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2010

SLIIT

Group No - 06

SAMSON RUBBER

PRODUCTS (PVT) LTD

FINANCIAL

REPORTING

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ACKNOWLEDGEMENT

First and foremost, we would like to thank our lecturer in charge of Financial Reporting,

Ms. M. M. D. de S. Gunawardena for the valuable instructions, advices and guidance

given for writing out this report. She inspired us greatly to work as a team, armed with

the team spirit and moreover her willingness to motivate us, contributed tremendously

for the successful completion of this report

Besides we would like to thank Mr. Wijayebandara, The General Manager of Samson

Rubber Products for providing us with a good environment and facilities to complete this

report. Also, we would like to take this opportunity to thank, The Chief Accountant: Ms.

Arunodini, The Finance Officer: Ms. Harshi and The Assistant Finance Officer: Ms. Manori

of Samson Rubber Products for providing us their level best accurate accounting

information and other financial details of SRP.

Finally, honorable thanks go to our family members and friends for their understandings

and supporting to us in completing this report. If not for the guidance and help of the

particulars mentioned above, we would not have been able to complete this report

successfully as we expected.

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Table of Contents

INTRODUCTION..4

GENERAL DISCUSSION ON FINANCIAL REPORTING..................................................................... 5

FINANCIAL REPORTING OF SAMSON RUBBER PRODUCT (PVT) LTD........................................... 8

REGULATORY FRAMEWORK...................................................................................................... 11

WEAKNESSES AND RECOMMENDATIONS ................................................................................ 13

CONCLUSION ............................................................................................................................ 14

REFERENCES ............................................................................................................................. 15

APPENDICES ..............................................................................................................................17

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INTRODUCTION

Samson Rubber Products (Pvt) Ltd established in 1994 is an associate company of DSI

Samson Group a leading manufacturing, marketing and services organization in Sri Lanka.

DSI was found forty seven years ago by Late Mr. D. Samson Rajapaksha, originally as a

footwear manufacturer. The Group now comprises of twenty five companies including

the Samson Rubber Products (Pvt) Ltd which is largely focused on manufacturing and

related services.

Samson Rubber Products is geared to sustainable development through advanced

technology in processing rubber (both natural and synthetic) and plastics along with

economic, social and environmental initiatives, and looks on the business outward both

domestically and globally.

Samson Rubber Products is the market leader in exporting of mould rubber,EthyleneVinyl Acetate (EVA), Nylon and plastic products. The factory is fully equipped with high

tech machinery and employees a workforce of approximately two hundred highly skilled

technical staff and fifty in managerial, marketing and administrative positions.

It is an ISO 9001:2000 certified company with more than twelve years of experience

which enables to assure quality products which excel beyond customer expectations.

Samson Rubber Products (Pvt) Ltd is still not a quoted company in the Colombo Stock

Exchange (CSE), even though Samson International PLC is quoted in CSE. This report

contains a general discussion on financial reporting, identification of the stakeholders,

regulatory framework and how accounting records are kept on Samson Rubber Products

(Pvt) Ltd.

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GENERAL DISCUSSION ON FINANCIAL REPORTING

The accounting function which keeps record of the various business transactions

that take place within a business organization is termed as financial reporting. Therefore,

financial reporting is concerned with communication of information to various

stakeholders of an organization both internal and external. Hence, financial reporting is

the act of providing financial information to those stakeholders who need them, in a

timely and an understandable manner. Financial statements and other financial reports

are used for this purpose.

There are two main objectives of financial reporting.

1. Decision makingFinancial reporting enables decision making. These decisions are mainly

concerned with allocation of scarce resources among different alternatives.

2. Management accountabilityThe assets of a company invested by its principals (shareholders) are managed by

the agents (the management) assigned by the principals. In order to monitor the

progress of agents, shareholders should get periodic information about the

successful achievement of tasks assigned to agents. So financial reporting is

important in providing information about the effectiveness of the management

in utilizing the companys resources.

Financial reporting is done by different companies in different forms. As a result thefinancial statements prepared by them would also be different from one company to

another. Financial reporting can be done by profit oriented companies as well as not-

for-profit organizations. Further more financial reporting can be done by individuals

through personal financial statements. Electronic financial reporting has evolved from

paper based financial reporting due to globalization and technological changes.

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Elements of financial statements

The financial position of a company is primarily provided in the Statement of Financial

Position. The elements include:

1. Asset: An asset is a resource controlled by the enterprise as a result of past eventsfrom which future economic benefits are expected to flow to the enterprise.

2. Liability: A liability is a present obligation of the enterprise arising from the pastevents, the settlement of which is expected to result in an outflow from the

enterprise' resources, i.e., assets.

3. Equity: Equity is the residual interest in the assets of the enterprise afterdeducting all the liabilities under the Historical Cost Accounting model. Equity is

also known as owner's equity. Under the units of constant purchasing power

model equity is the constant real value of shareholders equity.

The financial performance of a company is primarily provided in an income statement or

profit and loss account. The elements of an income statement or the elements that

measure the financial performance are as follows:

Revenues: increases in economic benefit during an accounting period in the form

of inflows or enhancements of assets, or decrease of liabilities that result in

increases in equity. However, it does not include the contributions made by the

equity participants, i.e., proprietor, partners and shareholders.

Expenses: decreases in economic benefits during an accounting period in the

form of outflows, or depletions of assets or incurrence of liabilities that result in

decreases in equity.

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FINANCIAL REPORTING OF SAMSON RUBBER PRODUCT (PVT) LTD

Stakeholders of SAMSON RUBBER PRODUCTS (PVT) LTD

When analyzing the financial statements of the company following entities were

identified as the stakeholders of financial information.

The Company Directors Inland Revenue Departments/Government Banks Employees Suppliers The general public

Each of these parties expectations with regards to the company can be summarized as

below

The Company DirectorsThey are the primary stakeholders and would expect to maximize the company

profit as well as to be the No.1 footwear manufacturers in the country. In order to do

that they would need to make very important business decisions every day, so in order to

do so they would need accurate and up to date financial statements to derive the

information they need to make necessary decisions.

The Inland Revenue departmentThe Inland Revenue department would expect to be provided with accurate

information through financial reporting in order to determine the taxation rates that

should be charged and to make sure that the company is progressing in a stable

manner.

BanksBanks would need financial statements in order to make sure that the business

is able to pay back any loans taken and to see if the company is a stable and credible.

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EmployeesEmployees too would take great interest in financial statements of the company

because they provide information about the companys stability which in turn means that

their jobs are secure as well as remuneration, benefits that they can gain from the

company.

SuppliersThe suppliers would expect to have information regarding the financial position of

the company to decide whether or not to continue their relationships with the company.

The general PublicThe general public would expect to derive information such as whether the

company is stable etc. and then use that information to either invest in the company or

even choose the company to seek employment.

In this section a detailed description of how financial reporting is handled by this

company is presented.

Maintenance of accounting records:

Accounting records in a company can be recorded using two main methods, manual and

fully automated (computerized). In the manual method although it is called manual the

finance department uses a general Microsoft Office software packages but does the

calculations and data entry manually, the other system is using a fully automated

package where the operator only has to enter the relevant data, the reports and

calculations are done automatically. In this company accounting records are maintained

manually with the use of a Microsoft Excel Package performing all the functions

through manual operations and the finance department of the company handles all the

preparations of the financial statements required by the rules and regulations imposed

on the company.

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Preparation of financial reports and communication to stakeholders

The financial statements are prepared monthly and the accounts prepared are kept

separate only for the use of the Samson Rubber Products Companys needs. The

information is only kept within the directors of the organization and also the Head of the

accounting department in order to aid them in their business decisions and other needs

with regards to the company. The company does not openly publish or disclose any of

the information regarding its financial status and position and due to the fact that it is

not a quoted company it does not have to generate an annual report and present to its

shareholders either.

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REGULATORY FRAMEWORK

Companies can be classified as eitherlimited or unlimited. However most companies

are limited companies, that is, the liability of the shareholders is limited. The two mostcommon means by which this is achieved are:

Guarantee: each member guarantees to provide a specified amount in the eventof the company going into liquidation. This form is most commonly used by

charities.

Shares:the share holders liability is limited to any amount payable in respect ofshares purchased. If, therefore the shareholders have paid fully for any shares

purchased, there is no further liability. It is a method most commonly adopted by

companies.

The regulatory framework is a set of standards, forty one standards to be exact designed

by the Council of the Institute of Charted Accountants Sri Lanka (ICASL).

When considering about Samson Rubber Products, it is visible that it follows the

regulatory framework when preparing its financial statements as it adheres to thefollowing regulatory elements.

Companies Act No.07 of 2007 Sri Lanka Accounting Standards Industry Specific Rules and Regulations

1. Import & Export Act International Accounting Standards

Few other elements mentioned above are not relevant to the company because it is

neither a partnership nor it is listed in Colombo Stock Exchange. Yet the company has

to adhere to the rules and regulations posed by the government by timely payment of a

variety of taxes including,

VAT : Value Added Tax

NBT : Nations Building Tax

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ESC : Economic Service Charge TT : Turnover Tax IT : Income Tax

According to ICASL there are few accounting standards which are used in Samson

Rubber Products for financial reporting are mentioned follows

SLAS 03:Presentation of financial statements SLAS 05: Inventories SLAS 09: Cash flows SLAS 10: Accounting policies, changes in accounting estimates and errors SLAS 18: Property, plant and equipment SLAS 26: Consolidate and separate financial statements SLAS 29: Revenue SLAS 35: interim financial reporting SLAS 37: Intangible assets

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WEAKNESSES AND RECOMMENDATIONS

When analyzing the financial reporting function of Samson Rubbers Product

Company, there were few drawbacks. One such was that the financial statements werenot for the reference of general public as well as its employees. Furthermore they do not

have an automated accounting system to keep accounting records; instead of they are

using the manual system with the use of general office software. As a private limited

company even though that process generates costs to the organization, it is more

beneficial to those personnel who handle the accounting function such as assistant

accountants, trainees, accountants etc.

When preparing financial statement company have to prepare notes for each and

every adjustments that they make, but Samson Rubber Products have not make use of

that function which make confusion to understand the financial statements to its users.

So as a recommendation it will make more benefit to users if they prepare notes

regarding the adjustments.

Also they have to maintain a balance between the qualitative characteristics of

financial reporting as mentioned by the Institute of Charted Accountants of Sri Lanka,

which include Understandability, Relevance, Reliability, Comparability. To do so they

have to use financial information as and when it is required and produces reports.

Even though financial reporting is costly to the company it should generate more

benefits which exceed the costs of using it, if it is not it is not worthwhile of having such

a reporting system.

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CONCLUSION

This report provides a general review of the financial reporting and how it is carried out

in the organization considered Samson Rubber Products (pvt) Ltd.. It shows who the

stakeholders of financial information and their expectations are. Furthermore it looks at

the regulations applicable in preparing financial statements of the company,

maintenance of financial statements and how financial information is communicated to

the interested parties.

Ultimately, it highlights few weaknesses which were discovered during the process of

analyzing financial details of the company and recommendations have been given inorder to overcome those and to improve the financial presentation.

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REFERENCES

Andrew, L (2005) Regulatory Framework of a company, Financial Management

Magazine, 20(1), 12-15, CIMA publication

Financial reporting in not-for-profit and public sector entities and the Reporting

requirements of small and medium sized entities (SMEs), Institute of Charted

Accountants Sri Lanka. (2009) last visited on 10 th September 2010(online), at

http://www.google.lk/search?hl=en&defl=en&q=define:regulatory+framework&sa=X&e

i=SKuLTMHrO4arccTf6MUE&ved=0CBMQkAE

Financial Reporting (2006) last visited on 12 th September 2010,(online) at

http://en.wikipedia.org/wiki/Financial_reporting

Framework for the Preparation and Presentation of Financial Statements, Institute of

Charted Accountants Sri Lanka.(2009) last visited on 12 th September 2010,(online) at

http://www.icasrilanka.com/Technical/Contents/framework%208.pdf

GUNAWARDANA, M.M.De.S. (2010).Regulatory Framework, [lecture Handout], from a

Financial Reporting lecture, held on 23 rd August, Srilanka Institute of Information &

Technology, Malabe

OREGAN, Philip (2006) Financial Information Analysis.2nded, England, UK, John wiley &

sons Ltd.

Samson Rubber Products (pvt) Ltd, last visited on 10 th September 2010.(online) at

http://www.samsonrubberproducts.com

SHELSTED, Jeffery.J (2005).Modern Advanced Accounting, England, UK, McGraw-Hill

Higher Education.

http://www.google.lk/search?hl=en&defl=en&q=define:regulatory+framework&sa=X&ei=SKuLTMHrO4arccTf6MUE&ved=0CBMQkAEhttp://www.google.lk/search?hl=en&defl=en&q=define:regulatory+framework&sa=X&ei=SKuLTMHrO4arccTf6MUE&ved=0CBMQkAEhttp://www.google.lk/search?hl=en&defl=en&q=define:regulatory+framework&sa=X&ei=SKuLTMHrO4arccTf6MUE&ved=0CBMQkAEhttp://en.wikipedia.org/wiki/Financial_reportinghttp://www.icasrilanka.com/Technical/Contents/framework%208.pdfhttp://www.icasrilanka.com/Technical/Contents/framework%208.pdfhttp://www.samsonrubberproducts.com/http://www.samsonrubberproducts.com/http://www.samsonrubberproducts.com/http://www.icasrilanka.com/Technical/Contents/framework%208.pdfhttp://en.wikipedia.org/wiki/Financial_reportinghttp://www.google.lk/search?hl=en&defl=en&q=define:regulatory+framework&sa=X&ei=SKuLTMHrO4arccTf6MUE&ved=0CBMQkAEhttp://www.google.lk/search?hl=en&defl=en&q=define:regulatory+framework&sa=X&ei=SKuLTMHrO4arccTf6MUE&ved=0CBMQkAE

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STICE, Earl.K and STICE, James.D, (2006).Financial Accounting (Reporting & Analysis).7 th

ed., Mumbai, India, Thomson Publication.

WIJEWARDHANA, H, (2009).Financial Accounting in Sri Lanka (revised ed). 2 nd ed.,

Nugegoda, Sri Lanka., Sarasavi Publication.

WOOD, F. and SANGSTER, A. (2005) Business Accounting 2, 9thed, Delhi, India. , Pearson

Education (pvt) Ltd.

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Non Supervisory Level

Supervisory Level

Middle Managemant

Top Management

Managing Director

Mr. Ranatunga Rajapaksha

General Manager

Mr. Wijebandara

Chief Accountant

Mrs. Arunodini

Managemant Accounting

Division

Officer - Costing and Work

Study

Mrs. Krishanthi

Finance Division

Officer - Finance

Ms. Harshi

Assistant

Finance

Mrs. Manori

Assistant

Finance

Mrs. Shiromi

APPENDICES

1. Structure of the Accounting Department

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Objectives and qualitative characteristics

Definitions of elements, recognition andde recognition

Measurement

Reporting entity concept

Boundaries of financial reporting, andPresentation and Disclosure

2. Stakeholders of Samson Rubber Products (pvt) Ltd

3. Phases of conceptual framework

STAKEHOLDERS

Suppliers

Employees

Companyboard of

directors

Inland

Revenue

Department

General

public

Banks

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4. Names and contact details of the personnel contacted

Mr.L.J WijebandaraGeneral ManagerSamson Rubber Products (pvt) LtdD.Samson Rajapaksha Mawatha,Bataduwa,Galle.

Mrs. K.G.S Arunodini WickramasingheAccountantFinance DepartmentSamson Rubber Products (pvt) LtdD.Samson Rajapaksha Mawatha,Bataduwa,Galle.

Ms.W.H Manori SanjeewaniAssistant Finance

Finance DepartmentSamson Rubber Products (pvt) LtdD.Samson Rajapaksha Mawatha,Bataduwa,Galle.