment on an annual basis and deferred tax asset recognised may be written off, if required.

28.1 Provision for impairment of inventories

The Board of Directors has assessed the potential impairment loss of inventory as at 31 March 2024 by considering the potential impact of current econimic condition on net realisable value based on the implications on subsequent selling prices and cost to complete in additional to the normal assessment process.

The accounting policy for trade and other receivables has been given in Note 18.

The Sunshine Healthcare Lanka Ltd. and Lina Manufacturing (Pvt) Ltd. have received Treasury Bonds in lieu of settling the  government debts amounting to
Rs. 916,714,453/- on 10 March 2023. Details of treasury bonds are given below:

During the year Healthcare sector has recognised Rs. 30.5 Mn. Interest on Treasury bonds and sold the treasury bond on 22 May 2023.

30.1 Provision for impairment of trade receivables

* Trade receivables with the contractual amount of Rs. 8.5 Mn. (2023 – Rs. 50.9 Mn.) written off during the year are still subject to enforcement activity.

Expected credit loss method has been used to recognized the Impairment of trade receivable.

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 40.

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

All outstanding balances are short term in nature and there were no special terms and conditions pertaining to the outstanding balances.

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 40.

Cash and cash equivalents in the statement of financial position comprise cash at banks and in hand with a maturity of three months or less.

Statement of Cash Flows

The Statement of Cash Flows has been prepared using the Indirect Method of preparing Cash Flows in accordance with the Sri Lanka Accounting Standard (LKAS) 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 equivalents include cash in-hand, balances with banks and short term deposits with banks.

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

32.1 Bank Overdrafts