Financial Accounting and Reporting (SLFRS/LKAS)
This domain tests whether you can prepare and interpret general-purpose financial statements under Sri Lanka's reporting framework and apply the Companies Act disclosure and filing duties that sit around them. Expect computational questions on revenue, leases, financial instruments and consolidation, plus conceptual questions on measurement and presentation.
The framework you must name
SLFRS and LKAS are issued by CA Sri Lanka and adopt IFRS/IAS text with limited local amendments. The Sri Lanka Accounting and Auditing Standards Act No. 15 of 1995 gives them legal force for specified business enterprises; other entities apply SLFRS for SMEs. Listed companies on the CSE must also meet CSE Listing Rules on interim and annual reporting.
Core rules to have at your fingertips
- SLFRS 15: five steps - identify the contract, identify performance obligations, determine transaction price, allocate it, recognise revenue when/as control passes.
- SLFRS 16: lessees recognise a right-of-use asset and lease liability; lessors keep the finance/operating split.
- SLFRS 9: debt instruments at amortised cost only if hold-to-collect applies; impairment uses the expected credit loss model, not incurred loss.
- SLFRS 10: control rests on power, exposure to variable returns, and the ability to use power to affect those returns.
- LKAS 7: interest paid is normally a financing cash flow for a non-financial entity; interest received is investing.
Worked example
On 1 July 20X1 an entity receives LKR 1,200,000 for a 12-month maintenance contract starting that day; the year end is 31 March 20X2. Control passes over time, so revenue is recognised straight-line: 9 months of the 12 have elapsed, so LKR 900,000 is revenue and LKR 300,000 is a contract liability. Do not recognise the full receipt, and do not leave the balance in trade payables.
Traps that cost marks
Recognising revenue on invoicing; ignoring deferred tax on revaluation (LKAS 12); netting contract assets against contract liabilities from different contracts; treating a short lease as off-balance-sheet by habit rather than by the SLFRS 16 recognition exemptions.