Accounting Standard in Bangladesh

A REPORT ON APPLICATION OF BANGLADESH ACCOUNTING STANDARDS IN BUSINESS pic DEPARTMENT OF FINANCE UNIVERSITY OF neat of Bangladesh REPORT ON APPLICATION OF BANGLADESH ACCOUNTING STANDARDS IN BUSINESS FINANCIAL ACCOUNTING I F-103 Submitted To Dr. H. M. Mosarof Hossain Associate Professor Department of Finance Faculty of rail line Administration University of Dhaka Submitted By Members of Group-3 Section-B 14th Batch Department of Finance Names Roll No Upoma Antara Husain 14-052 Zubairia Khan 14-050 Nazmul Ehsan Omiya 14-054 Monowar Hossain 14-008 Md. Rubel Ahmed 14-030 DATE OF SUBMISSION 1 May 2008 TABLE OF CONTENTS CHAPTER I ? INTRODUCTION ? OBJECTIVES OF APPLYING BAS IN BUSINESS ? IAS ADDOPTED AS BAS ? SHORT DESCRIPTION OF BASs CHAPTER II ? ABOUT PRIME desire LIMITED ? BAS USED IN PBL ? APPLICATION OF BASs IN PBL ? IMPORTANCE OF APPLYING BAS IN PBL ? CONCLUSION CHAPTER III ? ANNEXURE ? BIBLIOGRAPHY CHAPTER I INTRODUCTION The rules and guidelines adopted and implimented terra firmawide in ex visualizeation record keeping and parameter prep ror maintaining uniformity ar known as world(prenominal) explanation Stand ard (IAS). IAS were make outd between 1973 and 2001 by the board of the International story standardizeds Committee (IASC).Bangladesh history exemplars (BAS) argon adopted From IAS by represent of Chartered Accountants of Bangladesh (ICAB) for preferred invoice practices in whole kinds of business in bangladesh. To govern the accounting system with the level of IAS, the ICAB (Institute of Chartered Accountants of Bangladesh) has been adopting BAS since 1984. The Institute of Chartered Accountants of Bangladesh is a professional accountancy body in the Bangladesh. It is the sole organisation in the Bangladesh with the justifiedly to award the Chartered Accountant designation.The ICAB up go out and adapted many important and the magazine demanding standards in several time BAS is a set of standards which controls the system o f accounting in Bangladesh. In our country Companies listed with Dhaka & Chittagong Stock exchange be to prepare their accounts according to the Securities and diversify Rules 1987 and the International Accounting Standards (IAS) as adopted by the Institute of Chartered Accountants of Bangladesh known as Bangladesh Accounting Standards (BAS). At present the (TRC) Technical research Committee of ICAB screens and evaluates IFRSs and recommends particular IFRS to the council of the ICAB for adoption.Prime money boxing concern exceptional is one of the promising banks in our banking sector. It is listed with Dhaka and Chittagong Stock supercede. The monetary statements of the curse are prepared chthonic the historical cost convention except investments and in accordance with the imprecate Companies Act, 1991, Bangladesh banking concern Circulars, International Accounting Standards and International fiscal reporting Standards adopted by the Institute of Chartered Accountants of Bangladesh as BAS, Companies act 1994, SEC Rules 1987 and former(a) laws and rules applicable in Bangladesh.IAS ADOPTED AS BAS BAS are developed by the ICAB and are based on older IASs cosmopolitanly those developed by the IASC rather than the modify IASs and new IFRSs developed by the IASB. The Technical and Research Committee of the ICAB develops the standards. Adoption demands approval of the ICAB Council. A list of IASs Adopted as BASs is shown below. IAS Version of IAS BAS total Remarks Adopted in Bangladesh IAS 1 Presentation of monetary 1987 BAS 1 2003 revisions non heretofore considered Statements by ICAB IAS 2 Inventories 1992 BAS 2 2003 revisions not that considered by ICAB IAS 7 Cash Flow Statements 1992 BAS 7 IAS 8 Accounting Policies, Changes in 1993 BAS 8 2003 revisions not yet considered Accounting Estimates, and Errors by ICAB IAS 10 Events After the Balance piece of paper 1999 BAS 10 Date IAS 11 Construction Contracts 1993 B AS 11 IAS 12 Income Taxes 2000 BAS 12 IAS 14 Segment Reporting 1997 BAS 14 IAS 16 retention, seed and Equipment 1997 BAS 16 2003 revisions not yet considered by ICAB IAS 17 Leases 1998 BAS 17 2003 revisions not yet considered by ICAB IAS 18 taxation 1993 BAS 18 IAS 19 Employee Benefits 2002 BAS 19 2003 and later revisions not yet considered by ICAB IAS 20 Accounting for Government Grants 1983 BAS 20 and Disclosure of Government Assistance IAS 21 The Effects of Changes in Foreign 1993 BAS 21 2003 and later revisions not yet Exchange Rates considered by ICAB IAS 22 Business Combinations 1998 BAS 22 IAS 22 has been superseded by IFRS 3, which has not yet been considered by ICAB IAS 23 acquire be 1993 BAS 23 IAS 24 connect Party Disclosures 1994 BAS 24 2003 revisions not yet considered by ICAB IAS 25 Accounting for Investments 1987 BAS 25 IAS 25 has been superseded by IAS 39, which has not yet been considered by ICAB IAS 26 Accounting and Reporting by 1987 BAS 26 hideaway Benefit Plans IAS 27 Consolidated and Separate 1998 BAS 27 2003 revisions not yet considered monetary Statements by ICAB IAS 28Investments in Associates 1998 BAS 28 2003 revisions not yet considered by ICAB IAS 29Financial Reporting in Not yet Adopted Hyperinflationary Economies IAS 30 Disclosures in the Financial 1990 BAS 30 IAS 30 has been superseded by IFRS Statements of swears and Similar Financial 7 ( nubive 2007), which has not Institutions yet been considered by ICAB IAS 31 sakis In Joint threatens 1999 BAS 31 2003 revisions not yet considered by ICAB IAS 32 Financial Instruments Disclosure Not yet adopted and Presentation IAS 33 profits Per Share 1999 BAS 33 2003 revisions not yet considered by ICAB IAS 34 Interim Financial Reporting 1998 BAS 34 IAS 35 Discontinuing Operations 1998 BAS 35 IAS 35 has been superseded by IFRS 5, which has not yet been considered by IC AB IAS 36 Impairment of Assets 1998 BAS 36 2004 revisions not yet considered by ICAB IAS 37 plannings, Contingent Liabilities1998 BAS 37 1998 and Contingent Assets IAS 38 intangible plus Assets 1998 BAS 38 2004 revisions not yet considered by ICAB IAS 39 Financial Instruments RecognitionNot yet adopted and Measurement IAS 40 Investment Property 2000 BAS 40 2003 revisions not yet considered by ICAB IAS 41 Agriculture Not yet adopted SHORT DESCRIPTION ON BAS BAS 1 Presentation of Financial StatementsThis Standard prescribes the basis for presentation of general purpose monetary statements to underwrite comparability both with the entitys fiscal statements of previous blockages and with the fiscal statements of early(a) entities. It sets out over every last(predicate) requirements for the presentation of financial statements, guidelines for their body structure and minimum requirements for their content. A complete set of financial statements compr ises (a) a statement of financial position as at the end of the utmost (b) a statement of comprehensive income for the period (c) a statement of changes in equity for the period (d) a statement of cash attends for the period e) notes, comprising a summary of signifi bumt accounting policies and other explanatory training and (f) a statement of financial position as at the beginning of the earliest comparative period when an entity applies an accounting polity retrospectively or makes a retrospective restatement of items in its financial statements, or when it reclassifies items in its financial statements. BAS 2 Inventories The quarry of this Standard is to prescribe the accounting discourse for inventories. A firsthand issue in accounting for inventories is the amount of cost to be recognise as an make forition and carried forward until the related tax incomes are recognized. This Standard provides guidance on the determination of cost and its subsequent recognition as a n expense, including any write-down to net realisable value. It also provides guidance on the cost formulas that are implementd to assign costs to inventories. Inventories sh both be measured at the lower of cost and net realisable value. BAS 7 Cash Flow StatementsThe objective lens of this Standard is to require the provision of information about the historical changes in cash and cash equivalents of an entity by means of a statement of cash flows which classifies cash flows during the period from run, investiture and financing activities. BAS 8 Accounting Policies, Changes in Accounting Estimates, and Errors The objective of this Standard is to prescribe the criteria for selecting and changing accounting policies, together with the accounting treatment and disclosure of changes in accounting policies, changes in accounting estimates and corrections of errors. The Standard is intended to enkindle the relevance and re financial obligation of an entitys financial statements a nd the comparability of those financial statements over time and with the financial statements of other entities. BAS 10 Events After the Balance Sheet Date The objective of this Standard is to prescribe a) When an entity should adjust its financial statements for events after the reporting period and (b) The disclosures that an entity should give about the date when the financial statements were authorized for issue and about events after the reporting period. The Standard also requires that an entity should not prepare its financial statements on a going concern basis if events after the reporting period indicate that the going concern assumption is not appropriate. BAS 11 Construction Contracts The objective of this Standard is to prescribe the accounting treatment of revenue and costs associated with construction contracts. Beca expend of the nature of the action undertaken in construction contracts, the date at which the contract activity is entered into and the date when th e activity is completed usually fall into contrastive accounting periods.Therefore, the primary issue in accounting for construction contracts is the allocation of contract revenue and contract costs to the accounting periods in which construction work is performed. This Standard shall be utilize in accounting for construction contracts in the financial statements of contractors. BAS 12 Income Taxes The objective of this Standard is to prescribe the accounting treatment for income taxes. For the purposes of this Standard, income taxes hold all domestic and foreign taxes which are based on taxable profits. Income taxes also include taxes, such as withholding taxes, which are payable by a accessory, associate or joint venture on distributions to the reporting entity.The school principal issue in accounting for income taxes is how to account for the current and future tax consequences of (a) the future recovery (settlement) of the carrying amount of assets (liabilities) that are recognized in an entitys balance cruise and (b) Transactions and other events of the current period that are recognized in an entitys financial statements. BAS 16 Property, Plant and Equipment The objective of this Standard is to prescribe the accounting treatment for shoes, plant and equipment so that users of the financial statements can discern information about an entitys investment in its property, plant and equipment and the changes in such investment. The principal issues in accounting for property, plant and equipment are the recognition of the assets, the determination of their carrying amounts and the depreciation charges and impairment freeinges to be recognized in relation to them. BAS 17 LeasesThe objective of this Standard is to prescribe, for lessees and lessors, the appropriate accounting policies and disclosure to apply in relation to leases. The classification of leases adopted in this Standard is based on the extent to which risks and rewards ensuant to owne rship of a leased asset lie with the lessor or the lessee. A lease is classified as a finance lease if it transfers substantially all the risks and rewards incidental to ownership. A lease is classified as an operating lease if it does not transfer substantially all the risks and rewards incidental to ownership. BAS 18 Revenue The primary issue in accounting for revenue is determining when to recognize revenue.Revenue is recognized when it is apparent that future economic benefits will flow to the entity and these benefits can be measured reliably. This Standard identifies the circumstances in which these criteria will be met and, therefore, revenue will be recognized. It also provides practical guidance on the application of these criteria. Revenue is the gross inflow of economic benefits during the period arising in the course of the ordinary activities of an entity when those inflows result in increases in equity, other than increases relating to contributions from equity parti cipants. This Standard shall be applied in accounting for revenue arising from the following minutes and events (a) the exchange of goods (b) the rendering of services and c) the use by others of entity assets yielding interest, royalties and dividends. BAS 19 Employee Benefits Employee benefits are all forms of status minded(p) by an entity in exchange for service rendered by employees. The objective of this Standard is to prescribe the accounting and disclosure for employee benefits. The Standard requires an entity to recognize (a) a liability when an employee has provided service in exchange for employee benefits to be paid in the future and (b) An expense when the entity consumes the economic benefit arising from service provided by an employee in exchange for employee benefits. BAS 20 Accounting for Government Grants and Disclosure of Government AssistanceThis Standard shall be applied in accounting for, and in the disclosure of, government grants and in the disclosure o f other forms of government assistance. Government grants are assistance by government in the form of transfers of resources to an entity in return for past or future respect with certain conditions relating to the operating activities of the entity. They exclude those forms of government assistance which cannot reasonably ask a value placed upon them and transactions with government which cannot be distinguished from the regular trading transactions of the entity. Government assistance is action by government designed to provide an economic benefit specific to an entity or range of entities qualifying under certain criteria.Government assistance for the purpose of this Standard does not include benefits provided only indirectly through with(predicate) action affecting general trading conditions, such as the provision of infrastructure in development areas or the imposition of trading constraints on competitors. BAS 21 The Effects of Changes in Foreign Exchange Rates An entit y may carry on foreign activities in two ways. It may have transactions in foreign currencies or it may have foreign trading operations. In addition, an entity may present its financial statements in a foreign currency. The objective of this Standard is to prescribe how to include foreign currency transactions and foreign operations in the financial tatements of an entity and how to translate financial statements into a presentation currency. The principal issues are which exchange rate(s) to use and how to report the effects of changes in exchange rates in the financial statements. BAS 22 Business Combinations The objective of this standard is to prescribe the accounting treatment for business combinations (both acquisitions and, in exceptional instances in which the acquirer cannot be identified uniting of interests). It provides guidance on the classification of a business combination, which includes whether an acquirer can be identified, and whether shareholders of the combini ng entities share inversely in the risks and benefits of the combined entity. BAS 23 Borrowing Costs Borrowing Costs Borrowing costs that are directly attributable to the acquisition, construction or achievement of a qualifying asset form part of the cost of that asset. separate borrowing costs are recognized as an expense BAS 24 Related Party Disclosures The objective of this Standard is to ensure that an entitys financial statements contain the disclosures necessary to draw attention to the possibility that its financial position and profit or loss may have been affected by the existence of related parties and by transactions and outstanding balances with such parties. BAS 26 Accounting and Reporting by Retirement Benefit PlansThis Standard shall be applied in the financial statements of retirement benefit plans where such financial statements are prepared. Retirement benefit plans are arrangements whereby an entity provides benefits for employees on or after termination of s ervice (either in the form of an annual income or as a lump sum) when such benefits, or the contributions towards them, can be determined or estimated in advance of retirement from the provisions of a document or from the entitys practices. The financial statements of a defined contribution plan shall contain a statement of net assets available for benefits and a description of the funding policy. BAS 27 Consolidated and Separate Financial StatementsThe objective of BAS 27 is to enhance the relevance, reliability and comparability of the information that a parent entity provides in its separate financial statements and in its consolidated financial statements for a group of entities under its control. The Standard specifies (a) the circumstances in which an entity must consolidate the financial statements of another entity (being a subsidiary) (b) the accounting for changes in the level of ownership interest in a subsidiary (c) the accounting for the loss of control of a subsidiary and (d) the information that an entity must disclose to enable users of the financial statements to evaluate the nature of the relationship between the entity and its subsidiaries. BAS 28 Investments in Associates This Standard shall be applied in accounting for investments in associates.However, it does not apply to investments in associates held by (a) venture capital organizations, or (b) correlative funds, unit trusts and uniform entities including investment-linked insurance policy funds. BAS 30 Disclosures in the Financial Statements of Banks and Similar Financial Institutions The objective of BAS30 is to prescribe appropriate presentation and disclosure standards for banks and similar financial institutions as a supplement of the requirements of other standards. It provides the Requirement for classification of items in the income statement and balance sheet by their nature, and for the balance sheet in ensnare of relative liquidity. Identifies the income statement and balance sheet line items requiring disclosure. ? Additional disclosure requirements, including concentration of assets, liabilities and off-balance items, losses on loans and advances, and general banking risks. BAS 31 Interests in Joint Venture This Standard shall be applied in accounting for interests in joint ventures and the reporting of joint venture assets, liabilities, income and expenses in the financial statements of ventures and investors, regardless of the structures or forms under which the joint venture activities take place. However, it does not apply to ventures interests in jointly controlled entities held by 1. (a) venture capital organizations, or 2. b) Mutual funds, unit trusts and similar entities including investment-linked insurance funds. BAS 33 Earnings Per Share The objective of this Standard is to prescribe principles for the determination and presentation of profit per share, so as to improve performance comparisons between different entities in the sa me reporting period and between different reporting periods for the same entity. The focus of this Standard is on the denominator of the earnings per share calculation. This Standard shall be applied by entities whose ordinary shares or potential ordinary shares are in public traded and by entities that are in the process of issuing ordinary shares or potential ordinary shares in public markets.An entity that discloses earnings per share shall calculate and disclose earnings per share in accordance with this Standard. Bas 34 Interim Financial Reporting The objective of this Standard is to prescribe the minimum content of an interim financial report and to prescribe the principles for recognition and measurement in complete or condensed financial statements for an interim period. Timely and reliable interim financial reporting improves the ability of investors, creditors, and others to understand an entitys capacity to generate earnings and cash flows and its financial condition an d liquidity. This Standard applies if an entity is required or elects to publish an interim financial report in accordance with International Financial Reporting Standards.Interim financial report means a financial report containing either a complete set of financial statements (as described in IAS 1 Presentation of Financial Statements (as revised in 2007)) or a set of condensed financial statements (as described in this Standard) for an interim period. Interim period is a financial reporting period shorter than a full financial course. BAS 35 Discontinuing Operations The objective of this standard is to enhance the ability to make financial projections by segregating information about discontinuing operations from information about continuing operations. BAS 35 does not establish any recognition or measurement principles in relation to discontinuing operations-these are dealt with under other BAS.In particular, BAS 35 provides guidance on how to apply BAS 36, Impairment of Asset s, and BAS 37, Provisions Contingent Liabilities and Contingent Assets, to discontinuing operations. BAS 36 Impairment of Assets The objective of this Standard is to prescribe the procedures that an entity applies to ensure that its assets are carried at no more than their recoverable amount. An asset is carried at more than its recoverable amount if its carrying amount exceeds the amount to be recovered through use or sale of the asset. If this is the case, the asset is described as impaired and the Standard requires the entity to recognize an impairment loss. The Standard also specifies when an entity should reverse an impairment loss and prescribes disclosures. BAS 37 Provisions, Contingent Liabilities and Contingent AssetsThe objective of this Standard is to ensure that appropriate recognition criteria and measurement bases are applied to provisions, contingent liabilities and contingent assets and that sufficient information is disclosed in the notes to enable users to unders tand their nature, timing and amount. IAS 37 prescribes the accounting and disclosure for all provisions, contingent liabilities and contingent assets, except (a) Those resulting from executory contracts, except where the contract is onerous. Executory contracts are contracts under which neither party has performed any of its obligations or both parties have partially performed their obligations to an equal extent (b) Those covered by another Standard. BAS 38 Intangible AssetsThe objective of this Standard is to prescribe the accounting treatment for intangible assets that are not dealt with specifi bandy in another Standard. This Standard requires an entity to recognize an intangible asset if, and only if, specified criteria are met. The Standard also specifies how to measure the carrying amount of intangible assets and requires specified disclosures about intangible assets. An intangible asset is an identifiable non-monetary asset without physical substance. BAS 40 Investment Pr operty The objective of this Standard is to prescribe the accounting treatment for investment property and related disclosure requirements.Investment property is property (land or a buildingor part of a buildingor both) held (by the owner or by the lessee under a finance lease) to earn rentals or for capital appreciation or both, rather than for (a) use in the production or supply of goods or services or for administrative purposes or (b) Sale in the ordinary course of business. OBECTIVES OF USING BAS IN BUSINESS Standardized Accountings The objective of applying BAS in business is to standardize the accounting issues and preparation of financial statements. International Recognition To keep agreement with International Business the use of International Accounting Standards adopted as BAS is important. It helps the businesses to gain international recognition. Maintaining harmonyAccounting standards are maintained in order to ensure uniformity in recording accounts and prepari ng financial statements within the businesses both in country and abroad. Ensuring hydrofoil An important objective of applying BAS is to ensure proper disclosure of necessary information in the financial statements. It provides transparency in the statements. Providing Reliability The application of BAS provides reliability and consistency in the accounting record keeping and financial statements to the outside parties. CHAPTER II pic ABOUT PRIME BANK LIMITED The Prime Bank Limited (the Bank) was incorporated as the public limited company in Bangladesh under companies Act, 1994.It commenced its banking business with one branch from April17, 1995 under the license issued bi Bangladesh Bank. Presently the Bank has 61 branches all over Bangladesh and a booth located at Dhaka Club, Dhaka. The Bank had no overseas branches as at 31 celestial latitude 2007. The Bank went for Initial Public Offerings in 1999 and its share is listed with Dhaka Stock Exchange Limited and Chittagong Stock Exchange Limited as a publicly traded company for its general class of shares. VISION The vision of the Bank is to be the best Private Commercial Bank in Bangladesh in terms of efficiency, capital adequacy, asset quality, sound management and profitability having strong liquidity. MISSIONThe mission of the Bank is to build Prime Bank Limited into an efficient, market driven, customer focussed institution with good corporate governance structure. Continuous improvement in the business policies, procedure and efficiency through integration of technology at all levels. STRATEGIC PRIORITY The strategic priority of the Bank is to have sustained growth, broaden and improved range of products and services in all areas of banking activities with the aim to add increased value to share holders investments and offer highest possible benefits to the customers. CORE VALUE For customers It refers to become most caring Bank by providing the most courteous and efficient services in every area o f our business. For employees It promotes well-being of the employees. For shareholders It ensures fare return on the investments of the shareholders through generating stable profit. For the community As a socially creditworthy corporate entity the Bank maintains close adherence to national policies and objectives. picBAS FOLLOWED IN PRIME BANK The Institute of Chartered Accountants of Bangladesh (ICAB) is the sole authority for adoption of International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS). While preparing the financial statements, Prime Bank allied most of IAS and IFRS as adopted by ICAB. Details are given below Name of the BAS BAS no Status Presentation of Financial Statements 1 employ Stationeries 2 use Cash Flow Statements 7 Applied Accounting Policies, Changes in Accounting Estimates and Errors 8 Applied Events after the Balance Sheet Date 10 Applied Construction Contracts 11 N/A Income Taxes 12 Applied Segment Reporting 14 Applied Property, Plant and Equipment 16 Applied Leases 17 Applied Revenue 18 Applied Employee Benefits 19 Applied Accounting for Government Grants and Disclosure of Government Assistance 20 N/A The Effects of Changes in Foreign Exchange Rates 21 Applied Borrowing Costs 23 Applied Related Party Disclosures 24 Applied Accounting for Investments 25 Applied Accounting and Reporting by Retirement Benefit Plans 26 Applied Consolidated and Separate Financial Statements 27 Applied Investments in Associates 28 N/A Disclosures in the Financial Statements of Banks and similar Financial Institutions 30 Applied Interests in Joint Ventures 31 N/A Earnings per share 33 Applied Interim Financial Reporting 34 Applied Impairment of Assets 36 Applied Provisions, Contingent Liabilities and Contingent Assets 7 Applied Intangible Assets 38 N/A Investment Property 40 Applied Agriculture 41 N/A Name of the BFRS BAS no Status Share Based Payment 2 N/A Business Combinations 3 N/A Non-current Assets Held for Sale and Discontinued Operations 5 N/A Exploration for and Evaluation of Mineral Resources 6 N/A *N/A=not applicable pic APPLICATION OF BAS IN PRIME BANK LIMITED For the convenience of discussion we are showing the effect of some important BASs in record keeping and accounting of Prime Bank Limited. BAS No. 1 Preparation of Financial Statements The financial statements of the bank are prepared in accordance with BAS-1 to give a fair view of the state of the Banks affairs and of the results of the operations and cash flows.The financial reports for the year ended in 31 celestial latitude 2007 are given as annexure for viewing. BAS No. 7 Cash Flow Statement Cash flow statement has been prepared in accordance with the BAS-7 Cash Flow Statement under direct method as recommended in BRPD Circular No. 14, dated June 25 2003 issued by the Banking Regulation and Policy Departmen t of Bangladesh Bank. BAS No. 12 Income Taxes Provision for current income tax has been made 45% as prescribed in the Finance Act, 2007 on the accounting profit made by the Bank after considering some of the add backs to the income and disallowances as expenditure as per income tax laws in compliance with BAS-12 Income Taxes. BAS No. 16 Property, Plant and EquipmentAll fixed assets are stated at cost less accumulated depreciation as per BAS-16 Property, Plant and Equipment. The cost of acquisition of an asset comprises its purchase price and any directly attributable cost of bringing the asset to its working condition for its intended use inclusive of inward freight, duties and non-refundable taxes. BAS No. 17 Leases Leases are classified as finance leases whenever the terms of the lease transfers substantially all the risks and rewards of ownership to the lessee as per BAS-17 Leases. ? The Bank as lessor Amount due from lessees under finance leases are recorded as receivables a t the amount of the Banks net investment in the leases. The Bank as lessee Assets held under finance lease s are recognized as assets of the Bank at the date of acquisition or if lower, at the present value of the minimum lease payments. BAS No. 18 Revenue ? Interest income In terms of the provisions of the BAS-18 Revenue, the interest income is recognized on accrual basis. ? Investment income Interest income on investments is recognized on accrual basis. ? Fees and commission income Fees and commission income arises on services provided by the Bank are recognized on a cash receipt basis. ? Dividend income on share Dividend income on share is recognized during the period in which declared and ascertained. Interest paid and other expenses in Conventional Banking In terms of the provision of the BAS-1 Presentation of Financial Statements interest and other expenses are recognized on accrual basis. ? Profit paid on deposits in Islamic Banking Profit paid to mudaraba depositors is reco gnized on accrual basis as per provisional rate. BAS No. 19 Employee benefits The retirement benefits accrue for the employees of the Bank as on reporting date have been accounted for in accordance with the provisions of BAS-19, Employee Benefit. Bases of enumerating the retirement benefit schemes operated by the Bank are outlined below ? Provident fund Provident fund benefits are given to the permanent employees f the Bank in accordance with Banks service rules. All confirmed employees of the Bank are contributing 10% of their basic salary as subscription to the fund. The Bank also contributes equal amount of the employees contribution. ? boon fund Actuarial valuation of gratuity scheme had been made to assess the adequacy of the liabilities provide for the scheme as per BAS-19, Employee Benefits. ? Welfare fund Prime Banks employees welfare fund is subscribed by monthly contribution of the employees. The Bank also contributes to the Fund from time to time. Disbursement from the fund is done as per rules for employees welfare fund. ? Incentive bonusPrime Bank started an 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. BAS No. 21 The Effects of Changes in Foreign Exchange Rates Foreign currency transactions are converted into equivalent Taka using the ruling exchange rates on the dates of respective transactions as per BAS-21, The Effects of Changes in Foreign Exchange Rates. Foreign currency balances held in US long horse are converted into Taka at plodding just rate of inter-bank market as determined by Bangladesh Bank on the closing date of every month.Balances held in foreign currencies other than US Dollar are converted into equivalent US Dollar at buying rates of New York closing of the priviou7s day and converted into Taka equivalent. BAS No. 33 Earnings per Share Basic earnings p er share have been reason in accordance with BAS-33, Earnings per Share which has been shown on the face of the profit and loss account. This has been calculated by dividing the basic earnings by the weighted average number of ordinary shares are standing during the year. The bonus shares issued during the year 2007 were treated as if they had been in issue in previous year also (declared for 2006 result). Hence, in computing the basic earning per share of 2006, the total number of shares including the said bonus shares has been considered as weighted average no. f shares outstanding during the year 2006 as per BAS-33, Earning per Share. BAS No. 37 Provisions, Contingent Liabilities and Contingent Assets A provision is recognized in the balance sheet when the Bank has a legal or constructive obligation as a result of a past event and it is probable that an outflow of economic benefit will be required to settle the obligations, in accordance with the BAS 37, Provisions contingent L iabilities and Contingent Assets. pic IMPORTANCE OF APPLYING BAS IN PBL stay on By The Rules Adopted BASs are enforceable for listed companies by SEC rules. So proper application of BAS in PBL is maintained to abide by the regulations of the nation. signpost For Accounting Issues BAS provides guidelines on different accounting issues to contribute to a common strategy and framework of reference for accountancy development and ensures transparent financial reporting, in accordance with sound corporate governance. Presenting Relevant & Reliable Information Applying BAS in the record keepings and preparation of financial statements makes the accounting information relevant and reliable to all involved parties. Assistance in International Business Application of BAS is important for keeping up to the International Standards which is important for International business. Co-operation Between Different PartiesThe use of BAS helps promote co-operation between governments, the account ancy and other professions, the international financial institutions, regulators, standard setters, capital providers and issuers. CONCLUSION In the world of globalization it is essential for businesses around the world to standardize the accounting record keepings and preparation of financial statements. The government of Bangladesh has made the International Accounting Standards adopted by Institute of Chartered Accountants of Bangladesh as Bangladesh Accounting Standards enforceable for all listed companies in order to ensure transparency and standard in accounting issues. Like other listed companies of our country Prime Bank Limited record their accounts and prepare their financial statements in compliance with these standards.The effects of these standards provide guidance and reliability in the accounting information. CHAPTER III ANNEXURE pic Balance Sheet As at 31 declination 2007 2007 2006 PROPERTY AND ASSETS Taka Taka Cash In hand (including foreign currencies) 663,028,189 452,560,474 Balance with Bangladesh Bank and its agent bank(s) (including foreign currencies) 4,755,788,872 3,662,426,602 5,418,817,061 4,114,987,076 Balance with other banks and financial institutionsIn Bangladesh 1,625,581,391 627,964,960 Outside Bangladesh 791,887,088 485,749,435 2,417,468,479 1,113,714,395 Money at call and short notice 1,490,000,000 Investments Government 12,090,285,095 7,673,700,299 opposites 607,735,533 170,682,648 12,698,020,628 7,844,382,947 Loans and advances/investments Loans, cash credits, overdrafts, etc 53,814,967,656 41,307,504,065 Bills purchased and discounted ,868,053,856 3,702,713,983 57,683,021,512 45,010,218,048 Fixed assets including premises, furniture 660,490,066 412,107,309 Other assets 710,613,052 914,107,309 Non-banking assets keep down assets 79,588,430,798 60,899,475,793 2007 2006 LIABILITIES AND CAPITAL Taka Taka Liabilities Borrowing from other banks, financial institutions 390,869,490 345,944,757 Deposits and other accoun tsCurrent/ al-wadeeah current deposits 10,590,463,357 8,261,264,165 Bills payable 1,144,540,968 528,231,748 Savings bank 6,027,260,878 4,125,622,204 Term deposits 52,750,109,722 41,808,962,467 Bearer certificate of deposit Other deposits 70,512,374,925 54,724,080,584 Other liabilities 3,411,909,021 1,969,561,728 be liabilities 74,315,153,436 57,039,587,069 Capital/ Shareholders equity Paid-up capital 2,275,000,000 1,750,000,000 Statutory reserve 1,873,543,597 1,404,170,652 Revaluation gain 2,723,913 Other reserve kept up(p) earnings 1,112,009,852 705,718,072 Total Shareholders equity 5,273,277,362 3,859,888,724 Total liabilities and Shareholders equity 79,588,430,798 60,899,475,793 Balance Sheet as at 31 December 2007 pic 2007 2006 Taka Taka OFF-BALANCE SHEET ITEMS Contingent liabilitiesAcceptances and endorsements Letters of guarantee 10,480,381,241 9,476,314,713 Irrevocable letters of credit 21,193,628,862 17,392,748,116 Bills for ingathering 1,414,716,406 1,060 ,486,687 Other contingent liabilities 33,088,726,509 27,929,549,516 Other commitments Documentary credits Forward assets purchased Undrawn ote issuance Undrawn formal standby facilities Liabilities against forward purchase and sale Others 33,088,726,509 27,929,549,516 Other memorandum items Value of travellerscheques in hand 141,383,952 14,284,764 Value of Bangladesh Patras in hand 1,348,897,500 346,193,975 1,490,281,452 360,478,739 Total 34,579,007,961 28,290,028,255 Profit and Loss Account For the year ended 31 December 2007 pic 2007 2006 Taka TakaInterest income 7,170,099,616 5,198,790,368 Interest paid on deposits (5,226,592,564) (3,698,441,036) Net interest 1,903,507,052 1,500,349,332 Investment income 1,294,205,056 419,496,059 Commission, exchange 1,198,942,404 998,117,247 Other operating income 419,555,862 314,073,525Total operating income (A) 4,816,210,375 3,232,036,163 Salaries and allowances 725,285,435 561,930,122 Rent, taxes and insurances 159,529,3 99 113,987,335 Legal expenses 24,728,362 4,951,307 Postage, stamp 60,999,650 47,690,052 stationery 121,691,050 63,382,686 Managing Directors salary 9,131,448 6,400,000 Directors fees 2,224,444 2,734,300 Auditors fees 791,725 570,990 Charges on loan losses Depreciation and repair of Banks assets 102,185,026 71,657,509 Other expenses 352,779,110 227,768,616 Total operating expenses (B) 1,559,345,650 1,101,072,827Profit/ (Loss) before provision(c=A-B) 3,256,864,725 2,130,963,336 Provision for loans/investments specialized provision (350,000,000) (210,000,000 General provision (350,000,000) (180,000,000) Provision for off-balance sheet items (210,000,000) (910,000,000) (390,000,000) Provision for diminution Other provision Total provision (D) (910,000,000) (390,000,000) Total profit / (loss) before taxes(C-D) 2,346,864,725 1,740,963,336 Provision for taxation Current tax (1,015,000,000) (592,362,815) Deferred tax 68,800,000 96,709,995 Net profit after taxation 1,400,664,72 5 1,051,890,526 Retained earnings (previous) 180,718,073 2,020,213 1,581,382,073 1,053,910,739 AppropriationsStatutory reserve 469,372,945 348,192,667 General reserve 469,372,945 348,192,667 Retained surplus 1,112,009,852 705,718,072 Earnings per share (EPS) 61. 57 46. 24 Cash Flow Statement For the year ended 31 December 2007 pic 2007 2006 Taka Taka A) Cash flows from operating activitiesInterest receipts in cash 7,076,601,586 5,616,509,362 Interest payments (5,266,592,564) (3,698,441,036) Dividends receipts 7,976,958 1,777,066 Fees and commission receipts in cash 1,198,942,404 998,117,247 Recoveries of loans 415,867 Cash payments to employees (729,416,883) (596,830,122) Cash payments to suppliers (286,567,522) (175,315,699) Income taxes paid (476,148,788) (590,139,079) Receipts from other operating activities 419,555,862 314,067,381 Payments for other operating activities (470,041,003) (296,680,802)Cash generated from operating activities 1,474,725,917 1,573,064,318 Increa se/ (decrease) in operating assets and liabilities Statutory deposits Purchase of trading securities (1,197,259,262) (1,161,365,969) Loans and advances to other banks Loans and advances to customers (12,672,803,463) (13,094,105,540) Other assets (3,796,358,897) 2,494,489,750) Deposits from other banks /borrowings 62,890,500 (490,439,000) Deposits from customers 15,171,985,121 18,833,626,261 Others liabilities accounts of customers 616,309,220 (140,262,287) Trading liabilities Other liabilities 1,437,147,293 (177,440,778) (378,089,488) 1,275,522,937 Net cash from operating activities 1,096,636,429 2,848,587,255 B) Cash flows from operating activitiesDebentures 4,932,282 5,000,000 Proceeds from sale of securities Payments for purchase of securities (430,320,723) (58,856,689) Purchase of property (333,719,898) (98,473,598) Payment against lease obligation (2,785,500) (1,995,468) Proceeds from sale of property 277,045 325,900 Net cash used in investing activities (761,616, 794) (153,999,855)C) Cash flows from financing activities Dividend paid Net cash from financing activities D) Net increase/(decrease) in cash and cash equivalents 335,019,635 2,694,587,400 E) Effects of exchange rate F) Cash and cash equivalents at beginning of the year 7,468,239,215 4,773,651,851 G) Cash and cash equivalents at the end of the year 7,803,258,850 7,468,239,215 Cash and cash equivalents at the end of the yearCash in hand 663,028,189 452,560,474 Balance with Bangladesh Bank 4,755,788,872 3,662,426,602 Balance with other banks 2,382,784,489 1,061,064,639 Money at call and short notice 1,490,000,000 Reverse repo 800,000,000 Prize bonds 1,657,300 2,187,500 7,803,258,850 7,468,293,215 Statement of Changes in Equity Particulars Paid up capital Statutory reserve Revaluation Retained earnings Total (Taka) (Taka) gain/loss (Taka) (Taka) (Taka) Balance as at 1 January 2007 1,750,000,000 1,404,170,652 705,718,072 3,859,888,724 Changes in accounting policy - - - - - Restated Balance 1,750,000,000 1,404,170,652 705,718,072 3,859,888,724 redundant on revaluation of - - - - - properties Surplus of investments - - 12,723, - 12,723,913 913 Currency translation differences - - - - - Net gains and losses(Unrecognized) - - 12,723, - - 913 Net profit for the year - - 1,400,664, 1,400,664,725 Dividends - 725 Issue of share capital 525,000,000 (525,000, - - 000) Appropriation - - - - - - 469,372,945 (469,372, - - 945) Balance as at 31 December 2007 2,275,000,000 1,873,543,597 12,723,