Status of adoption of IFRSs in Bangladesh as at July 2012
Provides a summary as at July 2012 of which standards issued by the
International Accounting Standards Board have been adopted by the Institute of
Chartered Accountants in Bangladesh (ICAB) as equivalent Bangladesh
Financial Reporting Standards (BFRSs).
International Accounting Standards (IAS)
IAS
Title
No.
1
Presentation of Financial Statements
2
Inventories
7
Cash Flow Statements
Accounting Policies, Changes in
8
Accounting Estimates and Errors
10
Events after the Balance Sheet Date
11
Construction Contracts
12
Income Taxes
16
Property, Plant and Equipment
17
Leases
18
Revenue
19
Employee Benefits
Accounting for Government Grants and
20
Disclosure of Government Assistance
The Effects of Changes in Foreign
21
Exchange Rates
23
Borrowing Costs
24
Related Party Disclosures
Accounting and Reporting by Retirement
26
Benefit Plans
Consolidated and Separate Financial
27
Statements
28
Investments in Associates
Financial Reporting in Hyperinflationary
29
Economies
31
Interests in Joint Ventures
Status of adoption by
ICAB
Adopted
Adopted
Adopted
Effective date as
BAS
1 January 2007
1 January 2007
1 January 1999
Adopted
1 January 2007
Adopted
Adopted
Adopted.
Adopted
Adopted
Adopted
Adopted
1 January 2007
I January 1999
1 January 1999
1 January 2007
I January 2007
1 January 2007
1 January 2004
Adopted
1 January 1999
Adopted
1 January 2007
Adopted
Adopted
1 January 2010
1 January 2007
Adopted
1 January 2007
Adopted
1 January 2010
Adopted
Not adopted - impractiable
in the Bangladeshi context
Adopted
1 January 2007
—
1 January 2007
32
33
34
36
37
38
39
40
41
Financial Instruments: Presentation
Earnings per Share
Interim Financial Reporting
Impairment of Assets
Provisions, Contingent Liabilities and
Contingent Assets
Intangible Assets
Financial Instruments: Recognition and
Measurement
Investment Property
Agriculture
Adopted
Adopted
Adopted
Adopted
1 January 2010
1 January 2007
1 January 1999
1 January 2005
Adopted
1 January 2007
Adopted
1 January 2005
Adopted
1 January 2010
Adopted
Adopted
1 January 2007
1 January 2007
International Financial Reporting Standards (IFRS)
IFRS
No.
1
2
3
4
5
6
7
8
9
10
11
12
13
IFRS title
First-time Adoption of International
Financial Reporting Standards
Share Based Payment
Business Combinations
Insurance Contracts
Non-Current Assets held for Sale and
Discontinued Operations
Exploration for and Evaluation of Mineral
Resources
Financial Instruments: Disclosures
Operating Segments
Financial Instruments
Consolidated Financial Statements
Joint Arrangements
Disclosure of Interests in Other Entities
Fair Value Measurement
Status of adoption
by ICAB
Effective Date as
BFRS
Adopted
1 January 2009
Adopted
Adopted
Adopted
1 January 2007
1 January 2010
1 January 2010
Adopted
1 January 2007
Adopted
1 January 2007
Adopted
Adopted
Not adopted
Adopted
Adopted
Adopted
Adopted
1 January 2010
1 January 2010
—
1 January 2013
1 January 2013
1 January 2013
1 January 2013
International financial reporting standards from Bangladesh perspective
Md Shahadat Hossain (The writer is a Chartered Accountant and can be reached at e-mail:
sha.hossain@gmail.com)
International Accoun-ting Standard Board (IASB), based in London, is committed to
developing, for the public interest, a single set of high quality global accounting standards that
require transparent and comparable information in financial statements, for the general
purpose. In pursuit of this objective, the IASB has issued various International Financial
Reporting
Standards
(IFRSs)
and
International
Accounting
Standards
(IAS).
The objective of issuing such IFRSs and IASs is to ensure global convergence of accounting and
financial reporting system. Accordingly to the IFRS, the objective of financial statements is to
provide information about the financial position, financial performance and cash flows of an
entity. These are useful to a wide range of users in making economic decisions. To help achieve
this objective by an entity at the end of a particular period of time, a set of financial statements
is prepared which comprises a statement of financial position as at the end of the period; a
statement of comprehensive income for the period; a statement of changes in equity for the
period; a statement of cash flows for the period and notes, comprising a summary of significant
accounting
policies
and
other
explanatory
information.
It is worth mentioning here that before issuing of IFRSs and IASs, the accounts were prepared
for all the entities, following the generally accepted accounting principles of the respective
countries (in case of Bangladesh herein after called traditional accounting system). They were
certainly different in the different countries, to some extent. For preparation of financial
statements, convergence around the world has become important. Particularly for a country like
Bangladesh, it is essential to ensure such convergence. For the economic development facilities
through inflows of foreign direct investment (FDI) and improved worldwide banking channel,
participation in global accounting convergence is all the more essential.
To make the foreign investors understand the strength, viability, payback period, returns on
investment etc., of a company/industry through financial statements, it is required to prepare
those statements, in such a manner so that the foreign investors can understand them easily. To
honour the letters of credit (LCs) for import or export, it is essential to understand the strengths,
of a local bank by the corresponding foreign bank. To assess such strength the foreign bank
needs to review the financial statements of local banks and that can only be possible when the
financial
statements
are
prepared
in
compliance
with
IFRS.
The basic difference between IFRS and traditional accounting system of Bangladesh is
that under the traditional method of accounting, financial statements are prepared complying
with historical cost convention but under the IFRS, financial statements are prepared by
applying various methods of measurement such as historical cost, current cost, amortised cost,
net realisable value, present value, fair value etc. More or less, in all the areas of recognition,
measurement, presentation and disclosure, differences remain between IFRS and traditional
accounting system of Bangladesh. For example, according to traditional accounting system,
recognition of deferred tax asset and deferred tax liability is not mandatory but according to
IFRS,
accounting
of
deferred
tax
is
mandatory.
The present status of following the IFRSs in Bangladesh is that all the listed companies are
obliged to follow IFRS as adopted by the Institute of Chartered Accountants of Bangladesh
(ICAB). Accordingly, all the listed companies are trying to follow it. About the disclosure issue,
the listed companies are really following the IFRSs, but with regard to the recognition and
measurement issue, the status of following IFRSs is not at a satisfactory level.
In this connection, one of the fundamental concepts of IFRS is that for fair presentation of
financial statements, an entity cannot rectify inappropriate accounting policies either by
disclosure of the accounting policies used or by notes or explanatory materials. Policies for
recognition and measurement of assets, liabilities, income and expenditure are more important
than their disclosure. So we will have to advance more to be IFRS-compliant.
The main challenges for following IFRSs is, first of all, the shortage of knowledgeable personnel.
In Bangladesh, the number of professional accountants is very limited. It is not possible to
appoint professional accountants for all the companies, which are big in volume. Due to lack of
an adequate number of professional accountants, the person responsible for the preparation of
financial statement is not capable enough to understand the contents of IFRS and implement
those
while
preparing
the
financial
statements.
There are other challenges, too. There is, thus, a lack of adequate expertise to measure the
value of different elements such as fair value of financial instruments, present value of
retirement benefit etc. Due to lack of such expertise, in some cases it may not be possible to
prepare the financial statements complying with the IFRS. There again, adverse mindset of
entrepreneurs
is
also
a
challenge
to
complying
with
IFRS.
Most of the entrepreneurs do not want to pay due care and importance to accounts and they
are not also interested to spend adequate money for accounts and audit of their organisations.
Lack of proper knowledge on the part of the users of the financial statements is also responsible
for non-compliance with the IFRS because most of the users do not understand the importance
of proper accounts; in some cases, it is also not clear to them whether the responsibility to
prepare the financial statements of an organisation is that of the management or that of the
auditor. Last but not least, contradictions, local laws, rules and regulations constitute an
important challenge for following the IFRS. In many cases, the tax law, company law and other
applicable ones are not in line with the IFRS for recognising and measuring assets, liabilities,
revenues and expenditures for presenting the financial position and performance of an
organisation.
As it has earlier been mentioned, it is imperative for preparation of financial statements in
compliance with the International Accounting Standards and International Financial Reporting
Standards in order to help promote the country's interests. It is critically important for global
acceptance as well. It is pertinent to note here that considering the economic conditions,
entrepreneurs' mindset and other available facilities, it is hardly possible for Bangladesh at this
moment to be hundred per cent compliant with IAS and IFRS. But the country must make
endeavours to be convergent on IAS and IFRS. The Institute of Chartered Accountants of
Bangladesh (ICAB), the regulatory body of the professionals in this field, has been taking
initiative to adopt all the IASs and IFRSs since 2004 to enable the country to become convergent
on the IAS and IFRS; every year all the new IASs and IFRSs are, thus, being reviewed and updated
as Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards
(BFRS).
In this context, it is worth noting that the ICAB can only review, adopt and publish accounting
standards but it cannot make the organisation mandatory to comply with all the BASs and
BFRSs. Only the regulatory body may enforce mandatory compliance with the IASs and IFRSs, as
adopted by the ICAB. Various local laws and regulations such as Income Tax law, Company Law,
Banking Companies Act etc., need to be updated, keeping consistency with BASs and BFRSs. So
far it has come to our notice that the present government has taken an initiative to update all
the laws. So it is the time to make the use of the BASs and BFRSs mandatory for the companies
and other enterprises in order to enable them to be global convergent on accounting standards