Analyze Lanka Hospitals Financial statements according to LKAS

1st Year

2nd Semester

1st Assignment

ACF 102 Financial Accounting ii

Analyze of the financial statements of Lanka Hospitals according to the Sri

Lanka Accounting Standards (LKASs)

Lecturer Name : Ms Sujeewa Kodithuwakku

Student’s Name : D.M.Manawadu

Registration No : A/12/BBA/118

About Lanka Hospitals

Vision Statement

"To be the foremost and preferred Private Healthcare Facility in the Country, which will serve

the Nation and her People to build a healthier community."

Mission Statement

"To maintain exceptional and compassionate quality while offering cost effective healthcare

solutions of international standards."

Promise

"We believe that every person has the right to be treated with utmost respect and consideration

Therefore at Lanka Hospitals we care about our patients We care about their families who are

anxious and concerned We care about our colleagues and how we as a team provide the best care

to our patients Because we care, we will be sincere, compassionate and sensitive to make a

difference in the lives we touch! "

Lanka Hospital’s History

Lanka Hospitals Corporation Ltd commenced operations in Sri Lanka on 7th June 2002, under

the brand name of Apollo Hospitals, a part of the chain of Apollo Hospitals founded by the

renown Dr. Pratap C. Reddy in India. As the only purpose built private hospital of its kind in Sri

Lanka, Apollo Colombo revolutionized Sri Lanka’s healthcare service offer, and today under the

brand Lanka Hospitals, it continue dominate and lead the healthcare sector. It is still considered

to be the best health care facility in the country.

In 2012, it celebrated a decade of excellence in healthcare. Over the past decade, Lanka

Hospitals has revolutionized the healthcare industry in Sri Lanka through infrastructure

development and advancement of its’ product and services, through sizeable investments, with a

view to deliver healthcare that is on par with global developments in medical technology. Lanka

Hospitals also play a critical role in the nation’s strategy to provide to provide world-class

medical care whilst balancing the equation of affordability and accessibility for all Sri Lankans.

Lanka Hospitals Medical Services

Lanka Hospital as a private hospital, consumers can get following medical services.

Emergency Services Heart Center Surgical Department Fertility Center Kidney Care Center Health Check Laboratory Services Radiology Services Eye Clinic Mother and Baby

Care

ENT Center Dental clinic Cosmetic Clinic Blood Bank Nuclear Medical

Center Dermatology Allergy Clinic Physiotherapy Vaccinations

LKAS 1 – Presentation of financial statements.

This Standard consider about the basis for presentation of general purpose financial statements to

ensure comparability both with the financial statements of previous periods and with financial

statements of various entities. It sets out overall requirements for the presentation of financial

statements, guidelines for their structure and minimum requirements for their content.

There are some discloses that should be done to be accordance with this standard.

An entity cannot rectify inappropriate accounting policies either by discloser of the

accounting policies used or by notes or explanatory material.

Going concern.

- Going concern means the ability to continue in business for the foreseeable future.

When preparing financial statements, management should make a self assessment of

an entity’s ability to continue as a going concern. If the financial statement does not

prepare according with going concern basis, it shall disclose that fact with the reason.

Lanka Hospitals has disclosed about the going concern and they have prepared their

statements as follows.

- Abstracted from Lanka Hospitals annual report.

Comparative Information – Every Financial Statements should carry comparative figures of the previous accounting periods and except LKAS permits or recommended. Lanka Hospitals financial statements also have disclosed this information as follows.

-Abstracted from Lanka Hospitals annual report

Reporting period – Generally financial statements are prepared for a finance year but sometimes it may necessary to prepare statement less than or more than a year. At that time following information should be disclosed. (1) Reason for selecting a period shorter or longer than a year. (2) The fact that comparative figures presented are not comparable.

Lanka Hospital’s financial reports has prepared for a financial year.

-Abstracted from Lanka Hospitals annual report.

Structure and Content – Each part of the financial statements should be clearly identified following information.

1. Name of the company. 2. Whether the statements are prepared for company or group. 3. Period covered. 4. Name of currency.

5. Levels of correctness (when figures are shown in thousands).


The Entity should be disclosed following items in the Statement of Financial Position according LKAS 01,

1. Property, plant and equipment. 2. Investment property. 3. Intangible assets. 4. Monetary assets. 5. Biological assets. 6. Inventory.

7. Trade and other receivables. 8. Cash and cash equivalents. 9. Trade and other payable. 10. Provisions. 11. Monetary Liabilities. 12. Income tax. 13. Stated capital and Reserves.

-Abstracted from Lanka Hospitals annual report.

An entity should disclose at least followings in the Comprehensive Income Statement. 1. Revenue 2. Financial Cost 3. Taxes 4. Profit or loss


A business should include a statement of changes in equity in financial statements as a separate section. In this standard, following items should be disclosed on the face of the equity statement.

- Profit of loss for the period

- Income or expenditure included directly within the equity, in compliance with

another standard with separate details or each item and the minority

shareholders.

- The total of the above as distributable between the equity shareholders and the

minority shareholders.


An entity should disclose followings on the Statement of Financial Position or in Notes. 1. On the each type of shares, -Issued and paid up shares. -Issued but not fully paid shares. -Comparison of shares at the beginning and the end of the year. -Right of each class, preferences, limitations and limitations on distribution of dividends and refund of shares/sated capital.

2. Nature and objectives of each reserve with the equity of the owners.

In the Lanka Hospital’s Financial Statement’s also disclosed above requirement as follows,

LKAS 02 - Inventories

The Objective of this Standard is to prescribe the accounting treatment for inventories. This Standard provides guidance on the determination of cost and its subsequent recognition as an expense, any write-down to net realizable value. It also provides guidance on the cost formulas that are used to assign costs of inventories.

According to this Standard followings should be disclosed.

The accounting policies adopted in measuring inventories, including cost formula used.

The total carrying amount of inventories and the carrying amount of classifications

appropriate to the entity.

The carrying amount of inventories carried at fair value less cost to sell.

The amount of inventories recognized as an expense during year.

The amount of any write-down of inventories recognized as an expense in the period.

The carrying amount of inventories pledged as security for liabilities.

Lanka Hospital’s financial statements consist with this standard as follows,

LKAS 07 – Statement of cash flow.

The objective of this Standard is to require the provision of information about the historical changes in cash and cash equivalents of an entity by means of a statement of cash flows during year from operations, investing and financing activities. Following discloses should be done to be accordance with this standard.

The Statement of cash flows shall report cash flows during the period classified by operations, investing and financing activities.

An entity can prepare cash flows from operating activities using either, The direct method, whereby major classes of gross cash receipts and gross cash

payments are disclosed. The Indirect method, whereby make necessary adjustments to profit or loss before

tax.

Cash flows from interest and dividends received and paid shall each be disclosed separately.

Cash flows arising from taxes on income shall be separately disclosed and shall be classified as cash flows from operating activities unless they can be specifically identified with financing and investing activities.

An entity shall disclose the components of cash and cash equivalents and shall present a reconciliation of the amounts in its statement of cash flows with the equivalents items reported in the statement of financial position.

Investing and financing activities that do not require cash or cash equivalents should exclude and shall be disclosed in the financial statements in a way that provides all the relevant information about investing and financing activities.

An entity should be disclose both obtaining and losing control of subsidiaries or other business during the period each of following,

I. Total consideration paid or received. II. The portion of the consideration consisting of cash and cash equivalents.

III. The amount of cash and cash equivalents in the subsidiaries or other business over which control is obtained or lost.

LKAS 10 – Events after the reporting period.

The objective of this standard is to prescribe,

When an entity should adjust its financial statements for events after the reporting period, The disclosures that an entity should give about the date when he financial statements

were authorized for issue and about events after the reporting period.

The standard also requires that an entity should not prepare its financial statements on a going concern basis if events after reporting period indicate that the going concern assumption is not appropriate.

The Disclosures that should be done according to this standard,

Date of Authorization for issue. - An entity shall disclose the date when the financial statements were authorized for

issue.

Who gave the authorization.

If the entity’s owners or others have the power to amend the financial statements after issue.

This Standard applied in Lanka Hospital’s financial statements as follows,



LKAS 12 – Income tax.

The Objective of this Standard is to prescribe the accounting treatment for income taxes. The principal issue in accounting for income taxes is come to account for the current and future tax consequences of,

The future recovery (settlement) of the carrying amount of assets (liabilities) that are recognized in an entity’s statement of financial position, and

Transactions and other events of the current period that are recognized in an entity’s

financial statements.

Following discloses should be done in the financial statements to be accordance with this standard and Lanka Hospital’s financial statements prepared according to LKAS 12 as follows.

Deferred tax assets and liabilities and current tax assets and liabilities should be presented separately from other assets and liabilities in the balance sheet.

Deferred tax assets and liabilities should not be classified within current assets and liabilities.

Tax expense should be presented in the income statement.

Temporary Different Reversals; The deferred tax expense relating to the origination or

reversal of temporary different and changes in tax relates or to the imposition of new taxes.

The aggregate current and differed tax relating to items charged or credited to equity.

The amount of income tax relating to each component of other comprehensive income.

Applicable tax rate.

A numerical reconciliation between tax expense and the product of accounting profit

multiplied by the applicable tax rate, disclosing also the basis on which the applicable tax tare is computed,

LKAS 16 – Property plant and equipments.

The objective of this standard is o prescribe the accounting treatments for property, plant and equipments so that users of the financial statements can discern information about the entity’s

investment in its property, plant and equipment and the changes in such investment. The principal issues in accounting for property, plant and equipment are recognizing the assets, determining carrying amounts and depreciation and impairment losses which are related to them.

Generally following discloses should be done to be accordance with this standard and we can identify these requirements in the in Lanka Hospital’s financial reports as follows.

The measurement bases used for determining the gross carrying amount.

The depreciation method.


The useful lives or the depreciation rates used,

The carrying amount and the accumulated depreciation at the beginning and end

of the period.


If items of property, plant and equipment are stated at revalued amounts,

- The effective date of revaluation. - Whether an independent valuer was involved. - The method and significant assumption applied in estimating the items’ fair value. - The extent to which the items’ fair values were determined directly by reference to observable prices in an active market or recent market transaction on arm’s length

terms or were estimated using other valuation techniques. - For each revalued class of property, plant and equipment, the carrying amount that would have been recognized had the assets been carried under the cost model. - The revaluation surplus, indicating the change for the period and any restrictions on the distribution of the balance to shareholders.

.


LKAS 37 - Provisions, Contingent Liabilities and Contingent Assets

The objective of this standard is to guide the accounting method & recommending the disclosure requirement for Provisions, Contingent Liabilities and Contingent Assets are measured, recognized and presented appropriately in the financial statements.

Following disclosures should be done regarding provisions, contingent liabilities contingent assets in the financial statements.

Provisions

For each class of provision, a full reconciliation should be disclosed during the period with the following information.

The carrying amount at the beginning and end of the period.

Additional provisions and increases too existing provisions made.

Amounts incurred and charged against the provision.

Unused amounts reversed.

The increase in the discounted amount arising from the passage of time and the

effect of any change in the discount rate.

Contingent Liabilities

If the expected outflow is not remote for a contingent liability;

A brief description of the nature of the contingent liability should be provided

This should include an estimate of the financial effect, indication of any

uncertainties and the likelihood of any reimbursement being forthcoming.

Contingent Assets

Where an inflow of economic benefits is probable, an enterprise should disclose a

brief description of the nature of the contingent assets at balance sheet date and

where practicable an estimate of their financial effects measured using the

principles set out for provisions in paragraphs.

LKAS 38 - Intangible Assets

Objectives

To prescribe the accounting treatments for intangible assets those are not dealt

with another LKAS.

To recognize an intangible asset if and only if specialized criteria are met.

To measure the carrying amount of intangible assets

To specify disclosure requirements about intangible assets

Following disclosures should be done in the financial statements regarding the intangible assets.

Reporting is similar to that for PPE and involves disclosure of;

- Significant accounting policies

- Separate classes of intangibles

- Basis for amortization

- Basis for finite useful lives

- Whether the asset is amortized

Differs from PPE because contra accounts not normally shown for intangibles

On balance sheet;

- Intangibles should be reported as a separate item.

- Goodwill, if present should be reported as separate item.

On income statement;

- Amortization expense and impairment losses(except goodwill) should be

presented as part of continuing operations

- Goodwill impairment losses presented on separate line

Notes should contain information about acquired intangibles, revaluations,

impairments and reversals

Disclosures on research and development cost

- Aggregate amount of costs.

- Costs charged to expense during period.

- Capitalized developments expenditures where material.

Economy & Finance

Analyze Lanka Hospitals Financial statements according to LKAS