report on ias 1
TRANSCRIPT
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
Abstract
Generally by the word “Banking Sector” easily understandable that it includes the financial
institutions and all other business organizations which deal with different activities according to
their own business area. Banking sectors are the primary contributor to the economy of a
country. Banking sectors are doing different activities and making profit as per their
requirements. For these, people and government are very much dependent on these Banking
sectors. As Banking sectors are rendering services and concern about profit earning.
Banking sector is spending its hand in different financial event every day. At the same time the
Banking process is becoming faster, easier and this sector is becoming wider. As a result, it has
become essential for every person to have some idea on the Banking sector and Banking
procedures. Generally these types of Banking Sectors are collecting their capital from market
that is through their activities. So it is necessary to report annually to its shareholders and other
necessary stakeholders.
To ensure the various rules & procedure of the banking operations, several standards must follow
by banks. International Accounting Standard (IAS) 1 prescribes the basis for presentation of
general purpose financial statements, to ensure comparability both with the entity’s financial
statements of previous periods and with the financial statements of other entities.
IAS 1 specifies the minimum line item disclosures on the face of, or in the notes to, the balance
sheet, the income statement, and the statement of changes in equity. Current and non-current
assets and current and non-current liabilities are presented as separate classifications on the face
of the balance sheet. IAS 1 specifies disclosures about information to be presented in the
financial statements, including judgments, key sources of estimation uncertainty, and accounting
policies.
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
The thesis on “Corporate Mandatory Disclosure in Financial Statement by Some Selected
Bank in Bangladesh as per IAS-1” explains the various financial & non-financial disclosures &
its rules & procedure followed by various bank as per IAS 1.
Chapter 1 provides a review and analysis of the study and provides a background expression of
the study. Define what is the objective of the study is & the methodology used to conduct the
survey to prepare the thesis. Define the limitation hindrances to make the thesis.
Chapter 2 provides a complete overview of the study bank that covered the following topics-
history & background of bank, principles of the banks that consider as foundations, performance
of the bank.
Chapter 3 mention the overview of IAS 1- A summary of complete set of financial statements
comprises a balance sheet; an income statement; a statement of changes in equity; a cash flow
statement; and notes, comprising a summary of significant accounting policies and other
explanatory notes.
Chapter 4 shows an analysis on the practice of IAS 1 in Bangladeshi banking sector, by
conducting survey, to various companies & professional accountants. Study data put by
appropriate coding into SPSS and derive the findings.
Chapter 5 provides finding of the study that is found from the previous analysis covered various
essential issues & recommend the action of the thesis topic- “Corporate Mandatory Disclosure
in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
Chapter 1
Introduction
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
1.1 Origin of the Report
The report was originated to make a study on the “Corporate Mandatory Disclosure in
Financial Statement by Some Selected Bank in Bangladesh as per IAS-1” with special
reference to International Accounting Standards -1 (IAS - 1) and as a part of the fulfillment of
thesis program required for the completion of the BBA program of the Accounting Faculty of
Business Administration of Stamford University Bangladesh.
The report was prepared under the supervision of Sazzadur Rahman Khan, Lecturer of
Business Administration, Stamford University Bangladesh. I am very much thankful to him for
assigning me such types of project work.
1.2Background of the Report
International Accounting Standards -1 are the authoritative statements of how particular types of
transactions and other events should be reflected in IAS -1 prepared by the public limited
companies listed in the Stock Exchanges of our country. According to Securities and Exchange
Rules 1987, every listed company is required to prepare its Financial & Non Financial
Disclosure in conformity with International Accounting Standards -1. Some companies follow
the requirements of IAS -1in presenting information with few exceptions.
1.3 Objectives of the Report
The main objectives of this report are to analyze the IAS-1 of various companies and help their
management in future policy formulation that is likely to improve the quality of their IAS-1.
The specific objectives are:
To gain an understanding of relevant laws and rules followed in preparing financial
statements.
To analyze the Financial& Non Financial Disclosure to explain the IAS - 1 adopted in
preparing International Accounting Standard -1.
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
To review the voluntary disclosure issues and reporting procedure of every financial
information. To provide some recommendations on the basis of my findings.
1.4 Scope of the Report
Financial reporting of a public limited company is a broad area. Within the limited time period of
thesis, it is virtually impossible to cover all aspects of financial reporting. So, the scope of my
report is limited only to the compliance of those International Accounting Standards (IAS’s) as
followed by various companies in preparing its financial statements and some other areas of
voluntary information disclosure. In preparing the report, I review and analyze the information
published in the annual report for the year 2008. Any change in accounting policies in respect of
providing information after this period is beyond the scope of my report.
1.5 Methodology
This report has been prepared on the basis of experience gathered through learning various
companies’ annual report. For preparing this report, I have also get information from website of
various companies. I have presented my experience and finding by using different charts and
tables, which are presented in the analysis part.
The details of the work plan are furnished below:
Data collection method: Relevant data for this report has been collected primarily by direct
investigations of different Banks’ annual report and website.
Data sources: The information and data for this report have been collected from secondary
sources. The secondary sources of information are annual reports, websites and different
manuals.
Data processing: Data collected from secondary sources have been processed manually and
qualitative approach in general and quantitative approach in some cases has been used
throughout the study.
Data analysis and interpretation: Qualitative approach has been adopted for data analysis and
interpretation taking the processed data as the base. So the report relies primarily on an analytical
judgment and critical reasoning.
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
1.6 Limitations of the report
The scope of the study is only limited to annual report and website. The report covers various
Banks’ IAS-1 reporting system that is whether they followed applicable laws and regulations to
prepare their IAS-1 reporting. Following are the main limitations of the report-
It was very different to collect the information form various Banks
Company policy was not disclosing some data and information for obvious reasons.
Because of the limitation of information some assumption was made.
The time was insufficient to know all activities of the different banks.
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
Chapter 2
Overview of the Bank
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
2.1 Profile:
South East Bank Limited
Southeast Bank Limited is a scheduled commercial bank in the private sector established under
the ambit of Bank Company Act, 1991 and incorporated as a Public Limited Company under
Companies Act, 1994 on March 12, 1995. The Bank started commercial banking operations on
May 25, 1995. During this short span of time the Bank has succeeded in positioning itself as a
progressive and dynamic financial institution in the country. The bank has been widely
acclaimed by the business community, from small entrepreneurs to large traders and industrial
conglomerates, including the top-rated corporate borrowers, for its forward - looking business
outlook and innovative financial solutions.
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
Southeast Bank Limited has been licensed by the Government of Bangladesh as a Scheduled
commercial bank in the private sector in pursuance of the policy of liberalization of banking and
financial services and facilities in Bangladesh. In view of the above, the Bank, within a period of
14 years of its operation, achieved remarkable success fully meeting capital adequacy
requirement of Bangladesh Bank. As evident from the financial statements for the last 10 years,
General I Events & Brief Profile
Certificate of Incorporation March 12, 1995
Certificate of Commencement of Business March 12, 1995
Bangladesh Bank license March 23, 1995
First Branch opened May 25, 1995
Dividend offered in 2008 35%
Number of Branches 46 as on 31/12/2008
Number of Employees 1231 as on 31/12/2008
Global Correspondents 587 as on 31/12/2008
Listing of Shares DSE & CSE
Financial Information Stability (Taka in million)
Authorized Capital 3,500.00
Paid-up Capital 2,852.20
Paid-up Capital and Reserve
in 2008 7,657.01
Deposit December 31, 2008 68,714.67
Loans and advances December 31, 2008 60,281.26
Investments December 31, 2008 12,299.61
Operating Profit December 31, 2008 3,012.58
* Initial public offering of shares of Tk. 150.00 million was completed in 1999
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it has been growing rapidly as one of the leaders of the new generation banks in the private
sector in term of business and profitability.
2.02 Profile:
National Bank Limited has its prosperous past, glorious present, prospective future and under
processing projects and activities. Established as the first private sector Bank fully owned by
Bangladeshi entrepreneurs, NBL has been flourishing as the largest private sector Bank with the
passage of time after facing many stress and strain. The member of the board of directors is
creative businessman and leading industrialist of the country. To keep pace with time and in
harmony with national and international economic activities and for rendering all modern
services, NBL, as a financial institution automated all its branches with computer network in
accordance with the competitive commercial demand of time. Moreover, considering its forth-
coming future the infrastructure of the Bank has been rearranging. The expectation of all class
businessman, entrepreneurs and general public is much more to NBL. Keeping the target in mind
NBL has taken preparation to open 15 new branches and 5 SME centers by the year 2009. In
addition we are further expanding our presence through developing and expanding the SME
financing, Any Branch Banking, Off-shore Banking facilities.
The emergence of National Bank Limited in the private sector is an important event in the
Banking arena of Bangladesh. When the nation was in the grip of severe recession, Govt. took
the farsighted decision to allow in the private sector to revive the economy of the country.
Several dynamic entrepreneurs came forward for establishing a bank with a motto to revitalize
the economy of the country.
National Bank Limited was born as the first hundred percent Bangladeshi owned Bank in the
private sector. From the very inception it is the firm determination of National Bank Limited to
play a vital role in the national economy. We are determined to bring back the long forgotten
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
taste of banking services and flavors. We want to serve each one promptly and with a sense of
dedication and dignity.
The then President of the People's Republic of Bangladesh Justice Ahsanuddin Chowdhury
inaugurated the bank formally on March 28, 1983 but the first branch at 48, Dilkusha
Commercial Area, Dhaka started commercial operation on March 23, 1983. The 2nd Branch was
opened on 11th May 1983 at Khatungonj, Chittagong.
At present, NBL has been carrying on business through its 106 branches spread all over the
country. Besides, the Bank has drawing arrangement with 415 correspondents in 75 countries of
the world as well as with 37 overseas Exchange Companies located in 13 countries. NBL was the
first domestic bank to establish agency arrangement with the world famous Western Union in
order to facilitate quick and safe remittance of the valuable foreign exchanges earned by the
expatriate Bangladeshi nationals. NBL was also the first among domestic banks to introduce
international Master Card in Bangladesh. In the meantime, NBL has also introduced the Visa
Card and Power Card. The Bank has in its use the latest information technology services of
SWIFT and REUTERS. NBL has been continuing its small credit program for disbursement of
collateral free agricultural loans among the poor farmers of Barindra area in Rajshahi district for
improving their lot. Alongside banking activities, NBL is actively involved in sports and games
as well as in various Socio-Cultural activities. Up to 2008, the total number of employee of NBL
stood at 2,737
2.3 Profile:
Prime Bank Ltd. created and commencement of business started on 17 April 1995. The
sponsors are reputed personalities in the field of trade and commerce and their stake ranges from
shipping to textile and finance to energy etc. As a fully licensed commercial bank, a highly
professional and dedicated team with long experience in banking is managing Prime Bank Ltd.
They constantly focus on understanding and anticipating customer needs. As the banking
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
scenario undergoes changes so is the bank and it repositions itself in the changed market
condition.
Prime Bank Ltd. offers all kinds of Commercial Corporate and Personal Banking services
covering all segments of society within the framework of Banking Company Act and rules and
regulations laid down by our central bank. Diversification of products and services include
Corporate Banking, Retail Banking and Consumer Banking right from industry to agriculture,
and real state to software.
The bank has consistently turned over good returns on Assets and Capital. During the year 2007,
the bank has posted an operating profit of Tk. 3257 million and its capital funds stood at Tk 6382
million. Out of this, Tk. 2275 million consists of paid up capital by shareholders and Tk. 2659.21
million represents reserves and retained earnings. The bank’s current capital adequacy ratio of
11.50% is in the market. In spite of complex business environment and default culture, quantum
of classified loan in the bank is very insignificant and stood at less than 1.35%.
Prime Bank Ltd., since its beginning has attached more importance in technology integration. In
order to retain competitive edge, investment in technology is always a top agenda and under
constant focus. Keeping the network within a reasonable limit, its strategy is to serve the
customers through capacity building across multi delivery channels. Past performance gives an
indication of its strength.
2.4 Profile:
Trust Bank Limited a domestic private sector commercial bank in Bangladesh incorporated in
June 1999 as a public limited company under the company act 1994. It started business
operations in July 1999 with an authorized capital of Tk 1,000 million divided into 1 million
ordinary shares of Tk 1,000 each. The bank's initial paid up capital was Tk 200 million, 50% of
which are held by Army Welfare Trust designated as group-A shareholder. The public
designated as group-B shareholders holds the remaining 50%.
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
Trust Bank Limited is one of the leading private commercial bank having a spread network of 39
branches across Bangladesh. Since bank’s business volume increased over the years and the
demands of the customers enlarged in manifold, our technology has been upgraded to manage
the growth of the bank and meet the demands of our customers.
In January 2007, Trust Bank successfully launched Online Banking Services, which facilitate
Any Branch Banking, ATM Banking, Phone Banking, SMS Banking, & Internet Banking to all
customers. Customers can now deposit or withdraw money from any Branch of Trust Bank
nationwide without needing to open multiple accounts in multiple Branches. Trust Bank is about
to introduce Visa Credit Cards to serve it’s existing and potential valued customers. Credits
cards can now be used at shops & restaurants all around Bangladesh and even internationally.
Trust Bank is a customer oriented financial institution. It remains dedicated to meet up with the
ever-growing expectations of the customer because at Trust Bank, customer is always at the
center.
Compliance of IAS/BAS Banks applied most of BAS and BFRS as adopted by ICAB-
Name of the BAS IAS/
BAS
Status
R-1 R-2 R-3 R-4
Presentation of Financial Statements 1 A A A A
Inventories 2 A A A A
Cash Flow Statements 7 A A A A
Accounting Policies, Changes in Accounting
Estimates and Errors
8 A A A A
Events after the Balance Sheet Date 10 A A A A
Construction Contracts 11 N/A N/A N/A N/A
Income Taxes 12 A A A A
Segment Reporting 14 A A A A
Property, Plant and Equipment 16 A A A A
Leases 17 A A A N/A
Revenue 18 A A A A
Employee Benefits 19 A A A A
Accounting for Government Grants and Disclosure of
Government Assistance
20 A A N/A A
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
The Effects of Changes in Foreign Exchange Rates 21 A A A A
Borrowing Costs 23 A A A A
Related Party Disclosures 24 A A A A
Accounting for Investments 25 A A A A
Accounting and Reporting by Retirement Benefit
Plans
26 A A A N/A
Consolidated and Separate Financial Statements 27 A A A A
Investment in Associates 28 A A N/A A
Disclosures in the Financial Statements of Banks and
similar Financial Institutions
30 A A A A
Interests in Joint Ventures 31 N/A N/A N/A N/A
Earnings per share 33 A A A A
Interim Financial Reporting 34 A A A A
Impairment of Assets 36 A A A A
Provisions, Contingent Liabilities and Contingent
Assets
37 A A A A
Intangible Assets 38 A A N/A A
Investment Property 40 A A A
Agriculture 41 N/A N/A N/A N/A
Chapter 3
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Overview of IAS 1
3.01 Key features of IAS 1:-
IAS 1 includes guidance on the meaning of ‘present fairly’ and emphasizes that the
application of IFRS is presumed to achieve a fair presentation. It requires departure from a
standard in very rare circumstances where compliance would be misleading (except where
not permitted by the relevant regulatory framework).
The contents of a complete set of financial statements are specified and there is a general
requirement for comparatives. Criteria for the classification of assets and liabilities as
current/ non-current are defined.
A choice is given as to the presentation of the balance sheet between separating current and
non-current assets and liabilities, and presenting assets and liabilities in order of their
liquidity (or in reverse order of liquidity) without a current/non-current distinction. Liquidity
presentation of assets and liabilities is required only when it provides a more relevant and
reliable presentation.
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The standard specifies minimum items on the face of the balance sheet and minimum items
on the face of the income statement.
Additional items may be needed to comply with another standard or to present fairly the
entity's financial position or when such presentation is relevant to an understanding of the
entity’s financial performance.
Disclosure of “extraordinary items” is prohibited.
An analysis of expenses, either by nature or by function, should be given either on the face of
the income statement or in the notes.
A statement of changes in equity is to be presented although this requirement may be met in
various ways.
Disclosure in the notes is required of accounting policies followed, information required by
other IAS, narrative descriptions or detailed analyses of items shown on the face of the
financial statements, and other disclosures necessary for an understanding and fair
presentation of the financial statements.
Judgments of estimations and key assumptions concerning the future that have a significant
risk of causing a material adjustment to the carrying amounts of assets and liabilities within
the next financial year must be disclosed.
3.02 Key impact on Bangladeshi companies:-
Income statement headings under IAS 1 are less detailed than in the Companies Act formats
IAS 1 describes two classifications for expenses (nature and function) which equate to
Companies Act formats 1 and 2.
There is more flexibility over balance sheet formats than permitted by the Companies Act
formats.
There is no equivalent under IFRS of the requirement in FRS 3 to disclose the effects of
acquisitions.
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IAS 1 goes further than FRS 18 in respect of the disclosure of judgments made in the
application of accounting policies and key sources of estimation uncertainty.
There are some differences in the definitions of current assets and current liabilities. For
example, a liability will be classified as current when it is expected to be settled in the
entity’s normal operating cycle, even if it is not due to be settled within twelve months after
the balance sheet date.
IAS 1 does not use the term “exceptional item” and, in particular has no equivalent of the
FRS 3 “paragraph 20 items” which are shown below operating profit. But there is a
requirement for separate disclosure of material items of income and expense. Companies
wishing to show operating profit would need to include in it items such as reorganization and
restructuring costs.
The statement of recognized gains and losses and reconciliation of movements in
shareholders’ funds are combined into a single statement of changes in equity under IAS 1.
But the statement of changes in equity is not a performance statement and, therefore,
amounts reported in certain cases are required to be “recycled” to the income statement.
3.03 Summary of IAS 1:-
Objective
The objective of IAS 1 (revised 1997) is to prescribe the basis for presentation of general
purpose financial statements, to ensure comparability both with the entity's financial statements
of previous periods and with the financial statements of other entities.
IAS 1 sets out the overall framework and responsibilities for the presentation of financial
statements, guidelines for their structure and minimum requirements for the content of the
financial statements. Standards for recognizing, measuring, and disclosing specific transactions
are addressed in other Standards and Interpretations.
Scope
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Applies to all general purpose financial statements based on International Financial Reporting
Standards. General purpose financial statements are those intended to serve users who do not
have the authority to demand financial reports tailored for their own needs.
Objective of Financial Statements
The objective of general purpose financial statements is to provide information about
The financial position,
Financial performance, and
Cash flows of an entity that is useful to a wide range of users in making economic
decisions.
To meet that objective, financial statements provide information about an entity's:
Assets.
Liabilities.
Equity.
Income and expenses, including gains and losses.
Other changes in equity.
Cash flows.
That information, along with other information in the notes, assists users of financial statements
in predicting the entity's future cash flows and, in particular, their timing and certainty.
Components of Financial Statements
A complete set of financial statements should include:
A statement of financial position at the end of the period,
A statement of comprehensive income for the period,
A statement of changes in equity for the period
Statement of cash flows for the period, and
Notes, comprising a summary of accounting policies and other explanatory notes.
When an entity applies an accounting policy retrospectively or makes a retrospective restatement
of items in its financial statements, or when it reclassifies items in its financial statements, it
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must also present a statement of financial position as at the beginning of the earliest comparative
period.
An entity may use titles for the statements other than those stated above.
Reports that are presented outside of the financial statements -- including financial reviews by
management, environmental reports, and value added statements -- are outside the scope of
IFRSs.
Fair Presentation and Compliance with IFRSs
The financial statements must "present fairly" the financial position, financial performance and
cash flows of an entity. Fair presentation requires the faithful representation of the effects of
transactions, other events, and conditions in accordance with the definitions and recognition
criteria for assets, liabilities, income and expenses set out in the Framework. The application of
IFRSs, with additional disclosure when necessary, is presumed to result in financial statements
that achieve a fair presentation.
IAS 1 requires that an entity whose financial statements comply with IFRSs make an explicit and
unreserved statement of such compliance in the notes. Financial statements shall not be described
as complying with IFRSs unless they comply with all the requirements of IFRSs (including
Interpretations).
Inappropriate accounting policies are not rectified either by disclosure of the accounting policies
used or by notes or explanatory material.
IAS 1 acknowledges that, in extremely rare circumstances, management may conclude that
compliance with an IFRS requirement would be so misleading that it would conflict with the
objective of financial statements set out in the Framework. In such a case, the entity is required
to depart from the IFRS requirement, with detailed disclosure of the nature, reasons, and impact
of the departure.
Going Concern
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An entity preparing IFRS financial statements is presumed to be a going concern. If management
has significant concerns about the entity's ability to continue as a going concern, the uncertainties
must be disclosed. If management concludes that the entity is not a going concern, the financial
statements should not be prepared on a going concern basis, in which case IAS 1 requires a series
of disclosures.
Accrual Basis of Accounting
IAS 1 requires that an entity prepare its financial statements, except for cash flow information,
using the accrual basis of accounting.
Consistency of Presentation
The presentation and classification of items in the financial statements shall be retained from one
period to the next unless a change is justified either by a change in circumstances or a
requirement of a new IFRS.
Materiality and Aggregation
Each material class of similar items must be presented separately in the financial statements.
Dissimilar items may be aggregated only if the are individually immaterial.
Offsetting
Assets and liabilities, and income and expenses, may not be offset unless required or permitted
by a Standard or an Interpretation.
Comparative Information
IAS 1 requires that comparative information shall be disclosed in respect of the previous period
for all amounts reported in the financial statements, both face of financial statements and notes,
unless another Standard requires otherwise. If comparative amounts are changed or reclassified,
various disclosures are required.
Reporting Period
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There is a presumption that financial statements will be prepared at least annually. If the annual
reporting period changes and financial statements are prepared for a different period, the
enterprise must disclose the reason for the change and a warning about problems of
comparability.
Structure and Content of Financial Statements in General
Clearly identify:
The financial statements
The reporting enterprise
Whether the statements are for the enterprise or for a group
The date or period covered
The presentation currency
The level of precision - thousands, millions, etc.
Balance Sheet
An entity must normally present a classified balance sheet, separating current and noncurrent
assets and liabilities. Only if a presentation based on liquidity provides information that is
reliable and more relevant may the current/noncurrent split be omitted. In either case, if an asset
(liability) category commingles amounts that will be received (settled) after 12 months with
assets (liabilities) that will be received (settled) within 12 months, note disclosure is required that
separates the longer-term amounts from the 12-month amounts. [IAS 1.52]
Current assets are cash; cash equivalent; assets held for collection, sale, or consumption within
the enterprise's normal operating cycle; or assets held for trading within the next 12 months. All
other assets are noncurrent. [IAS 1.57]
Current liabilities are those to be settled within the enterprise's normal operating cycle or due
within 12 months, or those held for trading, or those for which the entity does not have an
unconditional right to defer payment beyond 12 months. Other liabilities are noncurrent. [IAS
1.60]
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Long-term debt expected to be refinanced under an existing loan facility is noncurrent, even if
due within 12 months. [IAS 1.64]
If a liability has become payable on demand because an entity has breached an undertaking
under a long-term loan agreement on or before the balance sheet date, the liability is current,
even if the lender has agreed, after the balance sheet date and before the authorization of the
financial statements for issue, not to demand payment as a consequence of the breach. [IAS 1.65]
However, the liability is classified as non-current if the lender agreed by the balance sheet date to
provide a period of grace ending at least 12 months after the balance sheet date, within which the
entity can rectify the breach and during which the lender cannot demand immediate repayment.
[IA 1.66]
Minimum items on the face of the balance sheet [IAS 1.68]
Property, plant and equipment;
Investment property;
Intangible assets;
Financial assets (excluding amounts shown under (e), (h) and (i));
Investments accounted for using the equity method;
Biological assets;
Inventories;
Trade and other receivables;
Cash and cash equivalents;
Trade and other payables;
Provisions;
Financial liabilities (excluding amounts shown under (j) and (k));
Liabilities and assets for current tax, as defined in IAS 12;
Deferred tax liabilities and deferred tax assets, as defined in IAS 12;
Minority interest, presented within equity; and
Issued capital and reserves attributable to equity holders of the parent.
Additional line items may be needed to fairly present the entity's financial position. [IAS 1.69]
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IAS 1 does not prescribe the format of the balance sheet. Assets can be presented current then
noncurrent, or vice versa, and liabilities and equity can be presented current then noncurrent then
equity, or vice versa. A net asset presentation (assets minus liabilities) is allowed. The long-term
financing approach used in UK and elsewhere – fixed assets + current assets - short term
payables = long-term debt plus equity – is also acceptable.
Regarding issued share capital and reserves, the following disclosures are required: [IAS 1.76]
Numbers of shares authorized, issued and fully paid, and issued but not fully paid
Par value
Reconciliation of shares outstanding at the beginning and the end of the period
Description of rights, preferences, and restrictions
Treasury shares, including shares held by subsidiaries and associates
Shares reserved for issuance under options and contracts
A description of the nature and purpose of each reserve within owners' equity
Income Statement
In the 2003 revision to IAS 1, the IASB is now using "profit or loss" rather than "net profit or
loss" as the descriptive term for the bottom line of the income statement.
All items of income and expense recognized in a period must be included in profit or loss unless
a Standard or an Interpretation requires otherwise.
Minimum items on the face of the income statement should include:
Revenue;
Finance costs;
Share of the profit or loss of associates and joint ventures accounted for using the equity
method;
A single amount comprising the total of (i) the post-tax profit or loss of discontinued
operations and (ii) the post-tax gain or loss recognized on the disposal of the assets or
disposal group(s) constituting the discontinued operation; and;
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Tax expense; and
Profit or loss.
The following items must also be disclosed on the face of the income statement as allocations of
profit or loss for the period:
Profit or loss attributable to minority interest; and
Profit or loss attributable to equity holders of the parent.
Additional line items may be needed to fairly present the enterprise's results of operations.
No items may be presented on the face of the income statement or in the notes as "extraordinary
items".
Certain items must be disclosed either on the face of the income statement or in the notes,
if material, including:
Write-downs of inventories to net realizable value or of property, plant and equipment to
recoverable amount, as well as reversals of such write-downs;
Restructurings of the activities of an entity and reversals of any provisions for the costs of
restructuring;
Disposals of items of property, plant and equipment;
Disposals of investments;
Discontinuing operations;
Litigation settlements; and
Other reversals of provisions.
Expenses should be analyzed either by nature (raw materials, staffing costs, depreciation, etc.) or
by function (cost of sales, selling, administrative, etc.) either on the face of the income statement
or in the notes. [IAS 1.88] If an enterprise categorizes by function, additional information on the
nature of expenses -- at a minimum depreciation, amortization, and staff costs -- must be
disclosed.
Cash Flow Statement
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Rather than setting out separate standards for presenting the cash flow statement, IAS 1.102
refers to IAS 7, Cash Flow Statements
Statement of Changes in Equity
IAS 1 requires an entity to present a statement of changes in equity as a separate component of
the financial statements. The statement must show:
Profit or loss for the period;
Each item of income and expense for the period that is recognized directly in equity, and
the total of those items;
Total income and expense for the period (calculated as the sum of (a) and (b)), showing
separately the total amounts attributable to equity holders of the parent and to minority
interest; and
For each component of equity, the effects of changes in accounting policies and
corrections of errors recognized in accordance with IAS 8.
The following amounts may also be presented on the face of the statement of changes in equity,
or they may be presented in the notes:
Capital transactions with owners;
The balance of accumulated profits at the beginning and at the end of the period, and the
movements for the period; and
Reconciliation between the carrying amount of each class of equity capital, share
premium and each reserve at the beginning and at the end of the period, disclosing each
movement.
Notes to the Financial Statements
The notes must:
Present information about the basis of preparation of the financial statements and the
specific accounting policies used;
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Disclose any information required by IFRSs that is not presented on the face of the
balance sheet, income statement, statement of changes in equity, or cash flow statement;
and
Provide additional information that is not presented on the face of the balance sheet,
income statement, statement of changes in equity, or cash flow statement that is deemed
relevant to an understanding of any of them.
Notes should be cross-referenced from the face of the financial statements to the relevant note.
IAS 1.105 suggests that the notes should normally be presented in the following order:
A statement of compliance with IFRSs;
A summary of significant accounting policies applied, including: [IAS 1.108]
o the measurement basis used in preparing the financial statements; and
o The other accounting policies used that are relevant to an understanding of the
financial statements.
Supporting information for items presented on the face of the balance sheet, income
statement, statement of changes in equity, and cash flow statement, in the order in which
each statement and each line item is presented; and
Other disclosures, including:
o contingent liabilities and unrecognized contractual commitments; and
o Non-financial disclosures, such as the entity's financial risk management
objectives and policies.
Disclosure of judgments:- New in the 2003 revision to IAS 1, an entity must disclose, in the
summary of significant accounting policies or other notes, the judgments, apart from those
involving estimations, that management has made in the process of applying the entity's
accounting policies that have the most significant effect on the amounts recognized in the
financial statements.
Examples cited in IAS 1.114 include management's judgments in determining:
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Whether financial assets are held-to-maturity investments;
When substantially all the significant risks and rewards of ownership of financial assets
and lease assets are transferred to other entities;
Whether, in substance, particular sales of goods are financing arrangements and therefore
do not give rise to revenue; and
Whether the substance of the relationship between the entity and a special purpose entity
indicates that the special purpose entity is controlled by the entity.
Disclosure of key sources of estimation uncertainty: - Also new in the 2003 revision to IAS 1,
an entity must disclose, in the notes, information about the key assumptions concerning the
future, and other key sources of estimation uncertainty at the balance sheet date, that have a
significant risk of causing a material adjustment to the carrying amounts of assets and liabilities
within the next financial year. [IAS 1.116] These disclosures do not involve disclosing budgets
or forecasts.
The following other note disclosures are required by IAS 1.126 if not disclosed elsewhere in
information published with the financial statements:
Domicile of the enterprise;
Country of incorporation;
Address of registered office or principal place of business;
Description of the enterprise's operations and principal activities;
Name of its parent and the ultimate parent if it is part of a group.
Other Disclosures: - Disclosures about Dividends
The following must be disclosed either on the face of the income statement or the statement of
changes in equity or in the notes:
The amount of dividends recognized as distributions to equity holders during the period,
and
The related amount per share.
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The following must be disclosed in the notes:
The amount of dividends proposed or declared before the financial statements were
authorized for issue but not recognized as a distribution to equity holders during the
period, and the related amount per share; and
The amount of any cumulative preference dividends not recognized.
Capital Disclosures
As part of its project to develop IFRS 7 Financial Instruments: Disclosures, the IASB also
amended IAS 1 to add requirements for disclosures of:
The entity's objectives, policies and processes for managing capital;
Quantitative data about what the entity regards as capital;
Whether the entity has complied with any capital requirements; and
If it has not complied, the consequences of such non-compliance.
These disclosure requirements apply to all entities, effective for annual periods beginning on or
after 1 January 2007, with earlier application encouraged. Illustrative examples are provided as
guidance.
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Chapter 4
Evaluation on
Financial & Non Financial Disclosures
4.1 Financial Disclosures
IAS 1.126(a) (b)
The Banks and its activities
All the banks are scheduled commercial bank in the private sector established under the Bank
Companies Act 1991 and incorporated in Bangladesh as a public limited company to carry out
banking business in Bangladesh.
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All the offers services for all commercial banking needs of the customers, which includes deposit
banking, loans and advances, export import financing, inland and international remittance
facility, etc. The bank is listed with Dhaka Stock Exchange Limited and Chittagong Stock
Exchange Limited as a publicly traded company.
Islamic banking
Some of the bank operates Islamic banking for the purpose in complying with the rules of
Islamic Shariah, the modus operandi.
IAS 1.103(a)
Summary of significant accounting policies as per IAS 1
IAS 1.126(b)
Basis of preparation of the Financial Statements
The financial statements of the banks are made up to 31 December each year and are prepared
under the historical cost convention and in accordance with the First Schedule (Sec. 38) of the
Bank Companies Act 1991, BRPD Circular No. 14 dated 25 June 2003, other Bangladesh Bank
circulars, International Accounting Standards (IAS)/ International Financial Reporting Standard
(IFRS) adopted by the Institute of Chartered Accountants of Bangladesh (ICAB), the Companies
Act 1994, the Securities & Exchange Rules 1987 and other laws & regulations applicable in
Bangladesh.
The financial statements of the Islamic branches have also been prepared as per Bank Companies
Act 1991, Bangladesh Accounting Standards (BAS)/Bangladesh Financial Reporting Standard
(BFRS) and other relevant laws & regulations. Books & records are maintained separately.
Separate balance sheet and profit and loss account are shown with the figures under different
heads appearing been converted into relevant heads of counts under conventional banking for
consolidation and incorporate.
References have been made according to International Accounting Standards (IAS) and
interpretations as at 1st January 2007.
IAS 1.46(d) (e)
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Functional and presentation currency
These financial statements are presented in Taka, which is the Bank's functional currency.
Except as indicated figures have been rounded to the nearest taka.
IAS 1.110
Basis of consolidation
A separate set of records for consolidating the statement of affairs and income and expenditure
statements of the branches were maintained at the Head Office of the Bank in Dhaka based on
which these financial statements have been prepared.
IAS 1.113,116
Use of estimates and judgment
The preparation of the financial statements requires management to make judgments, estimates
and assumptions that affect the application of accounting policies and the reported amounts of
assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates
and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates
are recognized in the period in which the estimate is revised and in any future periods affected.
IAS 21.23
Foreign currency conversion
Transactions in foreign currencies are translated into Bangladeshi Taka and recorded at the
ruling exchange rates applicable on the date of transaction.
i) Assets and liabilities denominated in foreign currency are translated into Taka at the weighted
average rates at the balance sheet date.
ii) Transactions in foreign currencies are converted into Taka currency at the rate of exchange
prevailing on the dates of such transactions and any gains or losses thereon are adjusted to
revenue through foreign exchange trading account.
The following assumptions have been applied in preparing the maturity analysis:
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1. Balance with other banks and financial institutions, Money at call on short notice are on
the basis of their maturity.
2. Investments are on the basis of their maturity.
3. Fixed assets including premises land & buildings, furniture & fixtures are on the basis of
their useful life.
4. Other assets are on the basis of their adjustment.
5. Borrowings from Bangladesh Bank, other banks, financial institutions and agents are on
the basis of their payment.
6. Deposits and other accounts are on the basis of their maturity and payment.
7. Provision and other liabilities are on the basis of their adjustment.
IAS 1.36,38
Comparative Information
As guided in paragraph 36 and 38 of BAS 1 Presentation of Financial Statements, comparative
information in respect of the previous year have been presented in all numerical information in
the financial statements and the narrative and descriptive information where, it is relevant for
understanding of the current year's financial statements.
IAS 1.49
Reporting period
These financial statements of some banks cover one calendar year form 1 January to 31
December 2008.
IAS 1.102
Cash flow statement
Paragraph 102 of BAS 1 presentation of financial statements requires that a cash flow statement
is to be prepared as it provides information about cash flows of the enterprise which is useful in
providing users of financial statements with a basis to asses the ability of the enterprise to
generate cash and cash equivalents and the needs of the enterprise to utilize those cash flows.
Cash flow statement has been prepared under the direct method for the period, classified by
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operating, investing and financing activities as prescribed in paragraph 10 and 18 (a) of BAS 7
Cash Flow Statements.
IAS 1.95
Statement of Changes in Equity
The Statement of changes in Equity reflects information about the increase or decrease in net
assets or wealth.
IAS 1.110
Assets and basis of their valuation
Cash and cash equivalents
Cash and cash equivalents include notes and coins on hand, unrestricted balances held with
Bangladesh Bank and highly liquid financial assets which are subject to insignificant risk of
changes in their fair value, and are used by the bank management for its short term
commitments.
Loans, Advances/Investments and provisions
a) Loans and advances of conventional Banking / Investments of Islamic Banking branches are
stated in the Balance Sheet on gross value.
b) Provision for loans and advances is made on the basis of periodical review by the management
and of instructions contained in Bangladesh Bank BRPD Circular no. 5 dated 5 June 2006. The
classification rates are given below:
Particulars Rate
General provision on:
Unclassified loans and advances 1%
Small Enterprise 2%
Consumer finance for house building loan and loans for professional setup 2%
Other consumer finance 5%
Special mention account 5%
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Specific provision on:
Substandard loans and advances 20%
Doubtful loans and advances 50%
Bad/loss loans and advances 100%
Loans and advances are written off to the extent that-
1. There is no realistic prospect of recovery, and
2. Against which legal cases are filed and classified as bad loss for more than five years as
per guidelines of Bangladesh Bank.
These write off however will not undermine/affect the claim amount against the borrower.
Detailed memorandum records for all such write off accounts are maintained and followed up.
IAS 1.109
Investments
Investments are valued in compliance with BAS-25. All investment in securities are initially
recognized at cost, being fair value of the consideration given, including acquisition charges
associated with the investment. Premiums are amortized and discounts accredited, using the
effective yield method and are taking to discount income. The valuation of investment has been
enumerated as follows:
Items Applicable accounting value
Government Treasury bill (HTM) at present value
T&T Treasury bond at cost price
Zero coupon bond at present value
Bangladesh Government Treasury bond at present value
Prize bond at cost price
Investment in shares (quoted) at cost or market value at the balance sheet date whichever is
lower.
Investment in Shares (Unquoted) At cost price
IAS 16.73(a)
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Recognition of Fixed Assets
All Property and equipment are classified and grouped on the basis of their nature as required in
Paragraph 75(a) of BAS-1 Presentation of Financial Statements. The major categories of
Property and equipment held by the bank are property (land & Buildings), Furniture and fixtures,
office appliance, electrical appliances and motor vehicles. As per Para 31 of BAS 16 after
recognition as an asset, an item of property, plant and equipment whose fair value can be
measured reliably shall be carried at a revalued amount, being its fair value at the date of the
revaluation less any subsequent accumulated depreciation and subsequent accumulated
impairment losses.
IAS 1.108(b)
Assets acquired under own finance
As guided in paragraph 30 of BAS-16Property Plant and equipment these are capitalized at cost
of acquisition and subsequently stated at coat less accumulated depreciation. The cost of
acquisition of an asset comprises its purchase price and directly attributable cost of brining the
assets to its working condition for its intended use inclusive of inward fright, duties and
refundable taxes. The opening and closing carrying amounts of all property and equipment are
presented including the amount of additions, disposals and depreciation charged during the year
as required by paragraph 73(a-e) of BAS- 16,Maintanance expenses that does not increase in the
future economic benefit of assets is charged to profit & loss account.
IAS 17.31(e)
Assets acquired under lease finance
As per BAS 17 "Lease" all fixed assets acquired under finance lease is accounted for recording
the asset at the lower of present value of minimum lease payments under the lease agreements
and the fair value of assets. The related obligation under the lease is accounted for as liability.
Financial charges are allocated to accounting period in a manner so as to provide a constant rate
of charge on the outstanding liability.
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IAS 16.73(b) (c)
Depreciation on Fixed assets
As required in paragraph 43 of BAS-16 property Plant and equipment depreciation has been
charged at the following rates on reducing balance method on all fixed assets other than vehicles,
which are depreciated on straight line basis.
Category of the assets Rate of depreciation
Land Nil
Building 4%
Furniture and fixtures 10%
Electrical installation including computer 20%
Typewriter, adding and calculating machine 20%
Vehicles 20%
Depreciation has been charged from the month of purchase and in case of sale up to the month of
sale. The gain or loss arising on the disposal or retirement of an asset is determined as the
difference between the sale proceeds and the carrying amount of the asset and is recognized in
the profit and loss account.
IAS 1.110
Liabilities and basis of their valuation
IAS 1.76(b)
Statutory reserve
As per section 24 of the Bank Companies Act 1991, 20% of the net profit i.e. profit before tax
require to transfer to statutory reserve until such reserve equals to its paid up capital.
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IAS 1.76(b)
Exchange equalization fund
This represents the amount arise from exchange gain due to devaluation of Bangladesh taka with
foreign currencies and is accounted for as per instruction issued by the Bangladesh bank from
time to time.
IAS 19.120
Retirement benefit schemes
Accounting recognition & measurement, as well as the disclosures requirements for different
benefit schemes for employees are the followings.
IAS 19.120
Provident fund
Provident fund benefits are given to the staff of the bank in accordance with the registered
Provident fund rules. The commissioner of Income Tax, Large Tax Payers Unit, Dhaka has
approved the Provident Fund as a recognized fund within the meaning of section 2(52) read with
the provisions of part - B of the First Schedule of Income Tax Ordinance 1984. The fund is
operated by a Board of Trustees consisting of 6 (six) members of the bank. All confirmed
employees of the bank are contributing 10% of their basic salary as subscription of the fund. The
bank also contributes equal amount to the fund. Contributions made by the bank are charged as
expense. Interest earned from the investments is credited to the members' account on half yearly
basis.
IAS 19.120
Gratuity
Gratuity fund benefits are given to the staff of the bank in accordance with the approved Gratuity
fund rules. National Board of Revenue has approved the gratuity fund as a recognized gratuity
fund with effect from December 2001. The fund is operated by a Board of Trustees consisting of
7 (seven) members of the bank. Employees are entitled to gratuity benefit after completion of
minimum 7 (seven) years of service in the Company. The gratuity is calculated on the basis of
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last basic pay and is payable at the rate of one month's basic pay for every completed year of
service. Gratuity so calculated are transferred to the fund and charged to expenses of the bank.
IAS 19.120
Superannuation
The banks also contributes yearly amount to employee’s superannuation fund as per rules and
regulations of the fund recognized by the Tax Authority. Contribution of the bank to such fund
charged as expense of the bank.
IAS 1.110
Taxation
Income tax represents the sum of the current tax and deferred tax payable.
IAS 12.46
Current tax
Provision for current income tax has been made @ 45% as prescribed in the finance Act 2008 on
the accounting Profit made after considering some of the taxable add back income and
disallowance of expenditure in compliance with BAS-12.
IAS 12.47,15,24
Deferred taxation
The Bank has adopted deferred tax accounting policy as per Bangladesh Accounting Standard
(BAS) 12. Deferred tax liabilities are the amounts of Income tax payable in future periods in
respect of taxable temporary difference.
Deferred tax assets are the amount of income tax recoverable in future periods in respect of
Deductable temporary differences
The carry forward of unused tax losses and
Carry forward of unused tax credits
Deferred tax is computed at the prevailing tax rate as per Finance Act 2008.
IAS 37.85
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Provisions and accrued expenses
In compliance with BAS-37, Provisions and accrued expenses are recognized in the financial
statements when the bank has a legal or constructive obligation as a result of past event, it is
probable that an outflow of economic benefit will be required to settle the obligation and a
reliable estimate can be made of the amount of the obligation.
IAS 1.110
Revenue recognition
Moment of recognition, amount to be recognized and disclosure requirements of revenue has
been made as per BAS-18
IAS 18.35(a)
Interest income
The interest receivable is recognized on accrual basis. Interest on loans and advances ceases to
be taken into income when such advances are classified. It is then kept in interest suspense
account as per Bangladesh Bank instructions and such interest/profit is not accounted for as
income until realized from borrowers. Interest/ Profit are not charged on bad and loss loans as
per guideline of Bangladesh Bank. Such interest/profit is kept in separate memorandum account.
IAS 18.35(a)
Profit on investment (Islamic banking)
Mark-up on investment is taken into income account proportionately from profit receivable
account. Overdue charge/compensation on classified investments transferred to profit suspense
account instead of income account.
IAS 18.35(a)
Investment income
Income on investments is recognized on accrual basis.
IAS 18.35(a)
Fees and commission income
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Fees and commission income arises on services provided by the Bank and recognized on a cash
receipt basis. Commission charged to customers on letters of credit and letters of guarantee are
credited to income at the time of effecting the transactions.
IAS 18.35(a)
Dividend income on shares
Dividend income from shares is recognized during the period in which they are declared and
actually received.
IAS 18.35(a)
Gain on sale of security
Capital gain on sale of securities listed in the stock exchanges is accounted as per BAS-39 i.e.
only the realized profit from sale of securities are taken into Profit & Loss Account.
IAS 1.108(b)
Interest paid and other expenses (conventional banking)
Interest paid and other expenses are recognized on accrual basis.
IAS 1.108(b)
Profit paid on deposits (Islamic banking)
Profit paid to mudaraba deposits are recognized on accrual basis as per provisional rate.
IAS 1.108(b)
Reconciliation of inter-bank and inter-branch account
Accounts with regard to inter bank (in Bangladesh and outside Bangladesh) are reconciled
regularly and there are no material differences which may affect the financial statements
significantly. Unmatched entries/balances in case of inter branch transactions as on the reporting
date are not material.
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IAS 1.110
Risk Management
Risk Management is the key element for sound corporate governance of the Bank. With a recent
addition in regulatory mandates and increasingly active participation of shareholders, the Bank
has become increasingly concerned to identify areas of risks in the business, whether it is
financial, operational, ICT or reputation risk.
Southeast Bank identifies, measures, monitors and manages all risks of the Bank. Sophisticated
risk management framework is being implemented to carry out efficient risk management
exercises of the Bank including documenting and assessing risks, defining controls, managing
assessments and audit, identifying issues, implementing recommendations and corrective plans.
In accordance with Bangladesh Bank Guidance Notes, the Bank has established a risk framework
that consists of six core factors, i.e. (i) Credit Risk (ii) Asset and Liability/Balance Sheet Risk
(iii) Foreign Exchange Risk (iv) Internal Control and Compliance Risk (v) Money Laundering
Risk and (vi) Information and Communication Technology Risk.
The Banks has also identified the following four key infrastructure components for effective risk
Management programs:
1. Proactive Board of Directors and Senior Management’s Supervision,
2. Adequate Policies and Procedures,
3. Proper Risk-Measurement, Monitoring and Management Information Systems and
4. Comprehensive Internal Controls.
Business Risk
a) Credit Risk
Credit Risk is the probability of failure of a borrower or counterparty to meet its obligations in
accordance with agreed terms causing a loss of all or part of the replacement value of ongoing
contracts. Default signals an inability or unwillingness of the borrower to fulfill its obligations.
The goal of credit risk management is to maximize a Bank's risk-adjusted rate of return by
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maintaining credit risk exposure within acceptable levels. The effective management of credit
risk is a critical component of a comprehensive approach to risk management and essential to the
long-term success of any banking organization. The Basel Committee is encouraging Banks to
promote sound practices for managing credit risk. Following are the prerequisites of the credit
risk management structure:
Notes to the Financial Statements for the year ended 31 December 2008
(i) Establishing an appropriate credit risk monitoring environment,
(ii) Operating under a sound credit-granting process,
(iii) Maintaining an appropriate credit administration, measurement and monitoring process, &
(iv) Ensuring adequate controls over credit risk.
The sound credit risk management practices focus on the following key elements/ processes:
(i) Identification of risks,
(ii) Analysis of risks (qualitative & quantitative),
(iii) Response planning, &
(iv) Continuous Monitoring and Control.
IAS 1.110
b) Operational Risk
Operational Risk is the risk of loss arising from the potential that inadequate information system,
technology failures, breaches in internal controls, fraud, unforeseen catastrophes, or other
operational problems may result in unexpected losses or reputation problems. Failure to
understand and manage this risk may greatly increase the possibility that some risks will go
unrecognized and uncontrolled. Southeast
Bank Limited has established an effective, integrated operational risk management framework to
mitigate the Operational Risk. Internal Control and Compliance Division of the Bank with three
units has been performing the supervisory and monitoring works to manage this risk.
c) Market Risk
i) Foreign Exchange Risk Management
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Foreign exchange risk is defined as the potential change in earnings due to unfavorable
movement in exchange rates. Generally, the Bank is less exposed to foreign exchange risk as all
the transactions are carried out on behalf of the customers against L/C commitments and other
remittance requirements. The Bank has undertaken policy guidelines to minimize the foreign
exchange risk for exposure in currency movement. Treasury department has separate front office.
Its back office desks are responsible for deal verification limit monitoring and settlement of
transactions separately. The Bank continuously revalued all foreign exchange positions at market
rate as per the guidelines of Bangladesh Bank. All Nostrum Accounts are timely reconciled and
all outstanding entries are reviewed on a regular basis.
ii) Interest Rate Risk
Interest rate risk arises from the unanticipated change in interest rate that may adversely affect
the earnings of bank and / or net worth. The more rate sensitive assets and liability the bank has
the more it is exposed to its interest rate risk. The interest rate risk is measured from earning
perspective and the economic value perspective. The Asset Liability Committee (ALCO) of the
bank monitors the interest rate movement on a regular basis and takes effective measure to
minimize the interest rate risk.
iii) Investment Risk
Investment risk arises from movement in market value of investment in equities held. The risks
are monitored by Investment Division under a well designed policy framework.
Liquidity Risk
Asset Liability Risk Management
The Asset Liability Management technique designed to earn an adequate return while
maintaining a comfortable surplus of Assets beyond Liabilities, takes into consideration interest
rates, earning power and degree of willingness to take on debt. Southeast Bank has a committee
called the Asset Liability Committee (ALCO) which is meeting at least once every month to
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analyze, review and formulate strategy to manage the balance sheet. The ALCO of the bank
monitors market risk and liquidity risk, at the same time it interpret the market views and the
competition.
Reputation Risk
IAS 1.110
Money Laundering Risk Management
Money laundering is the process of criminals’ use to hide, control, invest and get benefit from
the proceeds of their criminal activities. This process is of critical importance, as it enables the
criminal to enjoy these proceeds without jeopardizing their source. According to the best
corporate governance, practices and aiming at protecting the Bank and its Employees,
Shareholders, Management and Customers, all the applicable laws, regulations, rules and
guidelines of Bangladesh Bank are complied with. The Bank actively prevents and takes
measures to guard against being used as a means of money laundering/terrorist financing and
other activities that facilitate the funding of terrorist or criminal activities.
Control Risk
IAS 1.110
Internal Control & Compliance Risk Management
Effective internal control is essential to a bank for management of risk and it is the foundation of
safe and sound banking. A good system of internal controls helps the management to safeguard
the bank’s resources. The Board of Directors and Management of Southeast Bank Limited
(SEBL) take the plan of the Bank and adopt all the methods, policies & procedures as per
standard guidelines with a view to continually recognize and assess all of the material risks that
could adversely affect the achievement of the bank’s goals. The system of Internal Control of
SEBL has been designed with intention to provide reasonable assurance in achieving objectives
against material misstatement or loss and ensure the:
1. Reliability of the financial information;
2. Effectiveness of operations;
3. Compliance with applicable laws and regulations;
4. Adherence to management policies;
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5. Safeguarding of Bank’s Assets;
6. Prevention and detection of fraud and errors; and
7. Accuracy and completeness of the accounting records.
Board of Directors, Board Audit Committee, Senior Management, each Division including
Internal Control & Compliance Division and Branches of SEBL are discharging their role on the
issue of managing the risk of Internal Control & Compliance effectively.
Information Technology Risk
IAS 1.110
Information and Communication Technology (ICT) Risk Management
The Bank is aware of the method of ICT Risk Management which is based on the syntax of Risk
Management. Information assets are critical to the services provided by the Bank to its
customers. Protection and maintenance of these assets are critical to its sustainability. The Bank
has already taken initiatives for protecting the information from unauthorized access,
modification, disclosure and destruction to protect customers’ interest. The Bank has already
developed its own ICT policies for different operation and services. Those are very detailed and
are closely in line with the ICT guidelines of Bangladesh Bank. The Bank has developed a
critical human resource fall tolerance plan with detail job description for each IT personnel,
segregation of duties for IT tasks and system support in respect of severity.
4.2 Non Financial Disclosure: -
Southeast Bank
Chairman's Report
The growth of our economy depends on the growth of capital. Capital depends on the growth of
productivity. The idea of productivity should, therefore, be part of our industrial culture. Looking
ahead for a brighter future, we shall try hard to:
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Add further value to our company
Add new products to our product-family
Start full-fledged merchant banking in 2009
Provide adequate logistic support to our dealing room for further expansion of trading
operations
Maintain required capital adequacy for Basel-II compliance
Provide clients with active and comprehensive financial counseling
Seek to attract additional fund to manage
Expand business and network further
Maintain high quality of assets
Long for and encourage closer co-operation with our customers
Achieve return on equity for more than 20%
Integrate our research work to be tailored to customer needs
Maximize profit
We shall pursue quality at every stage of our operations. Quality is both a professional pride and
a recipe for our success. With the continued commitment of our staff members, we look forward
into a new year with a considerable optimism. As forward looking statements involve
uncertainties and risks, they should be viewed accordingly taking into consideration the time and
the circumstances throughout the year -2009.
Report on Corporate Governance
It actively reviews appropriateness of the accounting policies, internal annual audit plan, and
audit reports, risk management of the Bank and Bank’s technological needs. It also oversees the
discharge of responsibilities of the external auditors. The Audit Committee consists of 3 (three)
members of the Board as per BRPD Circular No. 12 dated December 23, 2002 of Bangladesh
Bank. Mr. Azim Uddin Ahmed is the Chairman of the Audit Committee. The Audit Committee
held 04 (four) meetings in 2008. The minutes of meetings of the Audit Committee were
submitted before the Board of Directors and the Board reviewed them.
iii) Loan to Director
No loan was allowed to any Director of the Bank during the year 2008
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B) Bank Management
The Bank is manned and managed by a team of efficient professionals. The functions of the
Board and the Management are clearly defined and sharply bifurcated. The Management
implements and acts within the policies and manuals approved by the Board.
i) Management Committee (MANCOM)
To address general issues of importance, evaluate different types of risks, monitor internal
control structure and to review effectiveness of the internal control system, a Management
Committee (MANCOM) is working in the Bank. It is composed of senior members of the
Management.
ii) Asset Liability Management Committee (ALCO)
Asset Liability Management Committee consists of the Managing Director, the Deputy
Managing Director and strategically important Divisional Heads of Head Office. The Managing
Director and in his absence the Deputy Managing Director chairs the meeting of the Asset
Liability Management Committee.
iii) Credit Committee
A Credit Committee headed by the Deputy Managing Director – I [Managing Director (Current
Charge)] of the Bank has been constituted at Head Office of the Bank for minute appraisal and
quick disposal of credit proposals
C) Independent External Auditors
M/S Huda Vasi Chowdhury and Co., the Number-1 Audit Firm as per Bangladesh Bank’s list of
the qualified Chartered Accountants have been re-appointed as the External Auditors of the Bank
in the 13th Annual General Meeting held on April 28, 2008 for the second term.
D) Regulatory Authorities
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The role of regulatory authorities is very important in respect of corporate governance practices
of Southeast Bank Limited. We are pledge-bound to comply with all the requirements of
regulatory authorities.
E) The Shareholders
The shareholders of the Bank voice their views in the Annual General Meetings. The
constructive suggestions of the shareholders are implemented in the interest of the Bank. Our
Share Division is shareholders’ relationship department
Report on Corporate Social Responsibility
Southeast Bank’s banking practice is based on a network of relationship with its employees,
customers, suppliers, business associates, shareholders, regulatory authorities, and the
community. The Bank’s corporate social responsibility is about addressing the needs of all the
stake holders in a way that advances its business and makes a positive and meaningful
contribution to the society.
01. Employees
The Bank’s business is dynamic and growing. This dynamism and growth comes from its skilled
and experienced human resource that can be found at every level of the organization. The Bank
offers its employees very competitive pay package and bonus that are reviewed on a continuous
basis in line with the market forces.
02. Customers
The need to focus on the need of customers is fundamental to banking business. Southeast bank
discharges this vital responsibility by offering financial products and services that truly meets
their needs.
03. Shareholders
The Southeast bank is fully committed to protect the interest of its shareholders. Their
constructive suggestions are implemented for the betterment of the company. It releases enough
disclosures for the information of the shareholders in the Annual Reports, half-yearly financial
statements, the print and electronic media and in the Bank’s website.
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04. The Bank’s Business Associates
The Bank continuously endeavor’s to create a long-lasting win-win relationship with its suppliers
and business associates for mutual growth. Its relationship with them is based on mutual trust
and respect. It deals with them in a fair and transparent way. Southeast Bank enjoys credit lines
from Correspondents and Foreign Banks and special credit line from ADB and IFC
05. Environment
The Bank continuously strives to ensure that its operations are environment-friendly and
discourages financing projects contrary to it. It has extended its helping hands to initiatives of
community leaders for environment protection and development.
06. Regulators
Southeast bank firmly believes that it is imperative to comply with the relevant laws, rules and
regulations of all regulatory authorities to be a responsible corporate citizen
07. Community
Southeast Bank works to promote good community relations to foster a relationship of
understanding, trust and credibility. It has a long history of support for charitable causes. In
2008, Southeast Bank has spent Tk.14.82 million as donations for education, sports, art, culture,
health-cares, community development, relief operations etc. The major areas of donations are
given in the table below:
Report of the Audit Committee Report of the Bank’s Shariah Council
The Audit Committee of the Board of Directors of the Bank held 4 meetings in 2008. In these
meetings, the Committee stressed upon efficiency and adequacy of internal control, risk
management and reviewed the circumstances that may adversely affect the sustainability of the
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Bank’s operations. The Committee also provided the following guidelines / instructions for
compliance by the management:
Comprehensive audit of each branch should be undertaken twice in a year on best effort basis
to unearth irregularities, if any, committed at the branches and rectify them at the earliest.
At the time of submitting an audit report about an irregularity at a branch of the bank, the
modus operandi has to be clearly spelt out and the responsibility of the concerned officials
has to be fixed without fear or undue influence from any quarter.
The Management must make all out efforts to recover the classified loans and overdue
installments from defaulting borrowers within the shortest possible time.
The Management must take pragmatic steps to arrest further classification of loans and
advances to keep the percentage of non-performing loans at the lowest level.
Appropriate disciplinary action must be taken against the officials of the Bank who are found
responsible for committing gross irregularities leading to classification of Bank’s dues.
Loans and advances should not be allowed before completion of prime documentation
formalities.
Loans and advances should be allowed to the clients after ascertaining their integrity,
commitments, market reputation, credit worthiness and track-record for ensuring safety of
Bank’s lending.
Regular follow up for rectification of the lapses and irregularities detected by the auditors
must be ensured to vanguard the Bank’s interest.
Both centralized and branch level constant monitoring of classified and stuck-up loans should
be made mandatory for their early recovery.
Branches / unit with high concentration of classified loans in percentage must be brought
under special monitoring function of Credit Administration Division of Head Office for
timely recovery of Bank’s overdue.
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Branch-wise Loan Accounts which are showing signs of weakness with big exposures should
be listed and monitored by the Credit Administration Division of Head Office so that that
they do not turn into classified loans.
Special Mention Accounts of different branches should be listed quarterly and followed up so
that they do not get worse and instead rather turn into regular accounts.
Cases filed by the Bank in courts against defaulting borrowers must be monitored every day.
The presence of the Bank’s lawyers in the courts of law on the date of hearing of the case
must be ensured.
CAD squad and personnel of branches shall personally chase defaulting and recalcitrant
borrowers for recovery of Bank’s overdue.
Vigorous efforts must be made for recovery of classified loans from the defaulting credit card
holders of the Bank.
Vision
To be a premier banking institution in Bangladesh and contribute significantly to the national
economy.
Missions
High quality financial services with state of the art technology
Fast customer service
Sustainable growth strategy
Follow ethical standards in business
Steady return on shareholders’ equity
Innovative banking at a competitive price
Attract and retain quality human resource
Commitment to Corporate Social Responsibility
2. Commitment to Clients
Ours is a customer focused modern banking institution in Bangladesh. We deliver unparalleled
financial services to Retail, Small and Medium Scale Enterprises (SMEs), Corporate. Our
commitments to the clients are the following:
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Provide service with high degree of professionalism and use of modern technology.
Create long-term relationship based on mutual trust.
Respond to customer needs with speed and accuracy.
Share their values and beliefs.
Grow as our customers grow.
Provide products and service at competitive pricing.
Ensure safety and security of customers’ valuables in trust with us
National Bank
Chairperson’s Message
Bismillahir Rahmanir Rahim Respected Shareholders Assalamu A'Iaikum. I, on behalf of the
Board of Directors would like to share the success of National Bank Limited during 2008.1
warmly welcome you to the 26th Annual General Meeting of the Bank. Starting the journey on
March 23, 1983, the Bank within a span of 26 years has turned into one of the biggest private
sector banks in the country having 106 branches and assets over Tk. 72,212 million. This is the
result of the prudent policies and farsighted decisions taken by the board, active support from
shareholders, depositors, borrowers, other clients and well-wishers, a strong regulatory
framework and team work by the efficient executives. During the year, the Bank has not only
made good profit, but also it has enhanced its image further. NBL has now established itself as a
local financial institution with international corporate culture, state-of-the art systems, flawless
process, superior business ethics, strong control & compliance, good governance, visionary &
dynamic leadership, commendable market & product depth and strong financials. NBL is now
regarded as a local brand having regional and global potential. Our customers are increasingly
placing their trust on us. This would not have been possible without the strong commitment of
our personnel who have set a very high standard of service, which goes to promote our image
with our customers as well as the entire business community. The world economy that registered
an unprecedented average growth of 5 percent a year for consecutive four years is now entering a
major downturn in the face of the most severe shock in mature financial markets since 1930. The
major advanced economies are already in recession while a number of emerging and developing
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countries are under inflationary pressure. Despite such difficult conditions, the Bank had another
excellent year of successful performance. The Bank earned a profit before tax of Tk. 2,828.80
million for 2008, a growth of Tk. 793.70 million or 39 percent, over the normalized profit before
tax for 2007. The Bank's profit after tax and provision for 2008, at Tk. 1,517.40 million reflected
an even stronger growth of 22.51 percent or Tk. 1,238.10 million, over the normalized profit
after Bank's revenue was Tk. 8,893.10 million, which was up by Tk. 1,710.50 million or 23.81
percent. The bank's total loans and advances portfolio was Tk.49, 665.10 million at the end of
December 2008 compared to Tk.36, 475.70 million at the end of December 2007. The deposit
base of the bank registered a growth of 25.51 percent in the reporting year over the last year and
stood at Tk. 60,195.20 million in December 2008. This was achieved with better management of
interest margins in volatile market conditions and adequate Balance Sheet growth during the
period. Being a regular tax payer, we have made a direct contribution to Government Exchequer
of Tk. 761.70 million in the calendar year 2008 against Tk. 449.70 million in previous year
registering a staggering growth of 69.38percent. The measures we are using to siege the market
share comprises of shifting towards developing and expanding the SME financing, Any Branch
Banking, Off-shore Banking facilities, etc. In addition we are further expanding our presence
through opening new branches. In 2008, we have opened 5 new branches and plan to open 15
new branches and 10 SME centers in2009. National Bank, has now acquired strength and
expertise to support the banking needs of the foreign investors. NBL stepped into a new arena of
business and opened its Off Shore Banking Unit at Mohakhali to serve the wage earners and the
foreign investors better than before. National Bank, since its inception, was aware of complying
with Corporate Social Responsibility. In this direction, we remain associated with the
development of education, healthcare and sponsored sports, and culture and during the times of
natural disasters like floods, cyclones, landslides we have extended our hand to mitigate the
sufferings of victims. The bank established the National Bank Foundation in 1989 to remain
involved with social welfare activities. The foundation is running the NBL Public School &
College at Moghbazar where present enrolment is 1140. Besides awarding scholarship to the
meritorious children of the employees, the bank has also extended financial support for their
education. It provided financial support to Asiatic Society of Bangladesh at the time of their
publication of Bangla pedia and observance of 400years of Dhaka City. Besides financial help to
various organizations, the bank has also been sponsoring sports like Badminton, Football,
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Volleyball, Shooting and Golf. NBL has also played a major role in the health sector by creating
a provision of a Harmon dialysis machine at the BIRDEM Hospital. In addition to the regular
social activities the bank has been extending credit facility without collaterals at a lower rate to
the entrepreneurs having small capital and to the women folk to make them self reliant. With a
view to develop the socio-economic condition of the country the bank is expanding its credit in
the SMEsector.NBL has been extending agri-credit jointly with Barind Multipurpose
development Authority to the marginal farmers of Barind area of Rajshahi since 1993 with a
view to increase agri-output. The project has changed the socio-economic conditions of the
farmers for 2007. In 2008andhas made ecological improvement of the area through massive tree
plantation. Instant action for extending agri-loan for marginal farmers, taking a pilot project in
the Beverly affected Sirajgonj district immediately after the devastating flood of 2007 saved the
farmers from setback. Tremendous success of the project led its expansion not only in the
Sirajgonj district, but also, in other areas of the country. In dearth of capital, growth of weaving
industry, the traditional heritage of our country is being hampered. NBL has stepped forward by
extending credit to save the industry. We express our abhorrence at the recent gruesome killing
that took place in Plikhana BDR Headquarters and also our deepest sympathy to the members of
bereaved families. Our bank donated Tk.25.00 lac to the honorable Prime Minister's fund.
Besides, among the bereaved families, NBL decided to give Tk.40, 000/- per month to each five
families, which will continue for ten years. Ladies and Gentlemen, , the Bank has recorded rapid
and consistent growth in a tough and competitive sector. One of the major reasons for this
success has been the commitment of its motivated staff with a strong work ethic. We have a fine
team of people, shared set of priorities and a proud tradition of success. I sincerely appreciate the
efforts of the entire workforce led by our Managing Director for their outstanding achievements.
I would like to give my sincere thanks to the Finance Ministry, Bangladesh Bank, National
Board of Revenue, Securities and Exchange Commission, other government agencies, Dhaka and
Chittagong Stock Exchanges, Depositors, Borrowers, Well-wishers and last but not the least, the
Shareholders for providing us with continuous support to run the bank smoothly. I would also
like to take this opportunity to thank my colleagues on the Board, who have given their best, in
the face of adverse internal and external conditions and has made 2008 yet another year of
success for the Bank. We not only opted for the growth of the organization, but also, wanted to
share our financial success with shareholders in an appropriate manner. Hence, the Board of
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Directors proposed to the Annual General Meeting of shareholders for stock dividend at the rate
of 52percent on the profit of 2008. In fine, considering the Bank's present shape and strength, we
hope that National Bank is well poised to meet the challenges of 2009 and beyond.
Since the very beginning, the Bank exerted much emphasis on overseas operation and handled a
sizeable quantum of homebound foreign remittance. The Bank established extensive drawing
arrangement network with Banks and Exchange Companies located in important countries of the
world. Expatriates Bangladeshi wage earners residing in those countries can now easily remit
their hard-earned money to the country with confidence, safety and speed.
The Bank earned a profit before tax of Tk. 2,828.80 million for 2008, a growth of Tk. 793.70
million or 39 percent, over the normalized profit before tax for 2007.The Bank's profit after tax
and provision for 2008, at Tk. 1,517.40 million reflected an even stronger growth of 22.51
percent or Tk. 1,238.10 million, over the normalized profit after tax for 2007. In 2008 Bank's
revenue was Tk. 8,893.10 million, which was up by Tk. 1,710.50 million or 23.81 percent. The
bank's total loans and advances portfolio was Tk.49, 665.10 million at the end of December 2008
compared to Tk.36, 475.70 million at the end of December 2007. The deposit base of the bank
registered a growth of 25.51 percent in the reporting year over the last year and stood at Tk.
60,195.20 million in December 2008. This was achieved with better management of interest
margins in volatile market conditions and adequate Balance Sheet growth during the period.
Being a regular tax payer, we have made a direct contribution to Government Exchequer of Tk.
761.70 million in the calendar year 2008 against Tk. 449.70 million in previous year registering a
staggering growth of 69.38 percent.
National Bank, has now acquired strength and expertise to support the banking needs of the
foreign investors. NBL stepped into a new arena of business and opened its Off Shore Banking
Unit at Mohakhali to serve the wage earners and the foreign investors better than before.
National Bank, since its inception, was aware of complying with Corporate Social
Responsibility. In this direction, we remain associated with the development of education,
healthcare and sponsored sports, and culture and during the times of natural disasters like floods,
cyclones, landslides we have extended our hand to mitigate the sufferings of victims. The bank
established the National Bank Foundation in 1989 to remain involved with social welfare
activities. The foundation is running the NBL Public School & College at Moghbazar where
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present enrolment is 1140. Besides awarding scholarship to the meritorious children of the
employees, the bank has also extended financial support for their education. It provided financial
support to Asiatic Society of Bangladesh at the time of their publication of Bangla pedia and
observance of 400 years of Dhaka City.
Transparency and accountability of a financial institution is reflected in its Annual Report
containing its Balance Sheet and Profit & Loss Account. In recognition of this, NBL was
awarded Crest in 1999 and 2000, and Certificate of Appreciation in 2001 by the Institute of
Chartered Accountants of Bangladesh.
A team of highly qualified and experienced professionals headed by the Managing Director of
the Bank who has vast banking experience operates bank and at the top there is an efficient
Board of Directors for making policies
National Bank Limited is one of the leading private commercial bank having a spread network of
106 branches across Bangladesh and plans to open few more branches to cover the important
commercial areas in Dhaka, Chittagong, Sylhet and other areas in 2008.
National Bank Limited has been licensed by the Government of Bangladesh as a Scheduled
commercial bank in the private sector in pursuance of the policy of liberalization of banking and
financial services and facilities in Bangladesh. In view of the above, the Bank within a period of
25 years of its operation achieved a remarkable success and met up capital adequacy requirement
of Bangladesh Bank.
With a wide range of modern corporate and consumer financial products National Bank has been
operating in Bangladesh since 1985. In 1997, the bank introduced automated branch banking
system to increase efficiency and improve customer service. The bank is one of the leading
banks which introduced first Credit Card in Bangladesh. Our technology has been upgraded to
manage the growth of the bank and meet the demands of our customers. ATMs now allow
customers to retrieve 24x7 hours cash withdrawals.
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National Bank Limited is a customer oriented financial institution. It remains dedicated to meet
up with the ever growing expectations of the customer because at National Bank, customer is
always at the center.
Mission
Efforts for expansion of our activities at home and abroad by adding new dimensions to our
banking services are being continued unabated. Alongside, we are also putting highest priority in
ensuring transparency, account ability, improved clientele service as well as to our commitment
to serve the society through which we want to get closer and closer to the people of all strata.
Winning an everlasting seat in the hearts of the people as a caring companion in uplifting the
national economic standard through continuous up gradation and diversification of our clientele
services in line with national and international requirements is the desired goal we want to reach.
Vision
Ensuring highest standard of clientele services through best application of latest information
technology, making due contribution to the national economy and establishing ourselves firmly
at home and abroad as a front ranking bank of the country are our cherished vision.
Prime Bank
Economic trends and their impact
Fiscal year 2007 was another year of achievement for Bangladesh and its financial sector. The
economy of Bangladesh maintained a strong GDP growth of 6.5 percent resulting from robust
performance in services and manufacturing sector. The growth was substantially contributed by
increased inflow of remittances from Bangladeshi expatriates and reasonable growth in export.
The performance is praiseworthy despite high commodity price specially Petroleum products in
international market which influenced the domestic market adversely. Bangladesh Bank
increased the capital adequacy requirement of the banks from 9 percent to 10 percent of RWA
and also introduced general provision on Off-balance sheet items in an effort to reduce inflation
and strengthen lending facilities of Commercial banks for better asset & liability management.
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These affected both banks and borrowers. The loss of business confidence and cautionary
monetary policy resulted to excess liquidity in the banking sector. The growth of deposits and
lending activities slowed down from the level of last fiscal year. Increased provisioning
requirement on the off-balance sheet items will improve capital adequacy but reduce the ROA
and ROE of the banking sector. The banks are now facing increasingly interest sensitive
customers who are demanding higher rate of return against their deposits. Coupled with these
rising interest cost and reduced spread, the rise in prices of oil and other importable items have
exerted pressure on dollar which have squeezed the exchange and fee earnings of the banks.
However, banking sector particularly the private commercial banks showed its resilience and
continued to perform better by diversifying the asset portfolio to Retail, SME and Capital
Market. The available statistics indicate that share of business of PCBs are increasing in deposits,
lending and other business operations. In this competitive situation, PBL remained focused in all
key areas and achieved higher growth in operating profit during 2007.
Strategy
PBL has consistently remained focused on efficient customer service by providing wide range of
products and services. Our products and services are as diverse as the market segments demand.
Our customer group range from individuals, big corporate clients, NGOs to Non residents.
Financing to, NGOs were done for extending micro finance to cover less', privileged people who
are struggling to fight poverty. PBL will also focus on its delivery platform, its people and its
brand to support the growth. PBL will focus more on off balance sheet services for the clients by
enhancing the cash management and other advisory services through its state of art IT platform.
Improvement in mix of deposits by developing more retail savings products remained in our
policy objective and shall continue to remain so in 2008 as well. It will try to remain ahead of the
peer group bench mark. PBL's core value to remain socially responsible corporate citizen will
remain integral part to its strategy and communicating them to all stakeholders is intrinsic to the
plan.
Leveraging on diversification
Loans & Advances
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The growth of Loans & Advances was 28.11 percent during the year as against 40 percent of
previous year. The Loans and Advances cover following core areas: Corporate, SME, Retail and
Credit Card.
Corporate operations
Prime Bank's corporate business provides tailored services to corporate and institutional clients.
The financing is based on both conventional and Islamic Shariah mode. While providing large
loans to our customer, the policy of Bangladesh Bank is strictly followed. The Customer
Relationship Program has been strengthened and frequent interaction has been ensured to cater
the growing needs of our customers. Corporate finance in both modes (Conventional and Islamic
Shariah) showed steady growth. PBL has been a dominant player in arranging syndicated loan
for its customers. PBL already proved itself as a trusted partner of both syndication participants
and large loan borrowers and it is expected that demand for structured loan would increase
during 2008 for infrastructure projects. The sectors of financing include pharmaceutical,
chemical, cement, ceramic, steel, micro finance, food and allied industry, power station,
infrastructure. It raises funds from the market for financing term loans, working capital at the
most competitive rates under secured terms & condition. SME PBL took a strategic shift towards
developing and expanding the SME financing which has received considerable attention of the
policy makers. During 2007, Prime Bank’s strategy was focused on marketing the Bank's
products to wider range of customers and provided working capital and term loan to different
manufacturers, traders and service providers including backward and forward linkage industry
that fall working abroad to provide fastest delivery of remitted fund to local beneficiary. Having
this objective, we are continuously increasing our rural branches and making arrangements with
other local banks to extend fastest delivery service of inward remittances. In addition to the
opening of exchange house at Singapore, Prime Bank entered into agreement with various
exchange houses in USA, UK, and Middle East and South Asian countries to arrange inward
foreign remittances of the Bangladeshi expatriates. This strategy of the Bank allowed the rural
people to have modern banking facilities. PBL also participated in various trade fairs organized
by trade bodies abroad to bring more customers under its net.
Capital Market Operation
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Capital market of the country experienced a very vintage year in 2007. The total market
capitalization reached to a level of USD 10 billion mark. New inflow of liquidity and entry of
fresh investors pulled the stock market to its record height. Merchant Banking and Investment
Unit (MBU) has been reorganized and now actively participating in the secondary market under
appropriate risk management policies and guidelines approved by the Board. The Bank launched
a scheme titled "Prime Investment Portfolio Management Services" for the individuals and
institutional investors to invest in the stock market. Assistance services facilities are also
provided to portfolio account holder on the basis of published information and accounts.
Merchant Banking Unit contributed record operating profit during 2007. Its share to total
operating profit is 14.88 percent. From the 2nd quarter of 2007, SEC issued number of
regulations via Margin Rules, Margin ratio for Merchant Bankers which are far reaching and
conducive to investors' safety. MBID had to comply with regulations and took corrective actions.
Off-Shore Banking
The impressive growth of the economy during last couple of years and the facilities provided to
the foreign investors through opening of special export zones have attracted lot of foreign
investments in the country. Prime Bank has now acquired strength and expertise to support the
banking needs of the foreign investors. PBL opened its Off Shore Banking Unit at DEPZ, Savar,
Dhaka. Opening of the Offshore Banking Unit will allow the bank to serve the wage earners and
the foreign investors better than before. PBL also obtained a license for opening another offshore
branch at Patenga, Chittagong.
Performance of Subsidiary
Prime Exchange Co. Ltd. in Singapore finished its one and half year operation and has
substantially reduced its operating loss in 2007. Opening of the fully owned subsidiary in
Singapore has added a new dimension to the Bank's remittance operation widening its global
reach for remittance services. We hope that opening of the subsidiary will help the country in
augmenting the flow of inward foreign remittance through banking channel.
Capital Management
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Bank continues to manage its capital efficiently in order to support its annual business plan and
to ensure adequate return on capital to shareholders. Prime Bank recognizes the impact on
shareholders returns of the level of equity and seeks to maintain a prudent balance between Tier-
I and Tier II capital. PBL gave due attention to internal generation of capital by improving the
ROA & ROE and was successful in doing so during 2007. The capital adequacy of the Bank rose
to 11.50 percent from 9.95 percent of 2006. It not only met the enhanced regulatory requirement
of 10 percent but also remained over 1 percent to mitigate risks. Bangladesh Bank is
contemplating to start implementing Risk based capital accord "Basel II" from the year 2009 and
advised the banks for capacity building of its officers. PBL has already imparted training to the
officers and also streamlined the risk management process in order to be prepared for
implementation of Basel II on time. The Bank has formed an implementation team as per
guidelines of Bangladesh Bank.
Corporate Governance
To comply the ICT Guideline of Bangladesh Bank and to ensure the smooth operation of
business, an Independent "IT Audit & Security" Department has been formed in May, 2007. The
main aim of the department is to identify the inherent risks and vulnerabilities associated with
the use of IT, its operation and operation of core banking system Pc Bank /T24, to implement
controls to mitigate the risks and provide recommendations for improvement in controls for
reducing risks.
Internal IT Audit provides an objective means of reviewing the risks faced by the Bank in
relation to use of Information Technology and assesses whether they are being
controlled/mitigated in an effective and efficient manner; provides an assessment of the Bank's
IT control against Guideline on ICT for Scheduled Banks and Financial Institutions of
Bangladesh Bank. Internal IT Audit has carried out audit of 43 branches during 2007. Internal
Control and Compliance Internal Control contains self -monitoring mechanisms, and actions are
taken to correct deficiencies as they are identified. Even with effective internal control, no
matter how well designed, has inherent limitations including the possibility of the circumvention
or overriding of controls and therefore can provide only reasonable assurance with respect to
financial statement preparation. Further, because of changes in conditions, internal control
effectiveness may vary over time.
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PBL has taken all-out efforts to mitigate all sorts of risk as per guidelines issued by Bangladesh
Bank. As a part of robust risk management process, the Bank has formulated a comprehensive
Credit Risk Management Policy to address credit risk. To mitigate operational risk, money
laundering and terrorist financing risk, circumvention or overriding the internal control
procedure, Internal Audit, Board Audit Cell and Central Compliance and Internal Control
Divisions are carrying out regular audit and inspection of the functions of the Branches.
Deficiencies /lapses /irregularities detected by these audit and inspection are rectified/
regularized by the concerned Branches at the earliest and submit compliance report to the Head
Office. The Bank has already prepared the Risk Assessment Matrix of various banking functions
and incorporated the same in Departmental Control Function Checklist (DCFCL). The Branches
and Divisions of Head Office are following the DCFCL attaching due importance to high risk
and medium risk functions. The Bank also prepared Internal Control and Compliance Manual to
strengthen internal control function. The Bank has already introduced international standard
policies and standard operating procedures (SOP) prepared by reputed foreign consultant
PricewaterhouseCoopers. This will upgrade operational efficiency, reduce operational and other
risks, reduce major mistake, fraud and forgery, and ensure proper internal control, risk mitigation
and accurate financial reporting. To assess the position of internal control and anti-money
laundering compliance in various Branches of PBL, Central Compliance and Internal Control
Division carried out on site inspection of 44 Branches during 2007.
Corporate Social Responsibility
It is being widely recognized by the corporate sector that augmented Corporate Social
Responsibility (CSR) designed to respond to huge unmet needs of the society can be one of the
important means in the achievement of long term and persistent business value. The high level of
awareness of CSR has also strongly come about as a result of the United Nations Millennium
Development Goals (MDG), in which a major goal is the increased contribution of assistance
from a range of organizations to help alleviate poverty and hunger, and for businesses to be more
aware of their impact on society. In the context of current global and local scenarios, customers
and public together with the development players and partners are very much aware of the CSR
and its synergistic effects on national development process. There is no "one-size-fits-all" for
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
pursuing a CSR approach. Each company has unique characteristics and circumstances that will
affect how it views its operational contexts and its defining social responsibilities. One of the
nicest things about CSR as perceived by Prime Bank is the extent to which it takes real social
and community problems or issues in the way bank does business and innovates responses to
them. PBL supports the concept of "Triple Bottom Line" which focuses on:
Good economic performance
Good social practice
Good environmental practice
In respect of CSR, PBL has focused on following specific key areas of:
Nation building
Enhancement of market place
Promotion of the work place
Support to the community
Protection of environment
Benefits to the employees
The retirement benefits accrued for the employees of the Bank as on reporting date have been
accounted for in accordance with the provisions of Bangladesh Accounting Standard-19,
"Employee Benefit". Bases of enumerating the retirement benefit schemes operated by the Bank
are outlined below:
a) Provident fund
Provident fund benefits are given to the permanent employees' of the Banking accordance with
Bank's service rules. Accordingly a trust of deed and provident fund rules were prepared. The
Commissioner of Income Tax, Taxes Zone - 5, Dhaka has approved the Provident Fund as a
recognized provident fund within the meaning of section 2(52), read with the provisions of part -
B of the First Schedule of Income Tax Ordinance 1984. The recognition took effect from 07 July
1997. The Fund is operated by a Board of Trustees consisting six members (03 members from
management and other 03 members from the Board of Directors) of the Bank. All confirmed
employees of the Bank are contributing 10% of their basic salary as subscription to the Fund.
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The Bank also contributes equal amount of the employees' contribution. Interest earned from the
investments is credited to the members' account on yearly basis.
b) Gratuity fund
The Bank operates an unfunded gratuity scheme, provision in respect of which is made annually
covering all its permanent eligible employees. Actuarial valuation of gratuity scheme had been
made to assess the adequacy of the liabilities provided for the scheme as per BAS-19 “Employee
Benefits"
c) Welfare fund
Prime Bank's employees' welfare fund is subscribed by monthly contribution of the employees.
The Bank also contributes to the Fund from time to time. The Fund has been established to
provide coverage in the event of accidental death or permanent disabilities of the employees.
Disbursement from the fund is done as per rules for employees' welfare fund.
d) Incentive bonus
Prime Bank started a incentive bonus scheme for its employees. 10% of net profit after tax is
given to the employees in every year as incentive bonus. This bonus amount is being distributed
among the employees based on their performance. The bonus amount is paid annually, normally
first quarter of every following year and the cost are accounted for the period to which it relates.
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
Chapter 5
Analysis
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
5.01 Case Processing Summary:- R-1 R-2 R-3 R-4 %Y %N
Did the organization follow IAS? 1 1 1 1 100 0 Did the organization maintain the guideline to ensure
presentation of financial statement (F/S)?1 1 1 1 100 0
Did the company F/S under IAS 1 depart from IFRs? 1 1 1 1 100 0 Did the company using accrual basis accounting? 1 1 1 1 100 0 Did the company prepared F/S on consistency basis? 1 1 1 1 100 0 Did the company maintain the presentation &
classification of item in the F/S from one period to next period?
1 1 1 1 100 0
Did the organizations reporting period of F/S is at least annually?
1 1 1 1 100 0
Did the organization disclose comparative information in F/S?
1 2 1 2 50 50
Did the organization disclose any disclosure for any changed comparative amount?
1 1 1 1 100 0
Did the company's material items presented separately in the F/S?
1 2 1 1 75 25
Did the company's current & non current assets & liabilities presented separately?
1 1 1 1 100 0
Did the company disclose specifies disclosure about information presented in F/S?
1 1 1 1 100 0
Did the company offset the assets & liabilities, income & expenses?
1 1 1 1 100 0
Did the company maintain the requirement for minimum item in B/S?
1 1 1 1 100 0
Did the company disclose profit or loss attribute to minority interest?
1 1 1 1 100 0
Did the company setting out separate standards for presenting the cash flow statement?
1 1 1 1 100 0
Did the company maintain separate component to present entities change in equity?
1 2 1 1 75 25
Did the company disclose significant disclosure & note for changing accounting policies?
1 1 1 1 100 0
Did the company disclose any disclosure for the amount of dividends proposed or declared before the F/S?
1 2 2 2 25 75
Did the company disclose the amount of dividend recognized as distributions & amount per share?
1 1 1 1 100 0
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5.02 Table of Frequencies:-
1 2 3 4 5 6 7 8 9 10
N Valid 4 4 4 4 4 4 4 4 4 4
Missing 0 0 0 0 0 0 0 0 0 0
Mean 1.0 1.00 1.00 1.00 1.00 1.00 1.00 1.25 1.00 1.25
Median 1.0 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
Mode 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00
11 12 13 14 15 16 17 18 19 20
N Valid 4 4 4 4 4 4 4 4 4 4
Missing 0 0 0 0 0 0 0 0 0 0
Mean 1.00 1.00 1.00 1.00 1.00 1.00 1.25 1.00 1.75 1.00
Median 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 2.00 1.00
Mode 1.00 1.00 1.00 1.00 1.00 1.00 1.00 1.00 2.00 1.00
Percentage of the organization follow IAS
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
Percentage of the organization disclose for any changed comparative amount in F/S
Percentage of the company's material items presented separately in the F/S
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
Percentage of the company disclose any disclosure for the amount of dividends
proposed before the F/S
Percentage of the company maintain separate component to present entities change in
equity?
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
Chapter 6
Findings of the Study
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
6.01 Findings:-
In general, actual accounting and disclosure practices in Bangladesh fall far short of the
applicable requirements as per IAS. Some examples follow:
Consolidated financial statements - It is common practice not to comply with the IAS requirements
on consolidation.
Statement of changes in equity - Many companies’ financial statements did not include this.
Segment reporting - Few companies reported segment sales and only one company disclosed
segment assets and liabilities in addition to segment income and expenditure. Most companies that
apparently had business segments and geographical segments did not comply with the segment
reporting requirements.
Effects of changes in foreign exchange rates - Some companies that had exchange difference
arising on outstanding foreign currency loans on the balance sheet date adopted a capitalization
method instead of expensing. Although this is permitted under Companies Act 1994, it is a violation
of IAS. In other cases, export receivables were disclosed at the exchange rate prevailing on
transaction date instead of balance sheet date as required by IAS.
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Related party transactions - Detailed disclosures in accordance with IAS requirements were not
found in any sets of financial statements. For instance, the ownership structure of many companies
suggested that related parties and related party transactions existed, but in most cases there were
limited or no disclosures.
Revenue recognition - Many companies did not properly disclose the accounting policy on revenue
recognition. It is common practice for installment sale business in Bangladesh to recognize sales on
cash rather than accrual basis as required by IAS.
Property, plant, and equipment - In cases where fixed assets were revalued, detailed disclosures
required under the IAS were not available. Moreover, none of the companies addressed the IAS
requirements on impairment of assets.
Employee benefits - Many companies disclosed the existence of employee pension benefits but
failed to disclose information required by the relevant IAS. In many cases, the liability for employee
benefit expenses was not recognized on an accrual basis. No disclosure was made as to whether
actuarial or any other forms of valuations had been made to quantify outstanding liabilities for
employees’ post-employment benefits. One of the major listed companies in Bangladesh was
discovered to have appropriated loans from the employee provident fund and the workers’ profit
participation fund. The loans outstanding are several times the annual contributions made to these
funds. Details of the terms and conditions of these loans and reconciliation of the movements of these
funds were not disclosed.
Pre-operating expenses - Bangladesh accounting practice generally treats pre-operational expenses
as assets on the face of the balance sheet, and then writes off these expenses over several years. These
assets are not intangible and should have been expensed. .
Contingencies: - Many reviewed companies do not disclose contingent liabilities for obligations that
may arise from past events.
Leases - There are a number of leasing companies operating in Bangladesh. The principal business
operations are in the nature of finance leases, but very attractive fiscal incentives encourage lessor
and lessees to treat them as operating leases, contrary to IAS requirements.
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Interim financial reporting - While presenting half-yearly reports, all companies failed to present
the Statement of Changes in Equity and Notes to the Financial Statements.
Additional disclosure by banks - Banks did not disclose aggregate amounts included in the balance
sheet for loans and advances on which interest is not being accrued. Banks provided no information
or commentary on the risk management policy. For financial instruments, terms and conditions,
particularly the rate of interest and security for financial assets and liabilities, were not disclosed.
Several banks included as assets in their financial statements large amounts as “suspense accounts”
and “inter-branch balances” (un-reconciled differences), and no explanation was provided for such
treatment.
6.02 Recommendation:-
The recommendations outlined in this thesis will be useful as inputs for preparing financial
statements and implementing a country action plan for accounting improvement in Bangladesh.
Improve the statutory framework of accounting and auditing. Steps should be taken to ensure
that the legal and regulatory requirements on accounting, auditing, and financial reporting fully
protect the public interest. This might require the passing of a new Financial Reporting Act and
the repeal of the provisions on accounting, auditing, and financial reporting in Companies Act
1994, Bank Companies Act 1991, Insurance Act 1938, and other related regulations. The new
Act should focus on making legal arrangements for the following: -
Fully adopts IAS/IFRS and ISA with modifications and ensure mandatory observance of
these standards.
Adopt IAS/IFRS and related interpretations issued by the IASB as legally enforceable
standards applicable to the preparation of the legal entity and consolidated financial
statements of all public interest entities
Develop a simplified financial reporting framework for small and medium enterprises.
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Establish an independent oversight body to monitor and enforce accounting and auditing
standards and codes. Empower the oversight body to monitor and enforce accounting and
auditing requirements with respect to general-purpose financial statements.
Monitoring compliance with accounting standards. A monitoring unit of the Financial
Reporting Council will be responsible for identifying and forwarding findings on
noncompliance to the Enforcement Unit along with recommendations on the nature of
sanctions to be imposed on the parties responsible for infractions.
Reviewing auditors’ practice & enforcing sanctions for violations
Strengthen capacity of the regulatory bodies & take preventive measures to improve the
degree of compliance with accounting requirements by the publicly traded companies.
Improve the professional education and training arrangement of ICAB & Ensure effective
continuing professional education and development of the accountants and auditors in public
practice.
6.03 Conclusion:-
Reporting practices of listed banking companies in any county of the world is subject to
regulatory control. In Bangladesh, Listed banking companies of Bangladesh are required to
prepare annual report complying with the relevant provisions of regulations such as Companies
Act, 1994 and Securities and Exchange Commission Rules, 1987. Besides, ICAB has adopted
IAS-1: Presentation of Financial Statement for the preparation and publication of statutory
annual report of business enterprises of the country. But this has not been followed compulsory
by some company on the part of business enterprises. Reporting practices of business enterprises
are found to be not satisfactory. Because, these enterprises do not comply with the relevant
provisions of the aforementioned regulations including IAS-1.This is why, the thesis has
examined the relevant provisions of regulatory frameworks that influence the reporting practices
of listed banking companies in the country. The study has identified the legal flaws in reporting
practice and suggested the policy measures for improving the annual reporting practices of listed
banking companies in Bangladesh.
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Bangladesh Bank has adopted International Accounting Standards (IAS) as its accounting
framework and International Standards on Auditing (ISA) for auditing standard from financial
year 2003. In order to support the strengthening initiative, BB has utilized the services of
Financial Management Consultant BCA and FIA) and submitted their recommendations for
necessary amendments to these Acts to transform them into modern pieces of legislatures &
prepared by the Legal Counsels and then translate the same into Bengali, in order to build in-
house legal capacity.
The banking regulator has no much mechanism to monitor and enforce accounting and financial
reporting requirements. The Bangladesh Bank, as the regulator of banking and nonbanking
financial institutions, conducts routine supervision exercises to monitor and enforce prudential
regulations. Bangladesh Bank inspectors examine whether financial statements have been
prepared in accordance with established regulations such as IAS. In this inspection process, no
attempt is made to assess the degree of compliance with requirements on preparing general-
purpose financial statements.
References:-
Annual Report:-
Web Site:-
www.nblbd.com
www.sebankbd.com
www.trustbank.com.bd/
www.prime-bank.com
Article:-
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
AppendixSurvey QuestionnaireI’m Nasir Uddin Shah Mamun student of Stamford University Bangladesh. You are inviting to join a part of the survey of “Practice the International Accounting Standards in an organization”, whose mission is to find out the proper practice and implementation IAS.
Part-ABank Name: - ………………………………………………Participant Name: - ....……………………………………………Designation:-Contract Number:-
Part-BQ1:- Did the organization follow International accounting standards?
Q2:- Did the organization maintain the guideline to ensure presentation of financial statements as per IAS 1?
Q3:- Did the company’s financial statements under IAS 1 depart from IFRSs and Provide require disclosure?
Q4:- Did the company’s financial statements prepared on going concern basis?Except for cash flow did the company using accrual basis of accounting?
Q5:- Did the company prepared financial statements on consistency basis?
Q6:- Did the company maintain the presentation and classification of items in the financial statements from one period to the next?
Q7:- Did the organizations reporting Period of financial statements is at least annually as per IAS1?
Yes No N/A
Yes No N/A
Yes No N/A
Yes No N/A
Yes No N/A
Yes No N/A
Yes No N/A
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
Q8:- Did the organization disclose comparative information in respect of the previous period for all amounts reported in the financial statements?
Q9:- Did the organization disclose any disclosures for any changed comparative amounts?
Q10:- Did the company’s material items presented separately in the financial statements?
Q11:- Did the company’s Current and non-current assets and current and non-current liabilities are presented as separate classifications on the balance sheet?
Q12:- Did the company disclose specifies disclosures about information presented in the financial statements?
Q13:- Did the company offset or counterbalance the assets and liabilities, and income and expenses?
Q14:- Did the company maintain the requirement for minimum items on the face of the statement of financial position as per IAS 1?
Q15:- Did the company disclose “profit or loss attributable to minority interest; and to equity holders of the parent” on the face of the income statement?
Q16:- Did the company setting out separate standards for presenting the cash flow statement?
Q17:- Did the company maintain separate component /statement to present entities changes in equity?
Yes No N/A
Yes No N/A
Yes No N/A
Yes No N/A
Yes No N/A
Yes No N/A
Yes No N/A
Yes No N/A
Yes No N/A
Yes No N/A
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Report on - “Corporate Mandatory Disclosure in Financial Statement by Some Selected Bank in Bangladesh as per IAS-1”
Q18:- Did the company disclose significant disclosures and notes for management applying or changing the entity's accounting policies?
Q19:- Did the company disclose any disclosure for the amount of dividends proposed or declared before the financial statements were authorized for issue but not recognized as a distribution to equity holders during the period?
Q20:- Did the company disclose the “amount of dividends recognized as distributions to equity holders during the period, and the related amount per share” either in the income statement or in the statement of changes in equity or in the notes?
Yes No N/A
Yes No N/A
Yes No N/A