The Accountant Oct Dec 2015

Fully Regulated Member of UK Actuarial Profession
Actuary
Zafar Halim
October - December 2015
1
Management
FINANCIAL REPORTING REGULATIONS: GLOBAL PRACTICES
4 2
Regulators Auditor
3
Public
FINANCIAL
October - December 2015
REPORTING
REGULATIONS
GLOBAL PRACTICES
CONTENTS
EDITORIAL BOARD
Editorial
President’s Desk
ISSN 1993-3649
2
4
ARTICLES
Chairman
Md Abdus Salam FCA, FCS
Financial Reporting Regulations 6
Global Practices
Editor - M. Idris Ali FCA
Harun Mahmud FCA FRC: Accounting Profession Faces a Challenge 10
- Dr. Javed Siddiqui
Members Global Financial Reporting Regulation 15
A F Nesaruddin FCA The Model, Applicability and its Effectiveness
Akhtar Sohel Kasem FCA - Dipok Kumar Roy ACA
Nasir Uddin Ahmed FCA Financial Reporting Regulations Go Global 22
A Cerebral Review
Md. Shahadat Hossain FCA - M Jalal Hussain FCA
Gopal Chandra Ghosh FCA Accountability of Bank Management 28
Amanullah Khan FCA in USA for Fraudulent Reporting
Dr. Jamshed Sanyiath Ahmed Choudhury FCA - Iftekhar Hossain FCA
Md. Liaquat Hossain Chowdhury FCA Financial Reporting in Bangladesh 36
Md. Rokonuzzaman FCA - Tofazzul Hussain FCA
Sabbir Ahmed FCA The Practice of Corporate Social Responsibility 41
Disclosures by the Companies Operating in Bangladesh
Md. Sayeed Ahmed FCA Evidence from Textile & Tannery Industries
Mahmudul Hasan Khusru FCA - 1Mohammad Saif Uddin Bhuiyah
Snehasish Barua FCA - 2Sabina Yesmine
Muhammad Aminul Hoque ACA Unifying Accounting Designation in Canada 48
Abdullah-Al-Mamun ACA and Membership Pathway for ICAB Members
- Sarwar A Khan FCA
Zareen Mahmud Hosein ACA
Payment of Perquisites and its Tax Impacts 55
Muraheb Malik Chowdhury ACA - A. Wahab FCA
Abu Haider Mohammed Kibria ACA
A Forensic Analysis on Global Divergence of 59
SK. Md. Tarikul Islam ACA Financial Reporting Regulation with the rise
Shah Md. Jubaer ACA of Independent Public Oversight Body
Dipok Kumar Roy ACA - 1Mustaq Ahmed ACA
- 2Sazib Kumar Saha ACA
Abuzer Ghaffari ACA
Audit Fees 67
Mohammad Mosttafa Shazzad Hasan ACA A Study on Commercial Banks of South Asian Countries
Bidhan Chandra Mandal ACA - Sujan Chandra Paul ACA
Md. Yasin Miah FCA, Chairman-DRC Philanthro-Capitalism and the Economics of Foundations 75
Mohammad Saif Uddin FCA, Chairman-CRC - Ghulum Murshed Latiful Quader FCA, ACCA
Transfer Pricing 82
Member Secretary Are We Prepared?
- Akhter Zamil FCA
Mohammed Emdadul Haque FCA
Cloud Computing and Cloud Economy for Bangladesh 91
Technical Adviser-ICAB - M S Siddiqui
Growth and Development of Pharmaceutical 94
Companies in Bangladesh
An Evaluation
- Rokeya Parvin Jui
Monetary Policy of Bangladesh 105
Moving Towards the Right Direction
- Mohammad Zahid Hossain FCA
Accounting for Carbon Emissions 109
Published by the Editorial Board of the Council Global Practices and Lesson for Bangladesh
The Institute of Chartered Accountants of Bangladesh (ICAB) -1Dr.Yousuf Kamal
CA Bhaban, 100 Kazi Nazrul Islam Avenue, Dhaka 1215 -2Shah Md. Taha Islam
Tel : 9117521, 9112672, 9115340, 9137847
DISCLAIMER
Email : [email protected]
Website : www.icab.org.bd "The opinions expressed in this publication are those of the
respective authors themselves and do not necessarily reflect the
views of the Editorial Board of the Institute of Chartered
Accountants of Bangladesh (ICAB) or the ICAB itself."
EDIT ORIAL
URGE FOR AN EFFECTIVE
FRC UNDER FRA, 2015
Country’s recurrent financial irregularities. We believe the main

hindrances to establish the
in many folds in the area of
education and training, as well.
scandals have given birth to
transparent accounting system in
questions on transparency and As a regulator, the Institute is
the country are lack of proper
accountability in transactions of relentlessly working to upgrade
professional knowledge on the part
financial matters in different the quality of financial reporting as
of management in preparation of
spheres. It is true that knowingly well as training other regulatory
financial reports, together with lack
or unknowingly the auditors were bodies, preparers and stakeholders
of corporate good governance and
made scapegoat. The management on quality, compliance and
application of financial accounting
of the company makes public the transparent reporting system. For
and reporting standards. These many years, ICAB has been
audited financial reports and in
cannot be resolved over night, nor reviewing, adopting, disseminating
this process, the role of auditors is
could we be able to eliminate these the latest International Financial
to give their opinion on the
in a year or so, no matter how hard Reporting Standards (IFRS) and the
fairness of the accounts applying
we try. The country’s existing International Standards on
the International Standards on
regulatory bodies like Bangladesh Auditing (ISA) in Bangladesh as
Auditing as adopted in
Securities and Exchange Bangladesh Financial Reporting
Bangladesh. Responsibility for
Commission (BSEC), DSE, CSE, Standards (BFRS) and Bangladesh
preparation and presentation of
financial statements lies with the RJSC, NBR, OCAG, Bangladesh Standards on Auditing (BSA). The
management while the auditor Bank, ICAB and relevant ministries BFRSs are mandatorily applicable
performs audit based on audit need to work harmoniously, for for all listed entities as per BSEC
sampling, applying professional example, by forming a joint regulations. But appropriate
judgment within a stipulated technical task force to resolve these application of these reporting
timeframe to formulate issues. These views are also echoed standards in any corporate sector
independent audit opinion with in the World Bank’s Report on the will ultimately depend on
reasonable assurance. Although Observance of Standards and Codes technical expertise, knowledge
auditors cannot avoid their (ROSC) Update 2014. and wisdom of the management of
responsibility to some extent in It is commendable that ICAB is a the entities. In Bangladesh, only
case of wrong audit opinion where strict compliant of Statement of ICAB has the world class
there is material mistake due to Membership Obligations (SMOs) of professional curriculum & tuition
management fraud and error, it and also the facilities in providing
International Federation of
may not be always possible for hands-on training on application
Accountants (IFAC) which covers
them to give a true and absolutely of those standards through the
the quality assurance of audit and
correct opinion verifying all the audit firms. So involving more
assurance firm, professional
transactions in such a stipulated chartered accountants in corporate
education in line with International
time frame. In fact, audit sampling sector especially in listed entities
Accounting Education Standards,
and application of professional and other regulatory bodies is vital
International Standard on Auditing, for assuring quality financial
judgments are the suggested
Code of Ethics, International Public reporting system that will ensure a
guidelines in case of assurance
services where for differences in Sector Accounting Standards, transparent and accountable
sample selection and due to Investigation Procedures and corporate culture with good
different judgments audit opinion Disciplinary Measures and governance.
may differ from auditor to auditor. International Financial Reporting
Standards. ICAB is now following In this backdrop, on 6 September
It was lack of transparency and the curriculum of Institute of 2015 the Jatiya Sangsad (JS) passed
accountability which paved the Chartered Accountants in England the much-talked-about Financial
way for committing such financial & Wales, UK. It has thus advanced Reporting Act 2015 under which
02 October - December 2015 The Bangladesh Accountant

Financial Reporting Council (FRC) comprised of 12 members led by a and auditing standards and should
will be formed for ensuring more Chairman appointed by the have a thorough understanding of
transparency and accountability in government. Moreover, the council regulatory frameworks for standard
financial reporting activities. will be a statutory body with setting, monitoring and
members from various government enforcement. Incumbent should be
The FRC will monitor the functions capable to monitor effectively the
bodies, institutions and professional
of auditors and ensure transparency accountancy and audit sector; and
groups. It is of great concern that
and accountability in accounting secure compliance with, and
without having adequate number of
and auditing of the public interest enforce good governance
chartered accountants being expert
entities including various guidelines, rules and regulations,
on financial reporting, how the
governments, autonomous and are we thinking in that line?
council will deal with the highly
non-government institutions. Ever
technical matters like monitoring and
since, ICAB has been playing these Undoubtedly, a vast technical
implementation of the financial
roles having recognized reputation. expertise and knowledge to
reporting standards.
formulate and adopt standards like
A good number of both developed IFRS/IAS, ISA are required for
Surprisingly, there is a provision for
and developing countries do follow effective functioning of this FRC.
the punishment for any deviation of
identical laws and have councils or FRA would ultimately fail to yield
rules of this Act which is ambiguous
authorities to regulate the activities any better results if shortcoming in
and needs clarity. If an auditor’s
of the audit firms and ensure certain matters still remains -
wrong perception is reflected as the
accountability and transparency in expertise in relevant field, guidance
audit opinion and then it will be
financial reporting. While reviewing for professional enrichment, and
considered as charge of criminal
the Sarbanes and Oxley Act- 2002 corporate discipline are not
offence. How far will it be
in USA, FRC in UK, Australia, ensured.
compatible with the principle of law
Nigeria and India (proposed), it is
that a quasi-judicial body like FRC
observed that the provisions on Since the fulfillment of basic
will be able to award up to 5 years
auditors and corporate houses to requirements from users are
imprisonment or so? Is it not fact that
ensure professional services and essential, for better outcomes of
the area of auditing and accounting
corporate disciplines are FRC, highly-qualified chartered
service is civil in nature and
implemented through the CAs, accountants with professional
whereas, this area has been
being and heads of executive integrity and honesty are
unnecessarily drawn into the area of
departments as well as part of instrumental in its management and
criminal jurisdiction. Again, there are
council of these oversight bodies. operation.
criminal offence like fraud, etc.
In the provision of Companies Act which is perception based. Thus the Dear readers, you would find a
2013 of India, it is said that the FRC will award punishment taking it reflection of those in this issue of
central government may, by as criminal offence. Does the offence our Journal October-December
notification, constitute a National define in Code of Criminal 2015. Needless to say that ICAB
Financial Reporting Authority to Procedure (CrPC)? The FRA is far always supports the government’s
provide for matters relating to from being comprehensive. initiatives that expedite
accounting and auditing standards development of the economy of the
Under this Act, activities of the FRC
under this Act. The Chairperson and country and will to do so in the
will be accomplished through the
the members, who are in full-time days ahead.
following four divisions: (1)
employment with the National
Standards Setting Division, (2) We think consultation with related
Financial Reporting Authority, shall
Financial Reporting Monitoring stakeholders while preparing FRA
not be associated with any audit
Division, (3) Audit Practice Review rules of business and formation of
firm (including related consultancy
Division, and (4) Enforcement FRC will be worthy.
firms) during the course of their
Division. Now the head of these
appointment and two years after Best Regards,
Division should possess recognized
ceasing to hold such appointment
accounting qualification
but most of them shall be selected
accompanied with effective
from Chartered Accountants even
leadership quality and management
including the Chairman.
and policy skills, if FRC is to
Such provision was not considered succeed. Incumbent should have Md Abdus Salam FCA, FCS
in the proposed Financial Reporting wide technical expertise in auditing Chairman, Editorial Board and
and financial reporting matters and Council Member & Past President-ICAB
Council in Bangladesh. As per FRA
2015, the council will be in line with international accounting
The Bangladesh Accountant October - December 2015 03

PRESIDENT’S DESK
ICAB: Ahead with
the Changes
Throughout the year 2015 the held earning laurels have made
the year eventful. We have created
automation for enforcement of
rules & regulations.
Editorial Board has fully dedicated
a mutual working area with
its time & efforts to timely bring Mention may be made that Dr.
Regulators like Bangladesh Bank,
out the ICAB quarterly Journal Javed Siddique, Sr. Lecturer,
Bangladesh Securities and
'The Bangladesh Accountant'. I Manchester Business School, UK
Exchange Commission (BSEC),
owe my special thanks and has penned off an excellent
IDRA among others. Three
gratitude to the Editorial Board for presentation titled Audit Profession
working group meetings were held
their punctual, relentless but Regulation: Challenges & Way
with these regulators to discuss the
successful endeavor. The Forward. He presented it in the
limitations, scope and loopholes
distinguished contributors program very eloquently and
in core functional areas and the
cultivated and nurtured their earned instant laurels from the
way forward. We also had built
intellectual thoughts harnessing floor. The presentation divulged
strong ties with, NGOAB, OCAG,
knowledge for the Journal. It has the true picture of FRC & the audit
NBR, and World Bank, etc.
become a platform of sharing profession of the country, making
knowledge through manifestation The presentations on ROSC FRC questionable in Bangladesh
of current issues. This issue has Updates under Work Bank context.
concentrated on financial program in October this year, has
reporting regulations which are vividly depicted the present ICAB’s relentless efforts towards
very much pertinent to our scenario of accountability & financial accountability cannot be
country’s present context. The transparency of the financial ignored. In December 2015 ICAB
Secretary of the Editorial Board sectors in national and successfully published BFRS
deserves my high appreciation for international arena. The ROSC volume I &II under the
leading the publication to be updates concluded that only joint arrangement between ICAB and
brought out on time through out collaboration between the IFRS Foundation which empowers
the year. Regulators like office of the this task to ICAB only in
Registrar of Joint Stock Companies Bangladesh. That is all such
In 2015 our endeavor towards publications for development and
and Firms (RJSC), Bangladesh
professional development was publication of Bangladesh
Securities and Exchange
instrumental and ceaseless. Financial Reporting Standards
Commission (BSEC), Bangladesh
Although the path was not even, (BFRS), Bangladesh Accounting
Bank (BB), Insurance
we sailed through it quite well. In Standards (BAS) and BFRS for
Development & Regulatory
the offshoot of our concerted SMEs are solitary rights of ICAB.
Authority (IDRA), Institute of
efforts, a suitable ground has been
Chartered Accountants of
created where from true Two top notch Ministers of
Bangladesh (ICAB), Monitoring
professionals of excellence should Government honorable Finance
Cell of the Ministry of Finance and
be rewarded. Minister Mr. AMA Muhith as Chief
the National Board of Revenue
(NBR), is urgently required to Guest and honorable Commerce
A large number of training Minister Mr. Tofail Ahmed, MP as
ensure proper accountability &
programmes, both for Special Guest were present in 15th
transparency in financial sector. It
professionals and outsiders, were ICAB National Award Giving
also stressed for mechanism &

ceremony. Their presence has learning contents at anytime, from in 6.51% + GDP growth route.
illuminated us immensely. We anywhere. This will hopefully Very few countries of the world
were all overwhelmed & enriched result to develop a “learning are now consistently maintaining
by their deliberation in the environment” through ensuring this growth rate. Being one of the
program. ICAB’s endeavor is to smooth flow of information. NEXT-11, Bangladesh will be the
create awareness in the corporate pivot of development experience
sector about the value of timely ICAB already has submitted three for the rest of the world in coming
publishing audited Financial proposals for establishment and decades.
Statements were successful, we development of Inclusive
can claim. Technical & Research Center at Our journey ahead will be historic
ICAB (ITRCI) and ICAB Digital and it will attract enormous
For strengthening the knowledge Repository (IDR) to the Ministry of attention from the world!
catered with appropriate Commerce, GoB.
application and compliance of Thank you dear fraternity!
auditing and corporate reporting ICAB has always been striding for
standards, it may be pertinent to excellence as regulator. I believe, Best Regards,
improve ICPE to further heights. Chartered Accountants are
Additionallydeveloping an ‘ICAB instrumental and technically
Digital Repository’ can be a sound in professional services,
prioritized initiative of ICAB. This especially when economic Masih Malik Chowdhury FCA
would enable the students as well development is in progress in a President-ICAB
as the professionals to access the sustainable manner. Bangladesh is

Financial Reporting Regulations
Global Practices
M. Idris Ali FCA
Perspective of Enacting has to comply with the Statement of

Membership Obligations (SMO) in dealing
The Financial Reporting Act 2015 with Quality of Audit, Education,
in Bangladesh disciplinary procedure and code of
professional ethics. IFAC’s program is
Accounting and auditing profession in supported by International development
Bangladesh had been monitored and community through the Memorandum
conducted by the Institute of Chartered Understanding to Strengthen Accounting
Accountants of Bangladesh (ICAB) for over and Improve Collaboration (MOSAIC)
40 years since independence. ICAB has program. ICAB is member of South Asian
been successfully performing its task Federation of Accountants (SAFA). Despite
except in a very few cases where due to all these arrangements for perking up the
oversight or negligence of the auditors profession, the share market crash of 2010
some frauds or misstatements were left in the country put some audited Financial
undetected in the audited Financial Statements under question. Meanwhile
Statements which led to a vital question as after Enron scandal USA created Public
to who will audit the auditors. ICAB is a Company Accounting Oversight Board
self-regulated authority like other global (PCAOB), UK enhanced the power and
regulatory bodies. It has an investigation authority of its FRC, and Australia created
and disciplinary committee which had FRC in 2002. Many other African and
been penalizing some of the firms who Asian countries also established FRC
were found to have been negligent or vesting oversight authority over the
careless in carrying out their audit. It has a accounting and auditing regulatory
twinning arrangement with ICAEW bodies. In the context of global
through which members are trained to phenomenon and insistence and
improve their professional skill and recommendation by Donor agencies like
knowledge. ICAB has also a Quality the world Bank, IMF for bringing an
Assurance Department which ensures oversight body for financial reporting into
quality of audit by carrying out inspection being, ICAB could not sustain the pressure
of audit firms periodically. ICAB is a of Government to postpone creation of
member of the international Federation of Financial Reporting Council (FRC). At last
Accountants (IFAC) which is the FRC Act was passed in the parliament in
international Architect of Accounting and Sept., 2015.

SO INCLUSION OF
ONE CA ONLY AS
MEMBER OF FRC IS NOT
ENOUGH OR PRACTICAL.
INDIA HAS KEPT THE
Objectives of FRC  Setting and maintenance of CHAIRMAN OF FRC AS

technical actuarial standards CA, 3 MORE CAs HAVE
Objectives of all FRCs globally, are and oversight of regulation of
as below: actuaries by the Institute or BEEN INCLUDED AS
Faculty of actuaries. MEMBERS. PHILIPPINE
 Setting high quality standards
and codes for accounting,  Research and thematic studies. HAS DECIDED TO SELECT
auditing and actuarial practices
ALL MEMBERS OF FRC
in respect of listed and other Technical Competence of
entities with the aim of FRC, Bangladesh AS CAs. UK HAS KEPT 6
supporting investor, market
and public confidence in MEMBERS AS CAs IN
Globally FRCs are accountable to
financial and governance the shareholders and investors in THE FRC. MALAYSIA HAS
stewardship. public and hence ultimately
INCLUDED 6 MEMBERS
accountable to the Parliament
 Setting and promoting the through the relevant Ministry. AS CAs IN THEIR FRC.
highest quality of corporate ICAB is a Self - regulatory Authority
reporting and governance. of Public Accountants and yet WHY THEN IN
 Direct monitoring of financial

authorities like SEC, NBR, DSE, BANGLADESH ONLY 1 CA
B.Bank etc have been raising
reports and audits of public complaints against it for errors, HAS BEEN INCLUDED IN
interest entities; frauds and misstatements. As such THE FRC?
how can the complainants be a
 Oversight of the regulation of part of FRC? If these authorities are
the audit, accountancy and included as members of FRC but
actuarial professions by their do not have the technical
respective professional bodies; knowledge, how can they detect
the defects and frauds in Financial
 Monitoring, oversight, statements? how can they set,
investigative and disciplinary adopt, develop or monitor or
functions for major public oversee the implementation of
interest cases involving BFRSs, codes, BSAs and so on? The
auditors, accountants and degree of competence of
actuaries exercising supervisory, monitoring

and oversight expertise of FRCs Government nominees from AG, member of FRC is not enough or
depends upon its structure and Stock Exchange, Board of Revenue, practical. India has kept the
components. all 3 CAs. Chairman of FRC as CA, 3 more
CAs have been included as
Let us review the structure and How Fruitful will be the members. Philippine has decided
professional competence of the to select all members of FRC as
Creation of FRC in
FRCs of various countries. CAs. UK has kept 6 members as
Bangladesh CAs in the FRC. Malaysia has
Composition of FRCs of It appears that the regulatory and
included 6 members as CAs in
Various Countries their FRC. Why then in Bangladesh
functional activities of FRC would only 1 CA has been included in the
be dual or overlapping over those FRC? Who will perform the
Bangladesh: 12 members of ICAB. As per CA order 1973
Committee comprising 9 members technical tasks of examining the
ICAB controls the profession of Financial Statements, detecting
to represent MOF, MOC,CAG, Accountancy by way of teaching,
B.Bank, SEC, NBR, 1 professor of misstatements, frauds, setting,
rendering practical training, adopting, developing, monitoring
accountancy from public holding examinations of the
University, 2 members from or overseeing the implementation
students, issuing certificates, of BFRSs, codes, BSAs? Auditing
Accountancy profession (Ex-officio) issuing practicing license to
and one Chartered Accountant the Auditors’ works or regulating
qualified eligible chartered the regulators’ premises or faculties
(CA). Accountants, ensuring the quality is not as easy as merely forming
of audit, developing the standard, FRC. The aim of the Government
U.K: 15 members including 6 disciplining the negligent
non-practicing CAs, 1 actuary, 2 in passing FRC act to regulate the
practitioners, operating regulators on accounting and
former CEOs, 1 former secretary of professional development
Government, current chairman is a auditing, as the government
programs and so on. FRC Act claims, is to discipline the financial
former banker. provides that license of practice, reporting regime and thereby
renewal thereof will be issued by enhance its credibility, ensure
India: Chairman CA, 3 more CAs FRC if it is satisfied. Getting license
from accounting, auditing and highest standards for the auditors,
for an eligible CA is a right, not a improve the financial reliability of
enforcement and President ICAI question of satisfaction of FRC.
(total 5 CAs), Representatives from the listed companies and promote
FRCs in other countries are not development of accountancy as a
MCA, RBI, SEBI and a retired Chief involved with this primary task.
Justice. profession. Notwithstanding all
Moreover setting, adopting, good intentions however, at the
developing, monitoring or end of the day delivery of service is
Philippines: All members must be overseeing the implementation of
CAs. what matters most. There are many
BFRSs, codes, BSAs and examining mismatches, inappropriate and
the Financial Statements is a highly unjustified clauses in the FRC Act
Malaysia: Chairman must be ICAA technical job which cannot be
(Australia), 3 practicing CAs, 1 CA and these need to be revisited for
performed by non-Accountants. So assessing its gravity and
and 1 ACCA from industry, 1 inclusion of one CA only as
professor (ACCA with Ph.D), consequences. It is necessary for

the concerned authorities to have may become dysfunctional. This recommendation of the joint teams
in-depth knowledge about this may jeopardize the vital into confidence. This may
profession and review the entire profession. As a remedy following produce expected result of
matter before they enact such a 3 alternative suggestions are given: monitoring and oversight of
law. Without taking Chartered the accountancy and audit
accountants into confidence, no a) Majority of the members of profession.
law or regulations relating to FRC should be from practicing
accounting and auditing profession and non-practicing CAs who c) There may be a clear line of
will achieve its desired goals. may form a Technical demarcation as to which
Overlapping of activities in the Committee or act as Technical functions will be performed by
same area by various regulators members. They may present ICAB and what role of
may give rise to further confusion. their findings, innovation and monitoring and oversight will
The regulatory stream should not recommendation on all be done by FRC. In this case,
be like flow of a school technical issues to the ICAB’s principal functions may
administration, viz. student, Chairman for implementation. be technical matters,
teacher, headmaster and inspector. education of students,
FRC should be a highly responsible b) The technical members may professional training of
regulating, controlling and be deputed as advisers or members, improving quality of
oversight authority, ultimately observers to the Council of audit, disciplinary issues etc
answerable to the Parliament. But ICAB which, under leadership and FRC may perform
capability and expertise of its and/or joint efforts of the monitoring, administrative
members in achieving its Technical members of FRC functions and formalities.
objectives seems to be inadequate. may bring about amazing
As a result FRC is very likely to innovation and findings. The
The Author is a Fellow Member, ICAB
flop or if FRC imposes unjustified Chairman of FRC may take all
obligation or penalties the ICAB finding, innovation and

FRC: Accounting Profession
Faces a Challenge
Dr. Javed Siddiqui
The Jatiya Sangsad passed the Financial Especially, the investors seem to be
optimistic about the capability of the FRC
Reporting Act, 2015 (FRA) on Sunday to bring a degree of discipline in the
(September 06, 2015). Among other financial reporting and auditing process,
things, the FRA requires the establishment and subsequently, strengthen the capital
of a new oversight body, referred to as the markets. From that perspective, this is a
'Financial Reporting Council (FRC)'. The populist initiative.
main purpose of the FRC will be to
regulate the financial reporting process To a more inquisitive observer, however,
followed by the companies. there are reasons to be sceptical about the
efficacy of the proposed FRC. The purpose
As per the FRA, the FRC will be a of this article is, therefore, to initiate a
12-member body, comprising of debate on these possible shortcomings so
representatives from the government, the that the FRC can actually achieve its
Bangladesh Bank, the Bangladesh objectives.
Securities and Exchange Commission
(BSEC), the Federation of Bangladesh
Chambers of Commerce and Industry
Composition of FRC
(FBCCI), the academia, and the
To start with, the composition of the FRC
professional accounting bodies. The
is likely to be a potential problem. There
council will be headed by a full-time
is hardly any dispute regarding the
chairperson who will be appointed by the
competence of the representatives from
government through a panel of experts. In
the ministries of finance and commerce,
addition, the FRC will have a full-time
the Bangladesh Bank, the BSEC, the
chief executive. The FRA identifies four
Comptroller and Auditor General's (CAG)
major functions of the council, namely,
office, and the National Board of Revenue
accounting and auditing standard setting,
(NBR) in their related fields. However,
financial reporting monitoring, audit
much of FRC's function would involve
practice review, and enforcement of
overseeing the work of professional
disciplinary actions.
accountants, who have years of practical
experience in their field. In addition, the
Judging by the initial reactions as
FRC would also be responsible for the
published in the local media, this initiative
adoption of International Financial
appears to have a wide support from a
Reporting Standards (IFRS) and the
number of important stakeholder groups.

WITH THE
PASSING OF THE FRA IN
PARLIAMENT, THE FRC
HAS NOW BECOME A
REALITY THAT THE AUDIT
PROFESSION WILL HAVE
TO DEAL WITH. FOR THE
TIME BEING, THE FRC
International Standards on Auditing

APPEARS TO BE A
ridiculousness of the scenario, let
(ISA). Understandably, carrying out us put this in the context of other THREAT TO THE
these functions will warrant high professions: can the activities and
degree of professional expertise in professional judgments of medical PROFESSION, AS THE
the area of auditing and financial doctors be monitored or COUNCIL WILL TAKE
reporting. Interestingly, out of 12 questioned by non-physicians?
members of the council, the FRA Would you allow non-physicians AWAY MOST OF THE
requires only one member to to write prescriptions (synonymous POWERS EXERCISED BY
possess a professional financial with accounting and auditing
reporting and auditing qualification standards in this case) for you? THE ICAB. HOWEVER,
(there will also be one member
from the Institute of Cost and WITH EVERY ADVERSITY
Resource Commitments
Management Accountants of COMES AN
Bangladesh, but membership of The second function of the FRC
ICMAB does not require will be to monitor if the
OPPORTUNITY. THE ICAB,
professional experience and international accounting and THEREFORE, NEEDS TO
expertise in auditing). It is hard to auditing standards, as adopted by
imagine that the non-accountant the FRC, are being properly ENSURE THAT THE FRC
members sitting in the FRC would implemented by the companies.
have adequate expertise to make
ACTS IN A MANNER SO
The implementation of IFRS and
decisions on adoption of ISA is a challenge for many THAT THE PROFESSION
international accounting and companies. From that perspective,
auditing standards or monitor the IS BENEFITED.
it is a welcome initiative.
activities of professional However, at the same time, this is
accountants in public practice. In a mammoth task that will require
addition to seriously undermining significant resource commitments.
the role of the professional In the context of Bangladesh, the
accountants in Bangladesh, the BSEC, even after 25 years of
structure of the FRC, therefore, can existence, still struggles to monitor
significantly affect its capability to the implementation of IFRS in
carry out its stated functions. To listed public companies due to
highlight the apparent

resource constraints. Is there any or live abroad. This means that a as well as questioning their
reason for us to be optimistic that vast majority of the accountants judgements in individual audit
the FRC, another working in the corporate sector assignments through detailed
government-funded body, will (especially in small and inspection of working papers.
receive significantly high resource medium-sized companies) may not Again, this would require
allocations from the government, have sufficient skills and expertise substantial resource commitment
so that it can have an impact on to oversee the implementation of as FRC would need to hire
the financial reporting scenario? IFRS in their respective entities. In professional accountants for such
such a scenario, what would be the review. Already, the existing salary
A pertinent, but usually overlooked point of the FRC devoting so much offered in competing regulatory
point regarding the implementation resource in monitoring bodies (such as the BSEC) is not
of IFRS in Bangladeshi companies, implementation? Rather, wouldn't sufficient for attracting high quality
is the absence of sufficient number such resource be better spent in professional accountants. Also,
of qualified professional providing training to the similar quality control reviews are
accountants who could facilitate accountants, and possibly setting currently undertaken by the ICAB,
such implementation. For a up second-tier accountancy and it is difficult to see how the
country with a large population, bodies? FRC would be more competent
Bangladesh has a surprisingly small compared to a professional
number of professionally qualified Quality Control accounting body, such as the
accountants in the area of financial ICAB, in inspecting the work of
reporting and auditing. As of July The third stated function of the professional accountants. Based on
01, 2015, the Institute of Chartered FRC is to perform a quality control such quality review, the FRC can
Accountants of Bangladesh (ICAB), review of the practising auditors. recommend actions against
the only professional accountancy According to the FRA, each auditors. Alarmingly, this includes
body offering financial reporting practising audit firm will be a maximum punishment of five
and auditing qualifications in inspected by the FRC one in every years' imprisonment for the
Bangladesh, had only 1,536 three years. Presumably, such auditors.
members, a significant number of inspection would involve looking
which are either deceased, retired at the performance of the auditors

Disciplinary Action affairs. This will require significant Poor Level of Fees
resource commitments by the FRC.
FRC's power to take disciplinary Secondly, given the However, a close look at the state
actions against auditors can be socio-economic environment of of audit profession would identify
viewed from two perspectives. the country, we cannot rule out the the single most important factor
Firstly, this takes away the risk of potential abuse of such that affects quality of audit in
self-regulatory aspects of the disciplinary powers for undue Bangladesh: the appallingly poor
profession. Since its inception, the economic benefits. In such a case, level of fees offered to the auditors.
ICAB has been in charge of the establishment of the FRC may The fees paid to the auditors in
monitoring the activities of its end up as counterproductive for Bangladesh are significantly low
members. Arguably, the the corporate sector. even compared to neighbouring
professional body has not been India and Pakistan. This is mainly
very proactive in taking actions There are reasons for the policy due to the corporate culture in
against its members. Also, a few makers and other interested parties Bangladesh where the value of
actions have been affected by the to be concerned about the state of audit is not appreciated, as
lengthy judicial process. However, financial reporting and auditing opposed to more 'tangible'
before taking such actions, the practices in Bangladesh. The ICAB, services, such as legal and tax
professional judgements of the despite its recent efforts, has not services. The fees are so low that
auditors would need to be been able to create sufficient many audit assignments result in
evaluated, and due process would confidence regarding its capability losses for the audit firms, forcing
need to be followed in order to to monitor its own members. the firms to look for other sources
establish, without any doubt, that Consequently, perceptions of revenue, including the provision
the auditors, despite possessing the regarding the quality of audit have of various non-audit services (many
skills and the expertise, remained poor, perhaps of which have now been
intentionally issued a wrong audit compelling the policy makers to prohibited by the BSEC order on
report. The investigators would offer the FRC as a regulatory corporate governance, 2006,
thus require high degree of alternative. squeezing the revenue stream
experience and expertise in the further). Consequently, many audit
area of auditing and corporate firms have to be economically

dependent on their clients for their hence, potentially increasing the to convince the government to
own survival, compromising audit cost of audit further. Given the appoint professionally qualified
independence, and eventually, reluctance of the Bangladeshi persons in the positions of chair
audit quality. corporate sector to pay higher and chief executive of the FRC.
audit fees, it is likely that such Also, as a first step, the FRC can
The appallingly low levels of audit increase in the cost of audit would start reviewing the levels of audit
fees have failed to attract the not be matched by a fees offered to auditors in
internationally reputed Big 4 audit corresponding increase in fees, Bangladesh, and perhaps engage in
firms to consider Bangladesh as a eventually lowering the quality of discussions with practising auditors
potential market. At present, only audit. to determine a mandatory
one Big 4 firm operates in minimum level of audit fees, at
Bangladesh, whereas in With Every Adversity Comes least for publicly listed companies.
neighbouring India, Pakistan and An Opportunity Once this is ensured, the FRC can
Sri Lanka, these firms have a more then devote its time and resources
prominent presence. Arguably, the With the passing of the FRA in in taking actions against auditors
training offered in Big 4 firms parliament, the FRC has now for professional malpractice. After
could have raised the overall become a reality that the audit all, the finance minister has
quality of audit in Bangladesh. profession will have to deal with. justified the recent pay-hike of the
For the time being, the FRC public servants by stating that such
Thus, the main problem with appears to be a threat to the increase is likely to be followed by
auditing in Bangladesh lies with profession, as the council will take subsequent decrease in corrupt
poor audit fees rather than the away most of the powers exercised public practices. The same logic
adoption of international financial by the ICAB. However, with every should work for the auditors as
reporting and auditing standards. adversity comes an opportunity. well!
Unfortunately, the FRA does not The ICAB, therefore, needs to
address the issue of audit fees. ensure that the FRC acts in a
Rather, it requires auditors to The Author is an
manner so that the profession is Associate Professor of Accounting
register with the FRC in order to be benefited. To start with, this will
able to continue public practice, at the Manchester Business School,
require devoting substantial efforts University of Manchester, UK
The article is reprinted from The Financial Express

Global Financial Reporting Regulation
The Model, Applicability and its Effectiveness
Dipok Kumar Roy ACA
The Backdrop of Global looking to switch to IFRS by 2015, the

system used in the European Union and
Regulation many other countries. International
Financial Reporting Standards (IFRSs) have
With a view to bringing uniformity of been a part of financial reporting in the
global financial reporting, International United Kingdom since 2005 when EC
Accounting Standard Board (IASB), a Regulation 1606/2002 (‘the IAS
standard setting body of IFRS foundation, Regulation’) came into effect.The United
emerged (formerly International Kingdom has already adopted IFRS for the
Accounting Standard Committee, IASC) for consolidated financial statements of all
issuing globally accepted International companies whose securities trade in a
Financial Reporting Standard (IFRS). The regulated market in 2005. The United
world is a global village and as such, the Kingdom has used the option under the
business network has been easier and IAS Regulation of EU for all companies
extensive across the globe. The global whose securities do not trade in a
uniformity in accounting has been regulated market. UK GAAP has been
essential for understanding and analyzing adopted with limited disclosures based on
the financial statements for decision of IFRS for SMEs. So, IFRSs are only global
investment, trade and business for all over standards of accounting for financial
the world. In April 2001, the former IASC reporting to bring uniformity globally.
was converted to IASB with a view to
issuing IFRS instead of International Generally the Institute of Chartered
Accounting Standard (IAS) and since then Accountant (CA) or Certified Public
all standards will be issued as IFRSs and Accountant (CPA) of a country, whatever
all existing IASs (IAS 1-41) will be termed the term is, being a member of IFAC
as IFRSs unless otherwise superseded or (International Federation of Accountants),
replaced by new IFRS. These IFRSs are would act as regulator of accounting
widely accepted all over the world except profession for that country and adopts the
the local GAAP (Generally Accepted national accounting/reporting standards in
Accounting Principles) especially of USA line with socio-economic status after
and UK for using locally. Both USA and review and research of IFRSs issued by
UK are moving from their GAAP to IFRS IASB. IFAC and IFRS work together under
for global uniformity. GAAP is used MOU (Memorandum of Understanding) to
principally in the United States, although enable the development of high quality
the Security and Exchange Commission is global standards by IASB and promote,

adopt and implement of those professional services of accounting
standards in addition to Internal and auditing. So, the model of
Standard on Auditing (ISA) and global regulation of accounting IN BANGLADESH,
other standards. The institute of CA profession (both for accounting
or CPA is regarded as national
THE MAIN FUNCTIONS OF
and auditing) for most of the
institute and controls the members countries could be presented in the FRC UNDER FINANCIAL
of the institute rendering following diagrams:
REPORTING ACT, 2015
Financial Regulation Model other than UK and USA HAVE BEEN DESIGNED IN
IFRS Foundation
LINE WITH UK MODEL
IFRS
Adopts
EXCEPTING THE ROLE OF
Works for
standard
ACTUARY. THE ACT

under
MOU
ISA
Adopts FOCUSES ON ISSUING
IFAC
STANDARDS AND
research by
Review and
research by
Review and
POLICIES ON ACCOUNTS,
AUDIT, CORPORATE
Country’s own
-FRS
GOVERNANCE ETC. AND
-SA
Accepts
&Adopts ACTIONS ON AUDIT
Institute of Chartered
Accountants
QUALITY REVIEW,
(Established under country law
to regulate accountants)
Regulates
Members CORPORATE REPORT
(Chartered
Accountants)
REVIEW, PROFESSIONAL
OVERSIGHT,
Regulates
Corporate/securities laws and
regulations
PROFESSIONAL DISCIPLINE
AND PENALTIES. THE
Regulation Model in USA and UK BANGLADESH FINANCIAL
REPORTING ACT, 2015
DOES NOT CONTAIN THE
Financial Accounting Standard USA /UK
DETAILS PROVISIONS ON
Board, USA for GAAP and the Public Adopts
Company Accounting Oversight
Board ("PCAOB"), USA for SA
GAAP and SA
THE ABOVE. WE HAVE TO
/ Financial Reporting Council, UK
for GAAP and SA WAIT FOR (A) THE
GUIDELINES AND
by
Accepted
STANDARDS TO BE ISSUED
BY FRC FOR THESE
PURPOSES AND (B)
American Institute of Certified Public
Accountants (AICPA)/ The Institute of
Chartered Accountants of England and Regulates Members EFFECTIVE
Wales (ICAEW) (Certified
IMPLEMENTATION
(Established under country law to
regulate accountants) Accountants/
Certified
PROCESS BY FRC TO
Public
Accountants)
MEASURE THE ACTUAL

Regulates
Corporate/securities laws and
regulations OUTCOME.

In USA and UK, a separate regulator of auditors, was not management role, corporate
standard setting body is there to set much active and serious to enrich governance and auditor
GAAP or Standards in line with professional capacity and quality independence by the said act.
IFRS. In other countries those and, to bring the auditors under Under the SOX, Financial
standards are adopted by a legal punitive measures for the lack Accounting Standard Board (FASB)
committee of the Institute of CA or of professional due care and adopts the GAAPs/Standards as
CPA delegated for this purpose. deliberate fraudulent acts. As such, earlier before enacting the SOX.
Upon raising the financial scandals the era of self-regulating of Subsequently, the other countries
day by day, both the auditors and accounting profession ended up like New-Zealand, Mauritius,
their regulating institute came and the first Financial Reporting Nigeria, Malaysia, Sri Lanka and
under question on quality of Act was enacted in 1990 in UK finally in Bangladesh has adopted
services and responsibility as with a separate regulatory body- the new model of regulation of
external auditors and regulator. Financial Reporting Council accounting profession for ensuring
The CAs or CPAs failed to bring (FRC).Upon the financial scandal effective role of external auditors.
into notice of user a lot of financial of some reputed organization like
scandals while auditing the Enron, WorldCom, Peregrine The Revised Financial
financial statements of different Systems, Tyco in USA, a new act,
Regulation Model
companies in different countries sponsored by Senator Paul
especially in UK and USA. Some Sarbanes and Representative
As it was required to change the
cases, the auditors deliberately Michael G. Oxley, was enacted
self-regulating model and establish
escaped the fact or unintentionally titled Sarbanes and Oxley Act,
a separate agent for better
missed important issues to cover 2002 (termed as SOX) with a view
regulation, many countries
under audit due to lack of to conducting oversight the audit
adopted new act in different names
professional due care and practice and ensuring good
to set up an independent agent to
competence. In those cases, they corporate governance. Since then,
regulate accounting profession.
issued the unqualified or the self-regulation of accounting
Considering this new regulatory
inappropriate opinion and profession ended up in USA and
body, the general framework of
subsequently, it was found the the Public Accounting Oversight
revised regulation of accounting
negligence of auditor in auditing Board (PCAOB) took the role of
profession excepting USA may be
and direct fraudulent activities of regulating auditors by conducting
presented as follows:
the management concern oversight the audit practice and
especially of CFOs and CEOs. The monitoring the financial reporting
institute of CAs or CPAs, the in addition to ensuring
Country’s
own
Review and
IFRS Foundation Adopts -FRS
IFRS research by Adopts
-SA
FRC (Financial Reporting

Council)or other name
IFAC ISA Review and Regulates
Adopts research by The Institute
of Chartered
Accountants
and Cost and
Management
Accountant
Regula
tes
Corporate/securities laws
and regulations
Regulates Members- CA/CPA

In case of USA, the accounting
standards are generally adopted by
Financial Accounting Standard
Board (FASB) and the auditing
standards are adopted by the
Public Company Accounting
Oversight Board (PCAOB) like FRC
in the above diagram. In the SOX
act of USA, the regulation has got
very significant dimension by
focusing specially on management
certification, management report
on internal control, accelerated
reporting of insider trading,
disclosing code of conduct for
finance officer, whistle blower
protection, public company
oversight board and auditors
independent. In addition to
penalties, the initiatives and efforts
over and above oversight of audit
practice focus to ensure a stronger functions of FRC under Financial discipline and penalties. The
corporate culture by ensuring good Reporting Act, 2015 have been Bangladesh Financial Reporting
corporate governance with a view designed in line with UK model Act, 2015 does not contain the
to aligning the filed for presenting excepting the role of actuary. The details provisions on the above.
transparent financial reporting. In act focuses on issuing standards We have to wait for (a) the
UK, the FRC has two sets of jobs and policies on accounts, audit, guidelines and standards to be
on (a) code of standards and (b) corporate governance etc. and issued by FRC for these purposes
professional conduct covering actions on audit quality review, and (b) effective implementation
accounts, actuary and audit & corporate report review, process by FRC to measure the
assurance. In Bangladesh, the main professional oversight, professional actual outcome.
We may review the focused issues in the new law in USA, UK and Bangladesh
Sarbanes - Oxley Act, 2002

(Area of Emphasis)
Management Reporting Board Governance Management and Board Enforecement and

Conduct Auditor Independence
Penalities
-Management Certification - Audit Commitee
Standard -Accelerated reporting of
-Audit Committe pre-
- Public Company approves all audit or
-Management Report on insider trading Oversight Board (PCAOB)
- Prohibitions of loans to services
Internal Control Directors and Officers -Disclose code of conduct - Criminal Penalties for
for finance officer - Lead audit partner
known untrue limited to 5 years
-Whistleblower certifications
protection
UK Financial Reporting Act, 1991 Bangladesh Financial Reporting Act, 2015

(Area of Emphasis) (Area of Emphasis)
Conduct
Code of Standards Conduct
Code of Standards - Audit Quality Review
- Accountants - Audit Quality Review
- Accountants - Corpoarte Report Review
-Audit and Assurance - Corpoarte Report Review
-Audit and Assurance -Professional Oversight
-Actuary -Professional Oversight
-Corpoarte Governnace -Professional Discipline and
-Corpoarte Governnace -Professional Discipline
Penalities

The contents of the act may bring fees are adequate to ensure audit comes from the lack of
the expected outcome if it is quality (vii) the existing laws, rules professional due care. So, the
applicable to implement and regulations are aligned and the auditors need to bring under
considering the business structure application of rule of law is in line scanner for their effective role. Still
and environment and implemented with effective public interest (viii) we see, the new regulating law
by the FRC effectively and the FRC is constituted with a set of bears criticism on performance and
efficiently. In other way, the competent and experienced sometimes it is called as a failed
success of this act will depend on professional members to contribute law to ensure financial reporting
its applicability i.e., whether it is time for professional enrichment transparency and public interest
the best fit with the economy and and advancement instead of and consider as obstacle of
culture and its effectiveness i.e., focusing punishment (ix) the corporate and economic growth.
the degree of performance business is run ethically and bears
compared to desired outcome over strong ethical corporate culture (x) SOX, the USA financial reporting
the years. The state-governance align all act, is under question to address
persons and institute to be properly the financial reporting
The Applicability respectful and bow to the laws for transparency and a lot of criticisms
transparency of operation of on SOX performance and its
As stated earlier the self-regulating business so that the auditors can existence amongst experts of USA.
model are not effective enough for act independently without any fear Referring to Wall St. Journal
ensuring due professional care in of intimidation(xi) the market is Wikipedia mentions:-“A December
conducting audit assignment to the emerging or developed and the 21, 2008 Wall St. Journal editorial
publicly interest entity (PIE) due to effective role of accountant is stated, The new laws and
limitation of self-regulation. As essential for public interest with a regulations have neither prevented
such, the regulation by an agent view to accelerating the economic frauds nor instituted fairness. But
under a law has been a model of growth (xii) the role of regulators they have managed to kill the
regulating accounting profession like Central Bank, Securities and creation of new public companies
for ensuring effective professional Exchange Commission (SEC), in the U.S., cripple the venture
services and public interest from controller of insurance companies capital business, and damage
the service of auditors. Generally etc. are strong and effective entrepreneurship. According to the
the model of a separate regulating enough professionally with National Venture Capital
agent titled Financial Reporting adequate capacity (xiii) the new Association, in all of 2008 there
Council (FRC) under Financial model of regulation is cost have been just six companies that
Reporting Act is applicable and effective and the public interest is have gone public. Compare that
effective model where: (i) visible (xiv) implementation of with 269 IPOs in 1999, 272 in
corporate governance system is regulation process will not be cost 1996, and 365 in 1986."
stronger and effective and burden for small and medium (According to Hoover's IPO
concerns continuing improvement companies for their growth in Scorecard, however, 31, not six
(ii) more than one professional phases (xv) the foreign companies companies went public on the
accounting body/institute appear in will not be discouraged to set up major U.S. stock exchanges in
the market prominently involved in business and listing in capital 2008, a year when the economy
auditing services by their members market due to bureaucratic process was much worse than 2007 (when
(iii) the auditors and the regulating and cost of compliance (xvi) the 209 companies went public) or
institute of the auditors fail to new regulation will trickle down 2006 (205 IPOs). A 2012 Wall St.
render professional services with the benefit of all stakeholders Journal editorial stated, "One
due care by auditors and to ensure including auditors. reason the U.S. economy isn't
public interest by the institute (iv) creating enough jobs is that it's not
the financial scandals are common The Effectiveness creating enough employers... For
features in the market and audit the third year in a row the world's
fails to address those either In the developed countries the leading exchange for new stock
unintentionally or deliberately (v) corporate and state environments offerings was located not in New
the professional competence is up and rule of laws are much better York, but in Hong Kong... Given
to the mark of satisfaction and than Bangladesh and the aforesaid that the U.S. is still home to the
financial scandals come from the regulating act can be easily world's largest economy, there's
lack of professional due care as enforceable as the financial no reason it shouldn't have the
stated earlier (vi) the professional scandals or financial misreporting most vibrant equity
markets—unless regulation is

Global Financial Reporting Regulation
holding back the creation of new dilemma. Gordon Massie, the head experts are (i) cost associated have
public companies. On that score of the Leveraged Finance Group prevented public companies from
it's getting harder for backers of the with management responsibility for reporting higher profit (ii) Small
Sarbanes-Oxley accounting law to 60 investment professionals and and Medium Companies are
explain away each disappointing nearly $20 billion of invested looking to leave capital market due
year since its 2002 enactment as assets and the whistleblower for to additional layer of bureaucracy
some kind of temporary or American International Group and cost of compliance (iii) Foreign
unrelated setback." Referring to the (AIG), discovered that the Companies inclined to leave
Public accounting oversight board company, the 18th largest capital market or not interested to
Thomas M. Brehmer states in an company in the world, was list for cost of compliance and
article on SOX, “A recent report actively covering up accounting conflicting with own rule of
from the federal accounting fraud from 2002 to 2005. The AIG regulations like EU allows
industry watchdog agency, the collapsed and SOX has failed to workforce in the Board but SOX
Public Company Accounting protect this. After SOX other than mandates independency of the
Oversight Board, found that the AIG, some serious accounting Board. (iii) Lower level of talent in
incidence of deficient audits scandal was found in USA as per the Companies.
performed by the Big Four Wikipedia like Royal Ahold
accounting firms doubled in 2010, (inflating promotional allowances), If we review the above findings on
reaching a somewhat horrifying 33 HealthSouth Corporation ( income performance of SOX and grounds
percent.” overstated in certain fiscal years by of applicability of financial
as much as 4700% and assets reporting act in Bangladesh, we
More than fourteen years ago overstated by 10% of the will find some issues to be aligned
corporate America was in disorder Company’s total assets), Chiquita and developed for effective
and enfolded by financial scandals Brand International (illegal implementation of the act and
at companies like Enron and payments violating US ensuring the expected outcome.
WorldCom that significantly anti-terrorism laws), Lehman These are- (i) arranging and
battered public confidence in U.S Brothers (failure to disclose Repo ensuring good corporate
commerce that led to enacting the 105 transactions to investors), governance practice (ii)
Sarbanes-Oxley Act (SOX) as stated Autonomy Corporation ( a constituting the FRC with more
earlier. The law forced change in subsidiary of HP causing serious professional or business leaders for
corporate accounting practices and wrong accounting or financial quality services for the
imposed stiff penalties on company impropriety ) etc. With some of the development of the professional
officials who react against above scandals, the offices of UK practices and implementation of
whistleblowers. Has SOX of the said companies were the act (iii) ensuring rule of law by
overcome the situation of USA directly involved in spite of having the Government to bring all
from financial reporting scandal? FRC in UK since 1990. defaulters including the directors,
The Answer is -Certainly not! Even top management and influential
after Sarbanes-Oxley Act, US In addition to the above, some other persons under law for any
whistleblowers, the authority major findings on performance on non-compliance of law about
raising wrongdoing activities, face SOX as assessed by different financial presentation of operation

in addition to auditors. (iv) not need to follow and go forward responsibilities. To improve the
enriching the professional capacity blindly without judging its corporate governance in order to
and quality in conducting audit (v) effectiveness and expected get transparent corporate culture,
designing a standard fee structure outcome. The existing Companies the attempt we should have first (i)
to cover the cost of audit for Act, securities laws, taxation laws to reform the Companies Act and
quality audit services (vi) ensuring are defective to protect corporate securities laws to make it
ethical business and corporate scam. Both the Companies Act and contemporary & standardized
culture (vii) Strengthening the role securities laws are weak to address removing all ambiguity,
of regulators with capacity etc. standard framework of corporate contradictions and shortcomings
(viii) focusing professional upside governance for providing with a view to catering standard
instead of downside oriented transparent financial reporting. The corporate governance framework
punishment (ix) resolving the legal Board and the management (ii) to introduce national code of
contradiction and ambiguity of the significantly play a great role to corporate governance for all types
financial reporting act like the create corporate scam abusing the of companies based on which SEC,
definition of Public Interest laws that leads to misleading BB and other regulators may
Enterprise (PIE) which should cover financial statements. We need to introduce the guidelines for their
such organizations that avail a update the Companies Act, members (iii) to make mandatory
large amount of bank loan, i.e., the securities laws, Bank Company Act by law or by the code that every
public money. (x) having and other applicable laws for company must have corporate
commitment with adequate making liable the all corporate governance principles in writing as
capacity to adopt and issue the players like board & management approved by the Board in line with
required standards and guidelines for their duties & responsibilities in national code and to submit to the
in time to implement in timely the corporation and the auditors regulator (iv) to strengthen capacity
manner to make it consistent with for their professional fraud, of regulators like SEC, BB, RJSC
world’s presentation (xi) Keeping manipulation or misconduct. In and IRDA with review and
FRC free from political influence order to protect the whistleblower, monitoring framework making
and biasness (xii) upholding the the whistleblower protection them equipped professionally,
professional dignity and ICAB measures should be adopted to technically and technologically for
image for talent hunting for good secure the massive disaster in enforcement of corporate
leadership of the profession (xiii) corporate. If those acts are sharp governance. If the above actions
adopting the law for protecting and enforcement thereof is strongly could be effective, the corporation
whistleblower. effective by regulators, the good would get a directive pathway and
corporate culture will be evolved the regulators & accounting
As I stated earlier in my another resulting financial reporting professionals would be more active
article ‘an overview of Draft transparency. So, the thing we watchdog with keen eyes with
Financial Reporting Act 2010’ that need strongly and intensely for responsibilities and liabilities. All
the act reflects a traditional attempt transparency of financial reporting functions will be aligned towards
to control, in the name of public is good corporate culture evolved financial reporting transparency
interest oversight, financial from good Corporate Governance and thus, the financial reporting
reporting, accounting and auditing encompassing (i) good board transparency would come by the
profession in the country as if we practice (ii) effective control systems and efforts of all level.
are tightening the mouth of a jar process including internal control
keeping thousands of leaks on its systems in use (iii) transparent
body. We need to repair the leaks disclosures and (iv) protection of The Author is an
and then tighten the mouth of jar shareholders’ right (v) Board’s Associate Member of ICAB
to avoid of being empty. We do commitment to their duties and

Financial Reporting Regulations Go Global
A Cerebral Review
M Jalal Hussain FCA
Introduction set of global standards for financial

reporting with the U.S. Financial
Accounting Standards Board (FASB). Both
Despite the challenges of inequality, IASB and FASB cordially agreed to
culture and flight of capital beyond catechize convergence of U.S. standards
borders, economic and financial with international standards. Given this
globalization took place in the present situation, many accounting researchers
competitive world. The stakeholders, and practitioners in developed and
politicians and economists have accepted developing countries spent a large amount
the globalization concept by the great of their time considering the implications
hope, optimism, development and of a set of global financial reporting
progress. As businesses go global with regulations that comprise of uniform sets
new rhetoric phrases like “moving of accounting for recording global
forward” or “moving on”, the importance transactions, financial statements, financial
and necessity of uniform financial reports on environmental issues,
reporting regulations have greatly been economic viabilities and so on.
felt by the entrepreneurs, investors, International Financial Reporting System
accounting professionals, leaders and wise (IFRS) had been developed by IASB to
politicians around the globe. To meet the bring the global financial reporting
committals and challenges of rapid regulations under one umbrella enabling
globalization of industries, business and the global investors to understand the
commerce, tremendous pressure is there performance of their investments strewed
to adopt an acceptable, a resilient and around the whole world.
spick-and-span financial reporting
regulations world-wide. Globalization Many listed companies in the developed
that distends economic integration and and developing countries successfully
interdependence of regional, national and introduced IFRS but non-listed companies
international economies and exacerbates in developing countries are still far behind
beyond-border movement of goods, in implementation of IFRS.
services, capital and technologies, is a
major issue that determines the future of The perception for fundamental reforms to
financial reporting systems and standards. private and public sector financial
reporting are mounting gaudier and
The International Accounting Standards becoming more pervasive as the level of
Board (IASB) strived to pull together one

cognizance of the potential are plethora of challenges and
benefits of such reforms locally bottlenecks but these can be
and globally upsurges. The swift summarized under three categories
acceptance of IFRSs by countries as bounded rationality, process and
around the globe, the prospect of technical challenges.
keeping a single set of high-quality
global accounting and financial Putting IFRS into practice needs
reporting regulations for the use by educated and skilled accountants
private and public companies in all and auditors and these are in short
countries become more tangible supply in many countries in Africa
and more pulsating. The need for a and Asia. As a result these
standard set of global accounting countries face climacteric
and financial reporting regulations problems in implementing IFRS.
has been necessitated by the global Technical capacity is a basic
financial crisis started from USA to requirement for effective
Asia to Europe, which indorsed the implementation of IFRS. “Countries
MANY LISTED
interconnectedness of the world’s that implement IFRS face a variety
financial reporting systems, of capacity-related issues, COMPANIES IN THE
regulations and standards and depending on the approach they
italicized the demand for take. One major challenge DEVELOPED AND
translucent and agnate financial encountered in the implementation
information within the countries of process is the shortage of skilled DEVELOPING
the present time. accountants and auditors who are
COUNTRIES
technically competent in
Challenges to Implement of implementing IFRS and ISAs” said SUCCESSFULLY
Financial Reporting United Nations Report.
INTRODUCED IFRS
Regulations Globally Transactional frailties are
imbedded in the presence of BUT NON-LISTED
The existing financial reporting
scarce resources, poor skill
practices, standards and COMPANIES IN
performance and raunchy
regulations are controlled and
navigated mostly by two
application management. Process DEVELOPING
and technical impairments also
international bodies, viz., IASB and COUNTRIES ARE STILL
oscillate with the convolutions of
FASB. IASB has introduced IFRS as
IFRS technical accounting and
a standard reporting systems and
reporting standards. The overlap of FAR BEHIND IN
many countries in Europe
local and international regulatory
implemented IFRS as backed by IMPLEMENTATION OF
considerations, the required
legal authorities. FASB on the other
hand has been following Generally
conversion across business units IFRS.
and countries are considered as
Accepted Accounting Principle
mordant obstacles to execution of
(GAAP) especially in US and local
IFRS. Many countries lack the level
GAAP has been followed by many
of information technology (IT)
countries in Asia, Africa and Latin
set-up required in the organization
America. Many challenges are
and the scarcity of IT professionals
there that hinder the swift
with IFRS technical knowledge
implementation of global financial
who can construe and convert IT
reporting regulations. The location
applications for IFRS.Other notable
of the country, its culture, tradition,
challenges faced by third world
the education and skill of the
countries in application of global
people, financial and economic
financial reporting regulations are
creditworthiness of a country are
meretricious resource deployment,
the determinants for smooth
inadequate staff, etiolated training,
implementation of uniform
enfeebled management, bereaved
financial reporting standard. There
legal, political and state

sustenance. specifically required. benignities and recompenses of
having a uniform and commonly
IFRS vs. U.S. GAAP  Balance Sheet and Income understood financial reporting
statement layout is different. standards reinforced by strong
The contrariety about the adoption global accounting and financial
of IFRS in the U.S. has reeked in  There MUST be the clear reporting regulations. Globalized
the past few years. U.S. is presentation of debt (current financial reporting system brings
considered as the world power and vs. non-current). together material information
one of the most developed nation about amulti-national
in the world and as such all  Classification of deferred tax organization’s strategy,
disquietudes are on U.S. The U.S. assets and liabilities. governance, performance and
has not approbated and prospects in a way that reflects the
implemented the IFRS in as much  Classification of expenses on commercial, social and
as it champions for the adoption of the income statement. environmental context within
IFRS in other countries. It has which it functions. It provides a
preferred to keep using the US  Income statement – succinct and synoptic
GAAP. There are a lot of extraordinary items. representation of how an
resemblancesand divergences organization
between the US GAAP and the  Income statement – enucleatessustentation and how it
IFRS and few though over-riding discontinued operations. generates and withstands value in
differences between the US GAAP the long run.
and the IFRS such as the  Disclosure of performance
accounting treatments on inventory measures. Global corporatebodies that
and intangible assets. There have practice the same standards,
been talks between the setters of  Third balance sheet. regulations and practices to
both standards on the possible prepare their financial reports can
convergence for many years now. Why Do We Need Global be compared to each other more
However, adoption of IFRS is yet Financial Reporting accurately and precisely. This is
to see the light at the end of the particularly important when
Regulations? comparing the performances of
tunnel in US.
different companies located in
The world interchanges very fast different countries, as they might
The Boards of Directors from FASB
with the globalization of otherwise be using different rules
and the IASB, as they work
businesses and industries. and methodologies to prepare their
unruffled on the most significant
Globalization has prompted more statements and financial reports.
metamorphoses between US
and more investors to open their IFRS have become the de facto
GAAP and IFRS have pinpointed
business doors to foreign global standard for financial
the nine most significant
investments and expand their reporting. Its quality has been
dissimilaritiesthat are summarized
businesses to cross-border validated by almost a decade of
by Ernst & Young as below:
countries. Private and public sector use by markets in both advanced
investors want to acquiesce the and developing economies. The
 Financial periods are

United States has not yet the Accountants International that can ensure a common and
espousedIFRS and other countries Study group, followed by the first uniform reporting system. Most of
continue to hold out as well. This International Accounting textbook the EU member countries adopted
makes accounting and financial in 1967. The International IFRS in listed or publicly traded
reporting problematicby Association of Accounting companies. Many non-listed or
foreign-based companies that do Standards Committee (IASC) was private companies didn’t
business with America as they established. This group was implement IFRS although
often have to prepare financial established by the U.S. American implementation of IFRS is
statements using IFRS and another Institute of Certified Public mandatory for both listed and
set using American GAAP.IFRS Accountants (AICPA) in 1973. The non-listed companies in EU. In
uses a be-all and end-all-based, Financial Accounting Standards Asia, Africa and Latin America,
rather than rules-based viewpoint. Board (FASB) became a member of most of the listed companies could
This gives companies the freedom the IASC and voiced support for not fully implement IFRS and
to acclimatize IFRS to their specific Internationalization of Standards in thousands of non-listed companies
situation, which leads to more 1988. By 1991, FASB issued its remain outside the prerogative of
straightforwardly and useful first Strategic Plan for International IFRS.
financial statements. Activities, also involving United
States Congress and the Securities The United States of America, as of
Where Do We Stand Now and Exchange Commission(SEC). August 2012, has not officially
on Global Financial Abreakthrough occurred in 2002. adopted IFRS as their financial
FASB and IASB completed “The reporting standard. US GAAP
Reporting? Norwalk Agreement” at a joint remains the current financial
meeting on September 18, 2002 in reporting standard in US. “The
Lots of on-going discussions took Norwalk, Connecticut. IASB, whose guidelines are used in
place between most of the nations more than 120 countries mainly in
on the present globalized world As on September 30, 2015 more Asia, Europe and Africa, and the
that desired a more globally than120 countries across the globe
uniform financial reporting system have adopted fully or partly the U.S. FASB has been locked in talks
since the 1960’s. During that globally accepted IFRS as the to fine-tune their standard rules for
decade, 1966 saw the formation of global financial reporting standards many years. The work has become
Worldwide IFRS Adoption Map-For Public Companies

bogged down in technical debates
and pressure from auditors – such
as KPMG, PwC, Deloitte and Ernst
& Young – to take time to get it
right, but policymakers are losing
patience as investors are left
waiting” (Jones, 2012).The US SEC
preliminary plan which would
require US-listed companies to
report under international
accounting rules no earlier than
2015. The IASB has reported that
over 120 countries have adopted
IFRS, without the United States in
the list. Other major countries,
including China, Japan, and
Singapore have yet to undertake;
and are waiting for the US to
entwine, which in turn would
Commissions and the International accounting and financial reporting
bolster them that America has
Federation of Accountants standards set by IASB and FASB
fully committing to IFRS.
(IFAC).The world body of still conflict on many cases and
accountants (IFAC) and accounting become more complex over the
Currently, IFRS profiles are
and financial reporting regulations last few years. Standard setters and
completed for 140 countries and
setter (IASB) have the phantasm to regulators are acutely aware that
other publications including the
provide “for-profit” public and investors can be jumbled and
G20 jurisdictions plus 120 others.
private sector entities of the global preparers overwhelmed by the
The 140 profiles cover all areas of
world a common, comprehensive complexity of accounting standards
the world:
and high-quality global financial and by the content and volume of
reporting standards. The recent information presented in financial
Region Number of Percent of cases for fraudulent reporting range statements.“Complexity in
Jurisdiction Total from Enron of US and WorldCom accounting is costly for both
Europe 43 31% of US to Global Crossing of investors and companies,” FASB
Africa 19 14% Bermuda, to Polly Peck of UK, Chairman Russell Golden said in
Middle East 9 6% Parmalatof Italy, to Satyam of December at the AICPA
Asia & Oceania 32 23% India, to Olympus ofJapan are just Conference on Current SEC and
a few names to mention.Even the PCAOB Developments. “For
Americas 37 26%
Lehman Brothers case can be investors, overly complex financial
TOTAL 140 100% related to fraudulent financial reports often obscure important
reporting as there was a failure to information they need to make
Source: IFRS, June 2015
disclose Repo 105 to investors. sound capital allocation decisions.
Financial reporting frauds caused For preparers, a complicated,
What’s the Envision of IFAC colossal losses to the stakeholders unclear, hard-to-understand
and IASB on Global and also begrimed the goodwill standard obscures its meaning.
Financial Reporting and grandiosity of professional And even when an accounting
Regulations? organizations that upsurges the treatment is clear, applying it can
vision, mission and responsibilities be lengthy, difficult, and
The vision of global accounting of the SEC, IFAC and IASB towards expensive.” The apparition of
standards has been overtly founding a strong and effective IFAC, SEC, IASB and FASB should
supported by many international global financial reporting be to make the global financial
organizations, including the G20, standards. reporting standards simple, clear
the World Bank, the International and easy-to-understand by the
Monetary Fund, the Basel It’s witnessed by the professional users at national and global level.
Committee, International accountants on different
Organization of Securities international events that the

Conclusion framework, thereby enhancing To recap, as of September 2015,
economic output. over 120 countries have been
Global financial Reporting using these international standards
Standards are collocated in IFRS for There is a mounting acceptance of (IFRS).Since the current US
practice by all countries in the IFRS as a basis for financial Government and the SEC
present world. IFRS have reporting across the world. This avouched plan to adopt IFRS in
prefigured the dawn of a new era momentum represents a 2015 and the United States is an
in modern-day accounting and fundamental change for both axiomatic part of the global
financial reporting systems national and global accounting financial mise en scene, it would
globally. IFRS have been widely systems and professions. Since be a great obligingness for US and
adopted in all the corners of the establishment, the number of other countries doing business
world-East, West, South and North. countries that require or allow the with US, if the United States join
The innumerable benefits of use of IFRS for the preparation of these countries and adopt IFRS as
adopting the IFRS far outweigh the financial statements by publicly swiftly as possible. Adoption of
relevant costs. Prudently all traded companies has continued to global financial reporting
individual companies are increase. Proactive efforts and regulations by all countries
reinvigorated to adopt the IFRS as strong support of the governments including USA will concatenate
they present new progressive of the countries that couldn’t and ensconcethe global practices
developments such as the implement global financial and will bring a revolutionary
preparation of high quality reporting systems, are a must. change in the fraud-prone and
financial statements; Financial and technical assistance malfeasance global world by
harmonization of the underlying ofIMF, ADB, IFAC are sine qua non providing uniformity, reliability,
accounting bases; cost savings to for adoption of global financial transparency and comparability of
companies on translations of reporting regulations. Those days global financial reporting.
financial statements; opportunities are not far away when the global
for retrieving a larger pool of practices will be guided, controlled
credit; acceleration of cross-border and regulated in all countries The Author is the CFO of a
listing and ease of comparability. –developed, emerging, private group of companies and
Global Financial Reporting developing and underdeveloped, a Fellow Member, ICAB
Regulations have macro-economic by a high-quality and a uniform
benefits to a country as they financial reporting regulations.
improve on the financial reporting

Accountability of Bank Management
in USA for Fraudulent Reporting
Iftekhar Hossain FCA
The US Securities and Exchange In its quarterly and annual filings with the
SEC for 2010, 2011 and the first two
Commission (SEC) website shows that quarters of 2012, Trinity materially
Trinity National Corp. and its wholly misstated its provision for loan losses and
owned subsidiary, Los Alamos Bank, have its allowance for loan and lease losses. In
agreed in September 2015 to pay $1.5 2011, it reported profit of $4.9 million
million to settle charges of accounting instead of a loss of $25.6 million,
fraud. understating its net loss available to
common shareholders by $30.5 million.
Trinity Capital Corporation is a New According to its restatement, Trinity’s
Mexico corporation headquartered in Los provision for loan losses was understated
Alamos, New Mexico, USA. Trinity is the by $6.8 million (25%) in 2010, $22.3
holding company of Los Alamos National million (73%) in 2011,and $4.5 million
Bank, a national banking organization (68%) in the first quarter of 2012. Trinity
with $1.4 billion in assets. Trinity’s overstated its provision for loan losses for
common stock is registered with the the second quarter of 2012 by $2.3
Commission. million (31%).
As the economy declined during the According to the SEC’s complaint, the
financial crisis, Trinity Capital Corporation fraud was directed by Trinity’s
and its wholly-owned subsidiary, Los
Alamos National Bank (collectively, • Former chief executive officer (CEO),
“Trinity” or “the Bank”), experienced an William Enloe,
increase in problem loans and a decrease
in the collateral values supporting its loan • Former chief credit officer (CCO), Jill
portfolio and other real estate owned Cook, and
(“OREO”). In response, certain former
members of the Bank’s management • Former senior lending officer (SLO)
caused the Bank to engage in false and Mark Pierce.
misleading accounting and reporting that
concealed the Bank’s delinquencies and The complaint also alleges that former
declining collateral values and to hide the
true nature of its loan and OREO portfolio.
1
http://www.sec.gov/litigation/admin/2015/34-75999.pdf

• Chief financial officer (CFO) The alleged fraud was motivated,
Daniel Bartholomew, and at least in part, by the bank’s desire
to be released from a formal
• Vice president of internal audit supervisory agreement between
(VP-IA) Karl Hjelvik the bank and the Office of the
Comptroller of the Currency.
failed to implement sufficient
internal accounting controls and Summary Details of the
failed to ensure that the bank’s
Scheme
books and records were reasonably
accurate.
As laid out in the SEC’s complaint
filed in federal court, and the
Trinity, CEO, CFO, and VP-IA
settled administrative proceedings,
agreed to settle the SEC’s charges,
the fraudulent activities included:
while the litigation continues
against CCO and SLO.
• CEO Enloe, CCO Cook, and
SLO Pierce
Trinity and CEO consented to an WITHOUT
order to cease and desist from
• Directed Trinity’s loan ADMITTING OR DENYING
violating the antifraud, reporting,
department to engage in a
books and records, and internal THE SEC’S FINDINGS,
variety of conduct that kept the
controls provisions of the federal
bank from properly recording TRINITY AGREED TO
securities laws. Without admitting
losses on its financial
or denying the SEC’s findings,
statements, such as not PROVIDE ONGOING
Trinity agreed to provide ongoing
downgrading loans that were
cooperation and to pay a $1.5
delinquent and making
COOPERATION AND TO
million penalty, which takes into
account the company’s significant
delinquent loans appear to be PAY A $1.5 MILLION
paying on time; not identifying
remedial measures and
loans for which the bank was PENALTY, WHICH TAKES
cooperation during the
not going to be paid in full; INTO ACCOUNT THE
investigation. CEO Enloe agreed to
and not properly measuring
pay a $250,000 penalty and also COMPANY’S
individual loans for
agreed to be barred from serving as
impairment.
an officer or director at a public SIGNIFICANT REMEDIAL
company for five years. CFO
Bartholomew and VP-IA Hjelvik
• Extended credit to troubled MEASURES AND
borrowers that was used to
consented to charges of books and
make required payments on COOPERATION DURING
records, reporting, and internal
existing debt, which would THE INVESTIGATION.
control violations, and entered into
result in the borrower
cooperation agreements with the
appearing current on loan
SEC to assist in the litigation
payments when, in fact, the
against Cook and Pierce.
bank was not actually making
any collections from the
"Trinity was facing dire financial
borrower.
straits but rather than accurately
report its losses, we allege that the
• Failed to identify loans where
firm's executives grossly
it was probable that the bank
misreported its income to
would be unable to collect all
shareholders and regulators,” said
amounts due under the loan
Andrew J. Ceresney, Director of
agreement. In some instances,
the SEC’s Division of Enforcement.
documents were intentionally
"We will hold senior executives
drafted to avoid triggering a
liable when they misstate the
review of the transactions as
company's performance and fail
troubled loans.
to come clean with shareholders."

• Knew that collateral was worth basis; identify individually (1) The allowance required for
significantly less – sometimes impaired loans; and measure loans not individually assessed
millions of dollars less – than impairments properly and take for impairment, which is based
the amounts used in appropriate losses on real on grouping by loan grade and
impairment measurements, yet estate owned by the bank. type and collectively
they did nothing to correct the evaluating the pools for
inaccuracies. The website contains the three impairment; and
separate administrative
• CEO and CFO instructed proceedings against (i) Trinity (2) The allowance required for
employees to reject and not Capital Corporation, (ii) William C. individually impaired loans,
use appraisals that indicated Enloe -former CEO, and (iii) former which is based on an
lower values on the bank’s CFO Daniel Bartholomew and individual loan level
collateral and other properties. former Vice President of internal measurement of impairment.
audit Karl Hjelvik.
• SLO drafted and reviewed loan Any increase in the ALLL must
memoranda that were false The proceedings , inter alia, state be accompanied by the
and misleading and, together the following: recording of a provision for
with CEO Enloe and CFO loan losses on the income
Cook, permitted them to be 1. Facts - Relevant statement, thereby increasing
presented to outside auditors reported losses.
Accounting Guidance and
and others when they knew, or
were reckless in not knowing, Bank Policies 1.2. GAAP requires that OREO be
that the information hid the valued upon receipt at fair
troubled nature of various 1.1. Banks carry loans on their value less costs to sell and on
loans. balance sheets as assets and an ongoing basis measured at
generally record interest the lower of its carrying
• CFO Bartholomew and VP-IA income on the loans on their amount or fair value less cost
Hjelvik knew or should have income statements. According to sell. GAAP and Rule 9-04
known that certain impairment to Generally Accepted Item 14(d) of Regulation S-X
measurements were not Accounting Principles required the Bank to record on
correct and that some (“GAAP”), estimated loan its income statement any loss
appraisal valuations were losses must be accrued when it on OREO.
significantly overstated. In is probable that losses have
addition, neither of them took been incurred and the amount
of the loss can be reasonably 2. Facts-The Bank Failed To
action to implement adequate
estimated. These loan losses Measure Collective
internal accounting controls.
are recorded on the balance Impairments Properly
• As a result of this and other sheet as the ALLL (allowance
conduct, Trinity failed to for loan and lease losses). The 2.1. The Bank’s material
downgrade loans on a timely Bank’s ALLL includes two misstatements regarding the
components:

first component of the ALLL certain members of management management backdated
primarily stemmed from the to avoid having any “bad documents to make it appear
Bank failing to properly grade loans” in their loan portfolios, as if additional credit had been
hundreds of loans. During the including any loans that were extended prior to Trinity’s
Relevant Periods, the Bank’s graded below pass and loans internal audit department
loan policy provided for seven that were more than 30 days downgrading a loan
loan grades: pass1, pass2, past due. As a result, the relationship to substandard. In
pass3, special mention, Bank’s loan department other instances, credit was
substandard, doubtful, and ignored and hid loan extended to borrowers without
loss. Throughout the Relevant weaknesses that required the required credit analyses
Periods, the Bank’s loan downgrades and waited as being completed. In one
portfolio included numerous long as possible to downgrade instance a borrower’s loans
loans that were graded as pass, loans below pass, which were downgraded from pass to
but should have been sometimes included waiting substandard by the internal
downgraded to special until the loan was at or over audit department in late March
mention or substandard. These 90 days past due, or until the 2011, were then updated to
grading errors resulted in the loan was selected for review pass at the direction of former
Bank understating its ALLL by a third party and was members of management in
because lower graded loans therefore at risk for being early April 2011, and were
carry a higher loan loss identified as a grade “miss.” then again downgraded to
estimate, thereby increasing substandard in May 2011
the first component of the 2.4. The Bank’s loan department when the borrower appeared
ALLL. undertook steps to prevent on a list of loans to be
downgrades on certain loan reviewed by a third party.
2.2. Pursuant to the Bank’s loan relationships, including
policy, loans were to be authorizing checking account 3. Facts - The Bank Failed to
graded special mention when overdrafts and the extension of Identify Troubled Debt
they had potential weaknesses additional credit to borrowers
that deserved management’s who were unable to make Restructurings (TDR) and
close attention. Loans were to their required principal and Other Individually Impaired
be graded substandard when interest payments on their Loans
they demonstrated well existing debt. Sometimes this
defined weakness. Internal additional credit would be 3.1. The Bank’s failure to identify
Bank training further granted using loans referred to individually impaired loans,
elaborated on the as “ABC Loans,” which stood including TDRs, led to
characteristics of substandard for “Additional Balance Club material misstatements
loans, including those that are Loans.” The additional credit regarding the second
seriously past due (60 days or was used to make required component of the ALLL. GAAP
more) and those with payments on the existing debt, provides that a loan is
inadequate future cash flow which would result in the impaired when it is probable
potential, insufficient cash borrower appearing current on that the creditor will be unable
flow, unprofitable operations loan payments when, in fact, to collect all the contractual
and/or inadequate debt service the Bank was not actually interest and principal
coverage, questionable making any collections from payments as scheduled in the
repayment source, and the borrower. loan agreement. When loans
advances to fund interest are changed, for example by a
payments. 2.5. Certain former members of the restructure, extension or other
Bank’s management and loan modification, GAAP requires
2.3. During the Relevant Periods, department employees the transaction be evaluated to
the Bank’s loan department circumvented and ignored determine if the change
operated under a culture that internal accounting controls by constitutes a TDR. If a loan is
discouraged downgrading failing to downgrade troubled determined to be a TDR,
loans to special mention or loan relationships. For GAAP considers the loan
substandard. Loan officers example, one instance, a individually impaired and
were under pressure from former member of the Bank’s requires the amount of the

impairment to be measured based
on the individual impairment
guidance.
3.2. During the Relevant Periods,

the Bank failed to identify
hundreds of Individually
impaired loans, understating
the loans that should have
been considered individually
impaired by more than $50
million or more than 70%
during the Relevant Period.
Many of the newly identified
impaired loans were also
TDRs. In identifying impaired
loans, the Bank’s loan
department ignored GAAP and
failed to identify certain loans
as impaired until all potential
means of repayment, were
exhausted which in certain
cases included the Bank
granting numerous
concessions to the borrower. 4.2. It was the Bank’s practice to “as-is” appraisal value. However,
In some instances, the Bank’s order annual appraisals on in at least two instances,
internal loan documents were loans graded special mention, certain former members of the
intentionally drafted to avoid substandard, or worse. Among Bank’s management directed
triggering a review of the other things, these appraisals the use of the higher “as
transaction as a TDR. were used to value the Bank’s stabilized” or “as completed”
collateral that was used to values in measuring
4. Facts-The Bank Failed To measure the loss on impaired impairment losses when an
collateral-dependent loans. as-is appraisal should have
Measure Individual Loan The Bank’s appraisal been used.
Impairments Properly department used a standard
engagement letter that 5. Facts-The Bank Failed To
4.1. The Bank also made material
required appraisers to value Take Appropriate Losses On
errors regarding the second
properties in their current state
component of the ALLL by
(“as-is”). On properties still OREO (Other Real Estate
failing to measure properly the Owned)
under construction and
loss for individually impaired
completed properties
loans. If a loan is individually 5.1. During the Relevant Periods, it
generating income, the Bank
impaired, the amount of was the Bank’s practice to
also ordered appraisals that
impairment must be measured order appraisals on properties
would provide the value of a
and recorded as an expense that were moving into OREO
property at the time
with a corresponding amount and annual appraisals on
construction was complete
recorded to the ALLL. GAAP properties that remained in
(“as-completed”) or when the
permits the impairment to be OREO. In 2011, the Bank
property reached stabilized net
measured using the fair value failed to properly value and
operating income
of the underlying collateral if account for impairments to its
(“as-stabilized”). For purposes
the loan is collateral OREO by not using appraisals
of measuring the impairment
dependent, which is the that indicated that the value of
on a collateral dependent loan,
method the Bank typically OREO properties had
the Bank was required to
utilized. GAAP requires that decreased and that a decrease
consider the current condition
the best information available in the net carrying amount of
of the property, which can be
in the circumstances be used OREO was required.
accomplished by using an
to determine fair value.

Additionally, subsequent event the analysis of TDRs. For example, the loan department, in practice,
appraisals received after the the Bank’s internal loan loan department employees
end of a quarterly or annual approval and credit review were charged with
period, but before the financial processes failed to require an determining when appraisals
statements were filed, that analysis of whether a loan would be ordered on classified
provided a better estimate of modification or extension was loans and OREO properties.
the fair value of the OREO at a TDR. Similarly, in some Further, at the direction of
the end of the prior period instances, feedback and certain former members of the
end, were not always used, as working papers from Bank’s management and loan
required by GAAP, in the independent, third-party loan department, appraisals were
Bank’s OREO accounting. reviews indicated that a TDR sometimes not ordered timely,
analysis should be performed delayed, or ordered without
6. Facts-The Bank failed to on specific loans; however, the standard request for an
Devise and Maintain a there were no controls in place “as-is” fair value. The
to confirm that this feedback accounting department was
System of Internal was reviewed, noted, and not automatically notified
Accounting Controls acted upon. Further, during the when appraisals were
Relevant Periods, TDRs were received, which meant that
6.1. The material misstatements rarely discussed within the they were not always aware of
and the conduct by certain loan department, and appraisals relevant to
former members of Bank employees were not properly impairment measurements or
management was facilitated by instructed as to how and when OREO write downs.
the intentional circumvention to analyze modifications as
of internal accounting controls, potential TDRs. Finally, 6.6. Additionally, appraisals
but were also aided by the numerous loans should have received after the balance
Bank’s failure to devise and been evaluated as TDRs sheet date were not always
maintain a system of internal because a new loan was considered, as required by
accounting controls. provided to pay interest or GAAP, in the Bank’s loan and
principal due on an existing OREO impairment accounting.
6.2. During the Relevant Periods, loan. The Bank’s loan policy The Bank was aware of this
the Bank lacked sufficient failed to consider whether this internal control issue by at
internal accounting controls situation resulted in a least 2009 when the Bank’s
over the periodic review of “concession.” outside auditor found a $2.2
loans to ensure loans were million subsequent event
accurately graded and to 6.4. The Bank lacked sufficient accounting error. Nonetheless,
identify troubled and impaired internal accounting controls the Bank failed to implement
loans. Further, the Bank’s over its accounting for controls to adequately address
internal audit department was impaired loans in conformity this issue and, throughout the
not independent from with GAAP. Loan department Relevant Periods, the Bank’s
management and, as a result, personnel calculating the internal audit and accounting
the Bank’s Audit Committee impaired loan losses did not departments continued to
was not always provided with possess sufficient accounting stumble across appraisals that
complete and independent expertise and there was not had not been factored into the
audit findings. The Bank’s adequate involvement or Bank’s accounting.
internal audit department also review by the accounting
lacked a formalized risk department. As a result, errors 6.7. The Bank also lacked sufficient
assessment process and, as a occurred in the calculation of internal accounting controls
result, did not sufficiently impaired loan losses. over the Bank’s processes and
consider risks in financial computerized systems that
reporting in establishing audit 6.5. The Bank also lacked sufficient housed appraisals and loan
procedures. internal accounting controls information. Controls were
over appraisals. While the inadequate to ensure all
6.3. The Bank also lacked sufficient appraisal process was to be received appraisals were
internal accounting controls separate and independent from preserved in the Bank’s
over the use of ABC Loans and database. Numerous

employees, including loan officers, example, Enloe was aware of false 7.2. While serving as the Bank’s
had edit rights to these systems and misleading information in Chief Financial Officer, Daniel
allowing them to alter or impairment memos that were Bartholomew failed to
delete data about loans, provided to internal implement adequate internal
appraisals, collateral values accountants and the external controls over, among other
and customers. Because of auditors, including incorrect areas, impaired loan loss
these inadequacies, employees impairment calculations on calculations, troubled debt
could delete appraisals or loans that understated losses. restructurings (“TDRs”),
change collateral values Enloe was also aware of subsequent events, OREO, and
without documenting why the material information regarding appraisals. In some instances,
alterations were made. When the Bank’s loan portfolio that Bartholomew was also a cause
appraisals and collateral values was not provided to the of Trinity’s false books and
were deleted, the result was external auditors, including records and the submission of
that information was not made evidence of significant inaccurate reports because he
available to the OCC and borrower relationships where was on notice of certain
other third parties, as well as the borrowers were delinquent transactions that failed to
other Bank employees. or had indicated an inability to comply with generally
pay and yet the Bank did not accepted accounting principles
7. The proceedings against downgrade the loans below (“GAAP”), but he failed to
the CEO, CFO and VP-IA pass or designate the loans as correct the accounting errors.
impaired.
contained, inter alia, the 7.3. While serving as the Bank’s
following Enloe Controlled and Directed head of Internal Audit, Karl
Trinity’s Violations - Enloe, as Hjelvik was directly
7.1. From 1994 to February 1, the CEO of Trinity, had responsible for testing the
2013, Enloe served as Trinity’s management authority over Bank’s internal accounting
CEO. Enloe is now employed Trinity, and did in fact control controls and compliance with
by a private company. and direct Trinity’s loan and GAAP. When Hjelvik became
OREO accounting. Further, as aware of issues in the way in
Misleading Statements to set forth above, Enloe which loans were accounted
Accountants - Enloe also orchestrated and was directly for under the direction of the
made, or caused to be made, involved in Trinity’s fraudulent Bank’s management, he failed
misleading statements to the financial report to report his concerns to the
Bank’s accountants. For Bank’s audit committee, and in

some instances, he failed to take Respondents agree to additional Learning for Bangladesh
action to remedy inaccurate proceedings in this proceeding to
reports and books and records determine what, if any, civil The general perception in
as required by the Bank’s penalties pursuant to Section Bangladesh is that collusive fraud
policies and procedures. 21B(a) of the Exchange Act against by Directors and Top Managerial
Hjelvik also failed to ensure Respondents are in the public personnel are prevalent in many
that effective internal controls interest. In connection with such banks in Bangladesh. News media
were in place over impaired additional proceedings: (a) also report frauds by employees in
loan loss calculations, TDRs, Respondents agree that they will bank branches. Given the gigantic
subsequent events, OREO, and be precluded from arguing that backlog of cases in the judicial
appraisals. they did not violate the federal system, it takes years for the legal
securities laws described in this process to be completed. Adoption
In determining to accept the Offer Order; (b) Respondents agree that of the above process where the
of the Respondents, the they may not challenge the validity Regulator (SEC and/or Bangladesh
Commission considered remedial of this Order; (c) solely for the Bank) can penalize the fraudster
acts undertaken by Respondent purposes of such additional based on his cooperation and
and cooperation afforded the proceedings, the findings of the agreement to additional civil
Commission staff. Order shall be accepted as and penalties, if any, in the public
deemed true by the hearing officer; interest will go a long way in
Respondents acknowledge that the and (d) the hearing officer may acting as a deterrent to potential
Commission is not at this time determine the issues raised in the crimes. It will also force the banks
imposing a civil penalty based additional proceedings on the basis to further improve the internal
upon their agreement to cooperate of affidavits, declarations, excerpts accounting and control systems.
in a related enforcement action. of sworn deposition or
However, pursuant to this Order, investigative testimony, and The Author is the Senior Partner,
documentary evidence. ACNABIN, Chartered Accountants

Financial Reporting in Bangladesh
Tofazzul Hussain FCA
Introduction precise size to attract readers’ attention.

For making it precise some information
might be implicit or isolated; I am
Writing an article on Financial Reporting responsible for any limitations in this
is a daunting task mainly because of the piece of writing on Financial Reporting.
jargon and technical terms involved; they
are much heard, seen and used. Readers
Importance of Financial Reporting
as well as the writer are likely to feel
bored and withdrawn from the topic for
It is an old cliché that ‘Financial
straight forward and delicate expressions
Reporting’ (FR) provides useful
of the editorial. Hardly there is any space
information to a wide range of users in
to put some reader-enticing humors while
making their economic decisions.
filling in the account owing to the fact that
Nonetheless, the term, FR, is being uttered
an essay on such a topic usually revolves
too often by the people in economic
around: real life accounting cases;
game. Following the Enrorn, WorldCom,
stigmatizing scandals; squabbling about
Sunbeam, Parmalat, Global Crossing,
who is to be ultimately blamed for the
Halliburton, Nicor Energy and many other
protection of investors’ money and for any
cases of real life corporate accounting
unfortunate financial debacle; and
scandals1 which preceded the ongoing
volumes of related books on rigid rules,
global recession2—originated in 2007 in
regulations and abstract principles of the
the USA partly from a creative accounting
financial reporting regime. So the article is
and reporting of notorious sub-prime
destined to be an informative literature
mortgages known as derivatives— and the
with some yawn producing prosaic
recent Stock Market Crash in Bangladesh,
elements, but on the other hand it is a
market regulators and various users of
delight both for me and the readers who
corporate financial information are now
are avid learners and who take financial
clamoring for quality financial reporting
reporting business seriously. Throughout
after being badly hurt by the devastating
the article I have used the terms and facts
effect of the financial disasters.
from authoritative sources and footnoted
Bangladesh Stock Market plunge
the references on relevant pages.
particularly has caused bewildering
Needless to say, I had been torn between
financial loss and embarrassed people
elaborating the article and keeping it to a
1
http://www.forbes.com/2002/07/25/accountingtracker.html
2
http://en.wikipedia.org/wiki/Financial_crisis_of_2007%E2%80%932008

from all walks of life including the Considering the information need
government. Financial reporting is in the market and its role in
blamed in those instances as there economic activities, the
are ostensible claims that the International Accounting Standard
reported financial information Committee (IASC), the predecessor
could have saved the damage to of the International Accounting
some extent, though not entirely. Standard Board (IASB) has issued a UNCAPPED
The cited cases are classic FRAMEWORK4 explaining the
examples of Corporate Crime or purpose of a set of general purpose
PROFIT MOTIVES OF
White-collar Crime3 which in its financial statements, and the COMPANIES COUPLED
own right entails several misdeeds concepts that underlie the
perpetrated by educated people preparation and presentation of WITH OUR AVARICE FOR
with responsible duties in business financial statements for external MATERIAL GAINS
organizations. And at times users. With the fundamental
financial reporting can be assumptions of Accrual Basis and TRIGGER THE HABIT OF
instrumental in committing such a Going Concern on top, these
crime as we can now vouch from
CREATIVE ACCOUNTING;
concepts such as:
these remarkable scams where FR BOTH THE OWNERS
had been compromised abusing  Understandability
the loopholes of the financial  Relevance AND THE MANAGERS
reporting regulations.  Timeliness CAN PLAY
 Reliability
Within the Reporting  Prudence ROLE-OWNERS TO
Framework  Comparability MAXIMIZE RETURN BY
 Truthfulness
“Financial Reporting”, that  Fairness REDUCING TAX BURDEN
 Recognition and measurement
underpins accountability, is a
of: asset, liability, equity,
AND TO AVOID IT AND
process to provide information
about the financial position, income, and expenses to OTHER REVENUE OR
financial performance, and cash maintain capital are to be
adhered to while the preparers PROFIT SHARING
flows of an entity through a set of
general purpose financial of the financial statements REQUIREMENTS E.G.
statements that is useful to a wide apply the relevant Bangladesh
range of users to make a diversity Financial Reporting BTRC SHARES REVENUE
Standards/Bangladesh
of investment, credit, and other WITH TELECOM
decisions including tax assessment. Accounting Standards
Users, the buyer of the information (BFRS/BAS) and Bangladesh OPERATORS;
in the reported financial Financial Reporting
Interpretations/ Bangladesh COMPANIES ALSO HAVE
statements, need to know the status
of the business as a result of its past Accounting Standards TO SHARE PROFIT WITH
performances to expect and predict Interpretations (BFRI/BASI)—all
of these together form the WORKERS UNDER
current or future capacity of the
entity. They at varying degrees BFRS5. LABOR CODE AND
hinge upon the information that
the concerned organization In addition to the Framework and WPPF-MANAGERS TO
BFRS, the local regulators like the
supplies to allure them. Therefore,
Registrar of Joint Stock Companies
EARN DESIRED
it is of paramount importance that
the information be useful and and Firms, the Securities and BONUSES OR TARGET
attributive of qualitative Exchange Commission, NGO
Affairs Bureau, Bangladesh Bank INCENTIVES.
characteristics.
3
Sutherland 1949
4
IASB Framework
5
http://www.icab.org.bd/index.php?option=com_content&view=article&id=82&Itemid=116

etc. can prescribe industry specific
formats of presentation of financial
statements. Thus an applicable
Financial Reporting Framework
emanates from local statute, and
international standards. The range
of regulatory activities typically
includes setting minimum
standards and requirements for
corporate reporting, requiring
submission of the financial reports
to the oversight body for its review,
making regular inspections, and
investigating and prosecuting
misconduct by the corporate
entities for breaching and abusing Creativity and Motivations reduce or eliminate the volatility in
reporting framework. Therefore, profit or loss associated with
strongly active Financial Reporting While supplying information to hedging activities, which is a part
Regulations can encourage and external parties, the reporting of the management’s financial risk
compel standardized financial entities may create the figures to management process.
reporting within applicable their best advantage and report Management can deliberately fail
framework. them in the financial statements. the conditions to achieve the best
This is called creative advantageous performance result
The Pledge of the accounting—the active by not choosing to opt for hedge
Framework manipulation of accounting results accounting. Fortunately hedging
for the purpose of creating an activities are not yet widely
“The application of the principal altered impression of the practiced in Bangladesh.
qualitative characteristics and underlying financial position or
appropriate accounting standards performance (contrary to true and Warranty provision, and Provisions
normally results in financial fair view) of an enterprise by using against numerous lawsuits are
statements that convey what is accounting rules and guidance in a illustrative examples in our
generally understood as a true and spirit other than that which was country. BAS 37 requires the best
fair view of, or as presenting fairly intended when the rules were estimate of future obligations for
such information.” written. those activities in the past, but the
process can be sometimes
Our practical work life experiences This is a potential problem for complicated; management can get
also confirm that companies auditors, and the users of the away with making higher or lower
sincerely applying and using the financial statements. Recent provisions whilst prima facie
reporting framework including evidence suggests that it is one of presence of some warranty
BFRS can present the true and fair the major issues facing financial provision and disclosures of
view of their business status and reporting.6 contingent liabilities may be
performances. Despite the gratifying for us, the external
abundance of readymade Certain provisions under some parties.
guidelines for appropriate accounting standards allowing
reporting, entities sometimes managements’, the responsible Revenue is the most frequently hit
willingly or unwillingly (due to parties for financial reporting, item for earnings management via
lack of resources and indifferent judgment and estimates pave the creative accounting, so it tops the
attitude to statutory reporting) tend way for willful distortion of list of prone items; there are few
to show an altered scenario of their reported items. Such creativity other legitimate areas as follows:
business results which is discussed normally falls within permitted
next. regulations and is not therefore  Inventory valuations (policy
illegal. E.g., hedge accounting to may be abused or erroneous
6
ICAEW- audit and Assurance Study Manual- ACA advanced Stage

policy may be adopted; NRV test alternative costs capitalizing policy causes of altered reporting.
may not be done properly due (e.g. Companies Act 1994 Reporting entities generally form
to product’s uniqueness) allows certain expenses to be alliances and trade associations to
capitalized) influence regulators to get
 Depreciating asset over useful favorable requirements which also
lives (mainly capital intensive  Delaying investment or facilitate careless reporting.
companies may grab the financing decisions
opportunity) Therefore, it is palpable that
 Lenient regulators and NOT business entities always have
 Revaluing the non-current SO STRONG financial reasons to look for opportunities to
assets while impairment test is reporting regulations may provide misleading financial
rarely performed by the instigate an indifference to statements for various motivations
management (in this era of fast quality reporting of different people engaged and
pace technological involved in the organizations.
advancement, perhaps Land Motivations
and some intangible assets Red Flags and Detections
such as license, permissions Uncapped profit motives of
are appreciating in value; most companies coupled with our Professional and educated eyes
of the other long-lived assets avarice for material gains trigger with considerable knowledge on
are often impaired at any point the habit of creative accounting; business, industry sector, and
in time of a period, however, both the owners and the managers respective country regulations can
management overlooks the can play role—owners to maximize identify the abnormal areas in the
fact!) return by reducing tax burden and financial statements. Should they
to avoid it and other revenue or engage themselves in ponderous
 Businesses with related parties profit sharing requirements e.g. and careful review and analysis of
within group companies BTRC shares revenue with telecom the reports, they can pin-down the
operators; companies also have to bulged and tilted areas after a
 Prevalence of complicated share profit with workers under scrutiny of the following items:
accounting information labor code and WPPF—managers
processing system (those who to earn desired bonuses or target  Cash flows- operating cash
use integrated operating incentives. flows are out of line (when
systems may not be always bank statement collection does
able to generate specific SEC listed i.e. publicly traded not tie with receipt from
reports in line with BFRS; they companies are the most vulnerable customers, and non-operating,
usually export the data and to income smoothing technique for and financing receipts, there
may manipulate the figures in the reputation and sensitivity issues are some explanations)
excel sheet) attached to their reported
profit/EPS and share value.  Reportable income differ with
 Capitalization of intangible Boosting share price can be their taxable income without
assets (mainly companies in IT topmost priority. adequate explanation
and telecom sector)
 Acquired assets under deal or
When companies try to attract new
 Altering the contractual terms business acquisitions
investment or seek finances, they
to fail revenue test or lease may be inspired to show stronger  Journal entry episodes at year
BAS 17 tests financial health than the actual end
fitness. After obtaining required
 Impairment of accounts finances, the companies may be  Unexplained unusual ratios
receivables (bad debtors can conditioned to maintain a certain and trends
be shown as collectible per liquidity or business status, which
management discretion; but can put the management and  Inadequate policy notes and
aging analysis may reveals shareholders under duress. insufficient disclosures in the
long outstanding receivables) financial statements
Intellectually challenging
 Deferring income and/or interpretations and mere  Actual results significantly
expenditures; and adopting negligence of law can also be differ with estimated figures

(budget not achieved or overly
achieved)
 Management reward is target

based and incentives linked to
profit or other asset based
parameters
 Audit qualification and change

in auditors (rotation of auditors
in listed company is
explicable)
 Complex business structure-

mingled together with group
head office, possibility of regulatory agencies at times due to Good news is that Bangladesh is
unrecorded and arbitrary their constraints transfer some of moving forward, albeit the ongoing
transactions with related their monitoring duties to global economic turmoil, to join
party(ies) autonomous bodies like the the league of the “Middle Income
professional audit firms operating Countries” in tandem with the
This part is exciting; it warrants a under the license from the ICAB, target to achieve Millennium
separate long discourse. The who is entrusted with the Development Goal within the
pointers as above are merely responsibility of adopting and shortest possible time. These
eye-openers. Once detected, the promulgating International targets have been manifested in
items should be normalized by Financial Reporting Standards global forum; investors from both
adding and/or removing required (IFRS) and International Standards the developed and the developing
and/or undeserving amounts on Auditing (ISA) in Bangladesh. countries find interest in
and/or disclosures. However, local rules prevail over Bangladesh for its growth potential.
Streamlining Financial those adopted requirements. They are calling for globalized
standards under the auspices of the
Reporting ICAB and BFRS can guard against development partners—bilateral
Since there can be a relationship ill motive behind financial and multilateral— and international
between weak financial reporting reporting; fear of non-compliance organizations. In time, if not
regulations and shoddy financial with ICAB guidelines by auditors sooner, the demand for
reporting, strengthening the and BFRS by reporting entities standardized reporting of financial
regulations should be the most should be enhanced. information will be at its peak.
important initiative to regulate
Bangladeshi entities’ financial Conclusion ICAB and its members—in practice
reporting practice. and in employment—are vital for
Financial reporting is no more a the improvement of standard
Continuing the earlier discussion score keeping job; its importance is financial reporting practice in
on regulations i.e. the laws and much felt now. New roles are Bangladesh. We should not stop
rules that act as a guardian of evolving for financial accountants our pursuit of quality until we
financial reporting regime to guide in the economy. Reporting reach the prestigious stage where
and govern statutory reporting by standards are also being updated to people will accept our reports at
corporate entities it can be safely keep pace with the changed face value.
said that the range of regulatory economy. Businesses are
activities should entail penalizing becoming more global than ever
and punishing defaulter of standard before; the whole world is a The Author is a Fellow Member
based reporting practice. ICAB can connected global village, and of ICAB and Chairman
lead the movement. State we—Bangladesh— are a part of it. HUSSAINS Business Consultants Ltd.

The Practice of Corporate Social Responsibility
Disclosures by the Companies Operating in Bangladesh
Evidence from Textile & Tannery Industries
1
Mohammad Saif Uddin Bhuiyah | 2Sabina Yesmine
Abstract interestingly the rate of increment in this

practice from 2010 to 2014 was almost
same. In case textile industry it is 5% and
As a member of the global economy, for tannery industry the rate is 4% and the
Bangladesh needs to give more emphasis average rate of CSRD practice during the
on devising policies and regulations to period 2010 to 2014 by textile and
make business organizations tannery industry is only 33.34% and
environmentally and socially responsible. 26.74% respectively. DIS shows that
This paper focuses on identifying the companies under textile industry are
extent of corporate social responsibility disclosing more information relevant to
disclosures (hereafter CSRD) practices by their employees (47.45%) whereas for
the companies operating in Bangladesh. companies under tannery industry score
An effort has also been exerted to highest on community involvement
determine whether the practice varies with (44.67%). However, Disclosure Index
respect to industries, companies within an Scores with respect to environmental
industry and also in terms of CSR disclosure of companies under textile and
categories. To meet these objectives 34 tannery industry are 0.12 and 0.01
companies under Textile Industry and 5 respectively which indicates companies of
companies under Tannery Industry have Bangladesh are still not so concerned in
been taken covering the period 2010 to devising policies about how to deal with
2014. Here, data has been collected from the environment within which they are
the annual reports of the companies under operating. Disclosure Index Scores (below
consideration. Content analysis has been 0.10) of companies of tannery industry
conducted based on a Disclosure substantiate that they are still in a very
Checklist developed with the help of vulnerable condition in the performance
previous relevant literatures and also by of CSR activities.
taking the specific nature of the mentioned
industries into account. To draw Key words: Corporate Social
conclusion, Disclosure Index Scores (DIS) Responsibility, Content Analysis, Textile
have been calculated by using the Industry, Tannery Industry & Disclosure
outcomes of content analysis. Results Index Scores.
show that though CSRD practice by both
industries shows different pattern,

Introduction Manufacturing firms produce
products required for everyday life,
With the growing global public provide large number of
awareness of the role of employment opportunities and also
corporations in society, several contribute to tax revenue. Textile
COMPANIES ARE
issues such as pollution, waste, and tannery industry are two NOT LEGALLY BOUND TO
resources depletion, product leading industry in the
quality and safety, production manufacturing sector. The textile PERFORM SOCIAL
process, the rights and status of industry is the largest labor ACTIVITIES. CSR INCURS
workers, community involvement, intensive manufacturing sector of
and fair business practices have the country, which employs about HUGE COSTS.
been getting more attention over 5 million people including apparel
ULTIMATELY IT
the last few decades. For this industry (Bangladesh Economic
reason responsibility of the Review, 2015). At present total INCREASES TOTAL COST.
business organizations is extended direct employment opportunities in
to different external parties along the tannery sub-sector of SO WHY DO COMPANIES
with direct stakeholders through Bangladesh is about 15,000 SHOW SOCIAL
the implementation of different (including managerial and
socially desirable activities (Masud production staff), in footwear RESPONSIBILITIES
and Hossain, 2012). Therefore, sub-sector 51,400 (15,000 in TOWARD THE SOCIETY
business organizations have started mechanized sub-sector and 36,400
to engage in CSR activities and in small and cottage level AND ENVIRONMENT?
corresponding disclosure of these non-mechanized sub-sector) and in
leather goods sub-sector 10,200
SILBERHORN AND
activities. To show socially and
environmentally responsible, (1200 in mechanized units and WARREN (2007)
companies generally disclose 9,000 in non-mechanized units)
social, environmental, (Business Promotion Council). At EXPLORED THAT
sustainability, health and the same time these firms have a GERMAN AND BRITISH
philanthropy related information in detrimental effect on the natural
their report (Tschopp, Wells & and social environment. Raw COMPANIES PRESENTED
Barney, 2011). materials such as cotton, nylon,
CSR AS A
polyester and dyes as well as the
The motivation for this paper production process used in textile WIDE-RANGING
emerges from the realization that industry contribute to
most of the research in this sphere environmental degradation. BUSINESS STRATEGY,
of knowledge has explored Manufacture process of textile ARISING MAINLY FROM
Corporate Social Responsibility industry creates pollution and
Disclosure (hereafter CSRD) in the materials that used to make PERFORMANCE
western world, and only a small products are hard to recycle such CONSIDERATIONS AND
number of studies have been as nylon taking 30 to 40 years to
conducted into CSRD in decompose. Ministry of STAKEHOLDER
developing economies like Environment (MoE) of Bangladesh
reports that the tanneries
PRESSURE. MISHRA AND
Bangladesh and most of these
studies conducted in financial collectively dump 22,000 liters of SUAR (2010) CONCLUDED
sector. There has been little toxic waste including
research on the manufacturing cancer-causing chromium into THAT AN INCREASE IN
sector despite the strong Buriganga river of Dhaka every THE AGGREGATE CSR
contribution of manufacturing day. As a result large amount of
sector to the Bangladesh economy. toxic wastes from Hazaribagh have BOOSTS FIRM
Manufacturing sector contributed eaten up all oxygen in Buriganga
PERFORMANCE IN A
19% of total GDP of Bangladesh in and the DO level has fallen down
2012-13, 19.47% of total GDP in drastically. At present the DO NUMBER OF WAYS.
2013-14 and it is expected to be levels of Buriganga is near equal to
20.17% (provisional) in 2014-15 zero, which indicates no aquatic
(Bangladesh Bureau of Statistics.). life (Biswas and Hamada, 2012).

Compared to other sectors, the importance on disclosing human disclosed any information related
textile and tannery industry might resource information such as to the environment other than
be considered as the most employee numbers and expenditure on energy usage
polluting sector. So the firms remuneration, equal opportunities, (Belal, 2000). Almost similar result
operating under textile and tannery employee share ownership, was found by Belal et al. (2010)
industry are getting special disability policies, and employee and (Imam, 2000). Only 9 out of
attention of researchers to see what training (Gray et al. 2001). By 40 companies disclosed
types of step they get to restore the using content analysis Das, Dixon environmental issues and the
environment or what types of and Michael (2015) found that CSR remaining companies did not show
contribution they made toward disclosure practice by the selected any concern for environmental
employees, community. banks of Bangladesh has increased issues (Imam, 2000). Samina
Considering these social and in 2011 by 17.85% with respect to (2012) found that 6 full-fledged
environmental issues this study 2007 (59.02%). They observed that Islamic banks of Bangladesh are
investigates the extent of corporate health (31.69%), humanitarian and practicing corporate social
social responsibility practices of disaster relief (21.92%), and responsibilities and total CSR
firms operating in tannery and education (15.35%) getting major expenditure of these six Islamic
textile industry of Bangladesh shares of CSR expenditure of banks (except one foreign owned
through content analysis of annual banks; while art and culture Islamic bank) is 24.29% of the total
report. (9.37%) and sports (9.06%) also CSR expenditure of all commercial
were significantly large recipient banks in 2009.
Literature Review sectors.
It is true that there is no standard
Prior studies substantiated that CSR The Companies Act, 1994, and the for CSR but in Bangladesh,
practices vary with respect to Securities and Exchange Rules, Bangladesh Bank and finance act
countries, types of the industries 1987 made the disclosure of provide some suggestion for the
companies belong and even with energy usages as mandatory as it expenditure of CSR. Masud and
respect to the level of development has environmental effect. Some Hossain (2012) revealed that 100%
of the countries within which companies still do not disclose this Banks reported their CSR activities
companies are operating (Imam mandatory disclosure. 3 companies however it is a matter of concern
2000). Survey of CSR practices in out of 30 companies did not that less than 60% sampled banks
western countries found that disclose energy usage and no participated in prescribe CSR areas
companies set the maximum companies in the public sector according to finance act.

Nurhayati, Taylor and Tower In case of reporting pattern there is Methodology
(2015) found relatively low extent no standard pattern of CSR
of 13.57% of SED in annual reports disclosure. Das, Dixon and Research Design
of Indian textile firms. Mohamad, Michael (2015) revealed that all
Yunus & Norwani (2013) found listed banks practice social This study covers 143 firm-year
that although many companies responsibility in an unstructured observations of 34 companies
disclosed their CSR activities, the manner and thus need to adopt a under Textile Industry and 25
level of disclosures is still low in comprehensive format for CSR firm-year observations of 5
Malaysia. reporting. Imam (2000), Kamal and companies under Tannery Industry
Deegan (2013) found that there covering the period 2010 to 2014.
Which factors influence the was no separate section for social Here, companies under
varying degree of disclosure and environmental information. All considerations have been ranked
practice is a matter of study. the information disclosed in the and selected on the basis of the
Farouki and Hassan (2013) implied chair’s statement, directors' report availability of annual reports
that banks that are making high and in the notes to the accounts during the period 2010-2014. To
economic profit, large in size, with section. Imam (2000), Shil and meet the objectives of this study,
a consistent growth, paying Iqbal (2005) concluded that the data has been collected from
dividend regularly, having a high extent of disclosure remained less secondary sources mainly from
number of institutional ownership than one-fourth of a page in an annual reports of the selected
and highly levered are more likely annual report. Idowu and Towler companies. For this research work
to embark on CSR. Study by Das, (2004) found that some UK purpose, we used a CSR Disclosure
Dixon and Michael (2015) showed companies issue detaches reports Checklist that is similar with
that firm size, board size, for their CSR activities and others Yesmine & Bhuiyah, (2015). Here
ownership structure, and it is to mention that there exists no
allocate a part of their annual
independent non-executive specific guideline about the nature
reports.
director in the board have and number of items to be
significant positive impact on CSR included in the mentioned index.
Companies are not legally bound
disclosure practices, while it is
to perform social activities. CSR However, the index so constructed
negatively associated with firms'
incurs huge costs. Ultimately it contain a total of 35 items having 5
profitability and the age of the
increases total cost. So why do sub-heads named Community
company. But Mustaffa and Tamoi
companies show social Involvement (6),Environmental
(2006) revealed strong evidence
responsibilities toward the society Disclosure (7), Employee
that total corporate social
and environment? Silberhorn and Information (12), Product and
disclosure is positively related to
Warren (2007) explored that Service Information (6) and Other
companies’ profitability in
German and British companies Social Responsibility
Malaysia. They found no
presented CSR as a wide-ranging Disclosure(4).Using this checklist,
relationship between total
disclosure and audit firm & business strategy, arising mainly content analysis has been
leverage. Rouf (2011) also found from performance considerations conducted at the first instance by
positive association with and stakeholder pressure. Mishra examining the presence (1) or
proportion of Independent and Suar (2010) concluded that an absence (0) of selected items on
Directors, Board Leadership increase in the aggregate CSR the annual reports and then the
Structure, Board Audit Committee boosts firm performance in a outcome of content analysis has
and Percentage Return on Equity number of ways. First, the been used to calculate the CSR
but he found negative relationship CSR-induced revenue can increase Disclosure Index Score (DIS) which
between firms' size and Corporate from enhanced sales and is consistent with the prior studies
Social Responsibility Disclosures. prices/margins and second, the by Wallace 1988; Wallace et al.
Samina (2012) found a strong CSR-induced cost decrease can 1994; Leventis and Weetman
positive correlation between the result from tax concessions, 2006; Barako et al. 2006 and
CSR expenditure and deposit, reductions of duties by the Ghazali and Weetman 2004 and
investment amount and the profit. government to promote CSR Iskander 2008. Disclosure Index
Reverte (2009) identified the most activities, efficiency gains from Score has been calculated from
influential variable for explaining environment-friendly technologies, three perspective by using the
firms’ variation in CSR ratings is and reduced cost of capital. following mathematical
media exposure, followed by size expressions:
and industry.

For year wise DIS:
( )= ( )
=
Where,
Xi = Number of items actually disclosed by i th company in that year;

n = Number of items in the index;
Y = Number of companies considered in that year.
For category wise DIS:

( )= (
= = =
Where,
Xij = Number of items disclosed by i th company in jth year;
Yj = Number of companies in j th year;
n = Number of items in the category.
For company wise DIS:

( )= ( )
=
Where,
Xj = No of items actually disclosed by the company in j th year;
n = Number of items in the index;
Y = Number of year(s) considered for the company.
Finding & Analysis

Table 1 : Year -wise Comparison
Year CSR Disclosure Score
Textile Industry Tannery Industry
2010 31% 25%
2011 31% 27%
2012 32% 27%
2013 34% 27%
2014 36% 29%
Average Index 33.34% 26.74%
The table 1 shows the trend of interestingly the rate of increase in companies under textile industry
Corporate Social Responsibility this practice from 2010 to 2014 disclose more information about
(CSR) disclosures by textile and was almost same. In case textile CSR than that of tannery industry.
tannery industry. In case of textile industry it is 5% and for tannery The reason behind this could be to
industry the CSR Disclosures index industry the rate is 4%. However secure/maintain legitimacy and/or
in 2010 was 31% whereas it was from table 1 it can be concluded to meet community expectations
25% in case tannery Industry. that though companies under both (Deegan 2002; O’Dwyer 2002).
From 2011 Textile Industry shows industries are striving to disclose The disclosure practices of the
an increasing trend in CSRD CSR relevant information but still textile and garment companies of
practice. In case of Tannery the practice is below 40%.It does Bangladesh are motivated by
Industry it remains constant (27%) mean companies should be more pressures from powerful
during 2011-2013. Though the concerned about devising policies stakeholders, particularly since the
CSRD practice by both industries about it. Another interesting late 1990s (Kamal and Deegan,
shows different pattern, finding is that every year 2013).

Table 2: Categor-wise Comparisony
Categories CSR Disclosure Score
I. Community Involvement 17.37% 44.67%
II. Environmental Disclosure 12% 1%
III. Employee Information 47.45% 38.67%
IV. Product and Service Information 43.50% 24%
V. Other Social Responsibility Disclosure 40% 14%
Companies under textile industry disclosing information about how environmental policies,
are disclosing more information they are affecting the environment compliance with laws regarding
about their workforce (47.45%) and about the strategies they are environment protection, pollution
and the products and services adopting to protect the control (effluent treatment plan,
(43.50%) they are dealing with. environment. The environmental dust control), prevention or repair
However, the CSRD scores reveals disclosure index score is 12% and of environmental damage (e.g.,
that apart from the product and 1% respectively. No information tree plantation), conservation of
services (24%), the companies of relating to support for natural resources and recycling
tannery industry are giving public/private action designed to activities (e.g., water treatment).
emphasis on reporting how they protect the environment and These findings reveal that though
are affecting the community awards for environmental companies are generating profit by
(44.67%) within which they are protection/performance was found conducting business but are
operating and treating their in both textile and tannery showing little responsibility to the
employees (38.67%) (Table 2). industry. Most of the companies society and environment within
Results reveal that both industries under tannery industry do not which they are operating.
are giving least emphasis on disclose any information about
Table 3: Company wise Comparison

Company Index Company Index
Alltex Ind. Ltd. 8.5% Apex Tannery 9.14%
Square Textile 9.7% Bata Shoe 6.86%
Maksons Spinning Mills 7.4% Apex Footwear 2.86%
Al-Haj Textile 4% Samata Leather 3.42%
Ashraf Textile 8.6% Legacy Footwear 2.29%
Stylecraft 3.4%
Rahim Textile 7.4%
Saiham Textile 4.6%
Modern Dyeing 2.9%
Desh Garments 5.7%
Dulamia Cotton 8%
Tallu Spinning 4.6%
Apex Spinning 8%
Mithun Knitting 6.3%
Delta Spinners 4.6%
Sonargaon Textiles 7.4%
Prime Textile 6.3%
Anlima Yarn 9%
H.R.Textile 3.4%
CMC Kamal 2.9%
Safko Spinnings 6.29%
Metro Spinning 6.29%
Dacca Dyeing 9.7%
R N Spinning 2.3%
Malek Spinning 9.14%
Zahintex Industries 6.40%
Saiham Cotton Mills 9.5%
Generation Next Fashions 15.23%
Envoy Textile 11.42%
Mozaffar Hossain Spinning 34.29%
Matin Spinning Mills 42.86%
Hwa Well Textiles (BD) 25.71%
Far East Knitting 40%
Hamid Fabrics Limited 34.29%

Table 3 represents corporate social Industry (33.34%) is disclosing References
responsibility index scores of the more CSR relevant information Belal, A.R. (2000) ‘Environmental
companies operating under textile than those of Tannery Industry Reporting in Developing Countries:
and tannery industries. CSRD (26.74%). Again, most of sample Empirical Evidence from Bangladesh’,
Index Score of all companies under companies under textile industry Eco-Management and Auditing, 7(3),
114–121.
tannery industry and 80% are disclosing much information
companies of textile industry is Deegan, C. (2002) ‘Introduction the
relevant to their employees and the
Legitimizing Effect of Social and
below 10%. It substantiates their products and services whereas Environmental Disclosures – a
minimal involvement in corporate companies under tannery industry Theoretical Foundation’, Accounting,
social responsibility activities are reporting more information Auditing & Accountability Journal, 15(3),
which might affect their existence about their community 282-311.
negatively. However companies of involvement. However, DIS of Imam, S. (2000) ‘Corporate Social
textile industry named Matin environmental information (12% Performance Reporting in Bangladesh’,
Managerial Auditing Journal, 15(3), 133
Spinning Mills (42.86%), Far East for textile industry and 1% for – 142.
Knitting (40%), Hamid Fabrics tannery industry) reveals their lack
Kamal, Y. and Deegan, C., (2013)
Limited (34.29%) and Mozaffar of concern about how their ‘Corporate Social and
Hossain Spinning (34.29%) are activities are affecting the Environment-Related Governance
undertaking more CSR activities in surroundings. Disclosure Practices in the Textile and
comparison to other companies Garment Industry: Evidence from a
Developing Country’, Australian
under the same industry as they are Limitations & Further Accounting Review, 23(2), 117-134.
disclosing more CSR relevant Research
information. From table 3 it can be Mishra, S., & Suar, D. (2010). “Does
Corporate Social Responsibility Infulence
said that all companies under The findings of this study are Firm Performance of Indian Companies?”
tannery industry are in a more subject to several limitations. Use Journal of Business Ethics, 557-601.
vulnerable condition compared to of only non-financial companies Mustaffa, M.Z. and Tamoi, J.(2006).
textile industry with respect to the (manufacturing companies) as a “Corporate Social Disclosure (CSD) Of
execution of CSR activities. sample is the first limitation of the Construction Vompanies In Malaysia”.
Malaysian Accounting Review, 5(1),
study. Second, the study considers
Conclusion 85-114.
data of only five years. As a result
O’Dwyer, B. (2002), ‘Managerial
findings may differ if more years Perceptions of Corporate Social Disclosure:
Gaining economic efficiency are considered for comparison An Irish Story’, Accounting, Auditing &
(Hossain and Reaz, 2007), purpose. Third, we considered Accountability Journal, 15 (3): 406–36.
improving company reputation only companies under textile and Reverte, C. (2009). “Determinants of
(Bayoud et al. 2012), tannery industry which are listed in Corporate Social Responsibility Disclosure
communicating between business the Dhaka Stock Exchange (DSE). Ratings by Spanish Listed Firms”. Journal
and society (Branco and Rodrigues, So further study can be conducted of Business Ethics, 351-366.
2006) and attracting & retaining on other companies that are not Rouf, M. A. (2011). “The Corporate
good employees and increasing Social responsibility Disclosure: A Study
listed with DSE. Fourth, in of Listed Companies in Bangladesh”.
organizational commitment assessing CSR practices we took Business and Economics Research
(Bayoud et al. 2012) are few only annual reports of the Journal, 2 (3), 19-32.
benefits among other benefits of companies under consideration. Samina, Q. S. (2012). “Practice of
corporate social responsibility Further research can be explored Corporate Social Responsibility in Islamic
disclosure. So CSR not only incurs by taking corporate websites Banks of Bangladesh”. World Journal of
expenditure but also provide newspapers, in-house magazines, Social Sciences, 2 (6), 1-13.
intangible benefits to the radio, television, company Yesmine, S. & Bhuiyah, M.S.U., (2015)
companies that practice CSR. This newsletters and stand-alone
“Corporate Social Responsibility Practices
study in designed to analyze the in Bangladesh: Evidence from Engineering
sustainability reporting to identify and Pharmaceutical & Chemical Industry”,
current practice of CSR by the the practice of CSR. Fifth, an International Journal of Business and
companies operating in un-weighted disclosure index has Management Invention, 4(10).
Bangladesh. Disclosure Index been used in this study; the
Scores reveal that all companies findings might be different if a The Authors are:
under Textile and Tannery Industry weighted disclosure index is used.
1
Lecturer, Department of Accounting
are practicing corporate social & Information Systems, DU
The findings of the study should be
responsibilities though the degree
interpreted with keeping these 2
Assistant Professor, Department of
varies. It is found on an average
limitations in mind. Accounting & Information Systems, DU
the companies under Textile

Unifying Accounting Designation in Canada
and Membership Pathway for ICAB Members
Sarwar A Khan FCA
The demands of today’s global economy This structure of the Canadian accounting
profession was founded on historical
are redefining the nature of accounting distinctions among different types of
profession. Accounting and auditing
accountants, which are rapidly becoming
standards are converging, and are
outdated. The resulting complexity causes
increasingly being set by international
confusion in the marketplace and among
bodies rather than national ones. As
students interested in pursuing an
international trade barriers continue to
accounting or business career. And, at a
fall, there is an increased need for
time when accounting standards are
inter-jurisdictional mobility among
increasingly set at the international level,
accounting professionals to serve the
this diffuse structure could weaken
business requirements of their employers
accounting professions ability to influence
and clients. In response to these
and advocate for Canada's interests.
developments, global accounting
designations and strategic alliances among
accounting organizations are now Independent research studies
emerging to compete for national and commissioned by the accounting bodies
international influence. indicate that there is a growing confusion
about the differences among the three
accounting designations, despite the
Background organizations having expended significant
resources trying to differentiate one
Canadian accountancy profession is
accountant from another. With each
burdened by its fragmented structure of
organization broadcasting often similar
multiple designations operating within a
and overlapping messages, advertising
myriad of complex and costly regulatory
awareness research has found the
frameworks.
campaigns are working more to promote
The three accounting organizations- the accounting profession as a whole,
Canada’s Chartered Accountants (CA), rather than distinguishing the unique
Certified Management Accountants value of the individual designations.
(CMA), and Certified General Accountants
(CGA) - are composed of 40 different Emergence of Global Influence
accounting entities based in provinces and
territories that are responsible for Moreover many accounting and assurance
regulating members, students and firms. standards to which Canadian accountants

AS
INTERNATIONAL TRADE
BARRIERS CONTINUE TO
FALL, THERE IS AN
INCREASED NEED FOR
must adhere are now being The largest accounting INTER-JURISDICTIONAL
established beyond Canadian organization in the world, the
borders. In January 2011, American Institute of Certified MOBILITY AMONG
International Financial Reporting Public Accountants (AICPA), has ACCOUNTING
Standards (IFRS) became recently taken progressive steps to
mandatory for public companies in increase its global footprint by PROFESSIONALS TO
Canada. In addition, Canada is one offering uniform CPA Examination SERVE THE BUSINESS
of more than 125 countries using outside the 55 U.S. jurisdictions for
or in the process of adopting or the first time in its history in Japan, REQUIREMENTS OF
incorporating International Bahrain, Kuwait, Lebanon and the
Standards on Auditing (ISAs) into United Arab Emirates. The U.S. is
THEIR EMPLOYERS AND
their national auditing standards or also looking more at offering its CLIENTS. IN RESPONSE
using them as a basis for preparing exam in additional countries.
national auditing standards. AICPA has announced a joint TO THESE
venture with the Chartered Institute DEVELOPMENTS,
To ensure that accounting and of Management Accountants
assurance standards reflect the (CIMA) to create a new GLOBAL ACCOUNTING
interests of Canadian businesses international management
DESIGNATIONS AND
and the knowledge and experience accounting designation.
of Canadian accounting STRATEGIC ALLIANCES
professionals, Canada needs a With members in more than 100
more compelling, unified voice at countries, CPA Australia is AMONG ACCOUNTING
the global standard-setting table. aggressively recruiting beyond its ORGANIZATIONS ARE
borders. The CPA Australia
Moreover, the emergence of global membership network is NOW EMERGING TO
accounting designations and increasingly international with a COMPETE FOR NATIONAL
strategic alliances among national third of members based outside
accounting bodies is potentially Australia, and the organization AND INTERNATIONAL
challenging the Canadian now has offices and representation
accounting profession’s influence
INFLUENCE.
in 14 countries across three
at home and abroad. In recent continents. The Institute of
years, leading national member Chartered Accountants in Australia
bodies have looked beyond their is also taking steps to expand its
borders and begun aggressively reach, by entering into an alliance
pursuing international strategies as with the New Zealand Institute of
a means of growing their influence Chartered Accountants. The two
and advancing the professional bodies have also recently entered
interests of their members. into a three-way agreement with

the U.K.-based Chartered Institute to advance their own policy The professionals recognized that
of Public Finance and Accountancy agenda, honour trade over the long term it must
(CIPFA) to support public sector commitments and reduce eventually move to adopt a single
accountants in the Asia-Pacific bureaucratic and regulatory core designation and a new
region. complexity. common qualification program, for
which they considered the use of
The Institute of Chartered Similar to Canada, the accounting the Chartered Professional
Accountants in England and Wales profession in the United Kingdom Accountant (CPA) designation.
(ICAEW) is actively working to operates within a complex,
elevate its international influence multi-layered web of organizations. The CPA is already an extremely
and is focused on helping it strong brand, both within North
become a body capable of The U.K. House of Lords is America and around the globe. In
representing and supporting an publicly calling for the fact, it is the most used accounting
increasingly global profession. amalgamation of the six U.K. designation worldwide. Based on
ICAEW has recently expanded its professional accounting bodies: the the International Federation of
network in Bangladesh by allowing Association of Chartered Certified Accountants Council’s listing of
Bangladeshi CA firms to train Accountants (ACCA), the Chartered members and associates, some
students for ICAEW. Institute of Management form of the designation (“Certified
Accountants (CIMA), the Chartered Public Accountant” or “Certified
The Association of Chartered Institute of Public Finance and Practising Accountant”) exists in 30
Certified Accountants (ACCA) had Accountancy (CIPFA), the Institute countries.
actively lobbied governments of Chartered Accountants in
across Canada to gain recognition England and Wales (ICAEW), the Canada considered the use of
for its designation, thus far, the Institute of Chartered Accountants “Chartered Professional
ACCA has not been successful, but in Ireland (ICAI), and the Institute Accountant”, rather than the other
its actions are an indication of the of Chartered Accountants in CPA monikers used around the
potential entry of other accounting Scotland (ICAS), saying the world, for a number of reasons.
designation into Canada. fragmentation of the accounting
profession causes inefficiency. First, the word “Professional” more
The above scenario is also quite accurately reflects diverse
visible in Bangladesh, if one Decision to Have Single memberships than the word
follows aggressive activities of both Designation and Naming “Public”, which implies a sole
ACCA and CIMA who are focus on public practice.
providing education and It was therefore concluded that a
membership drive in accounting united Canadian accounting Second, going forward is to be
profession. profession would be more efficient aligned with the global designation
and effective than the status quo; of choice, should one emerge.
Increasingly, other national and be more relevant, both at home Today the CPA and CA are the
regional accounting bodies also are and abroad; be better able to most recognized designations
entering into alliance agreements enhance the support and services it around the world. Using the word
to increase their individual and provides to all members; and, be “Chartered” within the CPA would
collective strength, relevance and better able to protect and serve the allow the new designation to be
influence. Examples include the public interest. For these reasons aligned with both of these
Global Accounting Alliance Canadian accounting associations designations.
(www.globalaccountingalliance.co expressed their commitment to
m) and the Edinburg Group explore the merits and feasibility of Finally, the use of “Chartered
(www.edinburgh-group.org). uniting the three national and Professional” would serve to
provincial organizations. To bring distinguish the Canadian CPA from
these organizations together, the the CPA in the United States.
Potential for Government- creation of a new designation are
Imposed Reform considered – one that is a globally
recognized leader in both financial Unification
In Canada and internationally, and management accounting and
governments are facing mounting In January 2012, the Canadian
assurance, as well as an
pressures to encourage reform of Institute of Chartered Accountants
internationally recognized business
the accounting profession in order (CICA), the Society of Management
credential.

Accountants of Canada (CMA
Canada) and Certified General
Accountants of Canada
(CGA-Canada) issued A Framework
for Uniting the Canadian
Accounting Profession under a
new Canadian Chartered
Professional Accountant (CPA)
designation.
In October 2014, CPA Canada

(www.cpacanada.ca) was
established by CICA, CMA Canada
and CGA-Canada completing the
unification of Canada’s accounting
profession at the national level to
support Canadian provincial
accounting bodies that were
unifying under the CPA banner. • An acceptable course in • Financial Reporting
Canadian Business Law
In Canada, the professional is • Strategy and governance
primarily regulated by province. • Capstone 1 Module
Hence, Chartered Professional • Management Accounting
Accountants (CPAs) Ontario, • Capstone 2 Module
Canada (www.gocpaontario.ca) is • Audit and Assurance
formed after unification of three • The Common Final
professional bodies-Chartered Examination (CFE), and • Finance
Accountants (CA), Certified
General Accountants (CGA) and • 30 months of prescribed • Taxation
Certified Management Accountants practical experience
(CMA) in 2014. • Depth in 2 competency area:
Capstone 1 Module- develops
Membership Pathways for leadership skills, professional skills • Financial Reporting or
Internationally Trained and integration of competencies. Management Accounting plus
Accountants This module includes presentations
and team-based assignments, • One from other core
CPA Ontario has outlined five culminating in a business case competency areas
pathways to membership for completed with team.
members of professional Admission to membership in this
accounting bodies outside of Capstone 2 Module- prepares for pathway results in receiving of the
Canada. the Common Final Examination CPA designation.
(CFE) and focuses on applying
1. Member of an Accounting acquired knowledge of the core 2. Member of a Specified
body outside of Canada competencies to business cases by Accounting Body Outside of
successfully complete a profession Canada with which CPA
A member in good standing with developed capstone evaluation Ontario has a Memorandum
an accounting body (e.g. ICAB) preparation course. of Understanding (MOU)
outside Canada that is a member
body in good standing of the IFAC The Common Final Examination CPA Ontario have a MOU with:
at the date of application may (CFE)- the CFE is a three-day
eligible to register with CPA examination that requires members • Institute of Chartered
Ontario under this pathway. to demonstrate their: Accountants of India and
Students registered in this category • Breadth in all 6 core • Institute of Chartered
are required to successfully competencies area- Accountants of Pakistan
complete the following:

Effective from July 2015, students practical experience requirements Development (PD) within two
of these institutes are required to years on:
complete the following: • Upon admission must
successfully complete an • Canadian Taxation
• Capstone 1 Module online Professional
Development (PD) within two • Canadian Business Law
• Capstone 2 Module years on:
• Introduction to the Canadian
• The Common Final • Canadian Taxation CPA profession and
Examination (CFE) and
• Canadian Business Law • The Rules of Professional
• The prescribed practical Conduct
experience requirement • Introduction to the Canadian
CPA profession and Admission to membership in this
Students will be awarded CPA and pathway results in granting of both
CA designations, if completed, • The Rules of Professional the CPA and CA designation.
prior to Feb 1 2020. After that Conduct
students will be de-registered. 5. Members of Accounting
Admission to membership in this Bodies with which CGA
3. Member of a Recognized pathway results in granting of both Ontario or CMA Ontario have
Accounting Body or a the CPA and CA designation. Mutual Recognition
Recognized U.S. State Board Agreement (MRA)
of Accountancy 4. Member of a Reciprocal
Membership Body During the process of unification,
Applicable for the following CPA Ontario will continue to
Institute: Institutes: honour the following MRAs:
• InstitutoMexicano de • The Institute of Chartered MRAs between CGA Canada and:

ContadoresPublicos Accountants of Australia
• ACCA
• L’Institut des • The Institute of Chartered
Reviseursd’Enterprises de Accountants in England and • CPA Australia
Belgigue Wales
• CPA Ireland and
• Ordre des • The Hong Kong Institute of • OEC de France
experts-comptables(OEC) de Certified Public Accountants
France Requirements:
• The Institute of Chartered
• The Japanese Institute of Accountants of Ireland • Members in good standing
Certified Public Accountants
• New Zealand Institute of • Complete an online course on:
• The Netherlands Institute of Chartered Accountants
Chartered Accountants • Canadian Taxation
• The Institute of Chartered
Accountants of Scotland • Canadian Business Law
Requirements
• The South African Institute of • Meet any other requirements
• Successfully complete the CA
Chartered Accountants imposed by the CGA
Reciprocity Examination
Association
(CARE), Part 1 (testing
knowledge of Canadian • The Institute of Chartered
Accountants of Zimbabwe Individuals who are admitted to
taxation and Canadian
membership in this pathway
business law)
Upon admission must successfully receive the CPA, CGA designation.
• Experience will be assessed to complete an online Professional
MRAs between CMA Canada and:
ensure it meets prescribed

• CPA Australia ICAO (Institute of Chartered Canadian business law as part of
Accountants of Ontario) to convert their university degree and
• CIMA their designation into a local one. professional examination.
But as there was no clear path and Moreover from our practical
Requirements: no MRA with ICAB, members purposes, we strongly suggest to
could not convert their take the course which is very
• Members in good standing
qualification into Canadian CA practical and a must for a
• University degree or designation. However a number of professional like us. The course
equivalent members managed to do the other can even be completed sitting in
designation like Certified General Bangladesh via online from
• Meet the practical experience Accountant (CGA) and Certified Athabasca University
requirements Management Accountants (CMA) (www.athabascau.ca) - LGST 369
taking the advantage of some Commercial Law which is duly
• Application must be signed by exemption granted to them and recognized by CPA Ontario.
a sponsor who is a member in passing the selective papers.
good standing of CPA Ontario However ICAB may apply for such
In order to start and progress their exemption on the basis of the
Individuals who are admitted to career in Canadian job market, curriculum covered in the ICAB
membership in this pathway ICAB member are required to get exam, affiliation with ICAEW,
receive the CPA, CMA designation. the CPA designation. There is similar exemption being granted to
hardly any member who gets the India and Pakistan and Bangladesh
Membership Pathway for membership of CA or CPA. being a member of commonwealth
ICAB Members countries is still following English
Previously there were no formal law. The members, who are
Over the last number of decades, pathways for the members to get already in Canada and working in
people have migrated to the membership. The North the relevant field, have gained
developed countries in order to get American Chapter of ICAB took considerable knowledge on
better living condition as well to some initiative to get a mutual Canadian business law and hence
enhance their career. Like other recognition agreement (MRA) with may apply for exemption.
professions, Chartered Accountants the then Institute of Chartered
from Bangladesh also migrated to Accountants of Ontario (ICAO) and As per the requirement, submission
Canada to have a better life. Most there was some progress. At the of The Practical Experience
of the CAs have migrated under same time ICAI and ICAP got their Certificate Form is a must for the
skill categories and have settled in MRA with ICAO. But due to members for getting exemption to
Canada. Because of commercial non-submission of required 30 months prescribed practical
opportunity and language documents from ICAB, inactivity of experience. Usually ICAB
preference, number of people and the then committee and start of the members will be exempted from
professionals settled in Toronto-the unification process of the three practical experiment requirement
capital city of the professional associations, the subject to submission of
province-Ontario, the most initiative died down that time. Experience Certificate Form (ECF)
populous province of Canada. from the reach of present and
After the unification, CPA Ontario former employers. The members
There are about 50 ICAB members has developed the above 5 may also be required to submit
migrated or settled in Canada over pathways for the members of Mapping of Experience to each
the years and most of them are professional bodies outside of Competency which is very lengthy
based in Toronto, Ontario because Canada. processes to complete. The
of its commercial opportunities. determination of exemption will be
For the members of ICAB, the only made on the basis of the depth and
In Canada, professional breadth of competency
option is Pathway-1.Though
qualifications are known as requirement for the membership.
exemption option for Canadian
designation and are a must to get a ICAB may seek for an exemption
Business Law course is there, our
job and enhance career in the for submission of ECF on the basis
experience shows that such
accounting field. of certification from the ICAB
exemption are not granted to the
ICAB members. ICAB members about the members’ qualification
CAs who settled in Toronto and practical experience gained
initially pursued with the then have not completed a course in
after membership.

Public Accounting Licensing nature of their work and continue are being imposed to direct the
to support the growth of Canadian profession. I think time is perfect to
Admission to membership in CPA enterprise. The ultimate decision evaluate the whole scenario and
Ontario and the granting of the before the profession was a simple act accordingly looking into the
right to use the designations in one: Do they endeavor to operate global situation and development
Ontario does not automatically within the existing structure for as around the world.
qualify a member to be licensed as long as possible and wait for
a public accountant. Specific reform to be imposed upon them North America Chapter would like
requirements of regulations for by external forces (Government); to offer their guidance to the ICAB
Public Accounting Licensing must or do they anticipate the need to members who desires to settle in
be fulfilled to be license as a evolve and do so proactively, Canada before and after arrival in
public accountant in Ontario. thoughtfully and in a manner that Canada on professional matters.
best protects the integrity of our These will facilitate the members
ICAEW and CIMA profession and the public interest? to overcome the situation, relieve
some hurdles and smooth
ICAB members who are also The Canadian accounting transition in their settlement in
members of ICAEW and CIMA can professions choose the second path Canada. We encourage more
get the membership directly. CIMA by unifying the three professions. interaction among the members
is now offering membership to When the unification is completed, and sharing of their experience for
ICAB members for a limited period CPA Canada will have more than the benefits of the members.
through a special entry route 190,000 members and is among
which allows members to sit only the five largest accounting bodies References
for the final exam paper of CIMA in the world. The combined
e.g. the Strategic Level Case Study. Canadian accounting profession is 1. Uniting the Canadian
now better positioned to represent Accounting Profession-A
Please note that residents of their interests in Canada and position paper prepared by CA
Canada will not be able to use this abroad. A unified profession and CMA, May 2011
route as the membership has to be provides a cohesive response to
obtained before becoming the the entry into the Canadian market 2. A Framework for Uniting the
resident of Canada. This is more of foreign-based accounting bodies Canadian Accounting
applicable for the members who seeking to operate in this country. Profession: by CA, CMA and
desire to settle in Canada in future. Unification will also enhance the CGA,2012
influence, relevance and
contribution of the Canadian 3. www.cpaontario.ca/Admissions/
Conclusion accounting profession. The public InternationallyTrainedAccount
interest will be served by common ants/MemberAcctgBodyutside
Without question, need to deal
codes of conduct, disciplinary and Canada
with change is inevitable if
licensing regimes.
accounting profession is to
advance the interests of Canadian The Author is a
The situation in Bangladesh shows
accountants, reflect the changing Fellow Member of ICAB
the same direction and regulations

Payment of Perquisites
and its Tax Impacts
A. Wahab FCA
The Dictionary meaning of the term encashment or leave fare assistance, (5)
Overtime; and
'Perquisites' is a special right or privilege
resulting from a person's position. As per ii) Perquisites also mean any benefit
tax law the receipts of perquisites and whether convertible into money or
other benefits by an Employee from an money's worth as provided by an
Employer are treated as an income exempt employer to an employee excluding
from tax upto certain limit and the excess the employer's contribution to a
amount over the allowable limit is added recognized Provident Fund, approved
as salaried income in the Total Income of Pension Fund, approved gratuity fund
the concerned employee. Similarly, the and approved superannuation fund.
payments on account of these facilities in
the form of perquisites and benefits to the The perquisites/ benefits may be in the
employees are allowed as business form of accommodation, conveyance,
expenses of the concerned employer upto employees passage for tour, medical
certain limit for each of the employees facilities etc. The perquisites may be in the
and any payment over and above the limit form of allowances for foreign tours of
so prescribed is not treated as business employees and his dependants for
expenses and so it is added with the holidaying and recreation.
business income of the said employer for
tax purpose. Against the facilities provided to the
employees in the forms noted above the
As per section 2 sub-section (45) of employer will get relief at the rate of Tk.
Income tax ordinance 1984, perquisites 350,000/= for each of the employees as
have been defined as: business expenses and any amount in
excess of Tk. 350,000/- is disallowed
i) Any payment by an employer to an under section 30(e) and not treated as
employee in the form of cash or any business expenses of the employer
other form excluding (1) Basic Pay, 1 although the excess payment also has
(a) Festival Bonus (2) Incentive Bonus been incurred in connection with the
(Total allowable up to 10% of the business of the employer. This limit has
disclosed profit) (3) Arrear been raised to Tk. 450,000 as per Finance
salary/Advance Salary (4)leave Act 2015.

Perquisites Payment to an or Tk. 20,000/- per month
Employee whichever is the less. Any amount
in excess of the above limit is
Perquisites, any special allowance, assessable to tax and is includible
benefit specifically received by an in the Total Income of the
employee from his employer to employee as per Rule 33A.
meet the expenditure wholly and
necessarily incurred in the 2) Conveyance Allowance
performance of the duties of an
office or employment of profit are Conveyance allowance receivable
exempt from tax in accordance in cash with no conveyance facility
with para (5) of the sixth schedule is exempt from tax upto 30,000/-
Part `A' of Income tax ordinance per year and any amount in excess
1984 and accordingly excluded of the above limit is includible in
from total Income of an Assessee the Total Income of the employee
for tax purpose as per Rule 33C.
as per provision of section 44, THE
sub-section (I) of Income tax
ordinance 1984, subject to the Perquisites Receivable in PERQUISITES/ BENEFITS
limits laid down there under for Money's Worth MAY BE IN THE FORM OF
the purpose of valuation of the
perquisites as per Rule 33 of i) Perquisites may be in the form ACCOMMODATION,
Income Tax Rule 1984. the rent-free accommodation CONVEYANCE,
provided to an employee with
The limits referred to above are no deduction from salary for EMPLOYEES PASSAGE
applicable for different types of such accommodation.
perquisites receivable both in cash FOR TOUR, MEDICAL
and money's worth in respect of In that case the notional value of FACILITIES ETC. THE
accommodation, conveyance the accommodation provided to
employees passage for tour and the employee shall be determined PERQUISITES MAY BE IN
medical facilities etc. provided by @ 25% of the Basic Salary, or the THE FORM OF
an employer and are dealt with Rental Value, whichever is the less
under Rule 33A to 33I for arriving for its inclusion in the Total ALLOWANCES FOR
at the tax-free and taxable value of Income of the concerned
perquisites provided to an FOREIGN TOURS OF
employee.
employee. EMPLOYEES AND HIS
On the other hand when the
The value of any, perquisites over accommodation is provided at a DEPENDANTS FOR
and above the exempt limit is concessional rate with the HOLIDAYING AND
liable to tax and is includible in the deduction of certain amount from
Total Income of the employee for his monthly salary, the valuation of RECREATION.
tax purpose. the perquisites shall be determined
in the above said rate and there
Now let us discuss the various from the monthly deduction from
types of perquisites and benefits salary be adjusted to arrive at the
receivable in cash and money's taxable portion of the perquisites
worth as under: receivable by the employee for
such accommodation at
Perquisites in Cash concessional rate.
1) House Rent The amount arrived at in the above

way be included in the Total
House rent receivable in cash by Income of the employee for tax
an employee is exempt from tax to purpose as per Rule 33-B.
the extent of 50% of Basic Salary

ii) As per Rule 33-D where a
conveyance is provided to an
employee for his personal or
private use, the notional value
for such conveyance used
partly or exclusively for
personal or private purpose of
the employee, be determined at
the rate of 5% of the Basic Pay
for its inclusion in the total
income of the concerned
employee.
Additional conveyance allowance

as per Rule 33E, where an
employee receives an allowance in
addition to the conveyance
provided for his personal or private
use such additional allowance be
added to the value of perquisites
determined as per Rule 33-D. The
aggregate of the two be included in
the Total Income of the employee
for tax purpose.
Free or Concessional
Passage for Travel Abroad or
been so provided by the employer, households and defendants, by
within Bangladesh-Rule 33-G would be treated as income from conveyance owned by the
salaries of the employee for tax undertaking or chartered by it,
i) Where a free or concessional purpose. no amount will be added to the
passage is provided for the income of the employee for
employee including his Provided that where the employee such facilities provided.
household members and avails free or concessional passage
dependants in accordance with for travel abroad for more than
the terms of employment, any
Entertainment Allowance
once in every two years, the whole Rule 33H
payment in cash which exceeds of the cash received, if any, for
the actual expenditure incurred such additional passage be treated
by the employee shall be Where an entertainment allowance
as income from salaries of the is paid to an employee it is to the
treated as his income under the employee and even if no cash is
head salaries. full extent taxable as no exemption
paid by the employer for such is allowed for such payment as per
additional passage, the amount law.
ii) Where the employee is not which would have been expended
entitled to the passage in by the employee for such
accordance with the terms of However, if free tea, coffee,
additional passage, would be beverages or the like is provided in
employment, the whole of the treated as income from salaries of
cash paid by the employer shall the office premises during the
the employee. course of work, there will be no
be treated as income of the
employee from salaries. addition of income to salaries of
iii) Where the employer being an the employee concerned.
undertaking of transport
Or if no cash is paid by the carrying passengers and goods
employer the whole of the amount provides free or concessional Medical Expenses Rule 33 I
which would have been expended rated service for passage or
by the employee for such free or carrying goods of an employee Where any allowance is received
concessional passage, had it not including members of his or receivable by an employee as

cost of hospitalization or by way of actual expenditures whichever is portion is exempt from tax and
medical expenses or medical the less, not often once in every another portion is taxable.
allowances, the amount so two years.
received or receivable as exceeds Now let us see what is meant by
10% of the basis salary or Tk. The amount in excess of the above Basic Salary. Basic Salary means
60,000/- whichever is less, shall be limit will be disallowed as business the pay and allowances payable
treated as income from salary. expenses as per Rule 65A and monthly or otherwise but it does
section 30 (f) of I. T. Ordinance not include the monthly payments
Other Benefits-Rule 33 J 1984. However, to get the of the following nature:
exemption of the full allowable
There may be some other benefits amount when such payment i) Dearness allowance or
provided by the employer in the exceeds Tk. 10,0001- it is to be dearness pay unless it enters
form of annuity not covered under paid by the employer by crossed into the computation of
Rule 33A to 331, for the employee, bank cheque or a crossed bank superannuation or retirement
the members of his households or draft to the concerned employee. benefits of the employee
his dependants. concerned.
Perquisites to a Shareholder
In that case for such benefits, an Director ii) Employee's contribution to a
amount equal to the amount which recognized PF or to a Fund to
would have been expended by the A shareholder director may get which the Provident Fund Act
employee in obtaining such benefit some perquisites/ benefits from 1925 applies and the interest
or annuity from an independent more than one company. In that credited on the accumulated
source in the same or near locality case such Director shall be entitled balance of an employee as
had it not been provided by the to the benefit under Rule 33 from member of such fund.
employer as reduced by an one company only. The value of
amount, if any, expended wholly, the perquisites received/receivable iii) Allowance which are exempt
necessarily and exclusively in the from other companies shall be from payment of tax.
performance of duties of office included in his salary income for
held by him or actually paid by tax purpose. iv) Allowances, perquisites,
him in cash, would be treated as annuities and benefits as
income of the employee form Whatever may be the total value of referred to in sub-Rule (1) of
salary. the perquisites and benefits Rule 33. This is the excess
provided to an employee and amount of perquisites
Perquisites in the Form of determined as per rules related to includible in the salary income
that, the maximum relief to an of the employee under various
Allowance in Respect of employer for such facilities is rules dealt with as above.
Employees' Foreign Travel restricted to Tk. 350,000/- per
for Holidaying and employee as per clause (e) of The tax impacts of perquisites and
Recreation section 30 of I. T. Ordinance 1984. benefits discussed in the Article
represent the position upto the
An employer may provide foreign Basic Salary Finance Act 2014, relevant to the
tour facilities to an employee and Assessment year 2014-2015.
his dependants for holidaying and Valuation of perquisites is
recreation to the extent of 3 determined as per Rules 33A to The Author is a
months' basic salary of the rule 33J in terms of Basic Salary. Fellow Member of ICAB
employee or three fourths of the Of the value so determined a

A Forensic Analysis on Global Divergence of
Financial Reporting Regulation with the rise
of Independent Public Oversight Body
1
Mustaq Ahmed ACA | 2Sazib Kumar Saha ACA
Preface diversified effects. Access to the reliable

and accurate financial information on
timely manner is another aspect that’s
The world has basically two different need to be taken care of. Almost every
nature of accounting and financial model country has a well-defined code for
which is either principle based or rules accounting and financial regulations along
based. Although their approach is with the suggested standards. The
different, the target point remains same, prescribed format is also enacted to
that is basically to ensure true and fair address different set of needs. Now a days,
presentation of the underlying business it is evident that global economy is getting
information in the financial form. turbulent and eventually entrepreneurs are
getting affected which has a deep effect on
In order to regulate any object or the national and global economy. There is
objectives, two things need to be ensured a sufficient basis to endorse international
at the very first. These are a well accounting information systems.
addressed and crossed linked set of laws
and a full functioning autonomous The purpose of the use of international
enforcing agency. The prolonged accounting information systems and
recession and the slow growth recovery regulations is that similar accounting
have had long-term implications not only transactions are treated the same by
for employment but also for financial companies around the world, resulting in
reporting. In this environment, therefore, it globally comparable financial statements.
is increasingly important for businesses to Accountants, auditors and information
be financially transparent and for scientists around the globe are planning to
governments to establish a sound harmonize accounting information
regulatory environment for corporate systems with the goal of creating one set
financial reporting. of high-quality accounting rules to be
applied around the world.
Executive Summary
14 years after the reform of the
Depending on the financial structure as International Accounting Standards
well as the composition of ownership, the Committee (IASC) and the establishment
regulation on the financial information has of the IFRS Foundation and the IASB, the

profiles provide firm evidence that following different accounting and
the vision of global accounting financial codes for financial
standards is now a reality. Out of information reporting by different
the 140 jurisdictions whose counties, it creates ambiguity and
profiles have been posted 116 self-questing issue. The complexity
jurisdictions (83 per cent of the of the modern market means that
profiles) require IFRSs for all or there is a need for a single,
most domestic publicly high-quality set of global
accountable entities (listed accounting standards in order to
companies and financial maintain the confidence of users in
institutions) and most of the the transparency and integrity of
remaining 24 jurisdictions that do financial statements.A reconciled
not yet require IFRSs for all or most position can lessen the problem to
domestic publicly accountable some extent but ultimately because
entities already permit it for at least of timeliness and accuracy aspect,
some of those entities. it may not provide solid solution. NOW A DAYS, IT
Global financial reporting rules IS EVIDENT THAT
Failure of Securities and Exchange and regulations can improve the
Commission for ensuring effective credibility of smaller markets, GLOBAL ECONOMY IS
oversight, introduction of complex encouraging cross-border GETTING TURBULENT
accounting and financial investment and a more even
arrangements along with allocation of capital. AND EVENTUALLY
widespread use of creative
accounting, a new regulatory
ENTREPRENEURS ARE
Financial Reporting
framework has been developed so
Regulation GETTING AFFECTED
that the users can take informed
decision based on accurate WHICH HAS A DEEP
Financial reporting is the process
information. Independent oversight EFFECT ON THE
of producing statements that
body are being formed for
disclose an organization's financial
monitoring purpose from the third NATIONAL AND GLOBAL
status to management, investors
eye point which can foster the
and the government. Financial ECONOMY. THERE IS A
transparency of accounting
reporting is governed by statutory
information with the increase of
and common law, and it should be SUFFICIENT BASIS TO
credibility to both general and
special users.
done according to ethical ENDORSE
standards. Unfortunately, financial
reporting sometimes falls short of INTERNATIONAL
Key Words both legal and ethical standards. ACCOUNTING
These standards and requirements
International accounting for accounting and financial INFORMATION
classification, principle and rules reporting often change, so you
based of financial reporting, need to stay updated.
SYSTEMS.
accounting standards, independent
oversight body, implementing The International Accounting
agency, US GAAP, IFRSs, FRC. Standards Board (IASB),
independent standard-setting body
Introduction of the IFRS Foundation, has made
an enormous effort to engage with
Business world is getting changed emerging markets on the issue of
rapidly in every single moment, so implementing global standards.
the economic decision takers need The truly global marketplace that
to be in a state of having accurate has developed in recent decade
information. The global nature of has brought the need for truly
today’s economy means that these global accounting standards. The
events are no longer localised but first uniform accounting standards
ripple across the world. Because of

Accounting
Audit Assurance
& Financial
Reporting Financial & Attest & Advisory
Review,
Industry Reporting Compilation &
Insights
Center Preparation
evolved in the form of national between the two standard setters information scientists around the
generally agreed accounting has brought a significant reduction globe are planning to harmonize
principles (GAAPs). As the in differences between the two accounting information systems
influence of capital markets grew standards. This in itself has with the goal of creating one set of
and domestic market places increased the level of confidence high-quality accounting rules to be
became more sophisticated, in IASB’s standards and helped its applied around the world.
investors recognised that markets cause enormously. The Trustees of
needed a single, high quality IFRS Foundation think that An Overview of Global
language to increase transparency Convergence may be an Financial Reporting
and comparability that would appropriate short-term strategyfor a Standards
allow them to make better particular jurisdiction and may
informed investment decisions. facilitate adoptionover a Generally, there are two main
IASB has already made enormous transitional period. Convergence, stream of accounting standards
progress towards achieving this however, is not asubstitute for which are International Financial
aim. In a remarkable departure adoption. Adoption mechanisms Reporting Standards (IFRSs) and
from the multi-GAAP reality that may differamong countries and another one is US GAAP. But apart
existed at the time of IASB’s may require an appropriate from this two standards, there are
inception in 2001, more than 100 periodof time to implement but, many country specific standards
countries now require or permit whatever the mechanism, itshould such as India, China, Japan,
the use of international financial enable and require relevant entities Indonesia, Switzerland etc.
reporting standards (IFRSs). This list to state thattheir financial Because of the difference in these
includes most of the countries statements are in full compliance two standards, reporting of
belonging to the G20, which has withIFRSs as issued by the IASB. financial information has become
repeatedly called for rapid moves very complex and raises may
towards global standards. The purpose of the use of economic issues.
international accounting
IASB close work in recent years information systems is that similar Positively, there is a hope that
with the Financial Accounting accounting transactions are treated these two standards are getting
Standards Board (FASB) has served the same by companies around the leveled progressively to address
to improve its standards. The US is world, resulting in globally those unwanted economic glitches.
still home to the world’s largest comparable financial statements. The differences of these two set of
capital market. The cooperation Accountants, auditors and standards are the followings:
Sl no Area of difference US GAAP IFRS

1 Basis of approach Rule based Principle based
2 Adaptable to changes No Yes
3 Addressing new issues Not capable Capable
4 Chance of fraudulent reporting High Low

However, International Financial variations of IFRSs around the  Most of the remaining 24
Reporting Standards (IFRSs) have world; and jurisdictions that do not yet
become the de facto global require IFRSs for all or most
standard for financial reporting. Its  To identify where the IFRS domestic publicly accountable
quality has been validated by Foundation can help countries entities already permit it for at
almost a decade of use by markets progress on their path to least some of those entities.
in both advanced and developing adoption of IFRSs.
economies. Today, more than 100 IFRS’s adoption are not yet at the
countries require the use of IFRSs Present Scenarios of IFRS point of total and complete for
by public companies, while most Adoption publicly accountable entities
other jurisdictions permit the use around the world. But, if one
of IFRSs in at least some 14 years after the reform of the considers that just 15 years ago
circumstances. International Accounting Standards very few jurisdictions even
Committee (IASC) and the permitted IFRSs, it has made
To assess progress towards the goal extraordinary progress in a short
of global accounting standards, the establishment of the IFRS
Foundation and the IASB, the period of time.
IFRS Foundation has undertaken a
comprehensive project with three profiles provide firm evidence that
the vision of global accounting The list of the 140 jurisdictions for
related objectives: which profiles are posted as of
standards is now a reality. Of the
140 jurisdictions whose profiles June 2015 are shown in
 To develop a central source of
have been posted: Annexure-A.
information to chart
jurisdictional progress towards
 116 jurisdictions (83 per cent of Profiles of the 140 jurisdictions
the global adoption of a single
the profiles) require IFRSs for all show that IFRSs is widely used in
set of financial reporting
or most domestic publicly every region of the world are
standards;
accountable entities (listed shown below:
 To respond to assertions that companies and financial
there are many national institutions).
Region Number of jurisdictions

Jurisdic- Jurisdictions Jurisdictions Jurisdictions that Jurisdictions
tions in that that require permit that neither
the require IFRSs IFRSs as a per or require IFRSs require nor
region for all or cent of for at permit IFRSs
most domestic the total least some (but for any domestic
publicly jurisdictions not all or publicly
accountable in the region most) domestic accountable
entities publicly entities
accountable
entities
Europe 43 42 98% 1 -
Africa 19 15 79% 1 3
Middle East 9 8 89% 1 -
Asia and Oceania 32 24 75% 3 5
Americas 37 27 73% 8 2
Totals 140 116 83% 14 10
As per cent of 140 100% 83% - 10% 7%
Source: IFRS Foundation publication June 2015

In can be demonstrated from be sanctioned by the U.S. Committee and the Codes and
above table that there are 24 Securities and Exchange Standards Committee. The FRC sets
jurisdictions that do not yet require Commission (SEC). The Board is the operational standards for
IFRSs for all or most domestic funded principally by fees from auditors. No FRC member is a
listed companies. Among them public companies. practicing auditor. The majority of
larger economical jurisdictions are FRC Board members must not be
China, India, Indonesia, Japan, The PCAOB has four main individuals who in the five years
Saudi Arabia, Switzerland and responsibilities: prior to appointment have: been
United States. At present, they are practicing auditors, accountancy or
using their national standards along  Registration of accounting firms actuaries; or held voting rights in
with limited uses of IFRSs. Details (including non-US firms) that an audit, accountancy or actuarial
are shown in Annexure-B. audit public companies firms; or been employees of an
(including non-US issuers) audit, accountancy or actuarial
Independent Public trading in US securities firm, members of the
Oversight body markets; administrative or management
body of an audit, accountancy or
In addition to the global financial  Inspections of registered public actuarial firm or office holders of
reporting regulation, post-SOX accounting firms; an accountancy or actuarial body.
period brings a dramatic change in
oversight function. Failure of  Establishment of auditing and C. Financial Reporting Act (FRA),
Securities and Exchange related attestation, quality New Zealand
Commission for ensuring effective control, ethics, and
oversight, introduction of independence standards for As per FRA 1993, an External
continuous complex accounting registered public accounting Reporting Board consists of no
and financial arrangements as well firms; and fewer than 4 and not more than 9
as widespread use of creative members. However, a person is
accounting all over the world, a  Investigation and discipline of qualified for appointment as a
new regulatory framework has registered public accounting board member by reason of his or
been developed so that the users firms and their associated her knowledge of, or experience
can take informed decision based persons for violations of in, business, accounting, auditing,
on accurate information. This specified laws or professional finance, economics, or law.
section provides some brief standards.
description of such regulatory D. Financial Reporting Council
initiatives all over the world. B. Financial Reporting Council (FRC), Nigeria
(FRC), United Kingdom
A. Public Company Accounting On 18 May 2011 the Senate
Oversight Board (PCAOB), United The FRC is the United Kingdom passed the Financial Reporting
States oversight body for the accounting, Council of Nigeria Bill, which
audit and actuarial professions and repealed the Nigerian Accounting
The PCAOB is a private-sector, is also in authority for corporate Standards Board Act and replaced
nonprofit corporation shaped by governance in the UK. The FRC it with a new set of rules. The FRC
the Sarbanes-Oxley Act of 2002 to Board is responsible for the overall is a unified independent regulatory
supervise the audits of public governance and strategy of the FRC body for accounting, auditing,
companies and other issuers in and eventually approves all codes actuarial, valuation and corporate
order to guard the interests of and standards issued by the FRC. governance. The membership of
investors and further the public The chair and deputy chair are FRC in Nigeria includes: Central
interest in the preparation of appointed by the Secretary of State Bank of Nigeria, Corporate Affairs
informative, accurate and for Business, Innovation and Skills. Commission, Federal Inland
independent audit reports. Since Other Board members are Revenue Service, Federal Ministry
2010, the PCAOB also oversees appointed by the Board. The Board of Commerce, Federal Ministry of
the audits of broker dealers, is supported by three governance Finance, Auditor-General for the
including compliance reports filed committees (the Audit, Federation, Accountant-General of
pursuant to federal securities laws, Remuneration and Nominations the Federation, Securities and
to uphold investor protection. All Committees) and by the Executive Exchange Commission, Nigerian
PCAOB rules and standards must Committee, the Conduct Accounting Association, Nigerian

Association of Chambers of The IFIAR was established on 15 2015) in a bid to ensure more
Commerce, Industry, Mines and September 2006 by independent transparency and accountability in
Agriculture, Nigeria Deposit audit regulators from 18 financial-reporting activities as well
Insurance Corporation, and jurisdictions. Since its creation, as promoting high quality
Institute of Chartered Accountants IFIAR's membership has grown in corporate governance in the
of Nigeria. light of the establishment of new country. Among other things, the
independent audit regulators in FRA requires the establishment of a
E. Financial Reporting Council different jurisdictions around the new oversight body, referred to as
(FRC), Australia globe, bringing together the 'Financial Reporting Council
independent audit regulators from (FRC)'. As per the FRA, the FRC
The Financial Reporting Council a total of 50 jurisdictions. The will be a 12-member body,
(FRC) is responsible for supervision IFIAR core principles seek to comprising of representatives from
of the usefulness of the financial promote effective independent the government, the Bangladesh
reporting framework in Australia. audit oversight globally, thereby Bank, the Bangladesh Securities
Its key functions include the contributing to members and Exchange Commission (BSEC),
oversight of the accounting and overriding objective of serving the the Federation of Bangladesh
auditing standards setting public interest and enhancing Chambers of Commerce and
processes for the public and investor protection by improving Industry (FBCCI), the academia,
private sectors, providing strategic audit quality. More countries is in and the professional accounting
advice in relation to the quality of the process of formulating bodies. The council will be headed
audits conducted by Australian regulatory framework following by a full-time chairperson who will
auditors, and advising the Minister these countries. be appointed by the government
on these and related matters to the through a panel of experts. In
extent that they affect the financial IFIAR is the organization for addition, the FRC will have a
reporting framework in Australia. independent audit regulators. full-time chief executive. The FRA
Under section 235A of the ASIC Membership of IFIAR requires identifies four major functions of
Act, members of the FRC are subscription to the IFIAR Charter the council, namely, accounting
appointed by the Treasurer and (revised in 2013), which requires and auditing standard setting,
hold office on terms and that members must be independent financial reporting monitoring,
conditions determined by the of the profession and engage in audit practice review, and
Treasurer. The FRC includes audit regulatory functions in the enforcement of disciplinary
members appointed from public interest. actions.
nominations put forward by key
stakeholder groups, as well as G. Financial Reporting Act (FRA), A brief overview of financial
members appointed independently Bangladesh reporting regulation with
of stakeholder interests. independent oversight body of 5
The JatiyaSangsad passed the countries are shown below:
F. International Forum of Financial Reporting Act, 2015
Independent Audit Regulators (FRA) on Sunday (September 06,
(IFIAR)
Sl Country Accounting standard National Accounting Independent

no: monitoring body oversight body
1 United States of America US GAAP AICPA PCAOB
2 United Kingdom IFRSs ICAEW Financial Reporting
Council, United
Kingdom
3 Australia AASs (as like IFRSs) AASB Financial Reporting
Council, Australia
4 India IND ASs ICAI Not Applicable
5 Bangladesh BFRSs (as like IFRSs) ICAB Financial Reporting
Council, Bangladesh

Conclusion better-informed professional. IFRSs common platform and it will be a
eliminate many of the adjustments great challenge to get a streamlined
IFRSs promise more accurate, professionals historically have one set of code which will be able
comprehensive and timely made in order to make companies’ to address all the financial and
financial statement information, financials more comparable accounting issues of past, present
relative to the national standards. internationally. The reduction of and of course future. Considering
the cost of processing financial the fact, an independent oversight
Most of the countries are adopting information most likely increases body can be rested with the
IFRSs for public financial reporting. the efficiency which the stock responsibility to ensure the
Small investors are less likely than market incorporates in prices. accountability of implementing
investment professionals to be able IFRSs offer increased comparability agencies but caution should be
to anticipate financial statement and hence reduced information taken that composition of oversight
information from other sources. costs and information risk to body should be tailored to the
Improved financial reporting investors. perfect blending of technical
allows them to align better with knowledge, professional expertise
professionals, and hence reduces Based on the above analysis, it can and experience based on research
the risk they are trading with a be said that the global financial result.
reporting is yet to come on
Annexure-A
IFRS adopted jurisdiction for all or most publicly accountable entities
The 116 jurisdictions that require IFRSs for all or most publicly accountable entities are highlighted below:
Panama Switzerland
Paraguay
Cayman Islands Guatemala Macao
Guinea-Bissau
China Madagascar Thailand
Honduras
India
Indonesia Saudi Arabia
United States
Uzbekistan
Egypt
Vietnam
Bermuda Japan
Nicaragua
Bolivia Niger
Suriname
Source: IFRS Foundation publication June 2015

Annexure-B IFRSs for the purpose of trading in capitalisation is approximately
the US and in Europe. 20% of the Tokyo Stock
IFRS non-adopted jurisdiction Exchange. An additional 30
2. India companies are known to be
The following are comments considering moving to IFRSs.
among larger of the 24  IFRSs are currently permitted Two-and-a-half years earlier
jurisdictions that do not yet require on a limited voluntary basis. A (December 2012) only 10
IFRSs for all or most domestic few listed companies use IFRSs. Japanese companies were using
listed companies. IFRSs.
 India has recently adopted a
1. China new set of accounting standards 5. Saudi Arabia
for listed and large companies
 National standards are that is generally converged with  IFRSs are required for banks
substantially converged with IFRSs, but with some and insurance companies.
IFRSs mandatory and some optional
modifications. Those standards  There is a plan to adopt IFRSs
 While Chinese companies that are known as Indian for all listed companies and
trade on Mainland China stock Accounting Standards (Ind AS). financial institutions, which is
exchanges use national most likely to be effective in
standards, it should be noted 3. Indonesia 2017.
that Chinese companies whose
securities trade on the Stock  Listed companies follow 6. Switzerland
Exchange of Hong Kong may Indonesian Financial Reporting
choose either IFRSs, Hong Standards (SAK). Currently, SAK  IFRSs are permitted. Swiss
Kong Financial Reporting is substantially in line with GAAP FER, US GAAP and
Standards (HKFRS) or Chinese IFRSs as at 1 January 2009, but statutory bank standards may
Accounting Standards (ASBEs) there are a number of also be used. SMEs may also
for purposes of financial differences, and several use the IFRSs for SMEs.
reporting to Hong Kong Standards and Interpretations
investors. Those financial do not have SAK equivalents.  Of the 130 companies whose
reports are in addition to the primary securities listing is the
ASBE financial reports that the  The standard-setter is currently main Board of the SIX Swiss
Chinese companies issue working toward bringing SAK Exchange in January 2015, 91
within mainland China. substantially in line with IFRSs per cent use IFRSs.
as at 1 January 2014, again
 At 30 June 2014, a total of 296 with some exceptions. 7. United States
Chinese companies (known as
‘Red Chip’ and 4. Japan  SEC has studied whether to
‘H-Share’companies) trade in require or permit IFRSs.
Hong Kong. Of those 296  Listed companies may use
companies, 85 per cent use Japanese Accounting Standards,  IFRSs are permitted for non-US
IFRSs or HKFRS (identical to IFRSs or US GAAP. companies without
IFRSs); only 15 per cent use reconciliation to US GAAP.
ASBE. And the IFRS/HKFRS  In Japan, IFRSs adopters and Around 500 cross-border SEC
companies constitute 95 per their market capitalisation are registrants now use IFRSs.
cent of the market capitalisation growing rapidly.
of Chinese companies trading
in Hong Kong.  At May 2015, 85 companies The Author is are
are using or have publicly Associate Members of ICAB
 There are also a number of announced that they will adopt
Chinese companies that use IFRSs. Their market

Audit Fees
A Study on Commercial Banks of
South Asian Countries
Sujan Chandra Paul ACA
Abstract Keyword: Commercial banks, auditor,

Big 4, total assets, revenue, profit after
tax.
The aim of the study is to make a
comparison of the audit fees of the
Introduction
Commercial Banks in South Asian
Countries. The data was collected from
There are too many studies regarding the
the website of 98 commercial banks and
audit market and its actors (auditors and
their annual reports for the year 2012.
auditees). Many of them point the audit
Collected data were analyzed using
fees and their determinants.
descriptive statistics to meet the objectives
Carson/Fargher/Simon (2004), developed
of the research. The result of the analyses
on the Australian audit market for the
showed that during the 2012,
Bangladesh’s average audit fees as a period from 1995-1999, have built the
percentage of total assets, revenue and model trying to capture the individual
profit after tax is lower than any other characteristics of the client by the
countries in the South Asian region and following some parameters: the size of the
this year Afghanistan and Sri Lanka’s entity have used natural logarithm Total
average audit fees as a percentage of total Assets; complexity of the audit process is
assets, revenue and profit after tax is surprised by the number of subsidiaries to
higher than any other countries of the the entity, and the percentage of foreign
South Asia. Besides these, India, Pakistan, subsidiaries, the audit risk is surprised by
Sri Lanka, Afghanistan and Maldives’s the following parameters: current assets /
average audit fees in absolute value of total assets, treasury, long-term debt / total
USD was above 35,000 whereas assets, income before tax / total assets, the
Bangladesh, Bhutan and Nepal’s average indicator of opinion (dummy indicator
audit fees was below USD 10,000. One of variable with value 1 for a qualified
the reasons that has been identified in the opinion, and zero otherwise) recent loss
article that most of the auditors in indicator (dummy with value 1 for a loss
commercial banks during 2012 in India, in any of the past three years, 0 otherwise)
Pakistan, Sri Lanka, Afghanistan and was also used for assessing an indicator
Maldives are the Big 4 auditor whereas showing either to belong or not to the
only one auditor from the sample 46 mining industry, an indicator was
commercial banks’ auditors in introduced in a model that illustrates the
Bangladesh, Nepal and Bhutan is Big 4 relationship quantify the complexity of the
auditor. relationship between auditor and audited

is the natural logarithm of auditor 1990, an analysis of the elements
services paid (thousand dollars) determining the audit fees for audit
(this indicator was taken from the services, and D. Simon with
model Ezzamel, Gwilliam and collaborators, published in 1992, a
CODE OF ETHICS
Holland (2002)) eventually comparative study between audit FOR PROFESSIONAL
researchers introduced an services markets of the three
(dummy), an indicator for the countries.
ACCOUNTANTS (IFAC,
auditor’s being from the former Big 2010) ESTABLISHES THAT,
6 (six) otherwise. Hamid K. and Ali Y. Q. (2012)
showed that audit report quality
“WHEN ENTERING INTO
For the US market only a Standard has a positive and significant effect NEGOTIATIONS
and Poors survey shows that the on audit fees therefore; quality is
audit fees evolved from 0.08% of most important effective factors in
REGARDING
turnover in 1975 to 0.1% of audit fees. They added that another PROFESSIONAL SERVICES,
turnover in 2001. Zimmermann effective factors in audit fees is
(1986) appreciates that an audit is audit firm industry specialization
A PROFESSIONAL
efficient, when an auditor is therefore audit institutes should ACCOUNTANT IN PUBLIC
competent and independent. One can be rise their professional by
of the main characteristics of the trained in a particular industry
PRACTICE MAY QUOTE
auditor’s independence is a correct because they can be rise their audit WHATEVER FEE IS
fee for the service. activities in the target industry by
high efficiency and effectiveness.
DEEMED APPROPRIATE”
The aim of this research is to check (SECTION 240). HOWEVER,
a comparison of audit fees in terms The relation established between
of percentage of total assets, the audit quality and the audit fee
BOTH CODES OF ETHICS
revenue and profit after tax on 80 has made a study subject for MENTION THAT THERE
Commercial Banks in South Asian several researchers. So for the audit
Countries. In order to fulfill the aim services from the United States of
MAY BE THREATS IN
of the research, all 98 Commercial America, there is an empirical TERMS OF COMPLIANCE
Banks’ audit fees and revenues database that consists of a number
data are collected and audit fees as of important studies comprising 23
WITH THE FUNDAMENTAL
percentage of revenues calculated from 1980 to 2000 to support the ETHICAL PRINCIPLES
using Microsoft Excel. Then, idea that really big international
different types of statistical tools auditing companies (Big4) made
(INDEPENDENCE
(i.e. mean, median, standard audits of higher quality than the OBJECTIVITY,
deviations, maximum and other (DeAngelo(1981)).
minimum) are used to compare
PROFESSIONALISM),
these fees among different Hay and colleagues (2006) WHEN DIFFERENT FEES
countries of the South Asian conducted a meta-study examining
Region. possible determinants of the
LEVELS ARE CHARGED. IT
amount of audit fees in the last 25 MUST BE UNDERLINED
Review of the Literature years (1977-2002). Of the 88
THAT IF AN AUDITOR
research papers included in their
An important place in literature is analysis, only 6 were related to CHARGES A LOWER FEE
allocated to country analysis, auditing activity in emerging
market countries, while 45 were
THAN ANOTHER AUDITOR,
market audit services and audit
fees. In India, D. Simon published related to United State’s market. THIS IS NOT UNETHICAL,
together with a team of Hay (2006) considered in the
mentioned meta-study that audit
IF THE AUDIT IS CARRIED
collaborators an empirical study in
1986 on the market for audit fees determinants are: customer OUT AT A
services and audit fees of India. size, the overall audit risk, and
complexity of the client, customer
CORRESPONDING QUALITY
Similar studies were conducted for
Hong Kong, Malaysia, and profitability, owners of the LEVEL.
Singapore by L. Low and company, the degree of
colleagues, who published in competition of market share.

De Angelo (1981), Chan (1999), professional accountant in public YE = indicator variable, 1 =
and Whisenent, practice may quote whatever fee is December 31st year-end, (+)
Sankaraguruswamy, Raghunandan deemed appropriate” (Section
(2003) believe that the practice of 240). However, both codes of Loss = indicator variable, 1 = loss
setting lower initial audit fees is ethics mention that there may be in the past three years, (+)
due the following two factors: cost threats in terms of compliance with
of auditor change, and the fundamental ethical principles REGSPEC = indicator variable, 1=
expectations of the auditor to (independence objectivity, auditor with market share greater
establish higher fees in the professionalism), when different than 20%
following years. fees levels are charged. It must be
underlined that if an auditor for firm in regulated industry, 0=
Hayes et al. (2005) mentions the charges a lower fee than another otherwise. (-)
following: the auditee’s size and auditor, this is not unethical, if the
the geographical dispersion, the audit is carried out at a REGNSPEC = indicator variable,
size of the audit company, the corresponding quality level. 1= auditor with market share less
level of consulting services, the than 20%
quality of the auditee’s internal Chen K.Y. and Elder R.J. (2001)
control system, the type of contract used Cross-sectional audit fee for firm in regulated industry, 0=
regarding fees (fixed fees against regression models similar to otherwise. (+/-)
variable fees). Moreover, Hayes et Simunic (1980) and Craswell et al.
al. (2005) remarks at the Big4 (1995) to examine the effect of NREGSPEC= indicator variable,
companies the existence a fee raise industry specialization on audit 1= auditor with market share
request, called fee premium. fees in both regulated and greater than 20%
non-regulated industries.
Research Methodology for firm in non-regulated industry,
Ln (FEE) = a0 + a 1 0= otherwise. (+)
All the data used in this paper have Ln(ASSET) + a2 SUB + a3 DE + a4
been collected from secondary ROI + a5 Foreign + a6 Opin + a7 The error term u is assumed to
sources. The main source among YE + a8 Loss + a9 REGSPEC + a10 have normal OLS regression
all the secondary sources is the REGNSPEC + a11 NREGSPEC + u properties.
financial statements of 98
Commercial Banks in 2012 of Where (with predict sign inside Empirical Results
South Asia. The other sources of parenthesis):
secondary data are books, journals, Descriptive results - (Audit fees as
website of different accounting Ln (FEE) = natural logarithm of percentage of Total Assets):
bodies and banks, circular etc. total audit fees,
Relevant articles and literature in Table 1 represents descriptive
this context have also consulted. In Ln (ASSET) = natural logarithm of statistics and illustrates the audit
this paper, two years data of audit assets, (+) fees as percentage of total assets in
fees and revenues in South Asian different countries of SAARC
Countries were analyzed. A SUB = square root of the number region during the year 2012. The
comparative study has been of subsidiaries, (+) average audit fees as percentage of
performed by applying different revenue of 30 private commercial
statistical tools i.e., mean, median, DE = ratio of long-term debt to banks in Bangladesh are 0.00059%
standard deviation, maximum, total assets, (+) whereas the same of 17 private
minimum etc. commercial banks in Pakistan is
ROI = ratio of earnings before 0.00189%, 16 private commercial
Audit Fees interest and tax to total assets, (-) banks in India is 0.00848%, 14
private commercial banks in Sri
Code of Ethics for Professional Foreign = proportion of Lanka is 0.00474% and 14 private
Accountants (IFAC, 2010) subsidiaries that represent foreign commercial banks in Nepal is
establishes that, “when entering operations, (+) 0.00155%, 4 private commercial
into negotiations regarding banks in Afghanistan is 0.01086%,
professional services, a Opin = indicator variable, 1 = 2 private commercial banks in
qualified audit report, (+) Bhutan is 0.00070%.

The median of the audit fees as
percentage of total assets of 30
private commercial banks in
Bangladesh are 0.00042% whereas
the same of 17 private commercial
banks in Pakistan is 0.00123%, 16
private commercial banks in India
is 0.00389%, 14 private
commercial banks in Sri Lanka is
0.00370% and 14 private
commercial banks in Nepal is
0.00142%, 4 private commercial
banks in Afghanistan is 0.01115%,
2 private commercial banks in
Bhutan is 0.00070%. The standard
deviation of the audit fees as
Bangladesh are 0.00062% whereas
the same of 17 private commercial
banks in Pakistan is 0.00173%, 16
private commercial banks in India
is 0.01677%, 14 private total assets of 17 private private commercial banks in Nepal
commercial banks in Sri Lanka is commercial banks in Pakistan was is 0.00036% of total assets
0.00351% and 14 private 0.00006% of total assets in 2012 whereas the maximum of the audit
commercial banks in Nepal is whereas the highest was 0.00533% fees as percentage of total assets of
0.00100%, 4 private commercial of total assets. The minimum of the the same banks in Nepal is
banks in Afghanistan is 0.00267%, audit fees as percentage of total 0.00382%. The lowest audit fees
2 private commercial banks in assets of 16 private commercial as a percentage of total assets of 4
Bhutan is 0.00024%. banks in India is 0.00004% of total private commercial banks in
assets whereas the maximum of the Afghanistan was 0.00739% of total
The minimum of the audit fees as audit fees as percentage of total assets in 2012 whereas the highest
percentage of total assets of 30 assets of the same banks in India is was 0.01376% of total assets. The
private commercial banks in 0.06691%. The lowest audit fees audit fees as percentage of total
Bangladesh is 0.00002% of total as a percentage of total assets of 14 assets of 2 private commercial
assets whereas the maximum of the private commercial banks in Sri banks in Bhutan are 0.00053% and
audit fees as percentage of total Lanka was 0.00088% of total assets 0.00087% of total assets and the
assets of the same banks in in 2012 whereas the highest was only banks in Maldives’ audit fees
Bangladesh is 0.00339%. The 0.01256% of total assets. The as a percentage of total assets is
lowest audit fees as a percentage of minimum of the audit fees as 0.00724%.
Table-1: Descriptive Statistics (Audit fees as percentage of total assets)
Country Mean Median Standard Minimum Maximum Sample

Deviation Banks
Bangladesh 0.00059% 0.00042% 0.00062% 0.00002% 0.00339% 30
Pakistan 0.00189% 0.00123% 0.00173% 0.00006% 0.00533% 17
India 0.00848% 0.00389% 0.01677% 0.00004% 0.06691% 16
Sri Lanka 0.00474% 0.00370% 0.00351% 0.00088% 0.01256% 14
Nepal 0.00155% 0.00142% 0.00100% 0.00036% 0.00382% 14
Afghanistan 0.01086% 0.01115% 0.00267% 0.00739% 0.01376% 4
Bhutan 0.00070% 0.00070% 0.00024% 0.00053% 0.00087% 2
Maldives 0.00724% 0.00724% 0.00000% 0.00724% 0.00724% 1

Descriptive Results- (Audit fees as
percentage of revenue)
Table 2 represents descriptive

statistics and illustrates the audit
fees as percentage of revenue in
different countries of SAARC
region during the year 2012. The
average audit fees as percentage of
revenue of 30 private commercial
banks in Bangladesh are 0.00553%
whereas the same of 17 private
commercial banks in Pakistan is
Bangladesh are 0.00848% whereas is 0.00041% of revenue whereas
the same of 17 private commercial the maximum of the audit fees as
banks in India is 0.03581%, 14
banks in Pakistan is 0.02154%, 16 percentage of revenue of the same
private commercial banks in Sri
private commercial banks in India banks in India is 0.09229%. The
Lanka is 0.03680% and 14 private
is 0.02685%, 14 private lowest audit fees as a percentage of
commercial banks in Nepal is
commercial banks in Sri Lanka is revenue of 14 private commercial
0.02753% and 14 private banks in Sri Lanka was 0.00810%
commercial banks in Nepal is of revenue in 2012 whereas the
2 private commercial banks in highest was 0.10538% of revenue.
Bhutan is 0.01876%. The minimum of the audit fees as
2 private commercial banks in percentage of revenue of 14
The median of the audit fees as private commercial banks in Nepal
Bhutan is 0.01085%.
percentage of revenue of 30 is 0.00365% of revenue whereas
private commercial banks in the maximum of the audit fees as
The minimum of the audit fees as
Bangladesh are 0.00393% whereas percentage of revenue of the same
percentage of revenue of 30
the same of 17 private commercial banks in Nepal is 0.04726%. The
banks in Pakistan is 0.01437%, 16 lowest audit fees as a percentage of
Bangladesh is 0.00019% of
private commercial banks in India revenue of 4 private commercial
revenue whereas the maximum of
is 0.03815%, 14 private banks in Afghanistan was
the audit fees as percentage of
commercial banks in Sri Lanka is 0.20580% of revenue in 2012
revenue of the same banks in
0.02907% and 14 private Bangladesh is 0.04828%. The whereas the highest was 0.32649%
commercial banks in Nepal is lowest audit fees as a percentage of of revenue. The audit fees as
0.01293%, 4 private commercial revenue of 17 private commercial percentage of revenue of 2 private
banks in Afghanistan is 0.24898%, banks in Pakistan was 0.00071% commercial banks in Bhutan are
2 private commercial banks in of revenue in 2012 whereas the 0.01108% and 0.02643% of
Bhutan is 0.01876%. The standard highest was 0.06331% of revenue. revenue and the only banks in
deviation of the audit fees as The minimum of the audit fees as Maldives’ audit fees as a
percentage of revenue of 30 percentage of revenue of 16 percentage of revenue is
private commercial banks in private commercial banks in India 0.03561%.
Table-2: Descriptive Statistics (Audit fees as percentage of revenue)

Deviation Banks
Bangladesh 0.00553% 0.00393% 0.00848% 0.00019% 0.04828% 30
Pakistan 0.02258% 0.01437% 0.02154% 0.00071% 0.06331% 17
India 0.03581% 0.03815% 0.02685% 0.00041% 0.09229% 16
Sri Lanka 0.03680% 0.02907% 0.02753% 0.00810% 0.10538% 14
Nepal 0.01682% 0.01293% 0.01209% 0.00365% 0.04726% 14
Afghanistan 0.25756% 0.24898% 0.05775% 0.20580% 0.32649% 4
Bhutan 0.01876% 0.01876% 0.01085% 0.01108% 0.02643% 2
Maldives 0.03561% 0.03561% 0.00000% 0.03561% 0.03561% 1

Descriptive Results- (Audit fees as 0.06490%, 4 private commercial minimum of the audit fees as
percentage of profit after tax) banks in Afghanistan is 1.14909% percentage of profit after tax of 16
and 2 private commercial banks in private commercial banks in India
Table 3 represents descriptive Bhutan is 0.03517%. The standard is 0.00322% of profit after tax
statistics and illustrates the audit deviation of the audit fees as whereas the maximum of the audit
fees as percentage of profit after tax percentage of profit after tax of 30 fees as percentage of profit after tax
in different countries of SAARC private commercial banks in of the same banks in India is
region during the year 2012. The Bangladesh are 0.06842% whereas 4.13647%. The lowest audit fees
average audit fees as percentage of the same of 17 private commercial as a percentage of profit after tax of
profit after tax of 30 private banks in Pakistan is 0.70651%, 16 14 private commercial banks in Sri
commercial banks in Bangladesh private commercial banks in India Lanka was 0.07045% of profit after
are 0.06740% whereas the same of is 1.07527%, 14 private tax in 2012 whereas the highest
17 private commercial banks in commercial banks in Sri Lanka is was 18.75892% of profit after tax.
Pakistan is 0.18131%, 16 private 4.92003% and 14 private The minimum of the audit fees as
commercial banks in India is commercial banks in Nepal is percentage of profit after tax of 14
0.69914%, 14 private commercial 0.51474%, 4 private commercial private commercial banks in Nepal
banks in Sri Lanka is 1.71470%, 14 banks in Afghanistan is 1.12148%, is 0.01834% of profit after tax
private commercial banks in Nepal 2 private commercial banks in whereas the maximum of the audit
is 0.29465%, 4 private commercial Bhutan is 0.00089%. fees as percentage of profit after tax
banks in Afghanistan is 1.07476%, of the same banks in Nepal is
2 private commercial banks in The minimum of the audit fees as 1.97546%. The lowest audit fees
Bhutan is 0.03517%. percentage of profit after tax of 30 as a percentage of profit after tax of
private commercial banks in 4 private commercial banks in
The median of the audit fees as Bangladesh is -0.04821% of profit Afghanistan was -0.28643% of
percentage of profit after tax of 30 after tax whereas the maximum of profit after tax in 2012 whereas the
private commercial banks in the audit fees as percentage of highest was 2.28730% of profit
Bangladesh are 0.03896% whereas profit after tax of the same banks in after tax. The audit fees as
the same of 17 private commercial Bangladesh is 0.27176%. The percentage of profit after tax of 2
banks in Pakistan is 0.04984%, 16 lowest audit fees as a percentage of private commercial banks in
private commercial banks in India profit after tax of 17 private Bhutan are 0.03455% and
is 0.27046%, 14 private commercial banks in Pakistan was 0.03580% of profit after tax and
commercial banks in Sri Lanka is -0.51747% of profit after tax in the only banks in Maldives’ audit
0.33720% and 14 private 2012 whereas the highest was fees as a percentage of profit after
commercial banks in Nepal is 2.75278% of profit after tax. The tax is 0.19635%.
Table-3: Descriptive Statistics (Audit fees as percentage of profit after tax)

Deviation Banks
Bangladesh 0.06740% 0.03896% 0.06842% -0.04821% 0.27176% 30
Pakistan 0.18131% 0.04984% 0.70651% -0.51747% 2.75278% 17
India 0.69914% 0.27046% 1.07527% 0.00322% 4.13647% 16
Sri Lanka 1.71470% 0.33720% 4.92003% 0.07045% 18.75892% 14
Nepal 0.29465% 0.06490% 0.51474% 0.01834% 1.97546% 14
Afghanistan 1.07476% 1.14909% 1.12148% -0.28643% 2.28730% 4
Bhutan 0.03517% 0.03517% 0.00089% 0.03455% 0.03580% 2
Maldives 0.19635% 0.19635% 0.00000% 0.19635% 0.19635% 1

Overall Commentary on Audit performing audit services in Banks in Afghanistan was USD
Fees Commercial Banks, is Sri Lanka. 39,601 and one of the sample
This average audit fees of 14 banks was audited by Big 4 audit
Finally it is found that in the sample PCBs of Sri Lanka was USD firms and the others three were
absolute currency of USD, India’s 53,336 during the year 2012 and audited by Grant Thornton which
auditors had been received more 11 banks had been audited by the were included in Big 6 audit firms
audit fees (average audit fees of Big 4 audit firms from the sample during 2012. Other than the above
sample 16 banks in 2012 was USD banks which was 78.57%. The mentioned countries in South Asia,
234,809) than any other countries only bank in Maldives’ audit fees the remaining countries’ average
on the basis of the sample 16 was USD 47,839 and it was also audit fees was below USD 10,000
Commercial Banks where 9 audit audited by one of the Big 4 and among 46 sample banks in 3
firms were the Big4 among all 21 auditors during 2012. The average countries (Bangladesh = USD
audit firms of the sample banks audit fee of 17 Commercial Banks 8,930. Nepal = USD 5,237. and
(including joint audit firm). The in Pakistan was USD 40,757 and Bhutan = USD 4,427) only 1 bank
country which auditors were all the sample banks were audited of Bangladesh was audited by the
received second highest amount of by Big 4 audit firms during 2012. Big 4 firms during 2012.
audit fees in terms of USD for The average audit fee of sample 4
Table-4: Big 4 auditor as percentage of total auditors & Average audit fees (in USD) of Sample Banks
Country No. of Total auditors Big4 % (Big 4 Average audit

Sample (including joint auditors auditors to total fees (in USD)
Banks auditors) auditors)
Bangladesh 30 34 1 2.94% 8,930
Pakistan 17 17 17 100.00% 40,757
India 16 21 9 42.86% 234,809
Sri Lanka 14 14 11 78.57% 53,336
Nepal 14 14 0 00.00% 5,237
Afghanistan 4 4 1 25.00% 39,601
Bhutan 2 2 0 00.00% 4,427
Maldives 1 1 1 100.00% 47,839
Conclusion audit fees in terms of profit after tax auditors. On the other hand, out
in Afghanistan and Sri Lanka were of 50 auditors (including joint
The result of the analyses showed more than 1.0% of profit after tax, auditors) of 46 sample banks in
that in 2012, the average audit fees whereas in India was.7% and other Bangladesh, Nepal and Bhutan,
in terms of total assets in countries were below 0.5%. only one auditor was Big 4 auditor.
Afghanistan, India, Maldives and
Sri Lanka was more than the During 2012, India, Pakistan, Sri References
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Philanthro-Capitalism and
the Economics of Foundations
Ghulum Murshed Latiful Quader FCA, ACCA
The Face book’s billion air founder Mark The US government introduced tax
reforms and today US foundations awards
Zuckerberg’s recent donation of $45 over $30 billion a year. The issues are
billion to charity has raised the causality now accountability and effectiveness of
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corporations entrusted with these
The proverbial emergenceorder of chicken responsibilities; and generation and
and egg, and the question which came implementation of innovative strategies for
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parlance of the western socio economic impoverished countries and tackle
perspective stand as: homelessness in urban population.
Was it a triumph of western democracy in Emergence of

its principled stance of fairer distribution Philanthro-Capitalism
of wealth? Or was it just another example
of altruistic predisposition of the mega In recent time, Microsoft’s billionaire
rich, born and bred in theequitable owner Bill Gates recognized failure of
societies of the west with liberal values? market mechanism to address the need of
Which caused the other to happen? the poor in health care sector. He donated
a large portion of his wealth to charity.
History of Giving Through foundation he deployed funds to
generate supply of drugs and treatments
In the early part of the last century,Andrew the poor need. For example, it would
Carnegie, a staggeringly rich industrialist provide market incentives to the drug
set the tone for modern American companies to put their resources to work
philanthropic tendencyof the super-rich. for the needy.
He donated large chunk of his wealth to
public cause, and had publicly declared Gates Foundation dispensed nearly $4
that the rich have a moral obligation to billion toward fighting H.I.V., malaria,
give away their wealth beyond a family's polio, and tuberculosis in poor countries.
necessity.The rich should choose the In these endeavors he works in
causes to give their monies to using their partnership with others and would also
superior capabilities. Others followed suit, raise funds for causes. Likewise, the British
and the likes of Rockefeller and Ford billionaire Dame Stephanie Shirley,
foundation came to being. stumped up £50m herself and has been is

A FOUNDATION
SHOULD MEASURE ITS
OWN PERFORMANCE
OVER TIME,
CHALLENGING ITSELF TO
CONTINUAL
IMPROVEMENT. A
FOUNDATION SHOULD
ALSO MEASURE ITS
OWN SUCCESS BY THE
PERFORMANCE OF THE
ORGANIZATIONS THAT IT
raising similar sums from other the “Giving Pledge.” They set up
donors to fund research into an individual philanthropic FUNDS. IT MUST ACCEPT
autism gene. organizations and pursuing their
RESPONSIBILITY FOR
own causes—and eventually
It became apparent from the work phenomenon earned the nick THE SUCCESS OR
of the Gates Foundation that the name: “philanthro-capitalism.”
philanthropists should be clear FAILURE OF THEIR
what they want to do, and stick These very large foundations are GRANTEES; AND A
with it. The foundation’s clear free from political and commercial
mission has been to challenge pressures and employ professional FOUNDATION, TO BE
global health inequalities in areas staff. The new generation of SUCCESSFUL, SHOULD
like infectious disease, HIV/AIDS, philanthropists oversees their
tuberculosis, global health foundations. However, not many PERFORM
strategies and global health of them have closing dates, and it CONSISTENTLY BETTER
technologies. is thought that the legacies should
be disposed of within generation THAN AVERAGE.
Charitable giving of these kinds which will keep them dexterous,
makes modern capitalism looks
SUPERIOR SOCIAL
un-bureaucratic and true to its
human. It sendmessage to Wall founder's ideas. PERFORMANCE PER
Street hedge-fund managers,
Russian oligarchs, European Real Cost of Giving DOLLAR OF FUNDING
industrialists, Arab oil sheiks, and SHOULD BE THE AIM.
anybodywho has accumulated a Earlier in the twentieth century,US
vast fortune. tax payers could deduct up to 15
percent of taxable income for
Warren Buffet, a fellow billionaire payment to charities. Corporations
investorstepped in Gates footstep, are now permitted to deduct up to
and following their example 20% as philanthropic
hundredother billionaires signed contributions.

The 1969Tax Reform Act plugged benefit is 2 and half times of the enterprises who receive those
a loophole in the system to prevent lost tax revenue. funds.They are free from political
businesses to siphon funds to tailor pressures,they hold the scale, the
made foundations. It became In contrast, with the $100 direct time horizon, and employ
compulsory to dispense cash (at contribution to the foundation, the professional management. They
least 6% of the market value of the coffer loses the same $40. But the are also strongly favoredthrough
assets) even out of its assets. In immediate social benefit is only tax preferences. They are in a
1986, onlyitemized gifts became the $6 per year that the foundation position to lead social progress by
deductible for income tax purpose. gives away, which is less than 14% making effective use of scarce
With lower marginal tax rate at the of the forgone tax revenue. resources
same time, the real price of giving
increased. The cost in holding the unspent However, there is criticism that
fund, at say10% discount rate, after many foundations do not think
Despite these, in the pastdecades five year is $21, after 100 years, it strategically and consider little
number of charitable foundations is $55. This amounts stands grim about how they can create
in the United States has doubled, against the $100 contributed value.They do not measure their
while the value of their assets directly in year one. results against the objective they
increasing more than 1,100%. were set upfor; and sometimes
They now hold over $330 billion The forgone tax revenue becomes they do so against
in assets and contribute billions bigger if one considers that the unrelatedyardsticks.
annually to educational, foundations pay no taxes on their
humanitarian, and cultural asset appreciation. In the nineties, That, their limitation lies with the
organizations. But are the societies it came to 75 cents, in foregone tax mind set of founders, trustees, and
realizing the full fruits of this revenue, for every dollar staff.They are not transparent and
commitment? foundations gave to social provide little information about
enterprises. The other costs include what they do, or are secretive
The Tax Implications of administrative costs, ($2-3 billion about their failures.
Giving per year) and compliance cost
because of detailed and protracted Andtheir serious drawbacks when
When an individual contributes application and reporting it comes to their governance
procedures arethat their existence is
$100 to a charity, the state coffers
loses about at the rate of the continuous andthey do not have
Philanthropy Through any compliance need to any
individual tax rate (say, $40 if the
Foundation competitive standards.
rate of tax is 40%). The $100 given
to is spent on creating social Foundations are bridges that
benefit. The immediate social Criticism also points towards short
connectdonors and the social

termism in investing with personal control, they will yield assetswere permanent. It hadan
tendencies to chop and influence the political parties. long time horizon in which to
change.They are keener on funding tackle social issues and develop
individual programs and rather The Study on the expertise in its field. Thus it could
than focusing on sustainability of Foundations achieve greater social impact than
the non-profit organization running the same monies spent by private
the program. In 1999, the Harvard Business donors or the government.
Reviewmade an in-depth analysis
A study in 2012 showed that the of foundations working across Creating Value by Giving
richest .01% per cent (16,000) of America. Naming it ‘Obligation to
American households owned Create Value’, it pointed to the The study pointed that in general
11.2% per cent of the total wealth widespread flaws in America's this could have been done in four
of the United States. The richest foundations that mostly remain to ways:
0.1% per cent owned 22% per this day.
cent of the total, which is more 1) Firstly, the foundations should
than the bottom 90% per cent of Following are the salient feature of use their expertise to choose
households combined. that land mark article. amongst competing
organization, the most effective
If transferring wealth to After making statutory users, which the individual
foundations escalates, then actions disbursement (6%of their asset donors would be less able to
of a small number of very rich value) the foundations often do.
people can have a bigger impact. investedthe balance to make
These wealth avoids taxes and the financial returns. (Only .01% of 2) The foundation should educate
charitable enterprises won’t face foundation investment portfolios and attract other donors,
liabilities on disposal of their stock. were invested to support improving the return on a larger
Rightfully then, their democratic philanthropic purposes).Some pool of philanthropic resources.
governancebecomes public $330 billionwereheld in They should help grantees to
concern. foundations in the late part of the raise additional resources.
last century. This amount
Foundations are not altogether represented a future benefit to 3) They could strive to become
detached from politics and could society, which were to be realized, partners to the grantees for
support partisan causes. Their when the money is given away. more effectiveness. This would
initiative will have bigger impact extend beyond the impact of
on policy outcomes than that of How, could the foundations have one grant, and can affect the
ordinary people. Besides a Limited increased the social impact of their social productivity of more
Liability Corporation (LLC) can work? resources.
spend can money on political
advertisements. So, as foundations A foundation brought more than 4) Finally, the foundations could
remain under their donors’ money and good intentions, and its create the value by funding

research which would create new 1. Superior Performance in a grants; the composition and roles
framework and shaped Chosen Area of its staff and board etc must be
subsequent work in the field. tailored to its positioning.
A foundation should measure its
Through in depth study of a field, own performance,as well as the 4. Every Positioning Requires
foundation could impact on public performance of the organizations Trade-offs
sentiment and government policy. that it funded. It should accept
In the 50s, concerned with world responsibility for the success or To achieve excellence at what it
hunger and population growth, the failure of their grantees; and should was doing, a foundation must forgo
Ford and Rockefeller Foundations perform consistently better than opportunities in other approaches
had created research institutes that average. and in other fields. Deciding what
triggered the green revolution not to dowas therefore also a
which resulted huge increase crop It wastherefore important that strategy.
output per acre. foundations accepted the
legitimacy of the goal of superior Way Forward
Similarly, Carnegie Foundation performance. They should measure
sponsored research and study their results and acted upon what The study identified following as
revolutionized medical teaching they learn. ways forward.
and training in the United States.
Over 20 years, nearly half of the 2. Choice of Strategy a) Foundations should invest in
medical schools in existence were research projects to identify
closed, and the model curriculum A foundation must determine areas which had not been
that was proposed still serves as where it would make its impact addressed adequately. They
the basis for medical training and how. should select amongst
across the country. It subsequently competing problems, the one
funded hundreds of studies in the For example, within the broad which they could contribute.
field of education, such as law, category of environmental work,
engineering, and business. Avina Foundation, created by b) A foundation should asses the
philanthropist Stephan oncoming socioeconomic
Strategic Giving Schmidheinyhad targeted: trends. Where work had been
sustainable environmentally ongoing by others, they should
Foundationswere there to friendly business practices in Latin explore their own possible
maximize potential by using scarce America. Thus it was clear about, roles, be it complementary or
resources to their maximum where it would make impact and hitting at the root causes.
potential. Strategic giving how.
wasessentially achieving social c) The foundation should carry
benefit with lesser funds for 3. Strategy and Positioning out what is known in the
comparable cost. The study business parlance as SWOT
suggested the following principles Every major activity of the analysis.
to be complied with: foundation—its selection process;
the size, mix, and duration of its d) The impact of synergy should

be assessed. Larger foundations
might choose to work in more
than one field; but many
foundations could put greater
proportion of their resources
thereby increasing investment
in their chosen work.
e) Foundation governance systems

should be decentralized to
empower staff in making grant
decisions; leaving the board to
consider and approve
initiatives, study the field, set
overall strategies, and assess
staff performance.
f) Philanthropy should evolve

from private acts of conscience
into a professional field.
g) A foundation many activities

must be realigned to the chosen
strategy. There must develop
measures to assess whether or
not it has been successful.
Philanthropic Marketplace
The recent high profile and large

scale pouring of monies into
philanthropy is like to escalate.
This has brought fore the question
emerge “social investors” as well governments and made widely
whether philanthropy should
as “venture philanthropists”. available.
develop a capital market. Should
future philanthropist be able to They should explore new ways of Accountibilty
“invest” in something, which have funding organizations, and in areas
been created by “social like poverty and inequality, they Underperforming foundations have
entrepreneurs”, just as should pool resources together been a concern of the
entrepreneurs create companies involving connections and governments, and there are talks
which are then traded in the stock influence as well as money. There about a five-yearly review of
market? are also talks about philanthropic foundations' charitable status and
banks, offering financial products their formal ratification. In Britain,
However, this would require an its charity is still governed by an act
such as loans, loan guarantees and
own infrastructure, the passed in 1601 and periodic and
grants.
philanthropic equivalent of stock renewable license are also on the
markets, investment banks, These are all about how best to card.
research houses, management harness assets to the causes, rather
consultants and so on. The than concentrating on the money Some older foundations
philanthropists should approach to give away. Philanthropist should themselves are concerned about
their endeavor with the mindset of invest and develop models, effectiveness, and have started
investors, with goal to make the providing start-up risk capital for demanding more information on
greatest possible difference to government services and welfare, how their money is being spent.
society's problems. There would which can then be taken up by

There are ongoing work on capital gain tax liability. If they what the difference of impact
performance evaluationand fuzzier were to pass on their assets to would have been.
goals such as “empowering descendants there would have
people”, “increasing the been estate tax. By giving asset to However, itremains to be seen
effectiveness of civil society” or charitable causes, they avoid both how the donors spend their
“fighting climate change” are these charges. They now can also under-controlled fund and use their
coming under scrutiny. roll oversome of the credits equal newly acquired leveragestowards
to the market value of these creating equitable society.
Measures involving financial, donated shares against their future
social and environmental income from salaries and dividend. The concerned governments, on
performance are susceptible to With tax planning, this could be as their part, should recompenseif
statistical manipulation. A much$333 million, based on the that develops. Only then, the fruits
downside could be payingmore proposed $1 billion transfer. of democratic governance and the
attention to managing easily use of taxation system for fairer
measureable inputs, than output. The Zuckerberg Initiative, formed distribution of wealth can be more
Or to concentrate donations on as a LLC obtains tax-exempt status realizable.
those activities that can be easily and has flexibility in their
measured, (number of vaccinations investment decisions and can http://www.learningtogive.org/resource
given), which may not be an investin private profit-generating s/key-dates-and-events-american-philan
effective way of tackling a ventures thropic-history-1815-present
problem.
The donors did not make the tax https://hbr.org/1999/11/philanthropys-
Donors also need to strike the right laws, which were intended to new-agenda-creating-valueHarvard
balance between asking enough promote giving funds to social Business Review
information to be able to monitor causes. It is in their prudence, the
the effectiveness and not bogging donors have decided donate to The birth of philanthrocapitalism _ The
their organizations down in charities and can legitimately claim Economist.htm
form-filling bureaucracy. In this tax benefits. The tax laws are
sphere, the Gates Foundation has working to achieve the http://says.com/my/news/what-no-one-i
developed a good reputation for government’s intended objective s-telling-you-about-mark-zuckerberg-do
getting the mix right and tailoring it and enticing people to donate nating-99-of-his-fortune-to-charity
to individual circumstances. more; while these fundsare making
differences in people’s lives.
Conclusion Alternatively, if the government
could collect these resources in the The Author is a
If Zukerbergs were to sell their form of tax levies and spent them Fellow Member of ICAB
shares, there would have been itself. There is no way to know

Transfer Pricing
Are We Prepared?
Akhter Zamil FCA
The National Board of Revenue (NBR) authority had already started practice of
raising sales on estimate basis as against
had introduced the “Transfer Pricing the actual claim of assessee and adds huge
Scheme” hurriedly and promptly in the amount in the name of sales. If the tax
financial year 2011-2012 without making officers do not find any cogent reasons
provision for infrastructure development against the sales recorded through bank
to absorb the scheme by the concerned receipts by assessee, they resort to raise
public. It did not even make any publicity the rate of gross profit ratio. This practice
so far for the concerned people like of similar nature are also being proposed
Assessee, Multinational Companies, local to be carried out to find out transfer price
companies who deals with International by the enterprise through International
transactions particularly Garments sector, Transactions. Thus, action of the Tax
Professionals, lawyers, chartered officials reminds us of old sayings “old
accountants and Businessmen at large. In wine in a new bottle” are similar to that of
consequence, the businessmen and “transfer pricing scheme”.
investors remain in dark about the
scheme. Now, long after 3 years, NBR has In the transfer pricing scheme we find that
woken up to transfer the burden of same views are also being encouraged by
vigilance to the shoulders of businessmen NBR to collect Tax in the name of transfer
about that transfer price. price transactions. NBR is of the opinion
that profit is being avoided by enterprise
Now, if we go back to our existing following tricky techniques to transfer
systems of Taxation, we find that the same price in other Tax haven countries.
techniques are prevalent now and
included in the statement of the transfer To illustrate the position of transfer price
pricing system. We are fully aware that tax we give below the following examples.
Zambia Transfer price

Company “X“ in Bangladesh Company “Z” in Zambia
to company ‘Y’ in UK
Sale price £ 120 Sale Price £ 150
Cost “ 100 Purchase price “ 120 This is called transfer
Profit “ 20 Profit “ 30 price
Tax Rate “ 35% Tax Rate 0%

ALTHOUGH
TRANSFER PRICE
SCHEME IS YET TO TAKE
THE MOMENTUM TO
BOOST-UP THE EXPORT
According to NBR ‘X’ company in earning huge forex in dollar and on SALES AND TO EARN
Bangladesh has avoided £ 30 over conversion of dollar into FOREX AT A HIGH STAKE.
the sales price of £ 150. Sales price Bangladeshi Taka and getting
of Bangladesh Company being higher amount in BDT out of the BUT IN THE ABSENCE OF
lower that of other countries and above transaction. In fact,
FOREIGN INVESTMENT
therefore they are loosing sale indirectly, Bangladeshi is also
price by £ 30 as well as Tax getting the benefits out of the IN BANGLADESH, THE
collection being ‘Zero’ Zambia transaction and can boast of
outside, the territory of earning forex in the name of huge NBR HAD NO OTHER
Bangladesh. So far, we understand, export. WAY BUT TO FALL UPON
if an assessee adopt legal means to
avoid any Tax it is called “Tax Although transfer price scheme is THE ABOVE SCHEME
avoidance”. In many Tax cases, it yet to take the momentum to PARTICULARLY ON THE
is decided by High Courts that if boost-up the export sales and to
any legal means are adopted by an earn forex at a high stake. But in TRANSACTION MADE BY
assessee, it will be considered as the absence of foreign investment
legally transacted amount and no in Bangladesh, the NBR had no
MULTINATIONAL
tax can be charged on profit from other way but to fall upon the COMPANIES CARRYING
that transaction. above scheme particularly on the
transaction made by Multinational BUSINESS IN
From the above exercise, we find companies carrying business in BANGLADESH. WHILE
that ‘Z’ Company is the subsidiary Bangladesh. While foreign
of ‘X’ company who sells out its investors are found shy of capital FOREIGN INVESTORS
product to ‘Z’ company at £ 120. investment in Bangladesh, any ARE FOUND SHY OF
‘Z’ company earned profit £ 20, ‘Z’ wrong decision in implementing
company purchased goods from such scheme of transfer pricing CAPITAL INVESTMENT IN
mother company ’Z’ and sells at £ may be found otherwise. When
150 and thereby earned £ 30 we have very limited number of
BANGLADESH.
without paying. ‘Z’ company of MNC/MNE in Bangladesh, we can
Zambia later on transferred the sale not compare our position in
value and profit to ‘Y’ company of respect of foreign investment with
U.K. at the instruction of ‘X’ neighboring country liked India.
company. No doubt, UK company They have huge number of foreign
and Zambia company are enjoying companies doing business but still
tax benefit from the transactions. India is seeking more investments
But it should be kept in mind that from foreign countries till now. Of
Bangladeshi company is also course, they are experiencing

litigations also over transfer pricing situation. We are to make vigorous be alert in their business
due to its introduction of transfer publicity about the Transfer pricing transactions, may it be of foreign
price scheme in India. In every 25 system and to bring the public, companies or local domestic
minutes time, one application of investors, Tax payers, Lawyers, companies having International
appeals is being filed. But we Professional Chartered transaction particularly garments
should keep in mind that India has Accountants and Cost and companies. Here the NBR did not
the due infrastructure Management Accountants and fix any amount of transactions
Development to absorb transfer particularly assessee of Domestic which may attract companies in
pricing having efficient and skilled Enterprises to be acquainted with respect of local or foreign for
manpower to face any adverse the Transfer Pricing system and its applying such scheme of transfer
situation which we cannot expect easy application. pricing.
now at this nascent stage of the
implementation of such policies. In this respect Institute of Chartered No doubt garments companies are
Accountants of Bangladesh had doing business of International
The President of the Dhaka adopted pioneering Role to arrange transactions and bringing forex to
Chamber of Commerce & Industry, imparting training to its old, middle the country. But small garments
Mr. Khaled Hussain in his speech and Young Members of the companies are doing business in a
expressed his concern that Institute vigorously. Institute is very limited way and they will be
Bangladesh does not have holding conferences, seminars, affected if they are to follow such
qualified and skilled manpower to workshops and discussion among scheme of transfer pricing now.
withstand the situation that many the members of the Institute. High
arise in Bangladesh on officials of NBR were also to be Moreover, we, being a middle
introduction of transfer price by fund present in the said seminars to income country, can not negotiate
NBR so quickly. share the views of the members of our deals strongly with the foreign
the Institute. The ICAB is also countries in respect of price and
Similarly the ex-chairman of NBR arranging training over quality foreign companies are always
Mr. Muhammed Abdul Majid had control on Audit and Assurance enjoying the upper hand in this
also expressed similar views over subject along with transfer pricing respect. Under this circumstance
the introduction of “Transfer for its members throughout the the NBR should not be harsh and
Pricing” scheme in Bangladesh so month of April, 2015. As a result hard towards Garment sector rather
hurriedly and hastily. According to every one has involved themselves deserves sympathy.
him, to bring acceptable situation in the exercise getting the idea, Telecommunication sector
at this time it will be very difficult pros and corns of the different companies and other companies
to cope with. Because there is a scheme including transfer pricing. under Export Processing Zone (in
acute dearth of efficient manpower The young members of Institute are some cases, companies of local
in NBR to chase the transactions seriously engaged in the business and foreign companies are located
with credibility. According to him and giving tips to the tax officials at EPZ and are enjoying many
stoppage of flight of capital by to rethink about the scheme and to facilities) for similar nature are also
giving false declaration or quoting change its views and opinion. Our enjoying Tax benefit in the form of
false information the price of a grateful thanks to the President of Tax holiday and other exemptions
goods by the foreign or local ICAB and his councilors who are under tax law.
domestic company cannot be also exerting their mite for the
controlled by the NBR alone as it assistance of the participants in the It is true, most of the countries of
has got no skilled manpower at the matter giving much labour, time the World have adopted this
moment. Tax officials are not and energy for the successful scheme to stop evasion of capital
trained sufficiently by this time to training of the concerned people. and Tax avoidance by foreigner
grasp the situation if ‘Transfer Price companies, we cannot sit idle
Scheme’ are taken into hand by the If we delay the operation of the against the changed situation of the
NBR. Transfer Price Scheme for a few business strategy by the World at
months or year, there will be no large. The main problem of our
We feel we should take more time chance to lose revenue by NBR. country is unskilled manpower in
to train our Tax officials in the light The present day attitudes of the every area of business and we
of the Transfer Price regime. Only Tax officials are enough to check cannot maintain our hopes and
training of Tax officials about the evasion of Revenue by any aspiration of becoming high profile
Transfer Price shall not help the means. Every people will definitely companies.

Previously, there is a trend in will make no difference in the field definitely improve when the
export and import business of our of implemention of the scheme. scheme is put into operation and
country to adopt “under invoice Individual professional Institution the officials start getting used to
and over invoice” tactics by the like ICAB had already given implementing the scheme through
Traders, Industrial Exporter emphasis on the subjects and their the passage of time. Experiencing
/Importer to evade due share of members will be available to make is surely one way of learning
foreign exchange. Now a day’s situation easy besides their own therefore; we need not be totally
Money Laundering is found benefits. disappointed about the hurried
rampant by the Industrial to implementation of the scheme. On
individual and some financial So far, we have discussed and the flip side of the coin, a
institutions are indulging such compared different techniques devastating catastrophe may occur
activities as we find in the daily used to evade Tax and flight of in our taxation system while
Newspaper, Magazines and capital from one country to another implementing a scheme that is
tabloids, every day. There are also under different channels. In order hard, harsh and complicated in its
Double Taxation treaties with to have a check on such approach with inconceivable tax
many foreign countries with NBR. transactions NBR has adopted the languages. With only a handful of
PSI companies were also engaged most modern and latest technique hardly trained officials and a mere
earlier by NBR for price checking called transfer pricing. This system infrastructure to monitor the
but we do not find any has been adopted by more than 76 transactions we stand a lesser
improvements in that sector. countries across the continents chance that we will prevail and
throughout the world and they succeed through trial and error
Since this being the situation, we have been successful in their surge basis rather we might end up
must make ourselves fit enough to because of the skilled manpower giving birth to a erroneous, half
withstand the environment, we do and sufficient infrastructure they hearted system that less comply
not find any difference between prepared earlier to introduction of with the laws and more with the
under invoice and over invoice the scheme looking forward to understanding the officials
situation with that of transfer maneuvering the technique themselves which is already an
pricing of course, transfer pricing is properly, precisely and effectively issue even with the current systems
the update version against when materialized. Unfortunately even after years of experience and
unscrupulous activities and needs but truly we have acute dearth of application in practice. This is
improvement in this sector by skilled manpower and honest high time we asked ourselves if we
more training and discussion. leadership to achieve such success are prepared. We have to prioritize
in our country in this very our goal that is to achieve utmost
Therefore, if we take more time it moment. But the situation may efficiency in taxation not to

implement the latest system that
we can’t follow right now.
Surely, we need our laws be up to

date and fashioned enough to cope
with the new age of global
transactions but before that we
need our system be up to date with
efficient manpower and sufficient
infrastructure. There is no doubt
that initiatives have been taken by
the appropriate authority to
remove the hurdles so that we can
reach to their goal but that is yet to
be enough indeed. We not only
need up to date system and
schemes but also educated
businessman who have enough litigation. Rather than net of information has made the
consciousness to comply with the implementing a system even more concept of transfer pricing more
ambience that the authority is complex yet friendly for many a mind-boggling to be absorbed by
trying to create in our taxation officials to help their evil cause tax the concerned people. We may
sphere. At the same time of authority may extend their helping discuss the issue in a nutshell for
improving, updating and furnishing hands to the assessee to overcome the consumption of the
the whole system if the tax such obnoxious situation easily. professionals of different categories
authority comes forward with an Prior information regarding as under:
assisting attitude towards the taxation of income may help the
business people of the country situation better and can create Chapter XIA started with section
who has entered into international rightful congenial relations 107A defining the phrase ‘Arm’s
transactions knowingly or between tax official and the Length price’ to be read with Rule
unknowingly only then complete assesses. Adopting a system to do 70 which stated that any income
success can be achieved. If some so is the most important thing we arising from international
information or disclosure are put should look for right now. We feel, transaction shall be computed in
forward for the business unless the attitude of the tax regard to Arm’s Length price under
community by tax authority in officials are changed, the passage 170C, Rule 71 and 72 and
advance after analyzing the possibility of more legal conflict further elaborated “Factors” for
experiences of other countries and will arise and collection of revenue considering comparability and
in the context of Bangladesh it may will fall into an uncertainty which appropriation of methods as may
give the desired result of creating is not desirable at all. be used by the enterprise or person
awareness and comprehension etc.
among them. Now, we are to look back into
transfer pricing systems as Although the term “income”
It is true, most of the tax payer pays introduced by the NBR in the year proposed to be used above has not
his tax after unearthing tax ended 30th June, 2012 under been elaborated in section 107A it
envision by NBR through Chapter XIA of the I. T. Ordinance, can only mean gross income/gross
investigation. But if we dig deep 1984. This chapter contains as receipts or gross revenue. But any
into reality we find that tax officials many as 11 sections with 6 adjustment to such gross revenue
by means of their discretionary sub-sections and many sub-clauses on the basis of Arm’s length price
power create unjustified tax beside Tax Rules which contains 7 would definitely have impact on
demands in most of the case, not Rules numbering from 70 to 75A the determination of total income.
in favor of national taxation but to having different sub-clauses to Tax authority however, remains
envelope their sweet-evil desire of describe in details as to how the silent in case of excess gross
benefit and create a win-win “transfer price” to be computed income over the actual income.
situation for both the parties and under different sections,
themselves through backdoor sub-sections, sub-clauses, rules and In case of permitting excess
which sometimes, not being sub-rules. Such broad and complex income over the actual income
harmonized mutually, leads to

would result into claim of activities are already existed in our Arm’s length price means
intangible addition by an assessee. tax system. describing a transaction negotiated
In the very beginning, this will lead and entered into by unrelated
to confrontation which is not Section 107C- relates to parties each of who acts in his or
desirable. computation of Arm’s length price. her own best intention using fair
Before we detail out the section we market value. It is assumed that
International transaction defined in would prefer to start from “Arm’s unless there is a related party’s
u/s 2 of section 107 (2) (5) explains length” and ‘price’ for the purpose disclosure all transaction described
a transaction between two or more of understanding of Arm’s length in financial statement are
associated enterprise either or both price. According to dictionary conducted at Arm’s length basis.
of whom are non-resident, instructs meaning of ‘Arm’s length’ means: From all these definitions, we find
how to determine the nature of that each party has to be given free
such transactions and how are “A transaction in which the buyers consent on transaction and
these defined by inclusion of and sellers of a product act willingness with the due diligence.
properties, goods, articles, things independently and have no
or items, patent, invention formula relationship to each other. The As opposed to price, Arm’s length
process, design, know how concept of an arm's length price has its unique nature and
franchise, license, contracts etc. transaction is to ensure that both only the involved parties can
described in sub-section (7) of parties in the deal are acting in determine it. But tax authority is in
section 107A. their own self interest and are not a position to ascertain any amount
subject to any pressure or duress at their discretion and this may not
Few other words are also included from the other party.” help the situation as prevalent in
in the sub-section 3 to 11 of the country now. Therefore, the
section 107A which are Enterprise On the other hand, “price” is transfer pricing system so far
(3), Independent enterprise (4), defined as under: created requires clear, transparent
International transaction (5) (a) & and easy language to make it
(b), Permanent establishment (6), “Price in relation to sale of any understandable to both the
Property (7) (already been goods or to the performance of any assessee and officials.
discussed above), Record service, includes every valuable
(8),Transfer Pricing Officer consideration, whether direct or Section 107C- which is related
indirect or deferred and includes to computation of Arm’s length
(9) Transaction (10) and any consideration which in effect price urged that Arm’s length price
Uncontrolled Transactions (11). relate to the sale of any goods or to is to be computed adopting some
Unless you are acquainted with the performance of any services appropriate methods selected from
these words, it will be very difficult although ostensibly relating to any the following methods based on
to understand the system of transfer other things.” the nature of transaction, the
pricing. availability of reliable information,
In another definition of ‘price’ – function performed, assets
Section 107B relates to price shall include all costs employed, risk assured or such
determination of income from incidental to the loading charges to other FACTORS as described.
International transaction in regard wagon, carrying charges of truck or
to Arm’s length price i. e. the tank lorry, containers etc. decided The methods are-
amount of any income, or in a case cited Commissioner of
expenditure arising from central excise Vs Chatta Sugar Co. (a) CUP method
international transactions shall be Ltd., AIR 2004. In all fairness, it is
determined having regard to the cost related matter. (b) RSP Method
Arm’s length price. It is clear from
the above section that the Tax The amount of royalty is (c) C.P. Method
authority will have the right to ask constituent part of price of the
you about your income and materials (sale of goods Act 3 of (d) P. S. Method
expenditure and to consider such 1930) section 61(2). The term
income as well as expenditure in ‘price’ indirect a facet that has (e) TN MM
an arbitrary and inconsistent already accrued in practice; a
manner which the assessee might completed affair after a property (i) Any other method where it can
not agree to. These sorts of has been or agreed to be sold. be demonstrated that-

Section 107EE- This section
relates to statement of International
transactions to be submitted by any
person who has entered into
International transaction and shall
file return of income statement of
International transaction in
different from as per Rule 73.
Section- 107F- Under this

section an accountant is required
to furnish a report if aggregated
International transactions of a
person exceeds three crore taka
during the income year, shall
furnish the report on or before
specified date by a Chartered
Accountant in a manner as
required under Rule 73/74.
Section 107G- This section

relates to imposition of penalty for
failure to keep, maintain or furnish
information documents, records to
DCT as required under section
107E of the Ordinance. But under
(ii) None of the methods (b) TPO after considering such no circumstances it will be
mentioned in clause (a) to (e) documents as produced to him exceeding one percent of the value
above can reasonably be by an assessee draw the of each International transactions.
applied to find out arm’s computation of Arm’s length
length price for the price in accordance with Section 107H- This is related to
International transaction and section 107C and send copy to penalty for failure to comply with
DCT. The DCT will then the notice or requisition under
(iii) Such other methods yield a complete the assessment order section 107C. However, the
result consistent with the arm’s and send it to assessee. penalty shall not exceeded one
length price. percent of the value of each
(c) The transfer price officer has International transaction entered
Section 107D-Refers to transfer the right to rectify any order into by a person.
pricing officer notwithstanding u/s 173 and accordingly, the
mentioned anything in section DCT will follow the order of Section 107I- This section
107C- TPO and carry assessment relates to penalty for failure to
order. furnish report under section 107F
(a) A Deputy Commissioner of by a person for failure to furnish a
Taxes with prior approval of Section 107E- is related to report from a chartered accountant
the Board may initiate the maintaining and keeping of as required under section 107F.
proceedings for determination information, documents and But in no case such penalty shall
of Arm’s length price in records as per rule 73 of the exceed three lakh taka.
relation to International Ordinance. The DCT by issue of
transaction. His Job will be to notice may ask to the assessee to Section 107J- This section is
serve notice to assessee for any furnish any information, related to enforcement of
evidence, documents from documents and records as provisions of this chapter and shall
assessee to compute the Arm’s maintained or as may be specified come into force from 1st July,
length price. in the notice. 2015.

So far all the sections under components of an uncontrolled (d) The reliability of assumptions
Chapter XIA are discussed in a transaction for International in the method.
nutshell to have the understanding transaction and different methods
of the issue. as mentioned above under Rule-70 (e) The sensitivity of results in the
which are (a) the characteristic of deficiency in data and
Now, we shall discuss about the property, services or tangible assumption.
Rules as framed by NBR for the properties involved in the
following up of the sections as transaction. (f) The extent under which
stated above. reliable and accurate
As regards to tangible property adjustment can be made to
There have been incorporated as physical feature of the property, its eliminate the differences if any
many as six rules starting from Rule quality and reliability, availability, between transactions.
70 to Rule 75A. value, and timing of property
transferred to be ascertained. Rule 73- This rules relates to
Rule-70- Described the maintenance of information and
procedures to be adopted by a In case of services provided the documents to be kept under
person while determination of nature and extent of the services section 107E. Here it is indicated
Arm’s length price under different are to be determined. that various information to be
appropriated methods under maintained from ownership profile
section 107C. In case of intangible property the to business profile of multinational
type of intangible, the form of companies, the line of business,
Separate procedures have been transaction, the expected benefits, strategies of past, present, and
proposed for separate methods the duration of protections, the future transactions.
such as- degree of protection etc. are
considered. Any other information, data,
(a) Cup Method to be followed documents, including information
under comparable Rule-72- Appropriate method as or data related to associated
uncontrolled price method. mentioned under section 107C. enterprises which may be relevant
Under this method, the facts and for determination of the arm’s
(b) RPM- for the transfer of circumstances which provide the length price.
property and services at its most reliable measure of an arm’s
prices when resold. length price in relation to the Rule 74- Report from a certified
International transaction are Accountant to be furnished under
(c) CPM- The direct cost or discussed. In selecting the section 107F as from Rule 75.
indirect cost incurred in the appropriate method as specified in
supply of property or services sub-rule, the following factors shall
have to be considered.
Rule-75 A prescribed form has
provided i. e. cost base to be been given under this rule.
determined.
(a) Nature and class of
International transaction of the Rule 75A- Statement of
PSM- Under this method, the enterprises involved in International transaction to be
combined profit arises from furnished under section 107EE
transaction.
International transaction to be under this Rule, a person is
divisible among the associated (b) The comparability factors requested to furnish the following
enterprise is to be identified. (contractual terms, market information under Rule 75A and
level risks, functions) which section 107EE.
TNNM- Under this method, the are materially significant in
net profit margin by the associate determining the price or A: Particulars of assessee-
enterprises from the International margin in relation to the
transaction is to be computed International transaction. (a) Name of the assessee
having regard to an appropriate
(c) The quality of relevant data (b) TIN-
base such as costs, sales, assets.
with reference to availability,
(c) (1) Circle (2) Taxes Zone
Rule-71 – Factors to be coverage, validity and
considered judging the reliability. (d) Assessment year-

(e) Income year from _________ has itself become clumsy and pick-up price of goods from the
to ________ confusion prone which cannot get view point of reasonableness and
expected response from the public. in fairness of law. Otherwise,
B: Under the Rule 75A more litigation process will grow heavily
details of the information The transfer price, money to stop collection of the revenue.
particularly International laundering, “under and over
transactions entered into by a invoicing” in same form double And at the same time, computation
person to be furnished. taxation treaty are more or less process of tax should be made
cannot be checked as expected by easily accessible for the users
So long, we have discussed the NBR. Our suggestion for NBR is to easily which would help avoidance
procedural aspects of the transfer follow easy method of increasing of litigation. Also a progressive and
pricing. In our opinion, we have so sale price on the basis of price, steady system is to be introduced
far pin pointed all the sections, quantity and quality with reference to further train the tax officials to
sub-section, sub-clauses together to comparable situations since we keep the deviation of laws at
with Rules and sub-rules. But still do not have any Institutions, where minimum level. Awareness of the
we feel, we could not discuss the from we can confirm value or public should be also encouraged
issue in a full length style giving market price which is fair market by regular publicity of the transfer
necessary examples for the comfort value, the key point for pricing. Vigilances have to be
of the users of the enactment. The computation of Arm’s length price. enhanced over Multinational
article has already increased Given there are no culture to issue Company, Multinational enterprise
manifolds in its shape and form. invoice for purchase and the and local subsidiary and their
All these sections and Rules as procedures practiced in activities. Provided everything
appeared are to be complied with Bangladesh for business transaction suggested are taken into action and
by the assessee. So many are incomprehensive, the relevant implemented successfully the
compliances to be maintained by section and rules for computation scheme of transfer pricing will only
assessee may give rise to adverse of Arm’s length price taking into then be fruitful which is still a long
situation. Readers are requested to consideration the appropriate wayto go.
go through original ordinance for method is a near to impossible task
better understanding of the for lawmen and unskilled user and
enactment as full disclosure of the business community as a whole. In The Author is the Senior Partner of
sections and rules that were not the interest of Tax collection, NBR Akhter Abbas Khan & Co.
discussed. The law so far framed may rethink the issues and to Chartered Accountants

Cloud Computing and
Cloud Economy for Bangladesh
M S Siddiqui
Bangladesh continues to solely focus on outsourcing of technology and

infrastructure for export of data processing
cheap labor. Apart from agriculture, the service to overseas customers as
economy is based on remittance from Bangladesh import cotton, fabric etc for
expatriates and export proceed of export oriented garment industries.
garments and both are largely depends
upon cheap labor. The current digital Cloud provisioning may enable small
Bangladesh policy, an attempt to improve enterprises to outsource some of the
connectivity, information access and information technology (IT) skills that they
literacy, achieve for Bangladesh. It is would otherwise have to provide
helping setup infrastructure for enhanced internally. Companies can benefit from
connectivity, ICT based citizen service greater storage and computing capacity, as
delivery and ICT based education system well as the expertise of cloud service
for outsourcing business again relying on providers in areas such as IT management
cheap ICT educated young persons. and security.
Digital Bangladesh will naturally continue
on its trajectory, competing in the global The definition of Cloud computing came
labor market. The other change in industry from the University of California at
would probably be from garment factories Berkeley: “Cloud computing refers to both
to electronics assembly lines utilizing the the applications delivered as services over
low cost labor forces. the Internet and the hardware and systems
software in the data centers that provide
Bangladesh has no other option due to those services.
lack of capital and technology. But it can
modify slightly “Digital Bangladesh” plan Bangladesh is now using internet service
for real economic development without from Gmail, Yahoo mail, mailboxes in
too much rely on cheap labors but some general provided by some local internet
technology. Other nations around the service providers. These free service
world are taking advantage of cloud providers have not commitment or
computing. Most importantly, all the agreement with users for security and
resources needed are available to anyone privacy of information. Cloud service
with an internet connection and minimal provider come into agreement for
funds. It is the commoditization and ensuring security and privacy of data. The
globalization of computing resources and data are stored in store of the service
electronic services. This may be providers at any locations had the security

CLOUD
PROVISIONING MAY
ENABLE SMALL
ENTERPRISES TO
of data are not known. These customers to deploy and run
web-based email services of
OUTSOURCE SOME OF
software. They provide
Gmail, Yahoo etc are examples of infrastructure and customers can THE INFORMATION
cloud computing implementations use those only with a computer
except some advanced service like with connectivity network. This TECHNOLOGY (IT) SKILLS
web-based document storage, facilitates use of advanced and THAT THEY WOULD
editing and collaboration tools. update technology with minimum
Cloud computing services are also investment and with minimum OTHERWISE HAVE TO
used for web-commerce. Some knowledge about the system. Users PROVIDE INTERNALLY.
mobile phone with aneroid don’t need software and hardware
software may provide some cloud service personnel in own office or COMPANIES CAN
services. iPhone use to preserve contract to maintain the
some information like Phone infrastructure and software. The
BENEFIT FROM GREATER
books and other details in their costs of hardware, upgrades, and STORAGE AND
server. Customer can download supporting personnel often
those information in case of dwarfed the purchase price. Cloud COMPUTING CAPACITY,
change of phone set. They also computing shifts these costs to AS WELL AS THE
auto-transfer contact details of one remote data centers which benefit
subscriber to other phone from significant economies of scale EXPERTISE OF CLOUD
subscriber as per prior instruction and scope.
of connectivity.
SERVICE PROVIDERS IN
Cloud computing is a medium AREAS SUCH AS IT
Cloud computing provides more used to deliver applications and
service like computation, software, services without having to hold the MANAGEMENT AND
data access, and storage services applications on the users’ own SECURITY.
that do not require end-user servers, computers or other
knowledge of the physical location devices. Cloud computing are
and configuration of the system quite friendly to cheaper devices
that delivers the services. The with low processing power, and
cloud service has three categories lower storage capacities. It can also
– infrastructure as a service (IaaS), give interlink for connectivity
platform as a service (PaaS) and between different service provider
software as a service (SaaS). The and service recipients and increase
cloud service provider’s capability of working on line
processing, storage, networks and without much transfer of data due
other fundamental computing to advanced technology and
resources allow the cloud connectivity. It reduces cost of IT

hardware and software and UNCTAD announced ‘The there is not a single cloud provider
management enhance elasticity of information Economy Report 2013 in developing countries. Among
storage, flexibility and mobility, declaring a concept of cloud the Asian countries, Japan and
cost free update the technology by economy ‘ecosystem’. The Singapore have their own
service provider and reliability. development and impact of cloud companies. Bangladesh can have
computing and cloud services dream of develop own cloud
With cloud computing files are within the wider information companies in future. Japan has
stored in the “Cloud”. Users can economy and relevance to national developed a nation-wide
access office files from wherever economic development since it is "Kasumigaseki Cloud" is being
and whenever. Another feature of not only a technology alone. The developed to enable various
cloud computing is that it is often cloud ecosystem includes a ministries to collaborate and at the
transferring data to server complex set of relationship local level, the "Jichitai Cloud" is
controlled by third party or service between technology and business, being built to provide
providers. Users can also work government and innovation, interoperability among local
together virtually even when they production and consumption. governments.
are not at the same place at the Government should now integrate
same time. Various documents can a cloud strategy in development Although there is no harmonized
be viewed simultaneously plan for execution, monitoring and international privacy framework
provided Internet connection is evaluation as part of ecosystem of regulating data transfers across
available. Cloud computing also cloud economy. borders, the implementation of
aids the easy access to information. strong domestic privacy regimes
Easy access in this context could A recent study described cloud could benefit developing countries.
be seen in how fast it is to access. technology will develop over the About 99 countries of the world
It links different networks and next two decades with major have data-privacy laws till 2013.
create a “network of networks” for implications for markets, Out of those Mexico has most
better exchange of services. This economies and societies. By 2025, update cloud-specific provision for
connectivity can enhance capacity most IT and web applications and data protection. Bangladesh may
of outsourcing service providers services could be cloud delivered consider new law or update the
like Bangladesh. or cloud enabled. The shift toward existing ICT act to make data
cloud computing by a combination secure as we are in service
The internet was the third of physical hardware, network, business of data processing and
revolution in information storage, services and interfaces computing for the customers in
distribution in mankind’s history require for IT services. Any developed countries. The key
after the printing press and the shortfall in any of these reform areas include privacy, data
alphabet. Let us keep update with knowledge, infrastructure and legal protection, information security
outsourcing cloud service to avail framework may left out any nation and cybercrime.
rapidly developed IT and get aside. Bangladesh cannot effort to
optimum benefit out of this stay out of global communicating We need policy and legal reform
knowledge. system. Moreover, Bangladesh is in to avail the technology for
process to emerge as software improvement of export oriented
Referring to cloud computing, service exporting country based on service sector like data processing,
United Nations Secretary-General cheap labor. Bangladesh cannot software etc through a new idea of
Ban Ki-moon states “This has afford to stay behind as cloud ecosystem. We may modify our
considerable potential for computing is not just about digital Bangladesh policy
economic and social development, Information Technology or incorporating cloud computing for
in particular for our efforts to Computer but it is related to the a cloud economy.
achieve the Millennium overall economy.
Development Goals and to define The Author is a Legal Economist
a bold agenda for a prosperous, Most of the cloud service providers and pursuing PhD in Open
sustainable and equitable future.” are in west particularly in USA and University, Malaysia

Growth and Development of
Pharmaceutical Companies in Bangladesh
An Evaluation
Rokeya Parvin Jui
Abstract few multinationals and local entrepreneurs

set up manufacturing facilities in the then
East Pakistan. Now over 245 registered
Pharmaceutical sector achieved companies produce medicines in
remarkable success in last several years Bangladesh out of which 164 are truly
through competitiveness in manufacturing operational (Abdullah and Shamshet:
cost, work forces, business environment 2011). The Pharmaceutical industry
and market promotions. Growth of such started growing in the country with the
sector accelerates the employment adoption of the 1982 dug policy. In the
creation, government revenue and helps following years, the industry received
provide a better standard of living to the generous policy support and financial
local people. 96% of our local demand for assistance in the form of subsidy to ensure
pharmaceutical products is met by local its steady growth. Taking advantage of the
manufacturers and exports are made to 87 favorable government patronage and later
countries of the world. We have fierce the World Trade Organization’s (WTO)
competition with MNCs inside and waiver of patent rights under Agreement
outside of the country. We need strategic on Trade Related Aspects of Intellectual
change to survive in global market. Property Rights (TRIPS) on generic drugs,
as an Least Developed Country(LDC), the
Keywords issued: Market country’s pharmaceutical sector achieved
Growth-Manufacturing Cost-Work Force phenomenal growth in the last two
Skills-Regulatory Environment-Strategic decades. The industry transformed itself
Change etc. from an import based to export based one
(Habib and Alam: 2011). The industry
Introduction contributes about 1% of the total Gross
Domestic Production (GDP). The
Pharmaceutical sector is one of the most domestic market of Pharmaceutical
developed hi-tech manufacturing products has shown a tremendous growth
industries in Bangladesh. This industry has over the last thee years.
gone through a transformation in the last
30 years. Professional knowledge, Statement of the Problem
expertise and innovative ideas of the
pharmacists working in this sector have Bangladesh has achieved remarkable
been the key factors for such success in pharmaceutical industry in the
transformation, Beginning in the 1950s , a last several years; this sector has been

THE COUNTRY IS
NOW ALMOST
SELF-SUFFICIENT IN ITS
PHARMACEUTICAL
PRODUCTS AS 96% OF
THE TOTAL DRUG
DEMAND IS MET BY
LOCAL MANUFACTURES.
BANGLADESH IS
EXPORTING THEIR
PHARMACEUTICAL
facing many challenges in fact. The 2011). The government and
huge size of the companies, regulatory environment do not DRUGS TO 87 COUNTRIES
complexities of their processes and appear to be conducive to IN THE WORLD. OVERALL
technologies used for this industry producing the safest, most effective
present many organizational and and accessible drugs. Some macro
EXPORT EARNINGS
managerial challenges. Since factors favor success while others FROM
Bangladeshi pharmaceutical are less decisive. To successfully PHARMACEUTICALS
companies have already entered proceed into the local and global
into international market they have marketplace in this competitive REACHED BDT 5,396
to compete with the world leading market, every organization must MILLION FOR THE YEAR
companies. The world plan strategically. Since no
pharmaceutical market is very organization has unlimited 2012 WITH A GROWTH
much competitive. Pharmaceutical resources, strategists must decide RATE OF 28%. ONE OF
sector’s international which strategy benefits the firm
competitiveness can be determined
THE REASONS OF SUCH
most among the alternative (Fred:
by four factors; manufacturing cost, 1997). One important thing is that GROWTH IS THE WTO
workforce, business environment, Local demand of pharmaceutical RULES WHICH ALLOW
and market. Considering these products is rising very fast because
factors, Bangladeshi firms have of increasing awareness of COMPANIES OF THE
obstacles to overcome to become healthcare, per capita income, LDCS INCLUDING
globally competitive (World Bank: growing government’s expenditure
2008). Some manufacturing costs in this sector and emergence of
BANGLADESH TO
are less than world average, but private healthcare service. PRODUCE AND EXPORT
some are higher since the local
ESSENTIAL DRUGS
pharmaceutical industry is not In five years time, the domestic
backward- integrated. About 80% demand for pharmaceutical WITHOUT MAINTAINING
of the Active Pharmaceutical products is projected to increase to PATENT WHICH IS
Ingredients (AIP) is to be imported. at least US $ 1.44 billion from
This results in higher existing US $ 585 million (Ala: AGAIN RENEWED
manufacturing cost brain- 2011). The industry will have to RECENTLY AND CREATED
intensive- industry. The workforce meet this local demand and cope
in this brain- intensive- industry
FURTHER
with the challenges facing in
lags global average . At the same changing environment and also OPPORTUNITIES FOR
time, the quality of drugs available maintain the current growth, and COUNTRY LIKE US.
domestically varies significantly. even improve its position in the
Some frms are producing world international market.
class quality (Habib and Alam:

Objectives of the Study Review of Related Studies used in this study from five leading
pharmaceutical firms. This study
a) To analyze the major In order to understand the also concentrated on identifying
characteristics of the growth implications of the different the ways to overcome the
and development of concepts and also to identify the challenges and weakness of this
pharmaceuticals units in areas already explored and to find industry. It also provided some
Bangladesh. out the areas unexplored so far and suggestions and recommendation
to make an in depth study, a for development of the
b) To find out the impeding review of related literature is of pharmaceutical industry.
factors for the growth trends of paramount importance. The
this sector. relevant studies are reviewed here Banu (2009) wrote an article
focusing their objectives, entitled, “Cost Composition of the
c) To suggest the ways for methodology followed, hypothesis Selected Pharmaceutical
developing the sector through tested, concluding remarks, and Companies Listed in Dhaka Stock
various initiatives. limitations thereon. Exchange, Bangladesh.” She
evaluated that cost is an indicator
Needs for the Studies Abdullah and Shamsher (2010) of both operational and financial
studied on “A Study on the Impact performance of an enterprise. The
The pharmaceuticals industry in of PEST Analysis on the Pharmaceutical industry in
Bangladesh is a dynamic growing Pharmaceutical Sector: The Bangladesh produces medicines at
sector. Listed companies of this Bangladesh Context”. They had an among the lowest prices in the
sector play a great role to develop endeavor to analyze the world. To strengthen the
this sector. These companies pharmaceutical sector of pharmaceutical sector in the global
occupy the major portion of total Bangladesh using the framework of market, cost trend of the
pharmaceuticals’ market share. The PEST (Political, Economic, Social, companies should be examined.
market of pharmaceuticals is very and Technological). PEST analysis Her study found overall rising
competitive and globalised. of any industry sector investigates trends in the average cost
Management practice is a very the important factors that are composition of five pharmaceutical
important issue of making proper affecting the industry and companies during 2001 to 2008.
strategy to survive and thrive in influencing the companies
competitive environment. operating in that sector. Both Ferdous and Abu (2013) found out
Primary and secondary information in their article entitled, “Prospects
Having a lot of importance and were used to conduct this research. of E-Commerce in Pharmaceutical
potentiality of this sector in This study brought to light the Industry of Bangladesh: Lessons
national economy, existing current state of the sector its from the Case of Drugstore.com.”
literature shows that a few studies progress and its problems. This that Drugstore.com has achieved a
have been done focusing on report analyzed the existing laws, great success in business arena. At
corporate governance, key success legislations, and government the same time, the regulatory and
factors, problems and challenges in policies which stand to affect the other strong challenges are still
the pharmaceutical industry. But sector directly and indirectly. found to be threatening.
how modern management is
practiced in pharmaceutical sector Ala (2010), in his article on Lincoln and Bhattacharjee (2007)
and what is the effectiveness on “SWOT Analysis of Pharmaceutical in their study examined the
organizational performance is still Industry: A Study of selected firms structure of the industry, evaluated
unexplored. However, while the in Bangladesh”, evaluated the performances and presented some
field of modern management is strength, weakness, opportunities strategies for further growth of the
increasing rapidly in developed and threats (SWOT) of industry. This paper was prepared
countries, theoretical and empirical pharmaceutical industry in mainly on published data and
investigations on this issue in Bangladesh. In this paper the information. Here they presented
developing countries have researcher tried to find out what the detail production of National
remained limited ( Haley and Tan types of strength, weakness, and Multinational companies. At
2000). Moreover, there is a need to opportunities and threats the same time they highlighted
understand more about the various pharmaceuticals face in major provisions of WTO and
aspects of management. Bangladesh. He emphasized on the implementations of TRIPS for
trends of this industry. Both the Bangladesh. Major Provisions
primary and secondary data were

included compulsory licenses Kasapi and Mihiotis (2011), in their profitability. Here indicators of
should be permitted after study named “Management as profitability such as , Gross Profit
consideration of the individual applied to New Products Ratio (GPR); Operating Profit Ratio
situation in which such license is penetration in the Competitive (OPR); Net Profit Ratio (NPR);
requested, patents should be Environment of Pharmaceutical Return on Equity (ROE), Return on
available and enjoyable without Industry” fulfilled to analyze, based Capital Employed (ROCE); Return
discrimination as to the place of on M. Porter’s five forces model on Equity (ROE) were taken into
invention, the field of technology (FFM), what kind of strategies were account for the study. This study
or whether the product is imported to be followed regarding the concluded that the profitability of
or produced locally. Some introduction penetration of new pharmaceutical companies is very
strategies were recommended for products in the pharmaceutical much satisfactory as both of the
the future development of third market taking into consideration companies meet the standard
sector such as joint R& D activity the extremely competitive and norms of profitability in terms of
by the pharmaceutical companies, challenging environment existing investment.
using various universities and around the pharmaceutical
research laboratories of these industry. In this article, the authors The World Bank (2008) conducted
countries should be initiated discussed the importance of a study on “Public and Private
without delay. Country quota strategic management practices for Sector Approaches to Improving
should be allocated based on the new products introduction and Pharmaceutical Quality in
prevailing GDP to undertake growth in the pharmaceutical Bangladesh” which was prepared
research activities. industry’s environment. They by a team of World Bank staff and
analyzed how Porter’s FFM and consultant led by Kees Kostermans.
Habib and Alam (2011), in their SMP can be applied in that sector This study’s analysis identified
article entitled “Business Analysis and focused on the industry’s specific policy and institutional
of Pharmaceutical Firms in revenues. This study provides a options to improve the cost and
Bangladesh: Problems and detailed analysis on new quality of pharmaceuticals
Prospects” attempted to investigate pharmaceutical products lifecycle produced in Bangladesh and its
the scenario of pharmaceutical i.e. drug discovery, development, competitiveness in the global
industry and to identify the major introduction and subsequently market. The authors conducted
problems of marketing, exporting, their growth, maturity and decline in-depth interviews in Bangladesh
production and operations, quality phase. Finally, the paper with representatives from
control in the pharmaceutical concluded by giving advice to all government, industry, NGO,
sector. They proposed some interested managers to overcome international organizations and
recommendations to overcome old mental models and apply pharmacists and completed a
these problems. They also change management taking into review of existing literature. This
identified the prospects of consideration that we live in the study presented the issues that
pharmaceutical industry in age of uncertainty and turbulence. must be considered to achieve
Bangladesh. The study was low-cost high-quality drugs to
conducted by both primary and Nimalathasan (2009) had a study benefit society and help
pharmaceutical companies in
secondary data on ten leading on profitability Listed
Bangladesh and explored the
pharmaceutical companies in Pharmaceutical Companies in
options that the Government and
Bangladesh. They highlighted Bangladesh. The main objective of
the local industry could pursue.
marketing problems such as the study was to compare (inter
This paper addressed some issues
insufficient incentives, high cost of and intra ) the profitability of
from a more private sector
marketing unstable political pharmaceutical companies. A total
approach. The existing quality and
situation and different types of of two pharmaceutical (IBN
price of pharmaceuticals were
violence. They also mentioned that SINAPH & AMBPH) companies
analyzed and alternative
foreign competitors with more were selected and these companies
mechanism was explored to
equipment, technology and plant have sufficient credential for being improve the quality and cost
facilities are threat for local firms. the representative of this industry competitiveness of Bangladesh’s
But managerial problem like how in terms on investment, sales, pharmaceuticals domestically and
to develop strategic factors in earning income, value addition, internationally. They discussed
competitive environment is not employment etc. Secondary data four factors that drive the price and
explored in this study. were used to measure the quality competitiveness of
indicators which are related to pharmaceuticals in Bangladesh.

score by the United Nations
Industrial Development
Organization (UNDPO) ; and
a net positive pharmaceutical
balance of trade.
This paper identified five potential

mechanisms to improve the quality
of drugs available in Bangladesh.
1. Export-led improvement-
Firms tend to improve the
quality of drugs that are made
for export but not the drugs
made for domestic
consumption. This has
implications for the domestic
market.
2. Regulatory-led improvement-
A strict regulatory environment
does result in higher drug
quality but significant political
will is required to enforce the
regulations.
3. Competition-led
improvement- There is
widespread agreement that
firms in economies with liberal
trade policies and greater
openness show stronger
economic growth and overall
development performance in
They are- Environment- The current
the long run.
regulatory environment is
1. Manufacturing Cost- protected and under-regulated.
4. Private sector-led
Bangladesh has a clear Importing drugs is difficult,
improvement- In many
advantage due to low labor allowing domestic firms to
industries and countries, the
costs, while it is at a dominate the market. Due to
private sector has played a role
disadvantage with regards to the power of these firms and
in maintaining and monitoring
the largest cost driver for the the government regulatory
quality which could play a role
pharmaceutical sector. agency’s weakness, quality
in this regard.
control laws are not strictly
2. Workforce Skills- Although enforced.
5. Knowledge-transfer-led
Bangladesh’s pharmaceutical
improvement- Most firms in
labor cost s are approximately 4. Macro Factors- Countries tend
Bangladesh want to provide
30% less than India’s labor, to have stronger domestic
the highest quality drugs
the industry faces challenges industries when the following
possible. Government and
in the technical training characteristics are present:
donors should work with firms
required because Bangladesh’s high levels of secondary and
producing at less than Good
relevant technical educational tertiary educational enrolment;
Manufacturing Practices (GMP)
system lags behind global GDPs greater than $100
levels to raise their standards
levels. billion; populations greater
to a minimum acceptable
than 100 million; a high
level.
3. Government and Regulatory manufacturing value added

This paper also examined two Research Methodology following Table displays the total
external forces currently impacting number for these manufacturing
Bangladesh’s pharmaceutical The study is exploratory in nature, units of 2002 and 2012. At
sector which can provide in the sense that the study explores present, there are 268 Allopathic,
opportunities for change. The first the business environmental factors 204 Ayurvedic, 268 Unani and 79
is WTO’s Trade Related Aspects of that influence the development Homeopathic drug manufacturing
Intellectual Property (TRIPS), which efforts of management authorities. companies in the country. From
grants Bangladesh domestic the table, it is revealed that among
manufacturing opportunities and Types and Sources of Data the different types of drug
limited export advantages. The manufacturers, allopathic system
Both quantitative and qualitative has the highest change (27.14%) in
second force affecting the industry
data are used for the study, number of units –followed by
is the rapidly changing
collected from the primary and Ayurvedic (26.70%). However,
international marketplace.
secondary sources. Practically according to DDA, among the 268
Globalization has resulted in an
official records of the relevant allopathic units only 193 are under
extremely competitive
authorities are followed to arrive at active production and others are
international market with firm
concluding remarks. either closed down or suspended
seeking low cost manufacturing
by the DDA due to
sources. This paper concluded
with polity and institutional
Pharmaceutical Industry non-compliance to GMP or drug
Structure laws.
suggestions for Government to
improve the price and quality It is observed from the table that
Bangladesh pharmaceutical
competitiveness of Bangladesh’s out of 268 companies, 252
industries began to increase in the
pharmaceuticals. The (99.63%) belong to private sector
private sector since the
recommendations were targeted at while only (0.37%) belong to
promulgation of the Drug (control)
improving the domestic market, public sector. The number of
Ordinance 1982. There are four
increasing export potential and types of manufacturers on the basis MNCs operating in Bangladesh is
taking advantage of TRIPS. The of type of drug-Allopathic, Unani, 8. Again, only 10 companies
conclusions were preliminary and Ayurvedic and Homeopathic. The (3.75%) of the total are listed with
more analysis was suggested. stock exchange of the country
Different types of Drug Manufacturers
System 2002 2012 Change (%)

(No of Units) (No of Units)
Allopathic 210 268 58 (27.61%)
Unani 261 268 7 (2.68)
Ayurvedic 161 204 43 (26.70)
Homeopathic 76 79 3 (3.9%)
Total 708 819 111(15.54%)
Source: Directorate of Drug Administration
The following table shows the distribution of pharmaceutical companies on the basis of their ownership at
the end of December, 2012.
Distribution of Pharmaceutical Companies on the basis of ownership

Types No. of % of Ownership No. of listed
Companies Companies
Private Limited (Local) 252 94.02
Private Limited (MNC) 4 1.49
Public Limited (Local) 8 3.0 10 (8+2)
Public Limited (MNC) 2 0.75
Government owned 1 0.37
Total 268 100

including eight local and two categories. These are: oral anti-biotic drugs.
MNCs.
a) Patent Medicines Distribution of
Public Sector Pharmaceutical Products
b) Generic Medicines
There is only one public sector Prompt and safe distribution and
manufacturing company in a) Patent Medicines are the public/ private storage facilities to
Bangladesh. The name of the products that are invented by the end should be ensured so that
company is Essential Drug the original companies, who the products are maintained
Company Limited (EDCL). It is a have their own research team throughout the whole process and
100% State Owned working in their own good quality essential drugs are
Pharmaceuticals Company and laboratories. These products always available to those who
controlled by the Ministry of are patented for many years to need them. Physical distribution of
Health & family Welfare of enjoy the monopoly market. pharmaceuticals in Bangladesh has
Bangladesh. In the year 1962, it After years of business the evolved in a unique way. Unlike
was functioning under the then formulation is sold in the other countries, Bangladesh
Central Government in the name & market so that others can go pharmaceutical industry is more
style of Government into mass production. retail-oriented and bulk of
Pharmaceuticals Laboratory (GPL) distribution is done by the
and subsequently it was renamed b) Generic Medicines are the companies themselves;
as Pharmaceuticals Production products that are produced pharmaceutical companies
Unit (PPU) in the year 1979. For and distributed in mass scale distribute their products from their
the interest of Public Health & without patent protection. own warehouses located in
smooth running of the These are marketed by several different parts of the country as no
organization, it was registered as a companies under different professional distribution house is
Public Limited Company under the brand names, where the available. Wholesales play limited
Companies Act-1994. Presently formulation of this product is role in this regard since companies
authorized capital of EDCL is Tk. almost same. Prices of supply products to both retailers
200 Crore and paid up capital is products under this category and wholesalers.
41.70 Crore of Tk.10 each share are competitive.
Distribution Channels of
(EDCL, 2012). Pharmaceutical Products
However, Bangladeshi
The main objective of EDCL is to pharmaceutical companies mainly
produce and market generic The following table shows the
manufacture quality drugs at an wholesale and retail registered
affordable price & supply to the medicines. About 85% of the drugs
sold in Bangladesh are generic and license holders of 2002 and 2012.
Government Hospital and other There were 1495 wholesale drug
Health Institutions. It has three 15% are patented drugs, whereas
generic drugs represent about 25% license holders and about 37,700
drug manufacturing units- two of retail license holders in Bangladesh
them are at Dhaka and Bogra and on average of worldwide
in 2000. At the end of 2012, the
the third unit is under the Institute pharmaceutical sales (Saad, 2012).
number of wholesale drug license
of Public Health (IPH) which There are about 450 generics
holder and retail drug license
produces vaccines and large registered in Bangladesh. Out of
holders in the country stood at
volume IV (Intravascular) fluids. It these 450 generics, 117 are in the
2202 and 98621 respectively. In
produced Drugs & Contraceptive controlled category i.e. in the
last 10 years wholesale drug
product worth Tk.978 million in essential drug list and 333 in the
license holders have increased by
the financial year 2001-2002. The decontrolled category. The total
47% and retail holders by 161%.
production increased to Tk.2965 number of brand items that are
According to the DDA apart from
million in 2010-11 (EDCL, website) registered in Bangladesh is
the license holders, there are lot of
the production of EDCL increased currently estimated to be 5,300, unlicensed retailers all over the
by 203%. while the total number of dosage country which are mainly
forms and strengths are 8,300 responsible for marketing
Pharmaceutical Products in (DDA). These include a wide range sub-standard and spurious drugs.
Bangladesh of products from anti-ulcerants,
flouroquinolones, anti-rheumatic,
The Pharmaceutical Products can non-steroid drugs, non-narcotic
broadly be classified into two analgesics, anti-histamines, and From the table it is revealed that

Wholesale and Retail Licensed Drug Holders of 2002 and 2012
Item Total Number in Total Number in Growth (%)

2002 2012
Wholesale Drug 1495 2202 47
License Holders
Retail Drug License 37700 98621 161
Holders
Market of Pharmaceutical Products
Market Size and Growth

The size of the retail market was BDT 1.8 billion in 1982, where as it reached to BDT94.0 billion in 2012
(IMS report). That means the retail market increased by 52 fold in last three decades. Five years back, the
market size was BDT 47.0 billion and 10 years back it was BDT 28.6 billion. Meaning it doubled in5 years
and more than tripled in 10 years. It is evident from the table below that retail sales in the domestic market
achieved 11.9% growth in 2012 following 23.6%, 23.8%, 16.8% over the last 5 years and 14.2% over the
last 12 years. This steady growth rate demonstrated the success story of this sector. Although the overall sales
recorded growth in 2012, the table shows that the growth rate of 2012 declined from 2011 and 2010.
Market Size and Growth

Year Size (BDT billion) Growth (%)
2001 24.5 -
2002 27 10.2
2003 28.6 8.6
2004 31.1 17.5
2005 36.5 17.5
2006 38 4.1
2007 44 15.8
2008 47 6.9
2009 54.9 16.8
2010 68 23.8
2011 84 23.6
2012 94 11.9
Average 48.1 14.2
Source: International Marketing Service (IMS) and Square Pharmaceutical Ltd. 2012
Factors behind Market Growth
From the previous section it is clear that pharmaceutical sector has shown tremendous growth in the last
decade. Some factors contributed to the growth of this sector. The table below shows some selected health
indicators for Bangladesh which helped to boost this industry.
Selected Health Indicators for Bangladesh
Health Indicators 2011 2005 2000

Life Expectancy 70 66.9 64.7
Govt. Expenditure (%of GDP) 36.6% 34.9% 39.0%
Health Expenditure (%of GDP) 3.7% 3.21% 2.82%
GDP per Capita (US$) 732 428.8 363.6
Health Exp. per Capita 27 13 10
Poverty Level 31.5% 40.0% 48.9%
Source: World Bank 2012

life expectancy improved from did not improve compared to relatively a new item in the export
64.7 in 2000 to 70 in 2011 which percentage of total healthcare basket of Bangladesh. The
highlights the increased health expenditure, there has been pharmaceutical export items cover
consciousness among the people. increased expenditure in absolute wide range of products of all major
Per capita income of the terms. Growth in private therapeutic classes and dosage
population doubled (from expenditure was the primary forms. It includes high technology
US$363.6 in 2010 to US$731 in reason behind fall in Government products like inhaler,
2011) over the last decade which expenditure. suppositories, nasal sprays,
allowed them to spend more for injectibles and infusion. Although
healthcare. Also per capital health Contribution to National the export of pharmaceutical
expenditure about tripled (from Exchequer products is still in an infant stage,
US$10 in 2010 to US$27 in 2011) the volume of export is increasing
over the time which indicated Pharmaceutical industry is the gradually. According to BAPI, 33
people’s willingness to spend more second highest contributor to the private pharmaceutical companies
to remain healthy. Medical national exchequer after tobacco have already entered into the
coverage of population with new (IMS Report, 2012). Usually like export market with their basic
hospitals is increasing which helps other manufacturing organization, materials and finished products.
to boost this sector. a pharmaceutical company has to The pharmaceutical sector has
pay some types of fees and duties demonstrated the capability of
Emergence of private healthcare to the government. These include exporting its products within a
service – a number of top class applicable VAT, corporate tax, short time. About two decades ago
hospitals started operating which export and import duty of raw Bangladesh was a drug importing
includes Apollo Hospitals, Square materials, licensing fee for every country, now it exports surplus
Hospitals, United Hospitals, pharmaceutical products and drugs to many countries of the
Popular Hospitals and others. manufacturing fee for factory. All world after satisfying the local
These hospitals became very types of fees, tax and duties are demand.
popular with the mass population increasing with the rising of sales
due to their quality service. They volume. Table 14 shows the export earnings
have been a major factor and growth rates of the
contributing to increased pharmaceutical products over the
healthcare expenditure. Export Earning last 12 years.
Although government expenditure Pharmaceutical product is The overall export earnings of the

Export of Pharmaceutical Products
Year Local Export % of Exported Export
(Tk. in mill) earnings (Tk. in mill) Drugs Growth (%)
2001 20417 311.8 1.5 -

2002 30501 406.9 1.3 31
2003 32384 545.5 1.7 34.1
2004 32858 1400.0 4.2 156
2005 40950 1421.0 3.1 1.5
2006 44457 2520.0 5.7 77.3
2007 51493 2347.0 4.6 -6.8
2008 59296 3131.1 5.3 33.4
2009 70961 3352.1 4.7 7.0
2010 79690 3274.3 4.1 -2.3
2011 123753 4212.2 3.4 28.6
2012 156245 5396.2 3.5 28.1
Average 61917 2360.0 3.60 35.26
country from pharmaceuticals of the fastest growing sectors in the government’s increased
reached BDT 5,396.2 million for economy with a double growth expenditure.
the year 2012 with a growth rate of rate (14.6%) in last ten years.
28.1% over the previous year. The Pharmaceutical market used to be Besides this success, one of the
average annual percentage of dominated by MNCs, now it underlying threats for this industry
exported drugs and growth is 3.60 shifted to local companies which is that this sector is not
and 35 respectively in last 12 enjoy about 90% of market share. backward-integrated. Most of the
years. However, the export growth It is highly concentrated as top 20 APIs (80%) are to be imported
was not steady across all the years. companies produce 85% of the every year. In addition to that,
The table shows that the growth of revenue. local pharmaceutical companies
export dropped to 6.8% in 2007 have to face fierce competition
and 2.3% in 2010. According to The country is now almost with the MNCs inside and outside
the drug administration, it is self-sufficient in its pharmaceutical of the country. However, to hold
because of some political problems products as 96% of the total drug the current market growth and to
in 2007 and world economic demand is met by local increase the future market, this
downturn in 2010. Except these manufactures. Bangladesh is sector needs to have proper
two years where trade slowed exporting their pharmaceutical strategy.
down significantly worldwide, drugs to 87 countries in the world.
pharmaceuticals export was robust Overall export earnings from References
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Conclusion with a growth rate of 28%. One of and Robaka Shamsher (2011). A
the reasons of such growth is the Study on the Impact of Pest
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living to the local people. It is one private healthcare and Studies, Vol.33, pp-165-180.

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Zahedul(2011). Business Analysis Journal of Faculty of Business, Improving Pharmaceutical Outlay
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http;//

Monetary Policy of Bangladesh
Moving Towards the Right Direction
Mohammad Zahid Hossain FCA
Bangladesh Bank formulates and 15.6 percent which are adequate to

support the growth and inflation
implements monetary policy for every six targets. It has also taken the growth
months with an objective to stabilize rates of both public and private credit
domestic monetary value and maintain a into account.
competitive external par value of the
Bangladesh Taka towards fostering growth • Domestic credit is projected to grow at
and development of country’s resources in 16.5 percent at the end of the fiscal
the best national interest. In simple words, year 2016. Private sector credit is
the focus of Monetary Policy is to ensure a projected to grow at 15 percent and
moderate Inflation and a competitive public sector Credit at 23.7 percent.
exchange rate. There has been a severe
draught in the investment of the country • Policy interest rates (repo, reverse
which is hindering the expected growth. repo) will remain unchanged, but
Such investment of unsatisfactory volume easing will be considered after
is posing a great threat at the ambitious point-to-point headline general
vision of entering the club of Middle inflation and core CPI inflation take a
Income Countries. Keeping this in mind, sustained declining trend.
the monetary policy of Bangladesh Bank
for July-Dec 2015 was formulated to boost • Bangladesh Bank's supervisory
investment and overall economic vigilance on banking governance will
development of Bangladesh. be straightened further to clamp down
on loan delinquencies.
Some important features of the monetary
policy of July-Dec 2015 are stated below: • Besides already ongoing inclusive
financing for farm and nonfarm Small
• This monetary policy was targeted to and Medium Enterprises (SMEs) and
support 7 percent growth and the 6.2 the export development (EDF) fund
percent inflation for the fiscal year support for exporters, new medium to
2016. longer term financing windows totaling
USD 500 million will be opened in the
• Reserve money is projected to grow at fiscal year 2016 for financing of
16 percent and broad money (M2) at manufacturing enterprises, and for

BESIDES
ALREADY ONGOING
INCLUSIVE FINANCING
FOR FARM AND
NONFARM SMALL AND
MEDIUM ENTERPRISES
(SMES) AND THE EXPORT
greening initiatives in the export FY16. Despite the significant DEVELOPMENT (EDF)
oriented textiles, apparels, and reduction of oil price in world FUND SUPPORT FOR
leather sectors. market, Bangladesh Petroleum
Corporation (BPC) has not adjusted EXPORTERS, NEW
The below discussion will domestic selling price of oil
articulate the significance of because the inflation rate is within
MEDIUM TO LONGER
monetary policy of Bangladesh the tolerable limit and BPC has an TERM FINANCING
Bank on Investment, employment accumulated loss to the tune of
and overall economic BDT 290 billion. Although general WINDOWS TOTALING
development of the country: inflation has fallen from 6.87 USD 500 MILLION WILL
percent in January 2015 to 6.24
Inflation percent in September 2015, core BE OPENED IN THE
inflation that counts nonfood and
FISCAL YEAR 2016 FOR
For a growing economy like nonfuel inflation is on the rise. It
Bangladesh, inflation range of 4-6 has inched up from 6.08 percent in FINANCING OF
percent is considered as moderate. January 2015 to 6.73 percent in
Bangladesh’s current level of September of the same year, MANUFACTURING
inflation of 6.24 percent is close to warranting a cautious stance right ENTERPRISES, AND FOR
government’s 6.2 percent target of now.
GREENING INITIATIVES
Rate of Inflation IN THE EXPORT
September, September,
(as measured by CPI, base August, 2015 ORIENTED TEXTILES,
2015 2014
2005-06)
APPARELS, AND
Point to point 6.24% 6.17% 6.84%
LEATHER SECTORS.
Monthly Average(Twelve
6.24% 6.29% 7.22%
Month)
However, the conservative approach of Bangladesh Bank in Monetary

Policy is expected to keep the inflation rate within target limit.

Interest Rate
High cost of fund is considered as

one of the critical factors deterring
the new investments and
increasing non-performing loans. It
has been a pledge of the Central
Bank to reduce lending rate and
bring it down to single digit while
it’s still in double digit. The
weighted average deposit rate fell
to 6.66 percent in Sep 2015 from
6.99 percent in May 2015. The
average spread, which stands on
the average deposit rate to give us
the average lending rate, slightly
fell from 4.83 percent in May 2015
to 4.82 percent in Sep 2015.
Consequently the average lending
rate fell from 11.82 percent in May
2015 to 11.48 percent in
September 2015. The call money
rate has fallen from 5.79 percent in
June 2015 to 5.71 percent in
September 2015. The changes are
nevertheless not substantial
enough to outweigh the concern growth for agriculture. Services, private investment, fuels money
about rising core inflation. Policy being the largest sector (more than into the economy and creates
rates will, therefore, remain on the 50 percent), grows at 6 percent on employment.
course as before. Central Bank the trend. The share of investment
expects to revise them whenever in GDP is around 29 percent – Credit growth
further developments warrant them adequate to generate 6 percent
to do so. plus growth in output. Deficit financing is mainly
Nevertheless, further efforts to managed by Govt. from bank
Period Deposit Lending Spread augment the investment ratio are borrowing. Public sector credit
rate rate warranted to achieve the growth registered a negative figure of 2.5
July 2014 7.71% 12.84% 5.13% target of 7.5 to 8 percent to be a percent in the last fiscal year due to
May 2015 6.99% 11.82% 4.83% middle income country by 2021. lesser or no amount of subsidy in
Sep 2015 6.66% 11.48% 4.82% Public investment in infrastructure fuel than the projection of Govt.
and energy is essential in this Private sector credit growth has
So, it appears that Central Bank has regard. Investment should rise always remained stable particularly
greater attention on keeping 37.6% of gross domestic product since the fiscal year of 2013 when
inflation at moderate level instead from the current 28.7% if 8% GDP the figure was 10.8 percent and
of bringing down interest rate to growth is targeted. Bangladesh will has stood higher at 13.6 percent in
boost investments. have to spend $7.4 billion to $10 the FY15. If the last fiscal year's
billion a year until 2020 to bring its 13.6 percent credit growth could
Investments power grids, roads and water endow the economy with 6.5
supplies up to the standard needed percent output growth, a provision
All three sectors of the economy- to serve its growing population. of 15 percent private credit growth
agriculture, industry, and services, To develop the infrastructure, the appears to be adequate to support
are performing well. Industrial implementation of Annual 7 percent output growth for the
growth has been faster than others Development Program (ADP) current fiscal year. Yet such simple
as expected. Bangladesh requires speeding up to equation may not be proved
experienced 8 percent plus growth accomplish mega public projects eventually as a realistic estimation.
for industry and around 4 percent that always create space for greater

Exchange Rate and Foreign from political influences. It is funds making the genuine
Reserves evident that undue influence of entrepreneurs demotivated for new
high-ups of the country safeguards investments.
Bangladesh Bank has kept on willful defaulters. Despite engaging
buying foreign exchange to protect of various supervisory techniques, Conclusion
external competitiveness of taka by quotable improvement is not
easing appreciation pressures on it. experienced by the Central Bank in Bangladesh Bank uses its core
Bangladesh Bank has been managing NPL. Bad loans weapons to control money supply
maintaining exchange rate stability accounted for 9.67 percent of the and creates investment friendly
for the last 2 years and a quarter total loans on June 30, 2015 environment thereby. Investors
since early 2013. The current trend compared to 10.47 percent in from home and abroad do not
of slow growth rate of export March 2015. Default loans of most consider monetary factors only in
(3.35%) and rise in import (12%) of the state-owned commercial taking investment related
will die out appreciating pressure. banks increased in the second decisions. Since Bangladesh Bank
Such situation will send quarter of 2015. Defaults at private can influence only monetary
Bangladesh Bank to a position that banks fell 1.12 percent to Tk. factors, it has limited scopes to
enables depreciation with better 223.50 billion at the end of June boost investments. Yet the success
ease. Bangladesh Bank’s foreign 2015 which represents 5.6 percent and failures in setting targets and
exchange reserves have grown fast of their outstanding loans. The fixing strategies in the monetary
to a level generally deemed as banks have a tendency to sanction policy for July-Dec 2015 will
adequate. At the moment, foreign large loans in violation of the facilitate them in formulating the
reserve can meet approximately 6 prudential norms. They some times next monetary policies. If workable
months' import bills. fail to use the borrower's updated strategies are targeted and all
CIB report while granting loans. vested quarters work together in an
This gives “opportunity” to the integrated manner ensuring Good
Banking Governance defaulters to get loan from a new Governance, overall
bank to regularize the ongoing macro-economic indicators are
Recent rise in Non-performing
NPL. Also, at the time of expected to exceed the target at
Loan (NPL) is potentially alarming.
rescheduling the loans they always the end of FY 2016.
Bangladesh Bank expressed firm
take down-payment, or even the
intention to take corrective
partial amount, in clear violation of
measures to clamp down on The Author is a Member
the central bank rules. The rampant
classified loans. However, it is still Board of Directors, BAPEX
attitude of defaulters is increasing
struggling to operate banking
the amount of bad loans which is
system under an environment free
ultimately swelling the cost of

Accounting for Carbon Emissions
Global Practices and Lesson for Bangladesh
1
Dr.Yousuf Kamal | 2Shah Md. Taha Islam
Abstract Introduction
Emission trading scheme (ETS) is one of

The paper investigates existing accounting the mechanisms to control the emissions
practices pertaining to carbon emissions. of greenhouse gases. In U.S.A, a
We investigate existing accounting
cap-and-trade system was first established
practices related to carbon emission that
as a part of the Clean Air Act (CAA) of
are practiced in some developed countries
1990 for sulfur dioxide (SO2) and nitrous
such as Australia, the UK, and USA. We
oxide (NOx) emissions of electric power
could not find any particular reporting
generators in 1995 (Ernst & Young, 2009).
trends, since there is no particular
Moreover, in 1997, under the Kyoto
accounting standards developed so far in
Protocol, 149 countries agreed to decrease
this regards. Due to this, the divergent
greenhouse gas emissions and 39
accounting approaches reduce the
industrialized countries made
comparability, effectiveness and accuracy
of emissions related accounting. For this commitment to lessen greenhouse gas
reason, stakeholders are facing difficulty to emissions by 5.2% (Kyoto Protocol, 1997).
make useful economic decisions which is As per the protocol, countries emitting
a fundamental objective of financial below their distributed quota could sell
reporting. We also investigate the existing their allocated amount units to countries
accounting practices relating to the that surpass their quota (United Nations,
classification of emissions allowances. We 2014). However, in the European Union
find significant variations in accounting (EU), the ETS is a keystone of its policy to
practices particularly in reporting tackle climate change and decrease GHG
accounting numbers and their subsequent emissions of industries in a cost effective
measurement. This paper also illustrates manner. It is the first and the largest
the rationale for introducing emissions international system for trading GHG
reduction scheme in developing countries emission allowances. It operates on the
such as Bangladesh. Finally, a concern is ‘Cap and Trade’ principle. It is projected
raised over developing a uniform standard that compared to 2005, emissions from
for carbon emissions accounting for both sectors under the EU ETS will be 21%
the developed and developing countries. lower in 2020. Further, by 2030, the
commission suggests the percentage
Keywords: Carbon, Emissions would be 43% lower (European
Allowances, Emissions Trading Schemes Commission, 2015). Despite the
(ETS), Accounting, Bangladesh. widespread concern over the greenhouse

BANGLADESH IS
THE MOST VULNERABLE
COUNTRY TO CLIMATE
CHANGE. PRESENTLY,
BANGLADESH
gas emissions and its regulation, standard setters regarding the
proper method of reporting carbon existing accounting anomalies and CONTRIBUTES TO THE
emissions allowances is still at the the pattern and trend of accounting 0.14% TO THE GLOBAL
nascent stage. It is vital to develop approaches. It reflects on the
an accounting standard for debatable matters related to carbon DISCHARGE CARBON
consistent reporting. Recognizing accounting which must be
this need, both the International
DIOXIDE. IT IS EXPECTED
resolved as soon as possible. The
Accounting Standards Board (IASB) world is moving toward the THAT CARBON
and the US Financial Accounting standardization of the accounting
Standards Board (FASB) added a standards. Unfortunately, carbon EMISSIONS WILL
joint project on accounting for emissions accounting approaches INCREASE IN THE
emissions trading schemes in are yet to be standardized. This
2007. An exposure draft was study also highlights the FUTURE DUE TO THE
supposed to be issued in late 2009 importance and significance of ECONOMIC GROWTH
(Ernst & Young, 2009). carbon emission and related
Unfortunately, the IASB and FASB accounting issues in Bangladesh. AND INCREASED
agreed to postpone their joint Our study will also raise a concern
project in November 2010. regarding the rationale for
CONSUMPTION OF
establishing a market based ENERGY, EVEN IF THE
Given this situation, the objectives mechanism and associated carbon
of this paper are: first, the accounting policies for ALTERNATIVE ENERGY IS
systematic investigation of the Bangladesh. USED.
accounting practices related to
emissions trading schemes based The remainder of this paper is
on the review of the recent articles. organized as follows: Section 2
Second, observing the reporting describes the rationale for a carbon
pattern and trend for carbon emission scheme. Section 3
emission allowances. Third, focuses on relevant literature.
illustrating different accounting Section 4 outlines the existing
approaches and their impacts on accounting practices. Section 5
the financial statements. This study suggests appropriate accounting
is useful to articulate the issues of practice for Bangladesh. Finally,
carbon accounting practices and to section 6 concludes this paper.
draw the attention of different
researchers, organizations and

Rationale for a Carbon
Emission Scheme
Emission trading scheme (ETS) is a
market based approach to control
the emissions which have
deleterious impact on the
environment and climate change.
This section covers the rationale
behind carbon emission schemes
from the context of both developed
and developing countries. Day by
day, carbon emission footprint is
becoming an integral part of
companies, since it has direct
economic impact on them
specifically to those which produce
high level of emissions. KPMG
(2013) conducted a study
considering sample of companies
listed on the S&P 500, reveals that
due to the generation of extra
thousand metric tons of carbon
discharge, the mean decline of the
firm’s value is $212,000. It dictates
that investors consider carbon
emissions in their investing (smart phones, cheap clothes and (Shah, 2012). Even though rich
decisions. The study also discloses other goods) which are used in countries are largely responsible
companies with disclosure of their countries. The report also for emitting carbons, they are also
carbon emissions have median notes that developing countries are putting pressure for cutting carbon
value of $2.3 billion higher than emitting an increasing portion of emissions on rising economics
the similar type of companies that carbon dioxide resulting from such as China, Brazil, India etc. In
do not. It shows disclosures of combustion of fossil fuels, because this way, justice and equity are
carbon emissions influence the of the production of goods and ignored while negotiating on this
value of the firm. Likewise, Climate services exported remarkably from issue. Being a developing country,
Disclosure Project (CDP, 2013) upper medium income countries to India has also taken steps to reduce
reports that top companies in terms rich countries (the Guardian, emissions of carbon, though it
of either climate disclosure 2014). It indicates the shrewdness argues that developed world
leadership index (CDLI) or climate of rich economics which are taking should take first steps to reduce
performance leadership index advantage of the rising economics. their emissions. It has launched
(CPLI) produce higher stock pilot projects of emissions trading
performance. Moreover, the Kyoto Protocol is schemes in some states such as
also largely responsible for the Maharashtra, Gujarat and Tamil
Now, we turn our attention in the above scenario. According to this, Nadu (Mohanty, 2015).
context of rising economics. carbon emissions are imposed to
Accounting for carbon emissions countries considering the Bangladesh is the most vulnerable
has become crucial due to the production place instead of basing country to climate change.
several reasons. As per UN draft on consumption place. For this Presently, Bangladesh contributes
report, “The world’s richest reason, Kyoto protocol is to the 0.14% to the global
countries are increasingly criticized. It paves the way to the discharge carbon dioxide. It is
outsourcing their carbon pollution developed world to adopt expected that carbon emissions
to China and other rising accounting trick so that they can will increase in the future due to
economics”. It is observed that rich show reductions in emissions by the economic growth and
economics are making rising outsourcing their manufacturing increased consumption of energy,
economics to produce goods products to the developing nations even if the alternative energy is

used. On a study using estimated Force (EITF) (2003) held a meeting issued before the issuance of
period till 2050, it is forecasted to discuss issue no. 03-14, European Union Emission Trading
that, in line with Copenhagen Participants’ Accounting for Scheme (EU ETS).
Accord, carbon emissions would Emissions Allowances under a
cross equity-based per capita “Cap and Trade” Program. In 1993, IFRIC3, Emission Rights, provided
emission limit in Bangladesh the Federal Energy Regulatory that under IAS 38 (Intangible
provided that there are no Commission (FERC) published Assets), emission permits should
improvements in carbon intensity “Uniform System of Accounts” always be accounted for as
and absence of gains in its energy which involved U.S emission intangible assets and it provides
efficiency (Gunter and Rahman, allowance accounting practices. the scope for historical cost model
2012). However, increasing trend According to FERC, emission and revaluation model. Generally,
in carbon emissions is noticeable allowances are reported as purchase allowances are measured
in Bangladesh. After the liberation inventory based on historical cost. at cost and if the government
war, Bangladesh is experiencing an In case of purchase allowances, authority provides allowances for
upward trend in carbon emissions. they are reported at exchange free or less than fair value, the
price. On the other hand, if allowances should be recorded at
From the above discussion we allowances are received from the fair value and impairment tests are
think it is rational to introduce Environmental Protection Agency required under either of the
emission trading scheme (ETS) in (EPA) at free of charge, they are method. Moreover, any decrease
Bangladesh. Nonetheless, there is recorded at zero bases. in fair value is reported in the
opposite view in this regard. Furthermore, periodic expense is income statement and conversely
Compared to the developed world, recorded on the basis of the any increase in fair value is
Bangladesh is not solely historical cost of allowances recorded in stockholders’ equity to
responsible for carbon emissions. If required to meet the actual the amount exceeding excess
restriction is imposed on the discharge of sulfur dioxide. revaluation. IAS 20 (Accounting for
carbon emissions, the economic Government Grants and Disclosure
growth of the country might be There are differing views on this of Government Assistance) is in
hampered and this similar view is accounting method among the force when the fair value of
expressed in case of India too. It is EITF members. Some members government allowances is deviated
completely contrasting to the steps argue for broader scope of this from the price paid. Owing to the
adopted by Rwanda and Ethiopia issue other than cap and trade difference, deferred income is
which considered low carbon programs. Other members opine recognized and revenue is
development as an opportunity that conflict may arise with other reported over the life time of
instead of detrimental to economic areas of U.S. GAAP, if changes are allowances irrespective of held or
growth (IIED, 2013). It is made to the FERC’s guidance. sold allowances. Under IAS 37
noteworthy to say, introduction of Moreover, at present, regulated (which is about Provisions,
emission trading scheme in companies are receiving lion’s Contingent Liabilities and
developing countries like share of emission allowances from Contingent Assets) liability and
Bangladesh is debatable. The next the EPA at free of cost and are expense related to actual emissions
focuses on some of the relevant recognized on a zero cost basis. are recognized. The liability is the
literature pertaining to this issue. This may distort the emission fair market value of allowances
accounting practices in particular which expected to be paid at the
Literature Review the recording of assets, liabilities end of the period. The net
and operating income of U.S approach is not permitted such as
Recognition and measurement of companies (Fornaro et. al, 2009). netting assets and liabilities
carbon emission allowances have IASB issued ‘IFRIC3: Emission (Fornaro et al., 2009).
been a contentious issue among Rights’ in December 2004 with the
the standard setters, academicians objective of providing authoritative Notwithstanding, later on, IFRIC3
and the corporate enterprises. guidance. Income recognition was withdrawn within six months
There are accounting anomalies for upon receiving carbon permits of issue following severe criticism
emission accounting throughout valuation of asset, liability and on the elements of the guidelines
the world. Due to this, there are expenses recognition and regarding accounting mismatch
diversified accounting practices all measurement basis for actual and failure in reflecting the
over the world. In November emissions were considered under business reality appropriately.
2003, the Emerging Issues Task this guideline. This guideline was European Financial Reporting

Advisory Group (EFRAG) also
questioned the elements and
opined that the guidelines should
not be adopted in European Union
(EU). EFRAG stressed that valuation
of assets and that of liabilities
under the guideline cause
accounting mismatches and lead to
inflated income. Due to this
objection, IFRIC3 was withdrawn
in June 2005 for further
examination. As a consequence of
withdrawing IFRIC3, the EU
carbon emissions market became
free from guidance. Absence of
proper guidance in place emerged
diversification in accounting
practice. International Emissions
Trading Association (IETA) and
PricewaterhouseCoopers (Pwc)
(2007) demonstrated in a joint
survey that accounting approaches
for emission are significantly
diversified.
From the above explanation, it is

clear that there are significant An Illustration of how estimations for 2014. Actual
accounting anomalies for emission Existing Carbon Emission emissions are reported at the end
allowances. The diversity of of each calendar year, and
accounting practices hinders the Accounting Practices under sufficient allowances must be
comparability of financial Different Standards delivered to the regulatory
information which creates problem authority by the end of the first
for making useful economic In the literature review part we quarter of the subsequent year.
decision. It is noteworthy to say, showed that the absence of Excess allowances can be
most of the previous studies are uniformity of carbon emission purchased or sold via an organized
based on identifying the carbon accounting hampers the exchange.
emission accounting practices of comparability, effectiveness and
companies. To the best of our the accuracy of the reporting for During 2014, the market price for
knowledge, there is no carbon accounting. This can be an emissions allowance at specific
investigative study on the carbon clearly demonstrated with respect dates is as follows:
emission accounting and its to a numerical example which has
present status and trends based on been taken from Fornaro et.al,
January 3 $6.00
the literature review. In absence of (2009). ABC Co. is a participant in
the uniform guidelines, it is a national cap-and-trade program March 31 $7.00
important to observe and reveal aimed at lessening the limit of CO2 June 30 $7.50
the disparate accounting practices emissions below a prior-year December 31 $8.00
related to carbon emissions baseline. On January 3, 2014, ABC
accounting. Furthermore, no Co. received 24,000 allowances Suppose, business activity
previous studies put forth the issue (free of cost) from a regulatory surpassed expectations, and during
of introducing emission trading agency. Each allowance permits 2014, ABC Co. emitted a total of
accounting issues arising from it in ABC Co. to discharge one ton of 28,000 tons of CO2. Projecting
developing countries like CO2 during 2014. This allocation this annual shortage in emissions
Bangladesh. We have addressed is below the company’s allowances, ABC Co. purchased
these issues in our research to fill previous-year levels and its most 1,000 additional allowances on
the existing gaps in the literature. latest internal emissions both March 31 ($7000) and June

30 ($7,500) at the existing market amount of allowances needed IFRIC 3
price. At the end, to confirm that it using FIFO or weighted-average
has enough allowances in reserve cost method. Finally, ABC Co. On January 3, 2014, assuming the
to meet actual emissions for the recognizes emissions expenses of historical cost option under IAS 38
year, ABC Co. purchased 2,000 $30,500 for 2014. An intangible to calculate the cost of allowances
more allowances on December 31, asset and a separate liability for owned ABC Co. records an
2014 ($16,000). In January, 2015, emissions of $30,500 are reported intangible asset and deferred
ABC Co. provided 28,000 on the balance sheet based on revenue of $144,000 on account of
allowances to the regulatory historical cost practices. 24,000 allowances. Again, the
agency to surrender its outstanding purchases of extra allowances
emissions obligations. Accounting Existing U.S. GAAP under FERC (4,000) are reported as intangible
activity related to this is shown regulation assets amounting to $30,500.
below under three different Furthermore, revenue is reported
situations: 1) commonly practiced ABC Co. prepares a memo entry to on a systematic basis and periodic
accounting method for EU-ETS record the receipt of 24,000 emissions expenses and a related
activity mentioned in the allowances in inventory at a nil liability are calculated and
PwC/IETA survey. 2) Existing U.S. basis on January 3, 2014. Similar recorded based on the actual
GAAP under the FERC regulations to EU practices, No deferred emissions to date using the market
3) IFRIC 3 (withdrawn later on). revenue equal to the fair value of value of allowances on the
the allowances received (24,000 × reporting date. For 2015, ABC Co.
Common Practices under EU-ETS $6.00 = $144,000) is not recognizes total revenue of
recorded. During 2014, the $144,000 and emission expenses
At first, ABC Co. prepares a memo purchases of extra allowances of $224,000 which is calculated
entry on January 3, 2015, to (4,000) are reported as inventory multiplying actual emissions
recognize the receipt of 24,000 amounting to $30,500 ($7,000 + (28,000) by the year-end price ($8)
allowances at a nil basis and $7,500 + $16,000). Emissions for a net expense of $80,000.
recorded them as an intangible expenses are recognized (and Intangible asset of $174,000
asset. No deferred revenue equal inventory relieved) using the ($144,000+ 30,500) and the
to the fair value of the allowances weighted average cost of liability for emissions of $224,000
received is recorded. Again, the allowances required to meet actual are reported on the “grossed-up”
purchases of extra allowances emissions. For 2014, ABC Co. balance sheet.
(4,000) are reported as intangible recognizes emissions expenses of
assets amounting to $30,500. To $30,500 representing the historical Now, the impact of the above
meet the actual emissions, periodic cost of 28,000 allowances. Neither practices on the financial
emissions expenses and a related additional assets nor liabilities are statements is shown briefly:
liability are calculated and reported on the balance sheet from
recorded based on the carrying these transactions.
Partial Income Statement

Particulars Existing practices in EU ($) U.S. GAAP (FERC) IFRIC 3 ($)
($)
Revenue 0 0 144,000
Emissions Expense 30,500 30,500 224,000
Net Expense 30,500 30,500 80,000
Partial Balance Sheet

Existing practices in EU U.S. GAAP (FERC)
Particulars IFRIC 3 ($)
($) ($)
Intangible
30,500 0 174,500
Asset/Inventory
Emissions Liability 30,500 0 224,000
Net Asset (Liability) 0 0 (49,500)

For settlement in 2015, ABC Co.
would provide 28,000 allowances
to the regulatory authority to meet
its emissions obligation for 2014.
At settlement, there will be no
recognition of loss or gain under
existing EU practices and U.S.
GAAP while a gain of $49,500 will
be recognized under IFRIC 3. The
reason for this is the accounting
mismatch in calculating the
allowances owned (carrying
amount of $174,000) and the
measurement of the related liability
at market price of $224,000 (Dec
31, 2014).This results a gain of
$49,500 at settlement.
It is clear from the above

theoretical and numerical
explanation that there are still
some controversial issues related to
the carbon emission accounting.
Carbon emissions accounting
under different models create
disparate financial results which
violates the objective of financial gas emissions?” Government’s economy is gradually moving to
reporting, since it hinders view with respect to this approach manufacturing from agriculture.
comparability, effectiveness and should be addressed too. Along Both the garments and
accuracy of reporting. with national issues, international manufacturing sectors offer strong
Consequently, users cannot take issues should be taken into prospects of underpinning
decisions based on this. account. As mentioned previously, economic growth
Companies in the EU and between industrialized nations are (Udenrigsministeriet, 2015). In
those in the U.S.A and EU cannot outsourcing CO2 to rising addition, Bangladesh government
be compared, owing to disparate economics to cut emissions in their has a plan to establish as many as
accounting practices. Furthermore, countries. As per the notion of 100 economic zones across the
the relevance of financial climate justice, the biggest country within the next 15 years to
information is also questionable responsibility and burden rest on encourage industrialization,
because of the mal-conformation of the industrialized countries who production enhancement, export
important accounting ratios such as are mainly responsible for climate promotion and diversification
return on assets (ROA), leverage change. Unfortunately, this notion (Budget Speech 2015-16, 2015).
ratios and other profitability is ignored by many rich countries Considering this economic
measures. and they are campaigning to bring prospect, Bangladesh should adopt
developing countries (i.e. China, emission reduction schemes and
Which Accounting Practice Brazil, India, and Bangladesh) associated accounting practice as a
can We Adopt for under emission reduction schemes part of future planning. However,
(Global Issues, 2012). Moreover, the opposite view says greenhouse
Bangladesh? Bangladesh is moving fast to be a gas (GHG) emissions per person
middle-income country. Over the compared to bigger developing
Before moving to the selection of a
past decade, Bangladesh has countries is not significant. As
particular accounting practice
experienced stupendous economic such, it is not fair to ask
pertaining to emissions
development. On average, since Bangladesh to reduce its emissions.
allowances, it is important to raise
2004, she is experiencing
the question: “Is it justified to ask
increasingly steady economic At this stage, low carbon
Bangladesh to reduce greenhouse
growth of 5-6% annually. Its development is not a national

priority, though Bangladesh is the recommended since it can distort one of the enhancing qualitative
most vulnerable counting to the liabilities, assets and operating characteristics of useful financial
climate change in the world. It is income pertaining to emissions, if information and the entities must
concerned that low carbon agenda emissions allowances are received provide information that is useful
will hamper the country’s free of cost with a zero cost basis. in making economic decisions that
economic growth and IFRIC 3 is not also proposed is also the fundamental objective
development. This poses a serious because it was withdrawn of financial reporting, as per the
challenge to developing countries following the accounting conceptual framework for financial
like Bangladesh in the way of mismatches in reporting. Unless reporting. From this viewpoint, it
implementing low carbon agenda. uniform standard comes in, we can be mentioned that present
To defend this view, approach propose that existing practices state of carbon emission
taken by Rwanda and Ethiopia, under EU ETS can be adopted in accounting practices violates an
where low carbon agenda has Bangladesh. important qualitative characteristics
been considered as an opportunity for useful information and the
instead of a potential obstacle to Conclusion basic objective of financial
growth (IIED, 2013). Introducing reporting. Our investigation reveals
emissions reduction schemes can We conclude this paper by stating another important fact that how
be a potential fund raising strategy that there are inconsistencies in the developed countries are taking
for Bangladesh. It will send a emissions accounting practices. It advantage of developing countries
message to the development was expected since there is no in achieving their emissions target.
partners and potential donors that uniform accounting practice The developed countries are
Bangladesh is prepared to reduce related to it. Along with the progressively outsourcing their
their emissions. In this way, the different researchers, several audit carbon pollution to the developing
raised fund can be utilized for firms (such as KPMG, PwC, countries. Consequently, the rising
climate change adaptation and Deloitte, Enrst & Young) reflected trend of the emissions of carbon
mitigation programs. This will upon this issue. We observed dioxide is noticeable in the
certainly have positive impact on deviations in recognizing developing countries. Bangladesh
the overall economic development emissions allowances as assets and is not also free from this.
of the country. also in the different accounting Bangladesh is also experiencing
practices under different models high growth in carbon emissions
From the above arguments, it can such as IFRIC 3, EU ETS existing since 1972. Rich countries are
be mentioned that concentrating practices and U.S GAAP practices. shrewdly exploiting this advantage.
on pollution intensive companies, The reason for these From this perspective, developing
Bangladesh should adopt inconsistencies is the absence of countries in particular Bangladesh
emissions reduction program such any accounting standards or should adopt ETS or other emission
as ETS as a pilot program at first. interpretation within United States’ curbing measures as a part of
With the growth in Generally Accepted Accounting proactive stance. However, there is
industrialization, the scope of such Principle (U.S.GAAP) or conflicting view as well. Curbing
scheme can be widened. Now, International Financial Reporting emissions of carbon may frustrate
from the accounting point of view, Standards (IFRS) that deals solely the economic growth. India has
a question arises which accounting with the accounting treatments for also expressed this view, even
practice should be adopted, if emissions allowances or renewable though it has launched pilot
emissions reduction program is energy certificates. As a result, on programs of emissions trading
introduced. Based on the overall the ground of the general scheme in the areas Gujarat,
analysis of accounting practices, principles of IFRS, companies are Maharashtra and Tamil Nadu.
existing practices under EU ETS is obliged to apply judgment and Following India, Bangladesh can
suggested, since EU ETS is the select to an accounting method. introduce emissions trading
largest carbon market (more than scheme as a pilot programs, since
75% of international carbon However, the disparate accounting she is vulnerable to the climate
trading) and European Union has practices weaken the comparability change and the upward trend of
been successful in reducing of financial statements. the carbon emissions. This study
emissions (almost 45% of total Consequently, stakeholders are shows direction about the further
emissions) substantially (European facing difficulty in making useful empirical research. An empirical
Union, 2013). Existing U.S GAAP economic decisions. It is research can be conducted
under FERC regulation is not noteworthy to say, comparability is showing the impact of different

accounting approaches on the Fornaro, M, J, Winkelman, A, K, and Kyoto Protocol, (1997). ‘The Kyoto
stakeholders’ decision. Finally, we Glodstein, D, (2009). Accounting for Protocol’, Available at:
raise the concern that the lack of Emissions: “Emerging issues and the www.kyotoprotocol.com
uniformity of carbon accounting need for global accounting standards”,
Available at Shah, A, (2012). ‘Climate Justice and
reporting might reduce the
http://www.journalofaccountancy.com Equity’, Available at:
comparability, effectiveness and /issues/2009/Jul/20081312 globalissues.org/print/article/231
accuracy of carbon emission
reporting. Global Issues, (2012). ‘Climate Justice The Guardian, (2014). ‘CO2 emissions
and Equity’, Available at are being ‘outsourced’ by rich
List of References http://www.globalissues.org/print/articl countries to rising economics’,
e/231>, Available at:
Ernst & Young, (2009). ‘Accounting for www.theguardian.com/environment/2
emission reduction and other incentive Gunter, G, B, Rahman, A, A, (2012). 014/jan/19/co2-emissions-outsourced-r
schemes’, International Financial ‘Bangladesh and the Copenhagen ich-nations-rising-economies.
Reporting Standards Group, UK. Accord: how much carbon dioxide
might Bangladesh emit in 2050?’ Udenrigsministeriet,
European Commission, (2015). ‘The Environmental Economics, Vol. 3, (2015).‘Challenges and Opportunities
EU Emissions Trading System (EU Issue 1. in Bangladesh’, available at:
ETS)’, Available at http://um.dk/en/danida-en/goals/countr
ec.europa.eu/clima/policies/ets/index_ IIED, (2013). ‘Bangladesh: from y-policies/bangladesh/challenges-and-o
en.htm adaptation to low carbon resilience’, pportunities-in-bangladesh
available at:
European Union, (2013). ‘The EU www.iied.org/bangladesh-adaptation-l United Nations, (2014). ‘International
Emissions Trading System (EU ETS)’, ow-carbon-resilience, Emissions Trading’, Available at:
unfccc.int/kyoto_protocol/mechanisms
/emissions_trading/items/2731.php.
The Authors are:

1
Associate Professor, Department of Accounting & Information Systems, University of Dhaka
2
Post Graduate Student in the Department of Accounting & Information Systems, University of Dhaka

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Fully Regulated Member of UK Actuarial Profession

October - December 2015

Country’s recurrent financial irregularities. We believe the main

02 October - December 2015 The Bangladesh Accountant

The Bangladesh Accountant October - December 2015 03

04 October - December 2015 The Bangladesh Accountant

The Bangladesh Accountant October - December 2015 05

Perspective of Enacting has to comply with the Statement of

06 October - December 2015 The Bangladesh Accountant

Objectives of FRC  Setting and maintenance of CHAIRMAN OF FRC AS

 Direct monitoring of financial

The Bangladesh Accountant October - December 2015 07

08 October - December 2015 The Bangladesh Accountant

The Bangladesh Accountant October - December 2015 09

10 October - December 2015 The Bangladesh Accountant

International Standards on Auditing

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The article is reprinted from The Financial Express

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The Backdrop of Global looking to switch to IFRS by 2015, the

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ACTUARY. THE ACT

MEASURE THE ACTUAL

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FRC (Financial Reporting

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Sarbanes - Oxley Act, 2002

Management Reporting Board Governance Management and Board Enforecement and

UK Financial Reporting Act, 1991 Bangladesh Financial Reporting Act, 2015

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Introduction set of global standards for financial

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Worldwide IFRS Adoption Map-For Public Companies

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3.2. During the Relevant Periods,

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Introduction precise size to attract readers’ attention.

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 Management reward is target