Investor Presentaiton

ANNUAL REPORT PP Private Power and Infrastructure Board ANNUAL REPORT 161 Private Power and Infrastructure Board 3.6 De-recognition a) Financial assets PPIB derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows in a transaction in which substantially all of the risks and rewards of ownership of the financial asset are transferred, or it neither transfers nor retains substantially all of the risks and rewards of ownership and does not retain control over the transferred asset. Any interest in such de-recognized financial assets that is created or retained by PPIB is recognized as a separate asset or liability. b) Financial liabilities PPIB derecognizes a financial liability (or a part of financial liability) from its statement of financial position when the obligation specified in the contract is discharged or cancelled or expires. 3.7 Offsetting of financial instruments Financial assets and financial liabilities are set off and the net amount is reported in the financial statements when there is a legal enforceable right to set off and PPIB intends either to settle on a net basis or to realize the assets and to settle the liabilities simultaneously. 3.8 Trade debts and other receivables Trade receivables are initially recognized at fair value and subsequently measured at amortized cost using the effective interest method, less any allowance for expected credit losses. Trade receivables generally do not include amounts over due by 365 days. PPIB has applied the simplified approach to measuring expected credit losses, which uses a lifetime expected loss allowance. To measure the expected credit losses, trade receivables have been grouped based on days overdue. Other receivables are recognized at amortized cost, less any allowance for expected credit losses. 3.9 Accrued and other liabilities Liabilities for trade and other payables are carried at cost which is the fair value of the consideration to be paid in the future for goods and services received. 3.10 Employee retirement benefits The main features of the retirement benefit schemes operated by PPIB for its employees are as follows: 3.10.1 Defined benefit plans PPIB has in place a defined benefit funded gratuity for all eligible employees who complete qualifying period of service and age. The fund is administered by trustees. Annual contributions to the gratuity fund are based on actuarial valuation using Projected Unit Credit Method, related details of which are given in note 14 to the financial statements. The obligation at the reporting date is measured at the present value of the estimated future cash outflows. All contributions are charged to income and expenditure account for the year. The latest actuarial valuation was carried out at 30 June 2019. Actuarial gains and losses (remeasurement gains losses) on employees' retirement benefit plans are recognized immediately in other comprehensive income and past service cost is recognized in income and expenditure account when they occur. Calculation of gratuity requires assumptions to be made of future outcomes which mainly includes increase in remuneration, expected long-term return on plan assets and the discount rate used to convert future cash flows to current values. Calculations are sensitive to changes in the underlying assumptions. 3.10.2 Defined contribution plan PPIB operates and manages a contributory provident fund scheme for all its regular employees who have completed the probation period. PPIB has created a trust for this purpose and has applied to Commissioner of Income tax for recognition of the fund under the provisions of part 1 of sixth schedule of Income Tax Ordinance, 2001. Equal monthly contributions are made by PPIB and the employees at the rate of 5% of basic salary. Contributions are charged to income and expenditure account. 3.11 Leave encashment PPIB also has a policy whereby all its employees are able to encash accumulated leave balance as per PPIB service rules. Provision is made in the financial statements for the amount payable on account of unavailed leave balance of the employees. Provision for leave encashment is made for unavailed leave balance as at period end at the rate of 2.5 days for every calendar month of duty period rendered by him. 3.12 Taxation Income tax expense comprises of current and deferred tax. Current Provision for current tax is based on the taxable income for the year determined in accordance with the prevailing law for taxation of income. The charge for current tax is calculated using prevailing tax rates or tax rates expected to apply to the profit for the year, if enacted. The charge for current tax also includes adjustments, where considered necessary, to provision for tax made in previous years arising from assessments framed during the year for such years. Deferred tax Deferred tax is accounted for using the statement of financial position liability method in respect of all temporary differences arising from differences between the carrying amount of assets and liabilities in the financial statements and the corresponding tax bases used in the computation of the taxable profit. Deferred tax liabilities are generally recognized for all taxable temporary differences and deferred tax assets to the extent that it is probable that taxable profits will be available against which the deductible temporary differences, unused tax losses and tax credits can be utilized. Deferred tax is calculated at the rates that are expected to apply to the period when the differences reverse based on tax rates that have been enacted or substantively enacted by the reporting date. Deferred tax is charged or credited in the statement of profit or loss, except to the extent that it relates to items recognized in other comprehensive income or directly in equity. In this case, the tax is also recognized in other comprehensive income or directly in equity, respectively. 3.13 Revenue recognition Income as presented in income and expenditure statement is the revenue as defined under IFRS 15 - Revenue from Contracts with Customers. IFRS 15 establishes the principles that an entity shall apply about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. Revenue is recognised from different sources as follows: -Registration fee, request for quotation fee, expression of interest fee and project processing fee is recognized on receipt basis. -extension and issuance of letter of intent (LOI) and letter of support (LOS) is recognized on meeting performance obligation which is dependent upon approval of Board. Revenue from profit on bank balances, investments, operations and other income is recognized on accrual basis. Dividend income is recognized when the right to receive dividend is established. Proceeds from encashment of performance guarantees is recognized as income in the year in which the guarantee is encashed and the management believes that the outcome of the transaction can be estimated reliably. 3.14 Off-setting Financial assets and liabilities are set off in the statement of financial position, only when PPIB has a legally enforceable right to set off the recognized amounts and intends either to settle on a net basis or to realize the assets and settle the liabilities simultaneously. 3.15 Foreign currencies Transactions in foreign currencies are recorded at the rates of exchange ruling on the date of the transaction. All monetary assets and liabilities denominated in foreign currencies are translated into Pak rupee at the rate of exchange ruling on the statement of financial position date and exchange differences, if any, are charged to income for the current year. 3.16 Cash and cash equivalents Cash and cash equivalents comprise cash in hand and balances with bank. 3.17 Provisions Provisions are recognized when PPIB has a legal or constructive obligation as a result of past events and it is probable that an outflow of resources embodying economic benefits will be required to settle the obligations and a reliable estimate of the amount can be made. 162