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CA Sri Lanka Integrated Annual Report 2024 117

flows are discounted to their present Institute’s business model for managing E The Institute has transferred its
value, using a discount rate that reflects financial assets refers to how it manages rights to receive cash flows from
current market assessment of the time financial assets in order to generate cash the asset or has assumed an
value of money and the risk specific to the flows. The business model determines obligation to pay the received
asset. whether cash flows will result from cash flows in full without material
collecting contractual cash flows or delay to a third party under a
Impairment losses of continuing selling financial assets or both. ‘pass-through’ arrangement and
operations are recognised in the either:
statement of comprehensive income in Financial assets and financial liabilities a) the Institute has transferred
those expense categories consistent with are offset, and the net amount is reported substantially all the risks and
the function of the impaired asset. in the Statement of Financial Position, rewards of the asset, or
if there is a currently enforceable legal b) the Institute has neither
A previously recognised impairment right to offset the recognised amounts transferred nor retained
loss is reversed only if there has been and there is an intention to settle on a net substantially all the risks and
a change in the estimates used to basis, to realise the assets and settle the rewards of the asset but has
determine the assets recoverable liabilities simultaneously. transferred control of the
amount, since the last impairment loss asset.
was recognised. If that is the case, The financial assets of the Institute
the carrying amount of the asset is include receivables, loans and advances When the Institute has transferred
increased to its recoverable amount. The to staff, fixed deposits held to collect its rights to receive cash flows from
increased amount cannot “exceed” the contractual cash flows, government an asset or has entered into a pass-
carrying amount that would have been securities, repurchase agreements and through arrangement, it evaluates if,
determined, net of depreciation, had no cash and cash equivalents. and to what extent, it has retained the
impairment loss been recognised for risks and rewards of ownership. When
the asset in prior years. Such reversal The Institute’s financial assets are it has neither transferred nor retained
is recognised in the statement of subsequently measured at amortised cost substantially all of the risks and rewards
comprehensive income. upon satisfaction of both of the following of the asset, nor transferred control
conditions: of the asset, the Institute continues to
2.1.7 Financial Assets - Initial recognise the transferred asset to the
Recognition and Measurement a) The financial assets are held within extent of its continuing involvement. In
a business model with the objective that case, the Institute also recognizes an
(a) Financial Assets to hold financial assets in order to associated liability. The transferred asset
The classification of financial assets collect contractual cash flows and and the associated liability are measured
at initial recognition depends on the b) The contractual terms of the on a basis that reflects the rights and
financial asset’s contractual cash financial assets give rise on obligations that the Institute has retained.
flow characteristics and the Institute’s specified dates to cash flows that
business model for managing them. are solely payments of principal and Continuing involvement that takes the
With the exception of trade receivables interest on the principal amount form of a guarantee over the transferred
that do not contain significant financing outstanding. asset is measured at the lower of the
components for which the Institute has original carrying amount of the asset and
applied the practical expedient, the Accordingly, financial assets at amortised the maximum amount of consideration
Institute initially measures financial assets cost are subsequently measured using that the Institute could be required to
at their fair value plus transaction costs. the effective interest (EIR) method and are repay.
Trade receivables that do not contain subject to impairment. Gains and losses
a significant financing component for are recognised in profit or loss when 2.1.9 Impairment of Financial Assets
which the Institute has applied the the asset is derecognised, modified or The Institute recognizes an allowance for
practical expedient are measured at impaired. expected credit losses (ECLs) for all debt
the transaction price determined under instruments measured at amortized cost.
SLFRS 15. 2.1.8 Derecognition of Financial Assets
A financial asset (or, where applicable, a ECLs are based on the difference
In order for a financial asset to be part of a financial asset or part of a group between the contractual cash flows due
classified and measured at amortised of similar financial assets) is primarily in accordance with the contract and all
cost or fair value through OCI, it needs derecognised when: the cash flows that the Institute expects to
to give rise to cash flows that are ‘solely E The rights to receive cash flows receive, discounted at an approximation
payments of principal and interest’ on from the asset have expired; or of the original effective interest rate. The
the principal amount outstanding. The expected cash flows will include cash