LOLC FINANCE PLC
FINANCIAL STATEMENT
31 MARCH 2022
HMAJ/WDPL/TP
INDEPENDENT AUDITORS' REPORT
TO THE SHAREHOLDERS OF LOLC FINANCE PLC
Report on the audit of the financial statements
Opinion
We have audited the financial statements of LOLC Finance PLC ("the Company"), which comprise the statement of financial position as at 31 March 2022, and the statement of profit or loss and comprehensive income, statement of changes in equity and statement of cash flows for the year then ended, and notes to the financial statements, including a summary of significant accounting policies.
In our opinion, the accompanying financial statements give a true and fair view of the financial position of the Company as at 31 March 2022, and of its financial performance and its cash flows for the year then ended in accordance with Sri Lanka Accounting Standards.
Basis for opinion
We conducted our audit in accordance with Sri Lanka Auditing Standards (SLAuSs). Our responsibilities under those standards are further described in the Auditor's responsibilities for the audit of the financial statements section of our report. We are independent of the Company in accordance with the Code of Ethics issued by CA Sri Lanka (Code of Ethics) and we have fulfilled our other ethical responsibilities in accordance with the Code of Ethics. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.
Key audit matters
Key audit matters are those matters that, in our professional judgment, were of most significance in the audit of the financial statements of the current period. These matters were addressed in the context of the audit of the financial statements as a whole, and in forming our opinion thereon, and we do not provide a separate opinion on these matters. For each matter below, our description of how our audit addressed the matter is provided in that context.
We have fulfilled the responsibilities described in the Auditor's responsibilities for the audit of the financial statements section of our report, including in relation to these matters. Accordingly, our audit included the performance of procedures designed to respond to our assessment of the risks of material misstatement of the financial statements. The results of our audit procedures, including the procedures performed to address the matters below, provide the basis for our audit opinion on the accompanying financial statements.
(Contd…2/)
Key audit matter | How our audit addressed the key audit matter |
Impairment allowances for financial Our audit procedures included amongst others the following: assets carried at amortised cost
We assessed the level of oversight, review and approval | |||||
Impairment | allowances | for | financial | of impairment allowances policies and procedures by | |
assets carried at amortised cost as | the Board and management | ||||
stated in Note 4, 6, 7 & 26 respectively | | We evaluated the design, implementation and operating | |||
is in accordance with the accounting | |||||
effectiveness of internal controls over estimation of the | |||||
policies described in Note 1.4 & 2.3. | |||||
impairment allowances, including testing of related | |||||
Impairment | allowances | for | financial | system controls | |
assets carried at amortised cost is a key | | We checked the completeness, accuracy and | |||
audit matter due to: | classification of the underlying data used in the | ||||
- materiality | of | the | reported | computation of impairment allowances by agreeing | |
details to relevant source documents and accounting | |||||
allowance | which | involved | records of the Company | ||
complex calculations; and |
- significant judgements used in For financial assets assessed on a collective basis for assumptions and estimates impairment:
made by the management as | | We tested key calculations used in the impairment | ||||
reflected in note 1.4, which in | ||||||
the current year was influenced | allowances. | |||||
by the | need | to assess | the | | We assessed whether significant judgements used in | |
change | in | current economic | ||||
assumptions and estimate made by the management in | ||||||
conditions | on | forward looking | ||||
the underlying methodology and management overlays | ||||||
information and the continuing | ||||||
were reasonable. We also evaluated the reasonableness | ||||||
impact | of | COVID-19 | debt | |||
of forward-looking information used, economic | ||||||
moratorium relief measures. | ||||||
scenarios considered, and probability weighting | ||||||
assigned to each of those scenarios. Our procedures | ||||||
were based on the best available information up to the | ||||||
date of our report | ||||||
For Loans and Leases assessed on an individual basis for | ||||||
impairment: | ||||||
| We assessed the reasonableness and timeliness of | |||||
Management's internal assessments of credit quality | ||||||
based on the borrower's particular circumstances | ||||||
We checked the accuracy of the underlying individual | ||||||
impairment calculations | ||||||
We evaluated the reasonableness of key inputs used in | ||||||
the provision for credit impairment made with the | ||||||
particular focus on current economic conditions. Such | ||||||
evaluations were carried out considering value and | ||||||
timing of cash flow forecasts particularly relating to | ||||||
elevated risk industries, status of recovery action and | ||||||
collateral values |
We assessed the adequacy of the related financial statement disclosures set out in notes 2.3, 4, 6, 7 & 26.
(Contd…3/)
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Key audit matter | How our audit addressed the key audit matter | |||||
Financial reporting related IT based Internal | Our audit procedures included the following: | |||||
controls | ||||||
A significant part of the Company's financial | We obtained an understanding of the Internal | |||||
control environment of the processes relating | ||||||
reporting process is primarily reliant on | to financial reporting and related disclosures. | |||||
multiple IT systems with automated | We identified and test checked relevant | |||||
processes and internal controls. Further, key | ||||||
financial statement disclosures are prepared | controls of key IT systems related to the | |||||
using data and reports generated by IT | Company's financial reporting process. | |||||
systems, that are compiled and formulated | We evaluated the design and operating | |||||
with the use of spreadsheets. | ||||||
effectiveness of IT controls, including those | ||||||
Accordingly, financial reporting related IT | related to user access and change | |||||
based Internal controls is considered a key | management. | |||||
audit matter. | We checked key source data of the reports | |||||
used to generate key disclosures for accuracy | ||||||
and completeness, including review of | ||||||
general ledger reconciliations | ||||||
Valuation of Investment Properties | Our audit procedures included the following; | |||||
Investment properties are carried at fair | We assessed the competency, capability and | |||||
value in accordance with its accounting | objectivity of the external valuer engaged by | |||||
policies and note disclosed in notes 2.5 and | the Group. | |||||
12 respectively. This was a key audit matter | ||||||
due to the: | We read the external valuer's report and | |||||
- materiality | of | the | reported | understood the key estimates made and the | ||
approach taken by the valuer in determining | ||||||
Investment | Properties | which | the valuation of each property. | |||
amounted to LKR 38 Bn as of | ||||||
reporting date; and | We assessed the reasonableness of the | |||||
- degree of assumptions, judgements | significant judgements made by the valuer and | |||||
and | estimation | uncertainties | valuation techniques used, per perch price and | |||
associated with the fair valuation of | value per square foot used by the valuer in the | |||||
investment | properties such | as | valuation of each property. | |||
reliance | on | comparable | market | |||
transactions | and | consideration | of | We have also assessed the adequacy of the | ||
current market conditions. | disclosures made in notes 2.5 and 12 in the | |||||
financial statements. |
Key areas of significant judgments, estimates and assumptions used in the valuation of the investment properties as disclosed in note 12 included the following:
- Estimate of per perch value of the investment properties
- Estimate of the per square foot value of the buildings
(Contd…4/)
-3-
Key audit matter | How our audit addressed the key audit matter | ||||
Accounting for Merger of the Company with | Our audit procedures included (among others) the | ||||
Commercial Leasing and Finance PLC | following procedures: | ||||
The Company merged with Commercial | We read the relevant board resolutions and | ||||
Leasing and Finance PLC on 31 March 2022. | approvals from regulators and shareholders. | ||||
The Company recognised LKR 169Bn as the | |||||
merger reserve to the financial statements | We obtained the audited financial statements | ||||
as disclosed in note 21.5 & 37. The merger | of Commercial Leasing and Finance PLC. We | ||||
was accounted for based on the Statement of | checked the mathematical accuracy of the | ||||
Recommended | Practice | for | Merger | calculations and the adjustments related to | |
Accounting | for | Common | Control | merger accounting. | |
Combinations issued by CA Sri Lanka. | We assessed the adequacy of the disclosures | ||||
We considered the accounting for the merger | included in the notes 21.5 & 37 to the financial | ||||
to be a key audit matter as it represents a | statements. | ||||
significant transaction entered into by the | |||||
Company during the year. | |||||
Other information included in the Company's 2022 Annual Report
Other information consists of the information included in the Company's 2022 Annual Report, other than the financial statements and our auditor's report thereon. Management is responsible for the other information. The Company's 2022 annual report is expected to be made available to us after the date of this auditor's report.
Our opinion on the financial statements does not cover the other information and we will not express any form of assurance conclusion thereon.
In connection with our audit of the financial statements, our responsibility is to read the other information identified above when it becomes available and, in doing so, consider whether the other information is materially inconsistent with the financial statements or our knowledge obtained in the audit, or otherwise appears to be materially misstated.
Responsibilities of management and those charged with governance for the financial statements
Management is responsible for the preparation of financial statements that give a true and fair view in accordance with Sri Lanka Accounting Standards, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the financial statements, management is responsible for assessing the Company's ability to continue as a going concern, disclosing, as applicable, matters related to going concern and using the going concern basis of accounting unless management either intends to liquidate the Company or to cease operations, or has no realistic alternative but to do so.
Those charged with governance are responsible for overseeing the Company's financial reporting process.
(Contd…5/)
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LOLC Finance plc published this content on 30 June 2022 and is solely responsible for the information contained therein. Distributed by Public, unedited and unaltered, on 30 June 2022 10:01:06 UTC.