Page 55 - CPM Sri Lanka Annual Report 2020-2021

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CPM Sri Lanka | Annual Report 2020-2021

Statement of cash flow
Statement of cash flow has been prepared using the indirect method.
(d) Liabilities and provisions

Liabilities are recognized in the statement of financial position when there is a present obligation as a result of past
events, the settlement of which is expected to result in an outflow of resources embodying economic benefits.
Obligations payable on demand or within one year of the reporting date are treated as current liabilities in the
statement of financial position. Liabilities payable after one year from the reporting date are treated as non-current
liabilities in the statement of financial position.

A provision is recognized if, as a result of a past event, the Institute has a present legal or constructive obligation
that can be estimated reliably, and it is probable that an outflow of economic benefits will be required to settle the
obligation.

(e) Taxation

(I) Income taxation

The provision for income tax is based on the elements of income tax and expenditures as reported in the financial
statements and computed in accordance with the Inland Revenue Act No. 24 of 2017 and amendments thereto.
(ii) Deferred tax

Deferred tax is recognized on temporary differences arising between the tax bases of assets and liabilities and their
carrying amounts in the financial statements. Deferred tax is not accounted for if it arises from initial recognition
of an asset or liability in a transaction other than a business combination that at the time of the transaction affects
neither accounting nor taxable profit or loss. Deferred tax is determined using tax rates that have been enacted
at the reporting period end date and are expected to apply when the related deferred tax asset is realized or the
deferred income tax liability is settled.

Deferred tax assets and liabilities are offset when there is a legally enforceable right to offset current tax assets
against current tax liabilities and when the deferred tax assets and liabilities relate to income taxes levied by the
same taxation authority.

(f) Employee benefits

(i) Defined contribution plans

Obligations to defined contribution plans are recognized as an expense in the statement of income and expenditure
when incurred. The Institute contributes 12% and 3% of gross emoluments of employees as Provident Fund and
Trust Fund respectively.

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