Introduction to Sri Lanka Accounting Standards

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This is the lesson 01 of free accounting lessons that will be provided to you through www.Accountingkuppiya.com. Before discussing about Sri Lanka Accounting Standards directly I though to give some understanding on how accounting standards are being developed and who are the institutes and parties involved in the Local context as well as Global context.

Before directly coming to the Accounting Standards I would like to explain the broader Picture of Accounting Standard ( Helicopter view).

Accounting Profession is within the scope of Regulatory Framework of Financial Reporting of the country.

Normally a Regulatory Framework Financial Reporting of a country refers to , sources of  laws and regulations which is mainly consist of ;

1. Accounting Standards
2. Company Law
3. Stock Exchange Rules

Local Context

Sri Lankan GAAP (Generally Accepted Accounting Practice) includes the following sources:

1. The Companies Act
2. SEC Regulations and rulings (applicable only for listed companies)
3. Accounting standards issued by the CA Sri Lanka
4. Interpretations

1. The Company Act

There are a number of sources of legislation relevant to companies in Sri Lanka. However The Companies Act No 07 of 2007 is the main legislation applicable to Companies incorporated in Sri Lanka.

Further following are the sections of the companies act which are very important for the Financial Reporting.

• Section 56 - Solvency requirement when doing a distribution to the shareholders
• Section 69 - Redemption of shares on the agreed date where company has an obligation to do so.
• Section 148 - Keeping accounting records
• Section 171 - Reporting date
• Section 192 - Directors' interest in transactions

It is compulsory to apply the Sri Lanka Accounting Standards to all companies incorporated under the Companies Act No. 7 of 2007. Therefore, financial statements of limited liability companies should be prepared in accordance with Sri Lanka Accounting Standards.

2. SEC Regulations and rulings

These are the regulations and rulings applicable to Companies who have listed their shares or debentures in Colombo Stock Exchange(CSE). Since Colombo Stock Exchange (CSE) is regulated by Security Exchange Commission of Sri Lanka (SEC) , the listing rules issued by SEC are applicable to them.

For more details visit ;

Colombo Stock Exchange - https://www.cse.lk
Listing Rules - https://www.cse.lk/home/listingRules
Security Exchange Commission of Sri Lanka - http://www.sec.gov.lk/

3. Accounting standards issued by the CA Sri Lanka

The only institute who can issue accounting standards in Sri lanka is CA Sri Lanka. From 01st January 2012 onward , CA Sri Lanka decided to fully adopt the accounting standards and pronouncements issued by International Accounting Standard Board (IASB).

What actually happens is IASB develop and issue International Financial Reporting Standards (IFRSs) and CA Sri Lanka adopts them as Sri Lanka Accounting Standards (SLFRs). Previously issued International Accounting Standards (IASs) have been adopted by CA Srilanka as LKASs.

4. Interpretations

These are called as International Financial Reporting Interpretations Committee (IFRICs). They issue IFRICs to;

1. Interpret the application of IFRSs.
2. Provide timely guidance on financial reporting issues not specifically addressed in IFRSs.


Following Flow Chart Will Summarize how Accounting Standards in Sri Lanka being issued.

Publishing in the gazette is a mandatory requirement as per the Sri Lanka Accounting and Auditing standards Act No. 15 of 1995. And also a standard will become effective legally only when it is published in a Gazette notification. Further as per the Sri Lanka Accounting and Auditing standards Act No. 15 of 1995, All the Specific Business Entities (SBEs) should apply Accounting Full Sri Lankan Accounting Standards(SLFRSs) issued by CA Sri Lanka.

To reduce the burden coming from adopting full SLFRSs for Small and Medium Size (SME) companies and Small Entities , Accounting Standard Committe has Recommended to adopt

• Sri Lanka Accounting Standard for Small and Medium Sized Entities (SLFRS for SMEs) 
• Sri Lanka Accounting Standards for Smaller Entities (SLFRS for Smaller Entities)

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References and Sources used to Write the Article

1. Accounting Standard Committee - http://www.slaasc.lk/accounting/index.php
2. CA Sri Lanka - http://www.casrilanka.com

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Article Written By : H.Harshana Sameeraka ( Bsc Accounting (Special) First Class (Gold Medal Winner), CA Passed Finalist with pending Viva(Prize Winner), Reading For CIMA SCS, Audit Supervisor KPMG)

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