Financial Reporting Environment of Bangladesh: Standard, Standard Setter and Comparative Accounting System

1. Financial Reporting Environment of
Bangladesh: Standard, Standard
Setter and Comparative Accounting
System
MD TAPAN MAHMUD (D-1)
INTERNATIONAL ACCOUNTING (OZU SEMINAR)
GRADUATE FACULTY OF ECONOMICS, KYUSHU UNIVERSITY

2. Flowchart of Presentation
 Statutory Framework
 Statutory Bodies in Accounting
 Accounting Standards in Bangladesh
 Accounting Standard Setting Process in Bangladesh
 Issues in IAS (as BAS) and IFRS (as BFRS) Application in Bangladesh
 The AAA’s morphology for Comparative Accounting Systems of Bangladesh
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3. Statutory Framework
 Corporate financial reporting requirements in Bangladesh:
 Companies Act of 1994
 Finance Act of 2014
 Bangladesh Securities and Exchange (BSEC) Rules of 1987
 Banking Act of 1991
 Insurance Act of 2010
 Bangladesh Chartered Accountants Order of 1973
 Cost and Management Accountants Ordinance of 1977
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4. Statutory Bodies in Accounting
 Institute of Chartered Accountants of Bangladesh (ICMAB)
 Established in 1973
 Statutory Audit of corporate sector accounts
 Regulatory matters of the profession and professional accountants
 Standards setting and adoption of international standards (Sole Authority)
 ICAB issues BAS (Bangladesh Accounting Standard) and BSA (Bangladesh Standards on
Auditing)
 Institute of Cost and Management Accountants of Bangladesh (ICMAB)
 Established in 1977
 Practice and promotion including limited audit (cost accounting records) of cost and
management accounting
 It doesn’t set any standards by itself
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5. Statutory Bodies in Accounting
 The Financial Reporting Act of 2015 established the Financial Reporting Council (FRC)
with the mandate to monitor the performance of auditors in Bangladesh
 ICAB operates under the oversight of the FRC
 ICAB is also accountable to SEC (Securities and Exchange Commission)
 ICAB has following international membership:
 The International Federation of Accountants (IFAC)
 The International Accounting Standards Board (IASB)
 The Confederation of Asian and Pacific Accountants (CAPA)
 The South Asian Federation of Accountants (SAFA)
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6. Accounting Standards in Bangladesh
 Bangladesh Accounting Standards (BAS); adopted from IAS
 Bangladesh Financial Reporting Standards (BFRS); adopted from IFRS
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7. BAS Vs IAS
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8. BFRS
Vs
IFRS
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9. Accounting Standard Setting Process in
Bangladesh
ICAB has Technical and Research
Committee (TRC), working under the
guidance of ICAB council
Identification of the broad
Areas
Constitution of the study
groups for preparing
Preliminary Drafts (PD)
Consideration and revision
of the PD
Preparation of Exposure
Draft (ED) according to
discussion and comments
Meeting with the TRC-
members from specified
outside bodies to ascertain
their views
Circulation of the PD
among the council
members of ICAB
Issuing the ED, inviting
ICAB members’ comment
Integrating comments,
finalizing ED, submission
to ICAB council for
approval
Consideration of the draft
accounting standard
(modification, if required)
The finalized accounting
standard is issued by ICAB
council as BAS
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10. Current status of IFRS Adoption
 Bangladesh has made a public commitment in support of moving towards a single set of
global accounting standards (specifically IFRS)
 Bangladesh has adopted IFRS Standards as Bangladesh Financial Reporting Standards
(BFRS); and the IFRS for SMEs Standard
 All companies whose securities are traded on the Dhaka Stock Exchange (DSE) and/or
the Chittagong Stock Exchange (CSE) are required to follow IFRS Standards as adopted
by the ICAB (i.e., BFRS)
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11. Current status of IFRS Adoption
 IFRS Standards as adopted by the ICAB are required in the separate financial statements
of companies whose securities trade in a public market
 IFRS Standards as adopted by the ICAB are permitted (but not required) in the financial
statements of companies whose securities do not trade in a public market
 All or some of the foreign companies whose securities trade in a public market are
required to use IFRS Standards in their consolidated financial statements
 IFRS Standards are incorporated into law or regulations (enforcement by SEC)
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12. Issues in IAS (as BAS)and IFRS (as BFRS)
Application in Bangladesh
 Despite adoption of certain IASs there is no legal enforceability of these standards. SEC
has made it mandatory for all listed companies to comply with IASs. For others, the
compliance is optional.
 Many laws, rules and regulations are (British) colonial in origin and their character is
detrimental to the development of financial reporting with complete adoption of
standards
 The extent of disclosure requirements under IAS/IFRS are progressively increasing, which
is resented by the minimum disclosure oriented corporate culture prevalent in
Bangladesh
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13. Issues in IAS (as BAS)and IFRS (as BFRS)
Application in Bangladesh
 Educational standards of the country are either inappropriate or not capable to
understand, interpret and apply IAS and there is acute need for training the trainers. .
This professional constraint is a major obstacle which often impedes the practical
benefits from implementation of standards and may even lead to misleading views
being presented by financial information
 Implementation of standards entails incremental costs of reporting entities in ensuring
compliance with IAS through employment of appropriately qualified professionals for
preparation of financial statements. Audit fees would also be increased for ensuring
such compliance, which is resented and may even result in discontent for application of
standards
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14. Issues in IAS (as BAS)and IFRS (as BFRS)
Application in Bangladesh
 A substantial portion of the country’s economy is outside the purview of any kind of
formalized financial reporting structure let alone application of IAS
 Resource constraints of ICAB, the main change agent. Throughout the world accounting
regulatory bodies do spend a lot of money on training, research and human resources
development sector relating to accounting. In Bangladesh, this has been one of the
most neglected areas
 The Company Act 1994 does not include any provisions for mandatory adherence of the
adopted IAS/IFRS in practice. The laws of Chartered Accountant 1973 have also not been
amended to require mandatory compliance to the adopted standards by ICAB members
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15. The AAA’s
morphology
for
comparative
accounting
systems of
Bangladesh
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16. Bibliography
 https://www.ifrs.org/use-around-the-world/use-of-ifrs-standards-by-
jurisdiction/bangladesh/
 https://www.ifac.org/about-ifac/membership/country/bangladesh
 http://documents.worldbank.org/curated/en/890461479708805505/Bangladesh-Report-
on-the-Observance-of-Standards-and-Codes-ROSC-Accounting-and-Auditing-A-A
 Miazee, M. H. (2014), Problems of Implementing of International Financial Reporting
Standards in Bangladesh, European Journal of Business and Management, 6(36):174-181.
 Nobes, C. and Parker, R. (2016), Comparative International Accounting, 13th Ed, Pearson,
England.
 Tasnim, S. H. (2015), Implementation Dilemma of International Accounting Standards
and International Financial Reporting Standards in Bangladesh, ASA University Review,
9(1): 103-117.
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