balangoda plantations plc auditors’ …these financial statements have been prepared in accordance...

BALANGODA PLANTATIONS PLC

AUDITORS’ REPORT AND FINANCIAL STATEMENTS

31 DECEMBER 2016

BALANGODA PLANTATIONS PLC

DETAILED PROFIT OR LOSS STATEMENTFOR THE YEAR ENDED 31 DECMEBER 2016

MPDC/CSW/SJJC

INDEPENDENT AUDITORS’ REPORTTO THE SHAREHOLDERS OF BALANGODA PLANTATIONS PLC

Report on the Financial Statements

We have audited the accompanying Financial Statements of Balangoda Plantations PLC (“the Company”)which comprise the Statement of Financial Position as at December 31, 2016 and the Statement ofprofit or loss and Statement of Comprehensive Income, Statement of Changes in Equity and Cash FlowStatement for the year then ended, and a summary of significant Accounting Policies and otherexplanatory information.

Board’s Responsibility for the Financial Statements

The Board of Directors (“Board”) is responsible for the preparation of these financial statements thatgive a true and fair view in accordance with Sri Lanka Accounting Standards and for such internalcontrol as Board determines is necessary to enable the preparation of financial statements that are freefrom material misstatement, whether due to fraud or error.

Auditors’ responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with Sri Lanka Auditing Standards. Those standards require that wecomply with ethical requirements and plan and perform the audit to obtain reasonable assurance aboutwhether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures inthe financial statements. The procedures selected depend on the auditor’s judgment, including theassessment of the risks of material misstatement of the financial statements, whether due to fraud orerror. In making those risk assessments, the auditor considers internal control relevant to the entity’spreparation and fair presentation of the financial statements in order to design audit procedures thatare appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of accounting estimates made by management, as wellas evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis forour audit opinion.

Opinion

In our opinion, the financial statements give a true and fair view of the financial position of the Companyas at December 31, 2016, and of its financial performance and cash flows for the year then ended inaccordance with Sri Lanka Accounting Standards.

Emphasis of Matter

Without qualifying our opinion, we draw attention to the Accounting Policy Note 3.3 to the financialstatements regarding the going concern ability of the Company. The Company incurred a net loss of Rs.314,341,672/= (2015 – Rs. 343,093,169/=) for the year ended 31 December 2016 and the Company’scurrent liabilities exceeded its current assets by Rs. 964,837,505/= (2015 – Rs. 701,408,546/=) as at31 December 2016. Hence there are conditions indicating an uncertainty on the going concern.

Report on Other Legal and Regulatory Requirements

As required by section 163 (2) of the Companies Act No. 07 of 2007, we state the following:

a) The basis of opinion, scope and limitations of the audit are as stated above.

b) In our opinion:

· we have obtained all the information and explanations that were required for the auditand, as far as appears from our examination, proper accounting records have been keptby the Company, and

· the financial statements of the Company comply with the requirements of section 151 ofthe Companies Act No.07 of 2007.

27 April 2017Colombo

Balangoda Plantations PLCNOTES TO THE FINANCIAL STATEMENTSYear ended 31 December 2016

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1 REPORTING ENTITY

Balangoda Plantations PLC was incorporated and domiciled in Sri Lanka, under the Companies Act No. 17of 1982 (The Company was re-registered under the Companies Act No. 07 of 2007) in terms of theprovisions of the Conversion of Public Corporation and Government-Owned Business Undertakings intoPublic Companies under Public Companies Act No. 23 of 1987. The registered office of the Company islocated at No 110 Norris Canal Road, Colombo 10, and Plantations are situated in the planting districts ofRathnapura, Balangoda & Badulla.

The Financial Statements of the company comprise with the profit or loss Statement, Statement ofComprehensive Income, Statement of Financial Position, Statement of Changes in Equity, Statement of CashFlows together with Accounting Policies and Notes to the Financial Statements.

1.1 Principal activities and the nature of the operations

During the year, the principal activities of the company were cultivation and manufacture and sale of Teaand Rubber.

1.2 Parent enterprise and ultimate parent enterprise

The Company’s parent undertaking and controlling party is Melstacorp PLC Limited which is incorporatedin Sri lanka as a limited liability company.

1.3 Date of Authorization for issue.

The financial statements of Balangoda Plantations PLC for the year ended 31 December 2016 wereauthorized for issue in accordance with a resolution of the board of directors on 27 April 2017.

1.4 Responsibility for Financial Statements.

The responsibility of the Directors in relation to the Financial Statements is set out in the Statement ofDirectors’ Responsibility Report in the Annual Report.


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2 BASIS OF PREPERATION

2.1 Statement of Compliance

The Financial Statements of Balangoda Plantations PLC have been prepared in accordance with Sri LankaAccounting and Auditing Standards Act No. 15 of 1995,which requires compliance with the Sri LankaAccounting Standards (SLFRS/ LKAS) promulgated by the Institute of Chartered Accountants of Sri Lanka(CASL) and with the requirements of the Companies Act No. 07 of 2007.

2.2 Basis of Measurement

These Financial Statements have been prepared in accordance with the historical cost convention other thanthe following material items in the Financial Statements.

· Managed Consumable biological assets are measured at fair value

· Financial instruments - Available-for-sale financial assets are measured at fair value.

Where appropriate, the specific policies are explained in the succeeding Notes

No adjustments have been made for inflationary factors in the Financial Statements.

2.3 Functional and Presentation Currency

The Financial Statements are presented in Sri Lankan Rupees (Rs.) which is the Company’s functional andpresentation currency.


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3 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

The accounting policies set out below are consistent with those used in the previous year.

3.1 Comparative information

The presentation and classification of the financial statements of the current year are comparable with thoseof the previous year.

3.2 Materiality and aggregationEach material class of similar items is presented separately in the Financial Statements. Items of a dissimilarnature or function are presented separately unless they are immaterial.

3.3 Going Concern

The financial statements of the Company have been prepared on the assumption that the Company is a goingconcern. However, the Company has continued to incur losses which are financed by related Companies. Inthe current year, the company incurred a gross loss of Rs. 230,693,602/- (2015 - Rs. 449,300,711) and netloss of Rs. 314,341,672/- (2015 - Rs. 343,093,169/-) and as of that date, the company’s current liabilitiesexceeded its current assets by Rs. 964,837,505/- (2015 – 701,408,546/-).

The directors of the Company are confident that a significant improvement in the financial position of theCompany would be achieved in the near future in view of the finance facilities available from the banks andrelated companies and the steps taken, among other things, to enhance the performance of the Company byincreasing volume of production, mainly by utilizing the idle factory capacity for processing bought leaf andby providing additional machinery to undertake different types of manufacture to take advantage of changingmarket trends.

3.4 Current versus non-current classification

The Company presents assets and liabilities in the statement of financial position based on current/non-current classification. An asset is current when it is:

Ø Expected to be realised or intended to be sold or consumed in the normal operating cycleØ Held primarily for the purpose of tradingØ Expected to be realised within twelve months after the reporting period

ORØ Cash or cash equivalent unless restricted from being exchanged or used to settle a liability for at least

twelve months after the reporting period

All other assets are classified as non-current.

A liability is current when:

Ø It is expected to be settled in the normal operating cycleØ It is held primarily for the purpose of tradingØ It is due to be settled within twelve months after the reporting period

ORØ There is no unconditional right to defer the settlement of the liability for at least twelve months after the

reporting period.

The company classifies all other liabilities as non-current.

Deferred tax assets and liabilities are classified as non-current assets and liabilities.


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3.5 Fair Value Measurement

The company measures financial instruments and non-financial assets at fair value at each statement offinancial position date. Fair value related disclosures for financial instruments and non-financial assets thatare measured at fair value or where fair values are disclosed, are summarised in the following notes:

· Consumable biological assets Note 14.2

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderlytransaction between market participants at the measurement date. The fair value measurement is based on thepresumption that the transaction to sell the asset or transfer the liability takes place either:

Ø In the principal market for the asset or liability

Or

Ø In the absence of a principal market, in the most advantageous market for the asset or liability

The principal or the most advantageous market must be accessible by the Company.

The fair value of an asset or a liability is measured using the assumptions that market participants would usewhen pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generateeconomic benefits by using the asset in its highest and best use or by selling it to another market participantthat would use the asset in its highest and best use.

The Company uses valuation techniques that are appropriate in the circumstances and for which sufficientdata are available to measure fair value, maximising the use of relevant observable inputs and minimising theuse of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements arecategorized within the fair value hierarchy, described as follows, based on the lowest level input that issignificant to the fair value measurement as a whole:

· Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities· Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value

measurement is directly or indirectly observable· Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value

measurement is unobservable

For assets and liabilities that are recognised in the financial statements on a recurring basis, the Companydetermines whether transfers have occurred between levels in the hierarchy by re-assessing categorisation(based on the lowest level input that is significant to the fair value measurement as a whole) at the end ofeach reporting period.

External valuers are involved for valuation of significant assets, such as managed biological assets.Involvement of external valuers is decided upon annually by the Management Committee after discussionwith and approval by the Company’s Audit Committee. Selection criteria include market knowledge,reputation, independence and whether professional standards are maintained. The Management Committeedecides, after discussions with the Company’s external valuers, which valuation techniques and inputs to usefor each case

For the purpose of fair value disclosures, the Company has determined classes of assets and liabilities on thebasis of the nature, characteristics and risks of the asset or liability and the level of the fair value hierarchy asexplained above.


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3.6 Property, Plant & Equipment

The Company applies the requirements of LKAS 16 on ‘Property Plant and Equipment’ in accounting for itsowned assets which are held for and use in the provision of the services, for rental to other or foradministration purpose and are expected to be used for more than one year.

3.6.1 Basis of Recognition.

Property Plant and Equipment is recognised if it is probable that future economic benefit associated with theassets will flow to the Company and cost of the asset can be reliably measured.

3.6.2 Measurement

Items of Property, Plant & Equipment are measured at cost (or at fair value in the case of consumablebiological assets) less accumulated depreciation and accumulated impairment losses, if any.

3.6.3 Owned Assets

The cost of Property, Plant & Equipment includes expenditures that are directly attributable to theacquisition of the asset. Such costs includes the cost of replacing part of the property, plant and equipmentand borrowing costs for long terms construction projects if the recognition criteria are met. The cost of self-constructed assets includes the cost of materials and direct labour, any other cost directly attributable tobringing the asset to a working condition for its intended use, and the costs of dismantling and removing theitems and restoring the site on which they are located.

Purchased software that is integral to the functionality of the related equipment is capitalized as a part of thatequipment.

When significant parts of property, plant and equipment are required to be replaced at intervals, the entityrecognises such parts as individual assets (major components) with specific useful lives and depreciation,respectively. Likewise, when a major inspection is performed, its cost is recognised in the carrying amountof the plant and equipment as a replacement if the recognition criteria are satisfied. All other repair andmaintenance costs are recognised in the Profit or Loss Statement as incurred. The present value of theexpected cost for the decommissioning of the asset after its use is included in the cost of the respective assetif the recognition criteria for a provision are met.

Capital work-in-progress is transferred to the respective asset accounts at the time of first utilisation or at thetime the asset is commissioned.

3.6.4 Leased Assets

The determination of whether an arrangement is (or contains) a lease is based on the substance of thearrangement at the inception of the lease. The arrangement is, or contains, a lease if fulfilment of thearrangement is dependent on the use of a specific asset or assets and the arrangement conveys a right to usethe asset or assets, even if that right is not explicitly specified in an arrangement.

Company as a lessee

A lease is classified at the inception date as a finance lease or an operating lease. A lease that transferssubstantially all the risks and rewards incidental to ownership to the Company is classified as a finance lease.

Finance leases are capitalised at the commencement of the lease at the inception date fair value of the leasedproperty or, if lower, at the present value of the minimum lease payments. Lease payments are apportionedbetween finance charges and reduction of the lease liability so as to achieve a constant rate of interest on theremaining balance of the liability. Finance charges are recognised in finance costs in the statement of profitor loss.


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A leased asset is depreciated over the useful life of the asset. However, if there is no reasonable certainty thatthe Company will obtain ownership by the end of the lease term, the asset is depreciated over the shorter ofthe estimated useful life of the asset and the lease term.

Operating lease payments are recognised as an operating expense in the statement of profit or loss on astraight-line basis over the lease term.

3.6.5 Derecognition

An item of property, plant and equipment and any significant part initially recognised is derecognised upondisposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arisingon derecognition of the asset (calculated as the difference between the net disposal proceeds and the carryingamount of the asset) is included in the profit or loss statement when the asset is derecognized and gains arenot classified as revenue.

3.6.6 Land Development Cost

Permanent land development costs are those costs incurred in making major infrastructure development andbuilding new access roads on leasehold lands.

These costs have been capitalised and amortised over the remaining lease period.

Permanent impairments to land development costs are charged to the profit and loss Statement in full orreduced to the net carrying amounts of such assets in the year of occurrence after ascertaining the loss.

3.6.7 Biological Assets

Biological assets are classified in to mature biological assets and immature biological assets. Maturebiological assets are those that have attained harvestable specifications or are able to sustain regular harvests.Immature biological assets are those that have not yet attained harvestable specifications. Tea, rubber, otherplantations and nurseries are classified as biological assets.

Biological assets are further classified as bearer biological assets and consumable biological assets. Bearerbiological asset includes tea and rubber trees, those that are not intended to be sold or harvested, howeverused to grow for harvesting agricultural produce from such biological assets. Consumable biological assetsincludes managed timber trees those that are to be harvested as agricultural produce or sold as biologicalassets.

The entity recognize the biological assets when, and only when, the entity controls the assets as a result ofpast event, it is probable that future economic benefits associated with the assets will flow to the entity andthe fair value or cost of the assets can be measured reliably.

3.6.7.1 Bearer Biological Assets

The bearer biological assets are measured at cost less accumulated depreciation and accumulated impairmentlosses, if any, in terms of LKAS 16 – Property Plant & Equipment.

The cost of land preparation, rehabilitation, new planting, replanting, crop diversification, inter planting andfertilising, etc., incurred between the time of planting and harvesting (when the planted area attainsmaturity), are classified as immature plantations. These immature plantations are shown at direct costs plusattributable overheads. The expenditure incurred on bearer biological assets (Tea, Rubber) which comes intobearing during the year, is transferred to mature plantations.


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3.6.7.2 Infilling Cost on Bearer Biological Assets

The land development costs incurred in the form of infilling have been capitalised to the relevant maturefield, if it increases the expected future benefits from that field, beyond its pre-infilling performanceassessment. Infilling costs so capitalised are depreciated over the newly assessed remaining useful economiclife of the relevant mature plantation, or the unexpired lease period, whichever is lower.

Infilling costs that are not capitalised have been charged to the Income Statement in the year in which theyare incurred.

3.6.7.3 Produce on Bearer Biological Assets

In accordance with LKAS 41, company recognise agricultural produce growing on bearer plants at fair valueless cost to sell. Change in the fair value of such agricultural produce recognized in profit or loss at the endof each reporting period.

For this purpose, quantities of harvestable agricultural produce ascertained based on harvesting cycle of eachcrop category by limiting to one harvesting cycle based on last day of the harvest in the immediatelypreceding cycle. Further, 50% of the crop in that harvesting cycle considered for the valuation.

For the valuation of the harvestable agricultural produce, the company uses the following price formulas.

· Tea – Bought Leaf rate (current month) less cost of harvesting & transport· Rubber – latex Price (95% of current RSS1 Price) less cost of tapping & transport

3.6.7.4 Borrowing Cost

Borrowing costs that are directly attributable to acquisition, construction or production of a qualifying asset,which takes a substantial period of time to get ready for its intended use or sale are capitalised as a part of theasset.

Borrowing costs that are not capitalised are recognised as expenses in the period in which they are incurredand charged to the Profit or Loss Statement.

The amounts of the borrowing costs which are eligible for capitalisation are determined in accordance withthe in LKAS 23 - Borrowing Costs’.

The amount so capitalised and the capitalisation rates are disclosed in Notes to the Financial Statements.

3.6.7.5 Consumable Biological Asset

Consumable biological assets includes managed timber trees those that are to be harvested as agriculturalproduce or sold as biological assets. Expenditure incurred on consumable biological assets (managed timbertrees) is measured on initial recognition and at the end of each reporting period at its fair value less cost tosell in terms of LKAS 41. The cost is treated as approximation to fair value of young plants as the impact onbiological transformation of such plants to price during this period is immaterial. The fair value of timbertrees are measured using DCF method taking in to consideration the current market prices of timber, appliedto expected timber content of a tree at the maturity by an independent professional valuer. All otherassumptions and sensitivity analysis are given in Note 14.2.


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The main variables in DCF model concerns

Variable CommentCurrency valuation Rs.

Timber content

Estimated based on physical verification of girth, height and consideringthe growth of the each spices in different geographical regions.Factor all the prevailing statutory regulations enforced for harvesting oftimber coupled with forestry plan of the company.

Economic useful lifeEstimated based on the normal life span of each spices by factoring theforestry plan of the Company

Selling price Estimated based on prevailing Sri Lankan market price. Factor all theconditions to be fulfilled in bringing the trees in to saleable condition

Planting cost Estimated costs for the further development of immature areas arededucted.

Discount RateFuture cash flows are discounted at following discount rates:Timber trees 14%

The gain or loss arising on initial recognition of consumable biological assets at fair value less cost to selland from a change in fair value less cost to sell of consumable biological assets are included in profit or lossfor the period in which it arises.

Permanent impairments to Biological Asset are charged to the Profit or Loss Statement in full and reduced tothe net carrying amounts of such asset in the year of occurrence after ascertaining the loss.

Consumable biological assets initially recognised is derecognised upon disposal or when no future economicbenefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset(calculated as the difference between the net disposal proceeds and the carrying amount of the asset) isincluded in the profit or loss statement when the asset is derecognized.

3.6.7.6 Nursery Plants

Nursery cost includes the cost of direct materials, direct labour and an appropriate proportion of directlyattributable overheads, less provision for overgrown plants.

3.6.8 Depreciation and Amortisation

(a) Depreciation

Depreciation is recognised in Profit and Loss Statement on a straight-line basis over the estimated usefuleconomic lives of each part of an item of Property, Plant & Equipment since this most closely reflects theexpected pattern of consumption of the future economic benefits embodied in the asset. Assets held underfinance leases are depreciated over the shorter of the lease term and the useful lives of equivalent ownedassets unless it is reasonably certain that the Company will have ownership by the end of the lease term.Lease period of land acquired from JEDB/ SLSPC will be expired in year 2045. The estimated useful livesand depreciation rates are as follows:

No. of Years Rate (%)

Buildings & Roads 40 2.50Plant & Machinery 20/25 4.00/5.00Motor Vehicles 15/20 6.67/5.00Equipment 8/4 12.50/25Furniture & Fittings 10 10.00Water Sanitations 20 5.00


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Mature Plantations (Replanting and New Planting)

No. of Years Rate (%)Mature PlantationsTea 33 1/3 3.00Rubber 20 5.00

Depreciation of an asset begins when it is available for use and ceases at the earlier of the date on which theasset is classified as held for sale or is derecognised. Depreciation methods, useful lives and residual valuesare reassessed at the reporting date and adjusted prospectively, if appropriate. Mature plantations aredepreciated over their useful lives or unexpired lease period, whichever is less.

No depreciation is provided for immature plantations.

(b) Amortisation

The leasehold rights of assets taken over from SLSPC are amortised in equal amounts over the shorter of theremaining lease periods and the useful lives as follows:

No. of Years Rate (%)Bare land 53 1.89Improvements to land 30 3.33Mature Plantations(Tea & Rubber) 30 3.33Buildings 25 4.00Machinery 15 6.67

3.7 Financial Instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liabilityor equity instrument of another entity.

3.7.1 Financial assets

3.7.1.1 Initial Recognition and Measurement

Financial assets are classified, at initial recognition, as financial assets at fair value through profit or loss,loans and receivables, held-to-maturity investments, AFS financial assets, or as derivatives designated ashedging instruments in an effective hedge, as appropriate. All financial assets are recognised initially at fairvalue plus, in the case of financial assets not recorded at fair value through profit or loss, transaction coststhat are attributable to the acquisition of the financial asset.

Purchases or sales of financial assets that require delivery of assets within a time frame established byregulation or convention in the market place (regular way trades) are recognised i.e., the date that theCompany commits to purchase or sell the asset.

The Company’s financial assets include cash and short-term deposits, short term investments, trade andother receivables, loans and other receivables, quoted and unquoted financial instruments.


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3.7.1.2 Subsequent Measurement

The subsequent measurement of financial assets depends on their classification as described below:

(a) Financial assets at fair value through profit or loss

Financial assets at fair value through profit or loss include financial assets held for trading and financialassets designated upon initial recognition at fair value through profit or loss. Financial assets are classifiedas held for trading if they are acquired for the purpose of selling or repurchasing in the near term.

Financial assets at fair value through profit and loss are carried in the statement of financial position at fairvalue with changes in fair value recognised in finance income or finance costs in the Profit and Lossstatement.

The Company has not designated any financial assets as at fair value through profit or loss.

(b) Loans and receivables

Loans and receivables are non-derivative financial assets with fixed or determinable payments that are notquoted in an active market. After initial measurement, such financial assets are subsequently measured atamortized cost using the effective interest rate method (EIR), less impairment. Amortized cost is calculatedby taking into account any discount or premium on acquisition and fees or costs that are an integral part ofthe EIR. The EIR amortization is included in other income and grants in the Profit or Loss Statement. Thelosses arising from impairment are recognised in the Profit or Loss Statement in finance costs for loans andin cost of sales or other operating expenses for receivables.

Loans and receivables comprise of trade receivables, amounts due from related parties, deposits, advancesand other receivables and cash and cash equivalents

(c) Held-to-maturity investments

Non-derivative financial assets with fixed or determinable payments and fixed maturities are classified asheld-to-maturity when the Company has the positive intention and ability to hold them to maturity. Afterinitial measurement, held-to-maturity investments are measured at amortised cost using the effective interestmethod, less impairment.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or coststhat are an integral part of the EIR. The EIR amortisation is included in finance income in the Profit or LossStatement. The losses arising from impairment are recognised in the Profit or Loss Statement in finance costs

(d) Available for sale financial Assets

AFS financial assets include equity investments and debt securities. Equity investments classified as AFS arethose that are neither classified as held for trading nor designated at fair value through profit or loss. Debtsecurities in this category are those that are intended to be held for an indefinite period of time and that maybe sold in response to needs for liquidity or in response to changes in the market conditions.

After initial measurement, AFS financial assets are subsequently measured at fair value with unrealised gainsor losses recognised in OCI and credited in the AFS reserve until the investment is derecognised, at whichtime the cumulative gain or loss is recognised in other operating income, or the investment is determined tobe impaired, when the cumulative loss is reclassified from the AFS reserve to the statement of profit or lossin finance costs. Interest earned whilst holding AFS financial assets is reported as interest income using theEIR method.

The Company evaluates whether the ability and intention to sell its AFS financial assets in the near term isstill appropriate. When, in rare circumstances, the Company is unable to trade these financial assets due toinactive markets, the Company may elect to reclassify these financial assets if the management has theability and intention to hold the assets for foreseeable future or until maturity.


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For a financial asset reclassified from the AFS category, the fair value carrying amount at the date ofreclassification becomes its new amortised cost and any previous gain or loss on the asset that has beenrecognised in equity is amortised to profit or loss over the remaining life of the investment using the EIR.Any difference between the new amortised cost and the maturity amount is also amortised over theremaining life of the asset using the EIR. If the asset is subsequently determined to be impaired, then theamount recorded in equity is reclassified to the statement of profit or loss.

3.7.1.3 Derecognition

A financial asset (or, where applicable, a part of a financial asset or part of a company of similar financialassets) is derecognised when:

· The rights to receive cash flows from the asset have expiredOr

· The Company has transferred its rights to receive cash flows from the asset or has assumed anobligation to pay the received cash flows in full without material delay to a third party under a ‘pass-through’arrangement; and either (a) the Company has transferred substantially all the risks and rewards of the asset,or (b) the Company has neither transferred nor retained substantially all the risks and rewards of the asset,but has transferred control of the asset.

When the company has transferred its rights to receive cash flows from an asset or has entered into a pass-through arrangement, it evaluates if and to what extent it has retained the risks and rewards of ownership.When it has neither transferred nor retained substantially all of the risks and rewards of the asset, nortransferred control of the asset, the asset is recognised to the extent of the Company’s continuinginvolvement in the asset. In that case, the Company also recognises an associated liability. The transferredasset and the associated liability are measured on a basis that reflects the rights and obligations that theCompany has retained.

Continuing involvement that takes the form of a guarantee over the transferred asset is measured at the lowerof the original carrying amount of the asset and the maximum amount of consideration that the companycould be required to repay.

3.7.1.4 Impairment of financial assets

The Company assesses at each reporting date whether there is any objective evidence that a financial asset ora group of financial assets is impaired and if such has been incurred, the amount of the loss is measured asthe difference between the assets carrying amount and the present value of estimated future cash flows.

Evidence of impairment may include indications that the debtors or a group of debtors is experiencingsignificant financial difficulty, default or delinquency in interest or principal payments, the probability thatthey will enter bankruptcy or other financial reorganisation and when observable data indicate that there is ameasurable decrease in the estimated future cash flows, such as changes in arrears or economic conditionsthat correlate with defaults..

3.7.1.5 Financial assets carried at amortised cost

For financial assets carried at amortised cost, the Company first assesses whether impairment existsindividually for financial assets that are individually significant, or collectively for financial assets that arenot individually significant. If the Company determines that no objective evidence of impairment exists foran individually assessed financial asset, whether significant or not, it includes the asset in a company offinancial assets with similar credit risk characteristics and collectively assesses them for impairment. Assetsthat are individually assessed for impairment and for which an impairment loss is, or continues to be,recognised are not included in a collective assessment of impairment.

The amount of any impairment loss identified is measured as the difference between the asset’s carryingamount and the present value of estimated future cash flows (excluding future expected credit losses thathave not yet been incurred). The present value of the estimated future cash flows is discounted at thefinancial asset’s original effective interest rate.


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The carrying amount of the asset is reduced through the use of an allowance account and the loss isrecognised in the statement of profit or loss. Interest income (recorded as finance income in the statement ofprofit or loss) continues to be accrued on the reduced carrying amount and is accrued using the rate ofinterest used to discount the future cash flows for the purpose of measuring the impairment loss. Loanstogether with the associated allowance are written off when there is no realistic prospect of future recoveryand all collateral has been realised or has been transferred to the Company. If, in a subsequent year, theamount of the estimated impairment loss increases or decreases because of an event occurring after theimpairment was recognised, the previously recognised impairment loss is increased or reduced by adjustingthe allowance account. If a write-off is later recovered, the recovery is credited to finance costs in thestatement of profit or loss.

3.7.1.6 Available for sale financial Assets

For AFS financial assets, the Company assesses at each reporting date whether there is objectiveevidence that an investment or a company of investments is impaired.

In the case of equity investments classified as AFS, objective evidence would include a significant orprolonged decline in the fair value of the investment below its cost. ‘Significant’ is evaluated against theoriginal cost of the investment and ‘prolonged’ against the period in which the fair value has been below itsoriginal cost. When there is evidence of impairment, the cumulative loss – measured as the differencebetween the acquisition cost and the current fair value, less any impairment loss on that investmentpreviously recognised in the statement of profit or loss – is removed from OCI and recognised in thestatement of profit or loss. Impairment losses on equity investments are not reversed through profit or loss;increases in their fair value after impairment are recognised in OCI.

The determination of what is ‘significant’ or ‘prolonged’ requires judgement. In making this judgement, thecompany evaluates, among other factors, the duration or extent to which the fair value of an investment isless than its cost.

In the case of debt instruments classified as AFS, the impairment is assessed based on the same criteria asfinancial assets carried at amortised cost. However, the amount recorded for impairment is the cumulativeloss measured as the difference between the amortised cost and the current fair value, less any impairmentloss on that investment previously recognised in the statement of profit or loss.

Future interest income continues to be accrued based on the reduced carrying amount of the asset, using therate of interest used to discount the future cash flows for the purpose of measuring the impairment loss. Theinterest income is recorded as part of finance income. If, in a subsequent year, the fair value of a debtinstrument increases and the increase can be objectively related to an event occurring after the impairmentloss was recognised in the statement of profit or loss, the impairment loss is reversed through the statementof profit or loss.

3.7.2 Financial liabilities

3.7.2.1 Initial recognition and measurement

Financial liabilities are classified as financial liabilities at fair value through profit or loss, loans andborrowings, or as derivatives designated as hedging instruments in an effective hedge, as appropriate.

All financial liabilities are recognised initially at fair value and, in the case of loans and borrowings andpayables, net of directly attributable transaction costs.

The Company’s financial liabilities include trade and other payables, bank overdrafts, loans and borrowings.


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3.7.2.2 Subsequent measurement

The subsequent measurement of financial liabilities depends on their classification as described below:

(a) Financial liabilities at fair value through profit or loss

Financial liabilities at fair value through profit or loss include financial liabilities held for trading andfinancial liabilities designated upon initial recognition as at fair value through profit or loss.

Financial liabilities are classified as held for trading if they are incurred for the purpose of repurchasing inthe near term. This category also includes derivative financial instruments entered into by the Company thatare not designated as hedging instruments in hedge relationships as defined by LKAS 39. Separatedembedded derivatives are also classified as held for trading unless they are designated as effective hedginginstruments.

Gains or losses on liabilities held for trading are recognised in the statement of profit or loss.

Financial liabilities designated upon initial recognition at fair value through profit or loss are designatedat the initial date of recognition, and only if the criteria in LKAS 39 are satisfied. The Company has notdesignated any financial liability as at fair value through profit or loss.

(b) Loans and borrowings

After initial recognition, interest bearing loans and borrowings are subsequently measured at amortized costusing the effective interest rate method. Gains and losses are recognised in the Profit or Loss Statement whenthe liabilities are derecognised as well as through the effective interest rate method (EIR) amortizationprocess.

Amortised cost is calculated by taking into account any discount or premium on acquisition and fees or coststhat are an integral part of the EIR. The EIR amortisation is included as finance costs in the statement ofprofit or loss.

3.7.3 Derecognition

A financial liability is derecognised when the obligation under the liability is discharged or cancelled orexpires. When an existing financial liability is replaced by another from the same lender on substantiallydifferent terms, or the terms of an existing liability are substantially modified, such an exchange ormodification is treated as the derecognition of the original liability and the recognition of a new liability. Thedifference in the respective carrying amounts is recognised in the Profit or Loss Statement.

3.7.4 Offsetting of financial instruments

Financial assets and financial liabilities are offset and the net amount is reported in the statement of financialposition if there is a currently enforceable legal right to offset the recognised amounts and there is anintention to settle on a net basis, to realise the assets and settle the liabilities simultaneously.


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3.7.5 Inventories

Agricultural Produce harvested from Biological Assets

Agricultural produce harvested from Biological assets are measured at their fair value less cost to sell at thepoint of harvest. The finished and semi-finished inventories from agricultural produce are valued by addingthe cost of conversion to the fair value of agricultural produce.

Finish goods manufactured from agricultural produce of biological assets

These are valued at the lower of cost and estimated net realisable value, after making due allowance forobsolete and slow moving items. Net realisable value is the estimated selling price at which stocks can besold in the ordinary course of business after allowing for cost of realisation and/or cost of conversion fromtheir existing state to saleable condition.

Input Material, Spares and Consumables

At actual cost on weighted average basis.

3.7.6 Impairment of Non-Financial Assets

The Company assesses, at each reporting date, whether there is an indication that an asset may beimpaired. If any indication exists, or when annual impairment testing for an asset is required, theCompany estimates the asset’s recoverable amount. An asset’s recoverable amount is the higher of anasset’s or cash-generating unit’s (CGU) fair value less costs of disposal and its value in use. Therecoverable amount is determined for an individual asset, unless the asset does not generate cash inflowsthat are largely independent of those from other assets or groups of assets. When the carrying amount ofan asset or CGU exceeds its recoverable amount, the asset is considered impaired and is written down toits recoverable amount.

In assessing value in use, the estimated future cash flows are discounted to their present value using apre-tax discount rate that reflects current market assessments of the time value of money and the risksspecific to the asset. In determining fair value less costs of disposal, recent market transactions are takeninto account. If no such transactions can be identified, an appropriate valuation model is used. Thesecalculations are corroborated by valuation multiples, quoted share prices for publicly traded companiesor other available fair value indicators.

The Company bases its impairment calculation on detailed budgets and forecast calculations, which areprepared separately for each of the Company’s CGUs to which the individual assets are allocated. Thesebudgets and forecast calculations generally cover a period of five years. For longer periods, a long-termgrowth rate is calculated and applied to project future cash flows after the fifth year.

Impairment losses of continuing operations, including impairment on inventories, are recognised in thestatement of profit or loss in expense categories consistent with the function of the impaired asset, except forproperties previously revalued with the revaluation taken to OCI. For such properties, the impairment isrecognised in OCI up to the amount of any previous revaluation.

For assets excluding goodwill, an assessment is made at each reporting date to determine whether there is anindication that previously recognised impairment losses no longer exist or have decreased. If such indicationexists, the Company estimates the asset’s or CGU’s recoverable amount. A previously recognisedimpairment loss is reversed only if there has been a change in the assumptions used to determine the asset’srecoverable amount since the last impairment loss was recognised. The reversal is limited so that thecarrying amount of the asset does not exceed its recoverable amount, nor exceed the carrying amount thatwould have been determined, net of depreciation, had no impairment loss been recognised for the asset inprior years. Such reversal is recognised in the statement of profit or loss unless the asset is carried at arevalued amount, in which case, the reversal is treated as a revaluation increase.


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3.8 Trade and Other Receivables

Trade and other receivables are stated at their estimated realisable amounts inclusive of provisions for badand doubtful debts.

3.8.1 Provisions

Provisions are recognised when the Company has a present obligation (legal or constructive) as a result of apast event, it is probable that an outflow of resources embodying economic benefits will be required to settlethe obligation and a reliable estimate can be made of the amount of the obligation. When the Companyexpects some or all of a provision to be reimbursed, the reimbursement is recognised as a separate asset, butonly when the reimbursement is virtually certain. The expense relating to any provision is presented in theProfit or Loss Statement net of any reimbursement.

3.9 Employees Benefits

(a) Defined Contribution Plans - Provident Funds and Trust Fund

A defined contribution plan is a post-employment benefit plan under which an entity pays fixedcontributions into a separate entity and will have no legal or constructive obligation to pay further amounts.Obligations for contributions to Provident and Trust Funds covering all employees are recognised as anexpense in profit and loss in the periods during which services are rendered by employees.

The Company contributes 12% on consolidated salary of the employees to Ceylon Planters’ ProvidentSociety (CPPS)/Estate Staff Provident Society (ESPS)/ Employees’ Provident Fund (EPF).

All the employees of the Company are members of the Employees’ Trust Fund, to which the Companycontributes 3% on the consolidated salary of such employees.

(b) Defined Benefit Plan

A defined benefit plan is a post-employment benefit plan other than a defined contribution plan. The liabilityrecognised in the Financial Statements in respect of defined benefit plan is the present value of the definedbenefit obligation at the Reporting date. The defined benefit obligation is calculated annually using theprojected unit credit method. The present value of the defined benefit obligation is determined by discounting the estimated future cash flows using the interest rates that are denominated in the currency inwhich the benefits will be paid, and that have terms to maturity approximating to the terms of the relatedliability. Actuarial gains and losses arising from experience adjustments and changes in actuarialassumptions are charged recognised as in retained earnings through other comprehensive income. Pastservice costs are recognised immediately in the profit or Loss statement.

The provision has been made for retirement gratuities from the first year of service for all employees, inconformity with LKAS 19, “Employee Benefits”. However, under the Payment of Gratuity Act No. 12 of1983, the liability to an employee arises only on completion of 5 years of continued service.

The Liability is not externally funded.

The key assumptions used in determining the retirement benefit obligations are given in Note 22.

3.10 Trade and Other Payables

Trade and other payables are stated at their costs.


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3.11 Capital Commitments and Contingencies

Capital commitments and contingent liabilities of the Company have been disclosed in the respective Notesto the Financial Statements.

3.12 Events occurring after the date of Financial Position.

All material post events occurring after the date of financial position have been considered whereappropriate; either adjustments have been made or adequately disclosed in the Financial Statements.

3.13 Earnings per Share

The Company presents basic earnings per share (EPS) for its ordinary shares. Basic EPS is calculated bydividing the profit or loss attributable to ordinary shareholders of the Company by the weighted averagenumber of ordinary shares outstanding during the period

3.14 Deferred Income

3.14.1 Grants and Subsidies

Government grants are recognised where there is reasonable assurance that the grant will be received and allattached conditions will be complied with. When the grant relates to an expense item, it is recognised asincome over the period necessary to match the grant on a systematic basis to the costs that it is intended tocompensate. Where the grant relates to an asset, it is recognised as deferred income and released to incomein equal amounts over the expected useful life of the related asset.

Where the Company receives non-monetary grants, the asset and the grant are recorded gross at nominalamounts and released to the Profit or Loss Statement over the expected useful life and pattern ofconsumption of the benefit of the underlying asset by equal annual instalments. Where loans or similarassistance are provided by governments or related institutions with an interest rate below the currentapplicable market rate, the effect of this favourable interest is regarded as additional government grant.

Grants related to Property, Plant & Equipment other than grants received for forestry are initially deferredand allocated to income on a systematic basis over the useful life of the related Property, Plant & Equipmentas follows: Assets are amortised over their useful lives or unexpired lease period, whichever is less.

Buildings 40 years

Grants received for forestry are initially deferred and credited to income once when the related blocks oftrees are harvested.

3.15 Profit or Loss Statement

For the purpose of presentation of Profit or Loss Statement, the function of expenses method is adopted, as itrepresents fairly the elements of the company’s performance.

3.15.1 Revenue

Revenue is recognised to the extent that it is probable that the economic benefits will flow to the Companyand the revenue can be reliably measured, regardless of when the payment is being made. Revenue ismeasured at the fair value of the consideration received or receivable, taking into account contractuallydefined terms of payment and excluding taxes or duty.

(a) Revenue from the sale of goods is recognised when the significant risks and rewards of ownership of thegoods have passed to the buyer, usually on delivery of the goods. Revenue is recorded at invoice valuenet of brokerage, sale expenses and other levies related to revenue.


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(b) Gains and losses on disposal of an item of Property, Plant & Equipment are determined by comparingthe net sales proceeds with the carrying amounts of Property, Plant & Equipment and are recognisedwithin ‘other operating income’ in the Profit or Loss Statement.

(c) For all financial instruments measured at amortised cost and interest-bearing financial assets classifiedas AFS, interest income is recorded using the effective interest rate (EIR). EIR is the rate that exactlydiscounts the estimated future cash payments or receipts over the expected life of the financialinstrument or a shorter period, where appropriate, to the net carrying amount of the financial asset orliability. Interest income is included in finance income in the statement of profit or loss.

(d) Dividend is recognised when the company’s right to receive the payment is established, which isgenerally when shareholders approve the dividend.

(e) Rental income arising from operating leases on investment properties is accounted for on a straight-linebasis over the lease terms.

3.15.2 Expenses

All expenditure incurred in the running of the business and in maintaining the Property, Plant & Equipmentin a state of efficiency is charged to revenue in arriving at the profit or loss for the period.

3.15.2.1 Financing Income and Finance cost

Finance income comprises interest income on funds invested. Interest income is recognised as it accrues inprofit or loss.

Finance costs comprise interest expense on borrowings, unwinding of the discount on provisions, changes inthe fair value of financial assets at fair value through profit or loss, and losses on hedging instruments thatare recognised in profit or loss. Borrowing costs that are not directly attributable to the acquisition,construction or production of a qualifying asset are recognised in profit or loss using the effective interestmethod.

The interest expense component of finance lease payments is allocated to each period during the lease termso as to produce a constant periodic rate of interest on the remaining balance of the liability.

Foreign currency gains and losses are reported on a net basis.

3.15.3 Taxes

3.15.3.1 Current Income Tax

Current income tax assets and liabilities are measured at the amount expected to be recovered from or paid tothe taxation authorities. The tax rates and tax laws used to compute the amount are those that are enacted orsubstantively enacted, at the reporting date in the countries where the Company operates and generatestaxable income.

Current income tax relating to items recognised directly in equity is recognised in equity and not in thestatement of profit or loss. Management periodically evaluates positions taken in the tax returns with respectto situations in which applicable tax regulations are subject to interpretation and establishes provisions whereappropriate.


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3.15.3.2 Deferred Tax

Deferred tax is provided using the liability method on temporary differences between the tax bases of assetsand liabilities and their carrying amounts for financial reporting purposes at the reporting date.

Deferred tax liabilities are recognised for all taxable temporary differences, except:

· When the deferred tax liability arises from the initial recognition of goodwill or an asset or liability in atransaction that is not a business combination and, at the time of the transaction, affects neither theaccounting profit nor taxable profit or loss

· In respect of taxable temporary differences associated with investments in subsidiaries, associates andinterests in joint ventures, when the timing of the reversal of the temporary differences can be controlledand it is probable that the temporary differences will not reverse in the foreseeable future.

Deferred tax assets are recognised for all deductible temporary differences, the carry forward of unusedtax credits and any unused tax losses. Deferred tax assets are recognised to the extent that it is probablethat taxable profit will be available against which the deductible temporary differences, and the carryforward of unused tax credits and unused tax losses can be utilised, except:

· When the deferred tax asset relating to the deductible temporary difference arises from the initialrecognition of an asset or liability in a transaction that is not a business combination and, at the time ofthe transaction, affects neither the accounting profit nor taxable profit or loss

· In respect of deductible temporary differences associated with investments in subsidiaries, associatesand interests in joint ventures, deferred tax assets are recognised only to the extent that it is probable thatthe temporary differences will reverse in the foreseeable future and taxable profit will be availableagainst which the temporary differences can be utilized.

The carrying amount of deferred tax assets is reviewed at each reporting date and reduced to the extentthat it is no longer probable that sufficient taxable profit will be available to allow all or part of thedeferred tax asset to be utilised. Unrecognised deferred tax assets are re-assessed at each reporting dateand are recognised to the extent that it has become probable that future taxable profits will allow thedeferred tax asset to be recovered.

Deferred tax assets and liabilities are measured at the tax rates that are expected to apply in the yearwhen the asset is realised or the liability is settled, based on tax rates (and tax laws) that have beenenacted or substantively enacted at the reporting date.

Deferred tax relating to items recognised outside profit or loss is recognised outside profit or loss.Deferred tax items are recognised in correlation to the underlying transaction either in OCI or directly inequity.

Deferred tax assets and deferred tax liabilities are offset if a legally enforceable right exists to set offcurrent tax assets against current tax liabilities and the deferred taxes relate to the same taxable entityand the same taxation authority.

Tax benefits acquired as part of a business combination, but not satisfying the criteria for separaterecognition at that date, are recognised subsequently if new information about facts and circumstanceschange. The adjustment is either treated as a reduction in goodwill (as long as it does not exceedgoodwill) if it was incurred during the measurement period or recognised in profit or loss.

3.16 Cash and Cash Equivalents

Cash and cash equivalents comprise cash balances and call deposits. Bank overdrafts that are repayable ondemand form an integral part of the company’s cash management and are included as a component of cashand cash equivalents for the purpose of the Statement of Cash Flows.


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3.17 Statement of Cash Flows

The Statement of Cash Flow has been prepared using the ‘indirect method’. Interest paid is classified asoperating cash flows, interest and dividends received are classified as investing cash flows while dividendspaid and Government grants received are classified as financing cash flows, for the purpose of presenting theCash Flow Statement.

3.18 Segment Reporting

Segmental information is provided for the different business segments of the Company Businesssegmentation has been determined based on the nature of goods provided by the Company after consideringthe risk and rewards of each type of product.

Since the individual segments are located close to each other and operate in the same industrial environment,the need for geographical segmentation has no material impact.

The segments information are disclosed in the Note no 6 to the Financial Statements.

Revenue and expenses directly attributable to each segment are allocated to the respective segments.Revenue and expenses not directly attributable to a segment are allocated on the basis of their resourceutilisation, wherever possible.

Assets and liabilities directly attributable to each segment are allocated to the respective segments. Assetsand liabilities, which are not directly attributable to a segment, are allocated on a reasonable basis whereverpossible. Unallocated items comprise mainly interest bearing loans, borrowings, and expenses.

Segment capital expenditure is the total cost incurred during the period to acquire segment assets that areexpected to be used for more than one accounting period.

3.19 Change in Accounting Policies and Disclosures

Amendment to LKAS 41 & 16 – Harvestable Produce Growing on Bearer Biological Assets

Amendments to LKAS 16 - Property, Plant & Equipment and LKAS 41 – Agriculture, require entity torecognise agricultural produce growing on Bearer Plants at fair value less cost to sell separately from itsbearer plants prior to harvest. After initial recognition, changes in the fair value of such agricultural producegrowing on Bearer Plants, recognised in profit or loss at the end of each reporting period.

Accordingly, the Company has applied these amendments retrospectively in the Financials Statements. Forthe details refer note 34.


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4. USE OF ESTIMATES AND JUDGMENTS

The preparation of Financial Statements in conformity with SLFRS/LKAS requires management to makejudgments, estimates and assumptions that influence the application of accounting policies and thereported amounts of assets, liabilities, income and expenses. Judgments and estimates are based onhistorical experience and other factors, including expectations that are believed to be reasonable under thecircumstances. Hence, actual experience and results may differ from these judgments and estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accountingestimates are recognised in the period in which the estimate is revised, if the revision affects only thatperiod and any future periods affected.

Information about significant areas of estimation uncertainty and critical judgments in applyingaccounting policies that have the most significant effect on the amounts recognised in the FinancialStatements is included in the following notes:

• Note 23 - Deferred Taxation• Note 22 - Measurement of the Defined Benefit Obligations• Note 14 - Biological Assets• Note 25 - Liability to make Lease Payment

4.1 Income Taxes

The Company is subject to income taxes and other taxes including VAT. Significant Judgement wasrequired to determine the total provision for current, deferred and other taxes pending the issue of taxguidelines on the treatment of the adoption of SLFRS in the financial statements and the taxable profit forthe purpose of imposition of taxes. Uncertainties exist, with respect to the interpretation of theapplicability of tax laws, at the time of the preparation of these financial Statements.

The Company recognized assets and liabilities for current deferred and other taxes based on estimates ofwhether additional taxes will be due. Where the final tax outcome of these matters is different from theamounts that were initially recorded, such difference will impact the income, deferred and tax amounts inthe period in which the determination is made.

4.2 Retirement Benefit Obligations

The present value of the retirement benefit obligations depends on a number of factors that aredetermined on an actuarial basis using a number of assumptions. Key assumptions used in determiningthe retirement benefit obligations are given in Note 22. Any changes in these assumptions will impact thecarrying amount of retirement benefit obligations.

4.3 Biological Assets

The fair value of managed timber trees depends on a number of factors that are determined on adiscounted method using various financial and non-financial assumptions. The growth of the trees isdetermined by various biological factors that are highly unpredictable. Any change to the assumptionswill impact to the fair value of biological assets. Key assumptions and sensitivity analysis of thebiological assets are given in the Note 14.2


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5 STANDARDS ISSUED BUT NOT YET EFFECTIVE

Standards issued but not yet effective up to the date of issuance of the company’s financial statements arelisted below. This listing of standards and interpretations issued are those that the company reasonablyexpects to have an impact on disclosures, financial position or performance when applied at a future date.The company intends to adopt these standards when they become effective.

Impending Accountings standards / Standards issued not yet effective

Certain new accounting standards and amendments / improvements to existing standards have beenpublished, that are not mandatory for 31 December 2016 reporting periods. None of those have beenearly adopted by the Company.

SLFRS 9 Financial Instruments: Classification and Measurement

SLFRS 9, as issued reflects the first phase of work on measurement of LKAS 39 and applies toclassification and measurement of financial assets and liabilities. This standard is effective for the annualperiods beginning on or after 01 January 2018.

SLFRS 15 Revenue from Contracts with Customers

SLFRS 15 establishes a comprehensive framework for determining whether, how much and whenrevenue is recognized. It replaces existing revenue recognition guidance, including LKAS 18 Revenue,LKAS 11 Construction Contracts and IFRIC 13 Customer Loyalty Programs. This standard is effectivefor the annual periods beginning on or after 01 January 2018.

SLFRS 16 -Leases

SLFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leasesand requires lessees to account for all leases under a single on balance sheet model similar to theaccounting for finance leases, under LKAS 17 except for few exemptions for leases for “low value”assets and short term leases with a lease term of 12 months or less. This standard is effective for theannual periods beginning on or after 01 January 2019.

Balangoda Plantations PLCSTATEMENT OF PROFIT OR LOSSYear ended 31 December 2016

NOTES 2016 2015Restated

Rs. Rs.

REVENUE 6 2,266,656,524 2,413,054,604

COST OF SALES (2,497,350,126) (2,862,355,315)

GROSS PROFIT / (LOSS) (230,693,602) (449,300,711)

GAIN/(LOSS) ON FAIR VALUE OF BIOLOGICAL ASSETS 14.4 18,839,244 89,669,220

OTHER INCOME AND GAINS 7 118,697,066 128,083,664

ADMINISTRATIVE EXPENSES (124,346,504) (125,153,980)

MANAGEMENT FEE (25,207,600) (24,908,400)

FINANCE COST 8 (128,367,044) (48,778,282)

PROFIT/ (LOSS) BEFORE TAX 9 (371,078,440) (430,388,490)

INCOME TAX EXPENSE 10 56,736,769 87,295,321

PROFIT/ (LOSS) FOR THE YEAR (314,341,672) (343,093,169)

BASIC EARNINGS/ (LOSS) PER SHARE 11 (13.30) (14.52)

The Accounting Policies and Notes on pages 09 to 49 form an integral part of the Financial Statements.

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Balangoda Plantations PLCSTATEMENT OF COMPREHENSIVE INCOMEYear ended 31 December 2016

For the year ended 31 December NOTES 2016 2015Restated

Rs. Rs.

Profit/ (Loss) for the year (314,341,672) (343,093,169)

Other Comprehensive IncomeOther comprehensive income to be reclassified to profit or lossin subsequent period ( net of tax )Net change in fair value of available-for-sale financial assets 15 (123,901) (181,787)Income tax effect - -

Other comprehensive income not to be reclassified to profit or lossin subsequent period ( net of tax )Actuarial gains/ (losses) on defined benefit plans 22 148,708,063 10,011,808Income tax effect (23,436,391) (1,577,861)

Net other comprehensive income/ (loss) not to be reclassified to profitor loss in subsequent periods 125,271,672 8,433,947

Other comprehensive income/(loss) for the year, net of tax 125,147,771 8,252,160Total Other comprehensive income for the year, net of tax (189,193,901) (334,841,009)


Net other comprehensive income/ (loss) to be reclassified to profit orloss in subsequent periods

(123,901) (181,787)

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Balangoda Plantations PLCSTATEMENT OF FINANCIAL POSITIONYear ended 31 December 2016

ASSETS NOTES 2016 2015 2014Restated Restated

Non Current Assets Rs. Rs. Rs.Lease hold Property ,Plant and Equipment 12 242,977,947 261,369,134 279,760,321Property, plant & equipment 13 652,896,713 688,275,977 595,349,159Bearer Biological Assets 14.1 2,307,627,081 2,088,809,788 1,810,631,291Consumable Biological Assets 14.2 1,771,340,321 1,755,818,586 1,662,375,598Available for Sale Financial Assets 15 507,312 631,213 813,000

4,975,349,374 4,794,904,697 4,348,929,369Current AssetsProduce on Bearer Bialogical Assets 14.3 5,245,740 1,966,858 1,901,033Inventories 16 340,602,406 265,303,655 333,546,297Trade and Other Receivables 17 98,179,836 142,643,583 143,168,087Amounts due from Related Companies 18 5,027,372 9,320,923 4,840,292ACT Recoverable 29,468,572 29,468,572 29,468,572VAT Receivable 11,975,814 11,333,424 10,453,452ESC Receivable 7,982,195 4,782,585 5,712,988Short Term Investments 19.1 3,107,029 62,911,618 234,324,596Cash and cash Equivalents 19.2 19,813,861 24,328,912 33,833,607

521,402,825 552,060,130 797,248,925TOTAL ASSETS 5,496,752,199 5,346,964,827 5,146,178,294

EQUITY AND LIABILITIESEquityStated Capital 20 350,000,010 350,000,010 350,000,010Timber Reserves 1,569,769,826 1,563,364,388 1,475,496,538Available for Sale Reserves 357,312 481,213 663,000Retained Earnings 179,371,363 374,846,801 797,373,873Total Equity 2,099,498,511 2,288,692,412 2,623,533,421

Non Current Liabilities & Deferred IncomeInterest Bearing Loans & Borrowings 21 954,660,048 714,381,768 521,232,826Retirement Benefit Obligations 22 677,583,208 757,903,350 684,325,565Deferred Tax Liability 23 4,921,470 45,753,815 140,359,796Deferred Income 24 180,363,631 191,420,805 202,696,028Liability to make Lease Payment after one year 25 93,485,000 95,344,000 97,133,000

1,911,013,357 1,804,803,737 1,645,747,215

Current LiabilitiesInterest Bearing Loans & Borrowings 21 129,409,893 129,127,143 15,750,292Liability to make Lease Payment within one year 25 1,859,000 1,789,000 1,719,000Trade and Other Payables 26 712,556,185 494,583,713 388,633,659Amounts due to Related Companies 27 133,601,944 111,208,222 104,471,439Income Tax Liabilities 15,328,092 15,958,510 16,288,580Dividends Payable 28 6,372,554 6,536,163 6,608,137Bank Overdraft 19.3 487,112,662 494,265,925 343,426,551

1,486,240,330 1,253,468,676 876,897,658TOTAL LIABILITIES 3,397,253,688 3,058,272,413 2,522,644,873TOTAL EQUITY AND LIABILITIES 5,496,752,199 5,346,964,827 5,146,178,294

Net assets per share (Rs.) 88.82 96.83 110.99

These Financial Statements are in compliance with the requirements of the Companies Act No. 07 of 2007.

………..……………………………………………. Chief Accountant

The Board of Directors is responsible for the preparation and presentation of these Financial Statements.Signed for and on behalf of the Board by

DIRECTOR

1 ………..…………………………………………….

2 ………………………………………………………


27 April 2017Colombo.

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Balangoda Plantations PLCSTATEMENT OF CHANGES IN EQUITYYear ended 31 December 2016

Timber Available for Retained TotalReserve Sale Reserves Earnings Equity

Rs. Rs. Rs. Rs.

As at 01 January 2015 ( as previouly reported ) 350,000,010 1,475,496,538 663,000 795,472,840 2,621,632,388

Impact of the amendments of LKAS 16 & LKAS 41 - - - 1,901,033 1,901,033( Refer Note No 34 )

As at 01 January 2015 - Restated 350,000,010 1,475,496,538 663,000 797,373,873 2,623,533,421

Profit/ (Loss) for the year - - - (343,093,169) (343,093,169)

Transferred to Timber Reserve - 89,603,395 - (89,603,395) -

Transferred to Retained Earnings (1,735,545) 1,735,545 -

Total other Comprehensive income for the year - - (181,787) 8,433,947 8,252,160net of tax

Dividend - - - --

Balance as at 31 December 2015 - Restated 350,000,010 1,563,364,388 481,213 374,846,801 2,288,692,412

Profit/ (Loss) for the year - - - (314,341,672) (314,341,672)

Transferred to Timber Reserve - 15,560,362 - (15,560,362) -

Transferred to Retained Earnings - (9,154,924) - 9,154,924 -

Total other Comprehensive income for the year - - (123,901) 125,271,672 125,147,771net of tax

Dividends - - - - -

Balance as at 31 December 2016 350,000,010 1,569,769,826 357,312 179,371,363 2,099,498,511


Stated Capital

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Balangoda Plantations PLCSTATEMENT OF CASH FLOWSYear ended 31 December 2016

2015CASH FLOWS FROM OPERATING ACTIVITIES NOTES 2016 Restated

Rs. Rs.

Net Profit/ (Loss) before Taxation (371,078,440) (430,388,490)

ADJUSTMENTS FOR

Depreciation/Amortisation 102,435,078 99,488,683Profit on disposal of Property Plant & Equipment 7 - (2,730,509)Profit on Sale of Timber Trees 7 (1,019,824) (1,844,175)Interest Income 7 (466,995) (7,530,874)Retirement Benefit Obligation -Provision 22 117,467,059 117,566,492Amortisation of Grants 24 (11,057,174) (11,275,223)Provision for Obsolete Stocks 16 (176,670) 640,808Provision for doubtful debts 17 (393,470) 429,279Interest Expenses 8 128,367,044 48,778,282(Gains) / Losses on Biological Assets 14.4 (18,839,244) (89,669,220)Operating Profit before Working Capital Changes (54,762,636) (276,534,946)

(Increase)/Decrease in Inventories 16 (75,122,081) 67,604,834(Increase)/Decrease in Trade and Other Receivables 17 42,288,859 (784,747)Increase/(Decrease) in Trade and Other Payables 26 217,813,472 105,950,054(Increase)/Decrease in amounts due from Related Companies 18 4,293,551 (4,480,631)Increase/(Decrease) in amounts due to Related Companies 27 22,393,722 6,736,783Cash Generated from Operations 156,904,887 (101,511,653)

Payment of Economic Service Charges (4,483,988) (6,906,303)Retirement Benefit Obligations - Payments (49,079,138) (33,976,899)Interest Paid (109,058,420) (39,823,991)Net Cash from Operating Activities (5,716,660) (182,218,846)

CASH FLOWS FROM INVESTING ACTIVITIES

Interest Received 3,035,353 10,146,008Purchase of Property, Plant & Equipment 13 (13,966,266) (143,893,644)Investment in Immature Plantations -Note A (262,631,949) (314,309,304)Proceeds from Disposal of Property, Plant & Equipment 10,174,747 6,735,229

Net Cash used in Investing Activities (263,388,114) (441,321,711)

CASH FLOWS FROM FINANCING ACTIVITIES

Receipts of loans 395,402,500 344,136,028Repayment of Loan (154,841,470) (37,610,231)Payment to Lessor on Lease rights (28,622,633) (14,742,287)

Net Cash from Financing Activities 211,938,397 291,783,510

Net Increase / (Decrease) in Cash & Cash Equivalents (57,166,377) (331,757,047)

C. Cash & Cash Equivalents at the beginning of the year (407,025,395) (75,268,348)

D. Cash & Cash Equivalents at the end of the year (464,191,772) (407,025,395)


-7-

Balangoda Plantations PLCSTATEMENT OF CASH FLOWSYear ended 31 December 2016

Tea Rubber Others Total

NOTE A: Investment in Immature PlantationsRs. Rs. Rs. Rs.

Investment in Immature Plantations -2016 8,297,103 236,881,052 17,453,794 262,631,949

Investment in Immature Plantations -2015 12,178,947 293,665,993 8,464,365 314,309,305

2016 2015NOTE C Rs. Rs.Cash & Cash Equivalents at the beginning of the year Cash & Bank Balances 24,328,912 33,833,607 Short term Investments 62,911,618 234,324,596 Bank Overdrafts (494,265,925) (343,426,551)

(407,025,395) (75,268,348)NOTE DCash & Cash Equivalents at the end of the year Cash & Bank Balances 19,813,861 24,328,912 Short term Investments 3,107,029 62,911,618 Bank Overdrafts (487,112,662) (494,265,925)

(464,191,772) (407,025,395)


-8-


6 REVENUE 2016 2015Rs. Rs.

6.1 SummarySale of GoodsTea 2,054,208,698 2,235,883,478Rubber 212,447,826 177,171,126

2,266,656,524 2,413,054,6046.2 Segment Information

Segment Revenue

TeaRevenue 2,054,208,698 2,235,883,478Revenue Expenditure (2,031,667,912) (2,458,470,117)Depreciation (55,412,802) (63,236,437)Other Non Cash Expenditure (141,550,608) (83,693,851)Segment Results (174,422,624) (369,516,927)

RubberRevenue 212,447,826 177,171,126Revenue Expenditure (227,930,954) (213,231,177)Depreciation (23,748,344) (27,101,330)Other Non Cash Expenditure (17,039,506) (16,622,403)Segment Results (56,270,978) (79,783,784)

TotalRevenue 2,266,656,524.00 2,413,054,604Revenue Expenditure (2,259,598,866.00) (2,671,701,294)Depreciation (79,161,146.00) (90,337,767)Other Non Cash Expenditure (158,590,114.00) (100,316,254)Segment Results (230,693,602) (449,300,711)

Gains on fair value of biological assets 18,839,244 89,669,220Other Income 118,697,066 128,083,664Other Expenditure (247,097,356) (161,872,591)Depreciation (4,882,754) (4,731,241)Gratuity (733,438) (7,328,430)Management Fees (25,207,600) (24,908,400)Operating Profit of the Company (371,078,440) (430,388,490)

Segment Assets 2016 2015Rs. Rs.

TeaNon Current AssetsCost 2,075,563,977 2,052,670,608Amortization/ Depreciation (1,037,858,589) (964,934,304)

1,037,705,388 1,087,736,304RubberNon Current AssetsCost 2,521,244,528 2,284,363,476Amortization/ Depreciation (468,655,029) (439,749,200)

2,052,589,499 1,844,614,276UnallocatedNon Current AssetsCost 1,988,523,220 1,964,786,671Amortization/ Depreciation (103,468,737) (102,232,553)

1,885,054,483 1,862,554,118

4,975,349,374 4,794,904,698

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6. REVENUE (Contd..)

6.2 Segment Information (Contd..) 2016 2015Rs. Rs.

TeaCurrent AssetsCost 388,145,263 235,564,110

388,145,263 235,564,110RubberCurrent AssetsCost 63,486,878 64,770,210

63,486,878 64,770,210

Allocated 451,632,141 300,334,320Unallocated 69,770,684 251,725,811

521,402,825 552,060,131

Total Assets 5,496,752,199 5,346,964,828

Segement Eqiuty and LiabilitiesNon Current Liabilities

TeaAllocated 723,966,639 787,674,098

723,966,639 787,674,098RubberAllocated 114,911,569 128,116,333

114,911,569 128,116,333

Allocated 838,878,208 915,790,431Unallocated 1,072,135,149 889,013,306

1,911,013,357 1,804,803,737

Current LiabilitiesTea 370,412,263 306,648,153Rubber 63,797,679 65,298,735Unallocated 1,052,030,389 881,521,791

1,486,240,331 1,253,468,676

Stated Capital and Reserve 2,099,498,511 2,288,692,412

Total Equity and Liabilities 5,496,752,199 5,346,964,827

Segment Capital Expenditure

CostTea 22,263,369 155,574,914Rubber 227,726,129 293,665,993Unallocated 26,608,717 8,962,041

276,598,215 458,202,948

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7 OTHER INCOME AND GAINS NOTES 2016 2015Rs. Rs.

Interest Income 466,995 7,530,874Amortisation of Government Grants 11,057,174 11,275,223Rent Income 40,881,310 41,260,637Sale of Refuse Tea 33,989,446 25,609,786Net Income from Travellers Paradise 1,717,989 2,660,586Net Income from Dolomite Project (264,713) (36,818)Sales of Rubber Trees 4,598,684 17,313,060Profit on Sale of Timber Trees 1,019,824 1,844,175Sundry Income 25,206,886 17,895,632Profit on Disposal of Property Plant & Equipment 23,471 2,730,509

118,697,066 128,083,664There are no unfulfilled conditions or contingencies attached to the grants.

8 FINANCE COST 2016 2015Rs. Rs.

Interest on Lease Rental (JEDB/SLSPC) 3,884,000 3,954,000Contingent Lease Rental (JEDB/SLSPC) 24,897,276 23,893,036Overdraft Interest 58,054,084 35,471,855Loan Interest 118,728,178 60,392,479

205,563,538 123,711,370Less: Amount Capitalised (77,196,494) (74,933,088)

128,367,044 48,778,282

9 PROFIT BEFORE TAX IS STATED AFTER CHARGING 2016 2015Rs. Rs.

Auditor’s remunerationAudit Service 4,074,000 3,760,000

Depreciation and Lease AmortisationRight to Use of Land 12.1 6,249,060 6,249,060Immovable leased Bearer Biological assets 12.2 9,040,819 9,040,819Immovable Leased assets 12.3 3,101,308 3,101,308Feehold Property ,Plant & Equipment 13 49,345,528 50,541,827Bearer Biological Assets 14.1 34,698,363 30,555,669

Staff CostDefined Benefit Plan Costs (Retirement Benefit Obligation) 22 117,467,059 117,566,492Defined Contributions Plan Costs - EPF & ETF 137,866,508 169,684,792Others - Staff Costs 1,269,299,822 1,503,591,239

Management Fees 25,207,600 24,908,400Provision /(reversal) for bad & doubtful debts (393,470) 429,279Provision /(reversal) for Obsolete Inventories (176,670) 640,808Gain on change in fair value of biological assets 18,839,244 89,669,220

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10. TAX EXPENSES

NOTES

10.1 STATEMENT OF PROFIT OR LOSS 2016 2015Rs. Rs.

(i) Current Income TaxCurrent Income Tax Charges 7,531,966 8,888,522

(ii) Deferred TaxRelating to Origination and (reversal) of temporary defferences 23.1 (64,268,735) (96,183,842)

Income Tax charge/(reversal) reported in Statement of Profit or Loss (56,736,769) (87,295,321)

10.2 STATEMENT OF OTHER COMPREHENSIVE INCOME

Deferred tax relating to items (charges)/ credited directly to OCI during the yearNet gain on acturial gains and losses on Defined Benefit Plans 23.1 (23,436,391) (1,577,861)

Deferred tax charged to Other Comprehensive Income (23,436,391) (1,577,861)

10.3 RECONCILIATION OF TAX EXPENSES AND THE ACCOUNTING PROFIT MULTIPLIED BY THESTATUTORY EFFECTIVE TAX RATE FOR 2016 AND 2015

2016 2015Rs. Rs.

Profit/ (loss) before Tax (371,078,440) (430,388,490)Effective Tax Rate 15.76% 15.76%

Tax effect on Accounting Profit / (Loss) Before Tax (58,481,962) (67,829,226)Tax effect on Aggregate disallowed items 24,913,268 41,024,651Tax effect on Aggregate allowable items (81,904,782) (97,263,327)

(115,473,476) (124,067,902)

Tax effect on Interest Income 140,873 2,121,923Tax effect on Rent Income 11,446,767 11,552,727Tax effect on Tax Loss B/F & Utilised (4,055,674) (4,786,127)Income Tax Charge/(Reversal) 7,531,966 8,888,522

11. EARNINGS PER SHARE

2016 2015Rs. Rs.

Amounts used as the Numerator : (314,341,672) (343,093,169)Net profit applicable to ordinary shareholders for basic earnings per share (314,341,672) (343,093,169)

Amounts used as the Denominator :Weighted average number of ordinary shares in issue applicable to 23,636,364 23,636,364basic earnings per share 23,636,364 23,636,364

Earnings/ (Loss) Per Share (13.30) (14.52)

The computation of the basic earnings per share is based on profit attributable to ordinary shareholders for the period divided by weightedaverage number of ordinary shares outstanding during the period and calculated as follows.

The major component of tax expenses for the year ended 31st December 2016 are as follows

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12 LEASEHOLD PROPERTY, PLANT & EQUIPMENT

2016 2015As at 31st December, NOTES Rs. Rs.

Right-to-use of land 12.1 177,734,173 183,983,233Immovable leased bearer biological assets 12.2.1 60,781,825 69,822,644

12.2.2 4,461,949 7,563,257

242,977,947 261,369,134

12.1 RIGHT-TO-USE OF LAND

2016 2015Rs. Rs.

Capitalised Value 331,200,716 331,200,716

AmortizationAs at 1st January 147,217,483 140,968,423Amortization charge for the year 6,249,060 6,249,060As at 31st December 153,466,543 147,217,483

Carrying amount 177,734,173 183,983,233

This right-to-use land is amortized over the remaining lease term or useful life of the right whichever is shorter and isdisclosed under non-current assets. The Statement of Alternative Treatment (SoAT) for right-to-use land does notpermit further revaluation of right-to-use land. However an adjustment to the "Right-To-Use of Land" could be made tothe extent that the change relate to the future period on the reassessment of liability to make the lease payment. Thevalues taken into the Statement of Financial Position as at 18th June 1992 and amortisation of the right to use land up to31 December 2016 are as follows.

“Right-To-Use of Land on Lease” as above was previously titled "Leasehold Right to Bare land". The change is in orderto comply with Statement of Alternative Treatment (SoAT) issued by the Institute of Chartered Accountants of Sri Lankadated 21st August 2013. Such leases have been executed for all estates for a period of 53 years.

Immovable Leased assets (other than right-to-useof land and bearer biological assets)

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12.2 IMMOVABLE LEASED ASSETS

12.2.1 Immovable Leased Bearer Biological Assets

Tea Rubber 2016 2015

Rs. Rs. Rs. Rs.

Capitalised Value

(18th June, 1992) 206,227,260 64,997,320 271,224,580 271,224,580

Amortisation

As at 1st January 153,425,431 47,976,505 201,401,936 192,361,117

Amortisation for the year 6,874,242 2,166,577 9,040,819 9,040,819

As at 31st December 160,299,673 50,143,082 210,442,755 201,401,936

Carrying amount 45,927,587 14,854,238 60,781,825 69,822,644

12.2.2 Immovable Leased assets (other than right-to-use of land and bearer biological assets)

UnimprovedLease Land

Improvementto Land

Other VestedAssets Buildings Machinery 2016 2015

Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Capitalised Value

(18 June, 1992) 899,449 15,701,754 151,815 64,023,644 26,164,471 106,941,133 106,941,133

Amortisation

As at 1 January 399,727 12,330,243 151,815 60,331,620 26,164,471 99,377,876 96,276,568

Amortisation for the year 16,970 523,392 - 2,560,946 - 3,101,308 3,101,308

As at 31 December 416,697 12,853,635 151,815 62,892,566 26,164,471 102,479,184 99,377,876

Carrying amount 482,752 2,848,119 - 1,131,078 - 4,461,949 7,563,257

These assets are being amortised in equal annual amounts over the following periods:

Mature plantations/improvement to land 30 yearsBuildings 25 yearsMachinery 15 years

The assets shown above are those movable assets vested in the Company by Gazette Notification at the date of formation of the Company (22nd June1992).

Mature Plantations

In terms of the ruling of the UITF of the Institute of Chartered Accountants of Sri Lanka prevailed at the time of privatisation of plantation estates, allimmovable assets in these estates under finance leases have been taken into the books of the Company retroactive to 18th June 1992. For this purpose,the Board decided at its meeting on 8th March, 1995, that these assets be stated at their book values as they appear in the books of the JEDB/SLSPC,on the day immediately preceding the date of formation of the Company. These assets are taken into the Statement of Financial Position as at 18 June,1992 and amortisation of immovable leased assets to 31 December 2016 are as follows.

Investment in Immature Plantations at the time of handing over to the Company as at 18 June, 1992 by way of estate leases were shown underImmature Plantations.

However, since then all such investments in Immature Plantations attributable to JEDB/SLSPC period have been transferred to Mature Plantations.These mature tea and rubber were classified as bearer biological assets in terms of LKAS 41 - Agriculture. The carrying value of the bearer biologicalassets leased from JEDB/SLSPC is recognised at cost less amortisation.Further investments in such plantations to bring them to maturity are shown inNote 14

Note :

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13 PROPERTY ,PLANT AND EQUIPMENT LandImprovements Buildings

MotorVehicles

Furniture &Fittings

Equipment &Tools

WaterSanitation

Plant &Machinery

As at 31.12.2016Total

As at31.12.2015

TotalAs at 31st December Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.Cost

As at 1st January 115,717,034 331,901,888 193,555,756 10,685,582 67,699,486 60,732,049 456,697,419 1,236,989,214 1,217,861,514

Additions during the year - - - 13,500 1,590,070 - 2,241,944 3,845,514 23,377,700Disposals/transfers - - - - - - - - (4,250,000)

As at 31 December 115,717,034 331,901,888 193,555,756 10,699,082 69,289,556 60,732,049 458,939,363 1,240,834,728 1,236,989,214

DepreciationAs at 1st January 38,424,767 92,140,533 180,618,622 10,164,378 61,007,971 44,288,442 282,841,974 709,486,687 664,652,552Charge for the year 5,770,295 8,295,710 6,411,716 164,557 1,715,229 2,686,351 18,385,614 43,429,472 48,659,136Disposals/transfers - - - - - - - - (3,825,000)As at 31 December 44,195,062 100,436,243 187,030,338 10,328,935.00 62,723,200.00 46,974,793.00 301,227,588 752,916,159 709,486,688

Net book value 71,521,972 231,465,645 6,525,418 370,147.00 6,566,356.00 13,757,256.00 157,711,775 487,918,568 527,502,526

ASSETS ACQUIRED ON FINANCE LEASECostAs at 1st January - - 674,200 - - - 134,086,186 134,760,386 31,218,294Additions during the year - - - - - - - - 103,542,092Disposals/transfers - - - - - - - - -As at 31 December - - 674,200 - - - 134,086,186 134,760,386 134,760,386

DepreciationAs at 1st January - - 191,024 - - - 3,529,099 3,720,123 1,837,432Charge for the year - - 134,840 - - - 5,781,216 5,916,056 1,882,691Disposals/transfers - - - - - - - - -As at 31 December - - 325,864 - - - 9,310,315 9,636,179 3,720,123

Net book value - - 348,336 - - - 124,775,871 125,124,206 131,040,262

WORK-IN-PROGRESSAs at 1st January 29,733,188 12,759,335Additions during the year 10,120,752 16,973,853Disposals/transfers - -As at 31 December 39,853,939 29,733,188

TOTAL NET BOOK VALUE 652,896,713 688,275,977

b) The cost of fully depreciated Property, Plant and Equipment which are still in use at date of Statement of Financial Position as follows.

Rs RsLand Improvements 362,737 311,127

Motor Vehicles 153,900,263 122,958,432Furniture & Fittings 9,095,166 9,052,391Equipment & Tools 56,345,650 54,456,578

Water Sanitation 14,849,673 7,005,031Plant & Machinery 159,056,568 151,220,942

393,610,057 345,004,501

a) The assets shown above are those movable assets vested in the Company by Gazette notification on the date of formation of the Company (18th June 1992) and all investment in tangible assets by the Company since its formation. The assets taken over byway of estate leases are set out in Note 12.

As at30.12.2016

As at30.12.2015

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14 BIOLOGICAL ASSETS Immature Mature Total TotalPlantations Plantations 2016 2015

14.1 BEARER BIOLOGICAL ASSETS Rs. Rs. Rs. Rs.

CostAs at 1st January 1,604,525,119 830,627,836 2,435,152,955 2,126,418,786Additions during the year 253,515,653 - 253,515,653 308,734,166Transfers (from)/to (96,395,340) 96,395,340 - -As at 31st December 1,761,645,432 927,023,176 2,688,668,608 2,435,152,952

DepreciationAs at 1st January - 346,343,164 346,343,164 315,787,495Charge for the year - 34,698,363 34,698,363 30,555,669As at 31st December - 381,041,527 381,041,527 346,343,164Carrying amount 1,761,645,432 545,981,649 2,307,627,081 2,088,809,788

14.1.1 Immature Plantations Tea Rubber Other TotalRs. Rs. Rs. Rs.

As at 1st January 91,068,468 1,506,477,983 6,978,668 1,604,525,119Additions during the year 8,297,103 236,881,052 8,337,498 253,515,653Transfers (from)/to (3,262,099) (92,755,315) (377,926) (96,395,340)As at 31st December 96,103,472 1,650,603,720 14,938,240 1,761,645,432

Mature Planataions Tea Rubber Other TotalRs. Rs. Rs. Rs.

At CostAs at 1st January 368,732,909 364,990,820 96,904,107 830,627,836Transfers (from)/to 3,262,099 92,755,315 377,926 96,395,340As at 31st December 371,995,008 457,746,135 97,282,033 927,023,176

DepreciationAs at 1st January 96,835,008 243,019,371 6,488,785 346,343,164Charge for the year 11,159,850 22,302,332 1,236,181 34,698,363As at 31st December 107,994,858 265,321,703 7,724,966 381,041,527

Carrying amount of mature plantations 264,000,150 192,424,432 89,557,067 545,981,649

14.2 2016 2015Rs. Rs.

As at 1st January 1,755,818,586 1,662,375,598

15,560,362 89,603,395

Increase due to development 9,116,296 5,575,138

Decrease due to harvest/ transfer (9,154,924) (1,735,545)As at 31st December 1,771,340,321 1,755,818,586

14.3 2016 2015Rs. Rs.

As at 1st January - as previously reported 1,966,858 - - 1,901,033

As at 1st January - restated 1,966,858 1,901,033Change in fair value less cost to sell 3,278,882 65,825As at 31st December 5,245,740 1,966,858

14.4 2016 2015Rs. Rs.

15,560,362 89,603,395

3,278,882 65,825 18,839,244 89,669,220

These are investments in immature/ mature plantations since the formation of the Company. The assets (including plantation assets) taken over by way of estate leases areset out in Notes 12 . Further investment in immature plantations taken over by way of these leases are shown in the above note. When such plantations become mature,the additional investments since take over to bring them to maturity, will be moved from immature to mature under this note.

The Company has elected to measure the bearer biological assets at cost using LKAS 16 - Property, Plant & Equipment.

The above additions include Rs. 77,196,494/= (2015-Rs.74,993,088/= ) of borrowing costs capitalised during the year at a capitalisation rate of 11.63%.

Managed trees include commercial timber plantations cultivated on estates. The cost of immature trees is treated as approximate fair value particularly on the ground oflittle biological transformation has taken place and impact of the biological transformation on price is not material. When such Plantations become mature, the additionalinvestments since taken over to bring them to maturity are transferred from Immature to Mature.

The fair value of managed trees was ascertained in accordance with LKAS 41. The valuation was carried by Messers Mr.W.M Chandrasena , incorporated valuers, usingDiscounted Cash Flow methods. In ascertaining the fair value of timber a physical verification was carried out covering all the estates.

CONSUMABLE BIOLOGICAL ASSETS - TIMBER PLANTATIONS

Gain/(loss) arising from changes in fair value less cost to sell

GAIN/(LOSS) ON FAIR VALUE OF BIOLOGICAL ASSETS

Consumable Bialogical Assets - Gain/(loss) arising from changes in fair value less cost to sell - Note No 14.2

Produce on Bearer Biologal Assets - Gain/(Loss) arising from changes in fair value less cost to sell - Note No 14.3

PRODUCE ON BEARER BIOLOGICAL ASSETS

Impact of the amendments of LKAS 16 and LKAS 41

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14.5 FAIR VALUE HIERARCHY

Level 1 — Quoted (unadjusted) market prices in active markets for identical assets or liabilities.Level 2 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is directly or indirectly observable.Level 3 — Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable.

NON FINANCIAL ASSETS - CONSUMABLE BIOLOGICAL ASSETS

As at 31st December Date of valuation 2016 2015 2016 2015 2016 2015Rs. Rs. Rs. Rs. Rs. Rs.

Assets measured at fair value

Consumable Biological Assets - Timber 31st December 2016 - - - - 1,771,340,321 1,755,818,586Produce on Bearer Bialogical Assets 31st December 2016 - - 5,245,740 1,966,858 - -

14.5.1 INFORMATION ABOUT FAIR VALUE MEASUREMENTS USING SIGNIFICANT UNOBSERVABLE INPUTS (LEVEL 3)

Non Financial Assets ValuationTechniques

Consumable Biological Assets - Timber DCF Method Discounting factor

Optimum rotation (Maturity) Lower the rotation period, the higher the fair value

Volume at rotation The higher the volume, the higher the fair value

Price per cu.ft.

1. The harvesting is approved by the PMMD and Forest Department based on the forestry development plan2. The price adopted are net of expenditure3. Though the replanting is a condition precedent for harvesting, yet the cost are not taken in to consideration.

The valuations, as presented in the external valuation models based on net present values, take into account the long term exploitation of the timber plantations. Because of the inherent uncertainty associated with thevaluation at fair value of the biological assets due to the volatility of the variables, their carrying value may differ from their realisable value. The Board of Directors retains their view that commodity markets are inherentlyvolatile and that long term price projections are highly unpredictable. Hence, the sensitivity analysis regarding selling price and discount rate variations as included in this note allows every investor to reasonably challengethe financial impact of the assumptions used in the LKAS 41 against his own assumptions.

Key assumption used in the Valuation

Unobservable Inputs

14%

25-35 Years

25-85 cu.ft

Rs. 200/- Rs.650 /- per Cu. Ft The higher the price per cu. ft., the higher the fairvalue

Range of Unobservable InputsRelationship of Unobservable inputs to Fair

Value

The higher the discount rate,the lower the fair value

In determining the fair value, highest and best use of timber, current condition of the trees and expected timber content at harvesting have been considered. Also, the valuers have made reference to market evidence oftransaction prices of the company, and the market prices of timber corporation, with appropriate adjustments for size and location. The appraised fair values are rounded within the range of values.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are categorised within the fair value hierarchy, described as follows, based on the lowest level input that is significant to thefair value measurement as a whole.

Level 1 Level 2 Level 3

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14.5.2 SENSITIVITY ANALYSIS

Sensitivity variation sales price

-10% +10%Managed Timber Rs Rs

As at 31st December, 2016 (177,134,032) 177,134,032As at 31st December, 2015 (175,581,858) 175,581,858

Sensitivity variation discount rate

-1% +1%Managed Timber Rs Rs

As at 31st December, 2016 66,721,709 (58,494,661)As at 31st December, 2015 75,153,970 (60,963,987)

15. AVAILABLE FOR SALE FINANCIAL ASSETS NO OF SHARES 2016 2015Rs. Rs.

Quoted Investments National Development Bank Ordinary Shares 3,252 507,312 631,213

507,312 631,213

Market Value per Share as at 31st December 2016 Rs 156/=.

16. INVENTORIES 2016 2015Rs. Rs.

Nurseries 9,033,483 11,257,315

Harvested Crop 281,997,485 218,419,722Input Stocks, Consumables & spares 50,421,162 36,653,012

341,452,130 266,330,049Provision for Obsolete Stocks (849,724) (1,026,394)

340,602,406 265,303,655

17. TRADE AND OTHER RECEIVABLES NOTES 2016 2015Rs. Rs.

Produce Debtors 17.2 9,465,968 5,850,978Employee Related Debtors 32,646,289 38,038,559Advances & Prepayments 445,972 64,091Loans to Company Officers 17.1 211,298 293,525Interest receivables from Fixed Deposits 131,535 2,699,893Other debtors 58,024,173 98,835,406

100,925,235 145,782,452Provision for doubtful debts (2,745,399) (3,138,869)

98,179,836 142,643,583

17.1 LOANS TO COMPANY OFFICERS 2016 2015Rs. Rs.

Balance at the beginning of the year 293,525 396,645Loans granted during the year 58,275 253,755

351,800 650,400Re payments (140,502) (356,875)Balance at the end of the year 211,298 293,525

Values as appearing in the Statement of Financial Position are very sensitive to changes of the discount rate applied. Simulations made fortimber 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:

Values as appearing in the statement of financial position are very sensitive to price changes with regard to the average sales prices applied.Simulations made for timber show that a rise or decrease by 10% of the estimated future selling price has the following effect on the netpresent value of biological assets:

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17.2 TRADE AND OTHER RECEIVABLES -Continued

The aging analysis of trade receivables is as follows:

Total 0-60 days 61-120 days 121-180 days 181-365 days > 365 days

Balance as at 31 December 2016 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000 Rs.'000

Produce Debtors 9,465,968 9,465,968 - - - -

Produce debtors are realised within seven days from sales

18. AMOUNTS DUE FROM RELATED COMPANIES 2016 2015

Relationship Rs. Rs.

Madulsima Plantations PLC Related Company 5,027,372 9,320,9235,027,372 9,320,923

19. CASH AND CASH EQUIVALENTS 2016 2015

Rs. Rs.

19.1 SHORT TERM INVESTMENT

Fixed Deposits with Hatton National Bank 3,107,029 62,911,6183,107,029 62,911,618

19.2 FAVOURABLE BALANCES

Cash in hand 415,735 489,786

Cash at bank 19,398,126 23,839,12619,813,861 24,328,912

19.3 UNFAVOURABLE BALANCES

Bank overdraft 487,112,662 494,265,925487,112,662 494,265,925

20. STATED CAPITAL 2016 2015

Rs. Rs.

Issued and Fully Paid Ordinary SharesOrdinary Shares including one golden Share held by the Treasury which has Special rights 23,636,364 23,636,364

350,000,010 350,000,010

Past due but not impaired

Stated Capital represents the amount paid to the company in respect of issuing 23,636,364 ordinary shares including one Golden Share which has Special rights.

Value of Issued and Fully Paid Ordinary Shares including one golden share held by the Treasury which has Specialrights.

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21. INTEREST BEARING LOANS AND BORROWINGS

Repayable Repayable Repayable Total Repayable Repayable Repayable Totalwithin after one year after five year Sub Total as at within after one year after five year Sub Total as at1 year less than five 31.12.2016 1 year less than five 31.12.2015

year yearRs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs. Rs.

Long Term Loans (21.1) 129,409,893 696,326,715 258,333,333 954,660,048 1,084,069,941 129,127,143 356,048,268 358,333,500 714,381,768 843,508,911

129,409,893 696,326,715 258,333,333 954,660,048 1,084,069,941 129,127,143 356,048,268 358,333,500 714,381,768 843,508,911

21.1 Long Term Loans Repayable Repayable Repayable Repayable Total Total Normal Termswithin within after after as at as at Rate of of1 year 2 to 5 years 5 years 1 year 31/12/16 31/12/15 Interest Repayment

Rs. Rs. Rs. Rs. Rs. Rs. %

Hatton National Bank

30040054913 - - - - - 3,943,200 AWPLR

30040054700 - 241,666,667 258,333,333 500,000,000 500,000,000 500,000,000 13.50

Tea Board Loan 3,750,000 23,250,000 - 23,250,000 27,000,000 - AWPLR + 1%

Tea Board Loan - HNB 33,594,000 100,782,000 - 100,782,000 134,376,000 167,970,000 AWPLR + 1.5% 60 equal monthly instalments @ Rs.2,799,500.

Tea Board Loan 22,722,000 - - - 22,722,000 26,400,500 N/A

Melsta Regal 32,469,205 - - - 32,469,205 31,645,131 18%

Melstacorp PLC (Rs 200mn) - 200,000,000 - 200,000,000 200,000,000 - AWPLR + 1%

Melstacorp PLC (Rs 100mn) - 87,500,000 - 87,500,000 87,500,000 - AWPLR + 1%

Finance Lease

Central Finance Company PLC 7,561,059 2,753,566 - 2,753,566 10,314,625 16,929,084 13.45%

Hatton National Bank

LF0302014071100003LF0302014071100001 118,737 - - - 118,737 360,538 12.5%

LF0302015041700004 29,194,892 40,374,482 - 40,374,482 69,569,374 96,260,458 9%

129,409,893 696,326,715 258,333,333 954,660,048 1,084,069,941 843,508,911

48 equal monthly instalments @ Rs. 2,834,685/=Commencing from 17/04/2015

36 equal monthly instalments @ Rs.22,126/= Commencingfrom 11/07/2014

2016 2015

21 equal monthly instalments @ 812,500/= and a finalinstallment @ Rs 693,200/=

60 equal monthly instalments after a grace peiod of 60Months from the date of 01st disburesement.

10 equal monthly instalments @ Rs.2,640,050commencing from 31/01/2016.

10 equal monthly instalments @ Rs.3,682,994commencing from 03/12/2015.

60 equal monthly instalments @ 707,793/= commencingfrom 23.05.2013

36 equal monthly instalments after a grace peiod of 12Months from the date of 01st disburesement 0f August2016

Capital to be repaid after a moratorium of 3 years.Interest payable monthly

Capital to be repaid after a moratorium of 3 years.Interest payable monthly

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22. RETIREMENT BENEFIT OBLIGATIONS 2016 2015Rs. Rs.

At the beginning of the year 757,903,350 684,325,565Interest Cost 75,790,335 68,432,557Current Service Cost 41,676,724 49,133,935Gratuity Payments for the year (49,079,138) (33,976,899)Liability experience loss / (gain) arising during the year (100,860,513) (10,011,808)Liability loss / (gain) due to changes in assumpions during the year (47,847,550) -At the end of the year 677,583,208 757,903,350

Staff Workers Company Staff Workers CompanyRs Rs Rs Rs Rs Rs

Within the next 12 Months 45,063,744 40,191,554 85,255,298 40,115,774 38,771,315 78,887,089Between 2 and 5 years 21,416,632 107,130,062 128,546,694 25,024,992 109,270,466 134,295,458Beyond 5 years 31,505,339 432,275,877 463,781,216 33,816,541 510,904,262 544,720,803

97,985,715 579,597,493 677,583,208 98,957,307 658,946,043 757,903,350

The key assumptions used by Messers.Actuarial & Management Consultants (Pvt) Ltd include the following.2016 2015

(i) Rate of Interest (per annum) 11% 10%

(ii) Rate of Salary IncreaseWorkers (every two years) 15% 15% Estate Staff (per annum) 10% 10%Head Office Staff & Executives (per annum) 7.5% 7.5%

(iii) Retirement AgeWorkers 60 years 60 yearsStaff 55 years 55 years

(iv) Daily Wage Rate Rs.500/= Rs.450/=

SENSITIVITY OF ASSUMPTIONS USED

Sensitivity analysis for significant assumptions as at 31st December 2016 is shown below.

Discount Rate Increase Decrease Increase DecreaseSensitivity level 1% 1% 1% 1%

Impact on defined benefit obligation - Rs. (45,757,295) 98,180,040 (55,692,385) 64,273,185

Future salary increment rate Increase Decrease Increase DecreaseSensitivity level 1% 1% 1% 1%

Impact on defined benefit obligation - Rs. 27,350,955 (25,649,935) 35,287,293 (32,957,471)

20152016

2016 2015

The actuarial valuations had been carried out by Messrs. Actuarial & Management Consultants (Pvt) Ltd, for retiring gratuity for all the employees of theCompany as at 31 December 2016, which amounts to Rs. 677,583,208/-. If the Company had provided for gratuity for workers on the basis of 14 days wagesand for staff and executive a half month salary for each completed year of service as at 31 December 2016, in line with the Gratuity Act No.12 of 1983 theliability would have been Rs. 989,102,891./-. Hence, there is a contingent liability of Rs. 311,519,683/- which would crystalise only if the Company ceases tobe a going concern, or the resignation or termination of employees which ever is earliest.

LKAS 19 requires the use of actuarial techniques to make a reliable estimate of the amount of retirement benefit that employees have earned in return for theirservice in the current and prior periods and discount that benefit using the Projected Unit Credit Method in order to determine the present value of theretirement benefit obligation and the current service cost. This requires an entity to determine how much benefit is attributable to the current and prior periodsand to make estimates about demographic variables and financial variables that will influence the cost of the benefit. The following key assumptions weremade in arriving at the above figure.The Present Value of Retirement Benefit Obligation is carried on annual basis

The following payment are expected from defined plan obligation on annual basis

The weigted average duration of the Defined Benefit plan obligation at the reporting period is 5.13 years and 8.48 years for staff and workers respectively

2016 2015

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23. DEFERRED TAX Temporary Tax Effect Temporary Tax EffectDifference Difference

Rs. Rs. Rs. Rs.As at 1 January 1,695,459,447 45,753,815 2,159,930,024 140,359,796Amount originating during the year (171,524,502) (40,832,344) (464,470,577) (94,605,981)As at 31 December 1,523,934,945 4,921,470 1,695,459,447 45,753,815

Defrred Tax LiabilityTemporary difference on Property, Plant and Equipment 504,565,254 79,519,484 438,336,591 69,081,847Temporary difference on mature and immature plantation 2,307,627,081 230,762,708 2,088,809,788 208,880,979Temporary difference on biological asset 1,776,586,061 177,658,606 1,755,818,586 175,581,859As at 31st December 4,588,778,396 487,940,798 4,282,964,965 453,544,684

Deferred Tax AssetsTemporary difference on Leased asset (7,977,823) (1,257,305) (16,956,825) (2,672,396)Temporary difference on retirement benefit obligation (677,583,208) (106,787,114) (757,903,350) (119,445,568)Carried forward tax losses (2,379,282,420) (374,974,909) (1,812,645,343) (285,672,906)As at 31 December (3,064,843,451) (483,019,328) (2,587,505,518) (407,790,870)

As at 31st December 1,523,934,945 4,921,470 1,695,459,447 45,753,815

23.1 Reconciliation of deferred tax charge / (reversal) 2016 2015Rs. Rs.

At the beginning of the year 45,753,815 140,359,796

Tax charge/(reversal) during the period recognised in Statement of profit or Loss (64,268,735) (96,183,842)

Tax charge/(reversal) during the period recognised in other Comprehensive Income 23,436,391 1,577,861

At the end of year 4,921,470 45,753,815

2016 2015

The effective tax rate used to calculate deferred tax liability for all the Temporary Differences other than Biological Asset as at 31 December,2016 is 15.76% (2015 - 15.76%) for the company.

The effective tax rate used to calculate deferred tax liability for Biological Asset as at 31 December, 2016 is 10% (2015 - 10%) for thecompany.

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24. DEFERRED INCOME

2016 2015Deferred Grants and Subsidies Rs. Rs.

Balance at the beginning of the year 191,420,805 202,696,028

Add : Grants received / (refunded) during the year - -

Less : Amortisation for the year (11,057,174) (11,275,223)

Balance at the end of the year 180,363,631 191,420,805

25. LIABILITY TO MAKE LEASE PAYMENT 2016 2015Rs. Rs.

Gross LiabilityAs at 1st January 167,039,000 172,712,000Repayment during the year (5,673,000) (5,673,000)

161,366,000 167,039,000Finance cost allocated to future periods (66,022,000) (69,906,000)Net Liability 95,344,000 97,133,000

Payable within one yearGross liability 5,673,000 5,673,000Finance cost allocated to future periods (3,814,000) (3,884,000)Net liability transferred to current liabilities 1,859,000 1,789,000

Payable within two to five yearsGross liability 22,692,000 22,692,000Finance cost allocated to future periods (14,478,143) (14,795,792)Net liability 8,213,857 7,896,208

Payable after five yearsGross liability 133,001,000 138,674,000Finance cost allocated to future periods (47,729,857) (51,226,208)Net liability 85,271,143 87,447,792Net liability payable after one year 93,485,000 95,344,000

Gross Liability = 1,970,581,601Finance Charges = (675,732,179)Net Liability = 1,294,849,422

The above reassessed liability is not reflected in these Financial Statements.

The lease of the estates have been amended, with effect from 11th June 1996 to an amount substantially higher than the previouslease rental of Rs. 500/= per estate per annum. The first rental payable under the revised basis is Rs.5.673 million from 11th June1997.This amount is to be inflated annually by the Gross Domestic product (GDP) deflator, and is in the from of Contingent rental.The contingent rental charged to the Income statement amounted to Rs.24,897,276/= Which is based on GDP deflator of 4.8%(2015)

The Statement of Recommended Practice (SoRP) for Right-to-use of Land on Lease was approved by the Council of the Institute ofChartered Accountants of Sri Lanka on 19th December 2012. Subsequently, the amendments to the SoRP along with themodification to the title as Statement of Alternative Treatment (SoAT) were approved by the Council on 21st August 2013. TheCompany has not reassessed the Right-to-use of Land because this is not mandatory requirement. However, if the liability isreassessed according to the alternative treatment (SoAT) on the assumption that the lease rent is increased constantly by GDPdeflator of 4.8% and discounted at a rate of 13% , liability would be as follows.

The Company has received funding from the Plantation Housing and Social Welfare Trust and Plantation Development Project(PDP) for the development of workers facilities such as re-roofing of line rooms, latrines, water supply, sanitation and roads etc. Theamounts spent are included under the relevant classification of property, plant & equipment and the grant component is reflectedunder Deferred Grants and Subsidies. Grants are amortised over the life of the assets for which they are being deployed.

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26. TRADE AND OTHER PAYABLES 2016 2015Rs. Rs.

Trade Creditors 387,395,781 215,131,734Employee Related Creditors 195,003,429 179,186,800Accrued Expenses 17,757,330 20,504,440Others 112,399,645 79,760,739

712,556,185 494,583,713

27. AMOUNTS DUE TO RELATED COMPANIES 2016 2015Rs. Rs.

Stassen Exports (Pvt) Ltd Managing Agent 132,718,039 110,380,639Madulsima Plantatons PLC Related Company 883,905 827,583

133,601,944 111,208,222

28. DIVIDENDS PAYABLE28.1 Unclaimed Dividend 2016 2015

Rs. Rs.Payable to - Related Parties - - - Others 6,372,554 6,536,163

6,372,554 6,536,163

28.2 DIVIDENDS PAID AND PROPOSEDDividend on Ordinary SharesDividend paid during the year Nil Nil

Nil Nil

Proposed for approval at AGMFinal dividends for 2016 Rs. Nil/= per share (2015- Rs.Nill/=) Nil Nil

Nil Nil

Dividends per share (Rs.) Nil Nil

Relationship

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29. ASSETS PLEDGED

Following assets have been pledged as securities for liabilities.

Name of Bank LoanFacility Security Nature of Liability

Rs. 2016 2015

Rs. Rs.CENTRAL FIANACE COMPANYPLC

34 Mn. Mortage on Colour Separator Long Term Loans 26,878,803 27,014,995

HATTON NATIONAL BANKPLC

190 Mn Primary mortgage over the Leasehold rights of Balangoda Estate.

PermanentOverdraft Facility

10,832,964 11,110,418


150 Mn Primary mortgage over the Leasehold rights of Walaboda Estate.

PermanentOverdraft Facility

5,280,466 5,415,710



Long Term Loans 10,832,964 11,110,418


17.8 Mn Mortage on Colour Separator Long Term Loans 13,946,070 14,552,420


0.7 Mn Abosolute Owership of the LeasedBikes

Finance Lease 348,337 483,176


114 Mn Mortage on Colour Separator &Mahinary

Finance Lease 87,415,526 103,542,092



Long Term Loans 10,832,964 11,110,418

MELSTA REGAL FINANCE LTD 40 Mn. Primary mortgage over theMachines and/or equipment ofMeddakande Estate.

Short Term Loans 5,027,793 6,207,891

30. COMMITMENTS AND CONTINGENCIES

31. EVENTS OCCURRING AFTER THE REPORTING PERIOD

32. RELATED PARTY DISCLOSURES

32.1 TRANSACTIONS WITH THE PARENT AND RELATED ENTITIES2016 2015

Nature of the Company Nature of Transaction Terms & Rs. Rs.Group company Conditions

Distilleries Co. of Sri Lanka PLC Reimbursement of expenses Market Terms 176,606 205,706-Other Related Parities

Stassen Exports (Private) Ltd. Management Fee Contractual (25,207,600) (24,908,400)Share of Head Office Expenses Market Terms (2,640,000) (2,640,000)

Madulsima Plantations PLC Reimbursement of expenses Market Terms (3,950,584) (893,881)Reimbursement of expenses Market Terms 2,092,342 1,828,875

Rent Received Contractual 2,762,981 2,619,415Sales of Green Leaf Market Terms 4,388,932 53,143,134

Hatton National Bank PLC Interest Income Market Terms 466,995 7,530,874Interest Expenses Market Terms (151,992,122) (82,625,174)

Lanka Bell Limited Lease Rental Received Contractual 3,153,842 2,675,995Communication Charges Market Terms (2,101,376) (2,048,520)

Melsta Regal Finance Ltd Loan Obtained Market Terms 40,000,000 -Interest Expenses Market Terms (2,645,754) (328,125)

Melstacorp PLC Loan Obtained Market Terms 300,000,000 -Interest Expenses Market Terms (18,980,559) -

The related party transactions were made on terms equivalent to those that prevail in arm's length transactions.

33.2 Transactions with the key management personnel of the company

Milford Exports (Ceylon) (Private)Ltd.

There were no material transactions with the key management personnel of the company and its parent for the year ended 31 December 2016other than those disclosed in the note 32.1.

Carrying Amount of AssetsPledged

No known contingent liabilities exist as at the date of financial position other than the matter disclosed in Note 22 to the financial Statements andfew legal cases pending at the year end of which the outcome is not determinable.

No circumstances have arisen since the reporting date which require adjustments to or disclosure in the Financial Statements.

Details of Significant Related Party Disclosures are as follows.

Amounts

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33 RELATED PARTY TRANSACTIONS

34 IMPACT OF AMENDMENTS TO LKAS 16 AND LKAS 41

2015 2015 2015Previously Reported Adjustment Restated

Amount Amount AmountSTATEMENT OF PROFIT OR LOSS Rs. Rs. Rs.Change in Fair Value of Biological Assets 89,603,395 65,825 89,669,220

STATEMENT OF FINANCIAL POSITION

Produce on Bearer Bialogical Assets ( Note No 14.3 )As at the beginning of the year - 1,901,033 1,901,033As at the end of the year - 1,966,858 1,966,858

Accumulated Profit / (Loss)As at the beginning of the year 795,472,840 1,901,033 797,373,873As at the end of the year 372,879,943 1,966,858 374,846,801

35 FINANCIAL RISK MANAGEMENT OBJECTIVES AND POLICIES

35.1 FINANCIAL RISK MANAGEMENT FRAMEWORK

35.2 CREDIT RISK

35.2.1 Trade and Other Receivables

35.2.2 Investments

The maximum exposure to credit risk for trade receivables of the company at the reporting date is Rs.9 Mn (2015 – Rs. 6 Mn).

Credit risks from invested balance with the financial institutions are managed by the Board of Directors. Investments of surplus funds are madeonly with approved counterparties and within credit limits assigned to them. The limits are set to minimize the concentration of risks andtherefore mitigate financial loss through potential counterparty’s failure.

The Company held short term investments of Rs. 3 Mn as at 31st December 2016 (2015 – Rs. 63 Mn) which represents the maximum creditexposure on these assets.

There are no related party transactions other than those disclosed in Notes 17, 18, 19, 21, 27, and 32 above

Amendment to LKAS 16 and LKAS 41, on bearer plants, harvestable biological assets growing on the bearer plants are measured at their fairvalue less cost to sell and accounted retrospectively.

The Company applied above amendment for the first time, which is effective for annual periods beginning on or after 1 January 2016. The natureand the effect of the changes are disclosed below.

The Board of Directors has the overall responsibility for the establishment and oversight of the company’s financial risk management frameworkwhich includes developing and monitoring the company’s financial risk management policies.

The company’s principal financial liabilities comprise loans and borrowings and trade and other payables. The main purpose of these financialliabilities is to finance the comapny’s operations. The company has loan and other receivables, trade and other receivables, and cash and short-term deposits that arrive directly from its operations. Accordingly the company has exposure to namely Credit Risk, Liquidity Risk, CurrencyRisk and Interest Rate Risk from its use of financial instruments.

This note presents information about the company’s exposure to each of the above risks, the company’s objectives, policies and processes formeasuring and managing risk.

This is the risk of financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations, andarise principally from the company’s receivable from customers.

The Company has a minimal credit risk of its trade receivables as the repayment is guaranteed within seven working days by the Tea auctionsystems.

The company establishes an allowance for impairment that represents its estimate of incurred losses in respect of trade and other receivables.

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35.2.3 Cash and Cash Equivalents

• Hatton National Bank PLC –AA – (lka)

35.3 LIQUIDITY RISK

As at 31st December2016

On Demand Less than 3Months

3 to 12Months

2 to 5 years >5 years Total

Rs. Rs. Rs. Rs. Rs. Rs.

Interest bearing loans &borrowing - 58,426,825 84,983,068 532,765,354 411,894,694 1,088,069,941

Trade & other payables 712,556,185 - - - - 712,556,185Bank overdraft 487,112,662 - - - - 487,112,662

1,199,668,847 58,426,825 84,983,068 532,765,354 411,894,694 2,287,738,788

As at 31st December2015Interest bearing loans &borrowing - 47,649,822 81,477,321 456,044,321 338,357,194 923,528,658

Trade & other payables 494,583,713 - - - - 494,583,713Bank overdraft 494,265,925 - - - - 494,265,925

988,849,638 47,649,822 81,477,321 456,044,321 338,357,194 1,912,378,296

The Company held cash and Cash Equivalents of Rs. 19 Mn as at 31st December 2016 (2015 – Rs. 24 Mn) which represents itsmaximum credit exposure on these assets.

Liquidity risk is the risk that the company will encounter difficulty in meeting the obligations associated with its financial liabilitiesthat are settled by delivering cash or another financial asset. The Company’s approach to managing liquidity is to ensure, as far aspossible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, withoutincurring unacceptable losses or risking damage to the Company’s reputation.

The Company does not concentrate on a single financial institution, thereby minimizing the exposure to liquidity risk throughdiversification of funding sources. The Company aims to fund investment activities by funding the long-term investment with longterm financial sources and short term investment with short term financing.

The Table below summarizes the maturity profile of the company financial liabilities based on contractual undiscounted payments.

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35.4 MARKET RISK

35.4.1 Interest Rate Risk

35.4.2 Equity Price Risk

35.4.3 Capital Management

The gearing ratio at the reporting date is as follows.

As at 31.12.2016 As at31.12.2015

Rs. Rs.Interest bearing borrowingCurrent portion of long term interest bearing borrowings 129,409,893 129,127,143Payable after 1 year 954,660,048 714,381,768Bank overdraft 487,112,662 494,265,925

1,571,182,603 1,337,774,836

Equity 2,099,498,511 2,288,692,412Equity & debts 3,670,681,114 3,626,467,248Gearing ratio 43% 37%

The Company’s policy is to retain a strong capital base so as to maintain investor, creditor & market confidence andto sustain future development of the business. Capital consists of share capital, reserves and retained earnings . TheBoard of Directors monitors the return on capital, interest covering ratio, dividend to ordinary shareholders.

Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because ofchanges in market prices. Market prices comprise four types of risk: interest rate risk , Currency risk & other pricerisk such as equity price risk. Financial instrument affected by market risk include loans & borrowings, deposits &derivative financial instruments.

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because ofchanges in market interest rates. The Company’s exposure to the risk of changes in market interest rates relatesprimarily to the Company’s long-term debt obligations with floating interest rates. The Company manages itsinterest rate risk by having a balanced portfolio of fixed and variable rate loans and borrowings.

The Company held long term borrowings with floating interest rates of Rs. 954 Mn (2015 – Rs.714 Mn) whichrepresents its maximum credit exposure on these liabilities.

The Company’s listed & unlisted equity securities are susceptible to market price risk arising from uncertaintiesabout future values of the investment securities. The Company manages the equity price risk through diversificationand by placing limits on individual and total equity instruments. Management of the Comapny monitors the mix ofdebt & equity securities in its investment portfolio based on market indices. Material investment within theportfolio are Managed on an individual basis and all buy and sell decision are approved by the Board. Equity pricerisk is not material to the financial statements.However,company does not hold any quoted shares as at the reportingdate.

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Balangoda Plantations PLCDETAILED PROFIT OR LOSS STATEMENTYear ended 31 December 2016

Notes 2016 2015Rs. Rs.

REVENUE (i) 2,266,656,524 2,413,054,604

COST OF SALES (2,497,350,126) (2,862,355,315)

GROSS PROFIT / (LOSS) (230,693,602) (449,300,711)

GAIN /LOSS) ON FAIR VALUE OF BIOLOGICAL ASSETS 18,839,244 89,669,220

OTHER INCOME AND GAINS (ii) 118,697,066 128,083,665

ADMINISTRATIVE EXPENSES (iii) (124,346,504) (125,153,980)

MANAGEMENT FEE (25,207,600) (24,908,400)

FINANCE COST (iv) (128,367,044) (48,778,282)

PROFIT/ LOSSES BEFORE TAX (371,078,440) (430,388,489)


(i). REVENUE 2016 2015Sale of Goods Rs. Rs.

Tea 2,054,208,698 2,235,883,478Rubber 212,447,826 177,171,126

2,266,656,524 2,413,054,604

(ii). OTHER INCOME AND GAINS 2016 2015Rs. Rs.

Interest Income 466,995 7,530,874Amortisation of Government Grants 11,057,174 11,275,223Rent Income 40,881,310 41,260,637Profit on Sale of B M Fannings 33,989,446 25,609,786Net Income from Travellers Paradise 1,717,989 2,660,586Net Income from Dolomite Project (264,713) (36,818)Sales of Rubber and Other Trees 4,598,684 17,313,060Profit on Sale of Timber Trees 1,019,824 1,844,175Profit on disposal of Property, Plant & Equipment 23,471 2,730,509Sundry Income 25,206,886 17,895,632

118,697,066 128,083,665


(iii) ADMINISTRATIVE EXPENSES 2016 2015Rs. Rs.

Advertisement Charges 72,114 56,322A.G.M. Expenses 3,432,143 2,717,902Audit Fees 230,000 209,000Bank Charges 294,259 610,099Bungalow Maintenance 10,917,110 11,184,183Ceylon Planters Provident Society 5,012,269 4,882,910Conferences & Seminars 33,357 71,992Contingencies 13,650 14,860Depreciation 4,417,733 8,101,509Electricity Charges 2,065,411 2,160,722Employees Provident Fund 1,035,142 919,698Employees Trust Fund 1,787,274 1,723,144Estates Staff Provident Society 1,102,076 1,089,966Entertainment Allowances 66,830 46,604Foreign Travel (Training) 367,260 -Gratuity 2,830,122 3,677,579Internal Audit Expenses 1,237,381 1,195,576Legal Expenses 1,472,257 2,772,963Medical Expenses - Outdoor 201,840 213,451News Paper Periodicals 98,000 101,600Office Expenditure 435,588 447,215Office Equipment - Maintenance 213,412 180,539Overtime 2,079,307 1,696,140Participation Fees 77,750 163,500Postage expenses 315,010 296,215Professional Fees 2,054,527 1,479,511Public Relations 61,950 95,302Rent & Rates 38,159 28,619Share of Head office Expenses 2,640,000 2,640,000Salaries & Allowances 65,956,534 63,524,385Secretarial Fees 352,899 328,643Security Charges 1,104,193 1,091,386Share Ledger Expenses 286,642 292,245Staff Welfare 541,569 465,597Stationary & Printing expenses 1,252,495 1,329,518Subscription Fees 597,675 196,995Telephone Charges 990,008 856,778Training Expenses 50,000 65,000Travelling & Subscription 502,029 523,408Vehicle Maintenance 8,110,529 7,702,906

124,346,504 125,153,980

IV). FINANCE COST 2016 2015Rs. Rs.

GOVERNMENT LEASE INTERESTInterest on Lease Rental (JEDB/SLSPC) 3,884,000 3,954,000Contingent Lease Rental (JEDB/SLSPC) 24,897,276 23,893,036Overdraft Interest 58,054,084 35,471,855Loan Interest 118,728,178 60,392,479

205,563,538 123,711,370Less: Amount Capitalised (77,196,494) (74,933,088)

128,367,044 48,778,282

balangoda plantations plc auditors’ …these financial statements have been prepared in accordance...

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