‘IFRS vital for finance management’

Ramani Kangaraarachchi

Tax administrators in the country should understand the concept ' International Financial Reporting Standards'( IFRS) and implement them to keep track of changes and be convergent with the new accounting standard as much as possible for a better reflection of financial position of a company. Partner KPMG Sri Lanka, Shamila Jayasekara said making a presentation on 'Tax issues on adoption of IFRS at the Tax Seminar 2012.

The seminar was organized by the Sri Lanka Institute of Taxation which was held at the Sri Lanka Foundation Institute on Wednesday. Jayasekera proposed that the way forward was to issue a set of guidelines clarifying the tax issues as there is no proper guidelines at the moment as to how to calculate taxes.

The Act does not specify the way in which profits should be calculated. However, up to now case law has established that profits should be calculated in line with accounting standards adjusted for statutory provisions.

She said IFRS is vital to Sri Lanka as it increases foreign direct investments (FDI), align with international standards ,for the presence of MNCs and cross border exchange listings and gives access to capital funding.

IFRS also ensure better comparability of cross border financial statements as group of companies can use one single accounting language. On the other hand IFRS moves the balance sheet closer to real market value and brings better substance to the financial statements. It improves better presentation of financial performance and fair value based reporting while facilitating foreign investors in understanding financial positions of the country, she said.