Legal and accounting experts have given their opinions this week on the treatment of land at Lanka Marine Services Limited (LMSL) following the Supreme Court judgment which ruled that the transfer of land was 'null and void ab initio' were considered by John Keells Holdings (JKH) Audit Committee.
According to an announcement by JKH on Friday, the company stated that the legal opinion suggests that they reverse the transaction from the inception since the acquisition of the land was declared in the judgment as 'null and void ab initio' whilst the ccounting opinion suggests a de-recognition of the land in the absence of criteria set out in Sri Lanka Accounting Standards (SLAS) 10 which refers to accounting policies, changes in accounting estimates and errors.
The announcement said that financial statements for the quarter ended 30 September 2008, which will be released in the coming week, will be prepared on the basis of the legal opinion which states that LMSL cannot de-recognize an asset that did not exist in law. Accordingly, the financial statements will be restated to reflect the reversal of the original entries.
JKH stated that the company will be approaching the Urgent Issues Task Force (UITF) of the Institute of Chartered Accountants of Sri Lanka (ICASL) for confirmation of this accounting treatment. The company further stated that a de-recognition will result in a non cash impact to the consolidated income statement of Rs.730 million and will not result in any additional impact on net assets per share since an equivalent value would have been recognized as a reversal in the financial statements for the quarter ended 30 September 2008.
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