Accounting Standard in Bangladesh

The rules and guidelines adopted and implimented worldwide in accounting record keeping and statement preparation ror maintaining uniformity are known as International Accounting Standared (IAS). IAS were issued between 1973 and 2001 by the board of the International Accounting Standards Committee (IASC).

Bangladesh Accounting Standards (BAS) are adopted From IAS by Institute of Chartered Accountants of Bangladesh (ICAB) for preferred accounting practices in all kinds of business in bangladesh. To standardize 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 right to award the Chartered Accountant designation.

The ICAB updated and adapted many important and the time demanding standards in several time BAS is a set of standards which controls the system of accounting in Bangladesh. In our country Companies listed with Dhaka & Chittagong Stock exchange are to prepare their accounts according to the Securities and Exchange 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 Bank Limited is one of the promising banks in our banking sector. It is listed with Dhaka and Chittagong Stock Exchange. The financial statements of the Bank are prepared under the historical cost convention except investments and in accordance with the Bank Companies Act, 1991, Bangladesh Bank Circulars, International Accounting Standards and International Financial Reporting Standards adopted by the Institute of Chartered Accountants of Bangladesh as BAS, Companies act 1994, SEC Rules 1987 and other laws and rules applicable in Bangladesh.

IAS ADOPTED AS BAS

BAS are developed by the ICAB and are based on older IASs – generally those developed by the IASC rather than the improved IASs and new IFRSs developed by the IASB. The Technical and Research Committee of the ICAB develops the standards. Adoption requires approval of the ICAB Council.

BAS 1: Presentation of Financial Statements

This Standard 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. It sets out overall requirements for the presentation of financial statements, guidelines for their structure and minimum requirements for their content. A complete set of financial statements comprises:

• (a) a statement of financial position as at the end of the period;
• (b) a statement of comprehensive income for the period;
• (c) a statement of changes in equity for the period;
• (d) a statement of cash flows for the period;
• e) notes, comprising a summary of significant accounting policies and other explanatory information;
• (f) a statement of financial position as at the beginning of the earliest comparative period 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.

BAS 2: Inventories

The objective of this Standard is to prescribe the accounting treatment for inventories. A primary issue in accounting for inventories is the amount of cost to be recognized as an asset and carried forward until the related revenues are recognized. This Standard provides guidance on the determination of cost and its subsequent recognition as an expense, including any write-down to net realisable value. It also provides guidance on the cost formulas that are used to assign costs to inventories. Inventories shall be measured at the lower of cost and net realisable value.

BAS 7: Cash Flow Statements

The objective 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 operating, investing 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 enhance the relevance and reliability of an entity’s financial statements and 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;

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. Because of the nature of the activity undertaken in construction contracts, the date at which the contract activity is entered into and the date when the activity is completed usually fall into different 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 applied 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 include 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 subsidiary, associate or joint venture on distributions to the reporting entity.

The 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 entity’s balance sheet;

b) Transactions and other events of the current period that are recognized in an entity’s financial statements.

BAS 16: Property, Plant and Equipment

The objective of this Standard is to prescribe the accounting treatment for property, plant and equipment so that users of the financial statements can discern information about an entity’s 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 losses to be recognized in relation to them.

BAS 17: Leases

The 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 incidental to ownership 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 probable 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 participants.

This Standard shall be applied in accounting for revenue arising from the following transactions and events:

a) the sale of goods;

b) the rendering of services;

c) the use by others of entity assets yielding interest, royalties and dividends.

BAS 19: Employee Benefits

Employee benefits are all forms of consideration given 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;

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 Assistance

This Standard shall be applied in accounting for, and in the disclosure of, government grants and in the disclosure of 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 compliance with certain conditions relating to the operating activities of the entity. They exclude those forms of government assistance which cannot reasonably have a value placed upon them and transactions with government which cannot be distinguished from the normal 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 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 entity may carry on foreign activities in two ways. It may have transactions in foreign currencies or it may have foreign 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 combining entities share mutually in the risks and benefits of the combined entity.

BAS 23: Borrowing Costs

Borrowing costs that are directly attributable to the acquisition, construction or production of a qualifying asset form part of the cost of that asset. Other borrowing costs are recognized as an expense

BAS 24: Related Party Disclosures

The objective of this Standard is to ensure that an entity’s 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 Plans

This 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 service (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 entity's 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 Statements

The 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;

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,

b) mutual funds, unit trusts and similar entities including investment-linked insurance 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 order 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:

a) venture capital organizations,

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 earnings per share, so as to improve performance comparisons between different entities in the same 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 publicly 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 entity’s capacity to generate earnings and cash flows and its financial condition and 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 year.

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 Assets, 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 Assets

The 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 understand 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 Assets

The objective of this Standard is to prescribe the accounting treatment for intangible assets that are not dealt with specifically 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 Property

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 building—or part of a building—or 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;

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 consistency with International Business the use of International Accounting Standards adopted as BAS is important. It helps the businesses to gain international recognition.

Maintaining Uniformity: Accounting standards are maintained in order to ensure uniformity in recording accounts and preparing financial statements within the businesses both in country and abroad.

Ensuring Transparency: 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.

The use of BAS helps promote co-operation between governments, the accountancy and other professions, the international financial institutions, regulators, standard setters, capital providers and issuers.

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.

Cite this Page

Accounting Standard in Bangladesh. (2018, Feb 18). Retrieved from https://phdessay.com/accounting-standard-in-bangladesh/

copy to clipboard