The Sri Lanka Accounting and Auditing Standards Monitoring Board (SLAASMB) said that Hunter and Company Limited (HCL) is required to disclose the provision of a company owned bungalow to key management personal in its financial report. In a letter to HCL (dated 20 August 2008) SLAASMB said that disclosures should be made under short term employee benefits reflecting the fair values of such benefits. SLAASMB said that disclosure on the nature of the related party relationship was also required "…as information about the transactions necessary for an understanding of the potential effect of the relationship on the financial statements." Last month in a circular to shareholders, Ernst and Young, said that they would resign as auditors of HCL as requested by its board of directors at a extraordinary general meeting after a dispute over the disclosure provisions of the company owned bungalow being used by key management personnel. The auditors said that the board of directors HCL was unhappy about the disclosure in the company’s audited accounts for the year ended 31 March, 2007. The auditors were told that the disclosure was incorrect and misleading and that a similar disclosure should not be made in the consolidated accounts for 2008. However the auditors did not agree to this and told shareholders that they would resign as per the board’s wishes. Hunter and Company PLC in a letter to the Island Financial Review said its auditors had not been asked to resign but had done so on their own. They sent us a copy of a letter from SLAASMB (dated 20 June, 2008) which stated the disputed disclosure was not necessary. However the SLAASMB letter was addressed to Heath and Company (Ceylon) Ltd, a subsidiary of HCL. SLAASMB in its recent letter to HLC had this to say. "This is the first clarification the Sri Lanka Accounting and Auditing Standards Monitoring Board is issuing to Hunter and Co. Ltd, regarding disclosure of a bungalow benefit provided to key management personnel of the group. "Prior to your request for the above clarification, we had issued a clarification on related party disclosure dated 20 June 2008 to Heath and Co (Ceylon) Ltd," it said. Heath and Co. owns two bungalows, on land approximately equivalent in extent, in Colombo 3. SLAASMB noted that these properties had been valued by a professional valuer in 2004 for a total value of Rs. 215 million. The bungalow facility provided is valued at Rs. 15,000 per month (Rs. 180,000 per annum for income tax purposes). SLAASMB drew its conclusions from the following accounting standards; SLAS 3 – Presentation of Financial Statements, SLAS 30 – Related Party Disclosure, IFRS 2 – Share-based payment and IAS 24 BC- Basis of Conclusions on IAS 24 Related Party Disclosures. (Note- SLAS- Sri Lanka Accounting Standards, IFRS- International Financial Reporting Standards, IAS- International Accounting Standards). |
