ACN 305 ASSIGNMENT

SUBMITTED TO:

Md. Safiuddin
ITP Lecturer, Department of Accounting
Independent University, Bangladesh

DONE BY
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Tasin Shafin Ishan 1810726

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 Letter of Transmittal

To,

Md. Safiuddin

ACMA, ITP Lecturer, Department of Accounting School of Business,

Independent University, Bangladesh (IUB)

Dear Sir,

I would like to thank you for giving me the opportunity to work and complete this assignment
through the guidance of your lectures.

This assigned task gives me the privilege to explore more about IAS & IFRS, accounting
principles and the presentation of financial statements.

In this assignment, I have mainly identified the difference in the presentation of financial
statements of Kattali Textile Limited (KTL) according to the requirement of IAS & IFRS. I have
given my best effort for the preparation of this assignment hence pardon me for any sort of
mistakes or difficulties that may arise as I am still a learner in the accountancy field.

Finally, I would love to express my gratefulness for your support and kind consideration
throughout the semester.

Regards,

Tasin Shafin Ishan

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 Acknowledgement

I would like to take this opportunity to convey my special appreciation and gratitude to Md.
Safiuddin, ITP Lecturer, Independent University, Bangladesh for being an extremely emphatic
mentor in guiding me throughout the whole course of ACN305.

Last but not the least, I would also like to thank to each other as we contributed our arduous
effort and time along with the instruction and guidance of Md. Safiuddin to complete the report
without which the assignment would’ve been incomplete. His encouragement and assistance
were vital in completing the task. This task extremely improved my knowledge and had made a
deeper impact in my thoughts of learning accounting and taking it as a professional qualification
in the near future.

Thank you.

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 Executive Summary

This report is based on analysis of the financial statements with emphasis on the balance sheet
liabilities and equity section of Kattali Textile Limited. The reason for this report is to see how
the accounting report takes after the prerequisites of IAS & IFRS which are utilized to assess the
occasional financial achievement of a firm. In this report, I will break down this organization
from the balance sheet of 2019-2020 years and distinguish the IAS & IRFS identified with the
introduction of balance and which follows the exposure only on liabilities and equity section of
the balance sheet. I will give clarification of IAS & IFRS principles and make a comparative
analysis. I am likewise going to distinguish the noncurrent assets and current assets those take
after the benchmarks of IAS & IFRS. At last, I will calculate some financial ratio of this
company.

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 Table Of Contents

Task 1……………………………………………………………………………………………6

Task 2…………………………………………………………………………………………...10

Task 3…………………………………………………………………………………………...12

Task 4………………………………………………………………………………………...…13

Task 5…………………………………………………………………………………….……..14

Task 6…………………………………………………………………………………………...16

Task 7…………………………………………………………………………………………...16

Task 8…………………………………………………………………………………………...17

Task 9…………………………………………………………………………………………...18

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Task 1:

The use of IAS/IFRS provides readers of Financial Statements with high-quality financial data
that meets the qualitative features of IAS/IFRS application, such as understandability, relevance,
reliability, and comparability. Users and issuers profit from the use of IAS/IFRS standards
because they have access to a wider pool of foreign capital at a reduced cost. Researchers have
expressed varying views on the advantages of adopting IFRSs as a single set of reporting
standards over the world. The adoption of IFRS has a number of advantages, including lower
capital costs, more efficient capital allocation, easier international capital mobility, capital
market development, improved and higher market liquidity and value, improved comparability,
cross-border capital movement, and increased transparency of results. According to Gordon's
research, the following are the advantages of IFRS adoption around the world: (i)better financial
information for shareholders; (ii)better financial information for regulators; (iii)improved
comparability; (iv)improved transparency of results; (v)increased capacity to secure cross-border
listing; (vi)better management of global operations; and (vii)lowered capital costs. Describe the
advantages of adoption as follows: I improved access to global capital markets; (ii) easier global
comparability; (iii) simple cross-border listing; (iv) improved financial reporting quality; and (v)
elimination of multiple reporting. The fragility of small investors was highlighted, which has
been a long-standing issue and a major hindrance to Bangladesh's stock market development.
The implementation of IFRS, which enhances financial reporting quality, allows small investors
to compete more effectively with well-informed professionals, lowering their trading risk. The
upside is that SMEs that previously had no responsibility to follow IFRS now have a complete
set of globally compatible standards to follow. It will ultimately assist SMEs in preparing and
presenting Financial Statements that are acceptable both nationally and internationally. The
implementation of IFRS will improve consolidated account comparability and transparency for
all organizations, for example, through enlarged segment disclosures, disclosing unfunded
pension obligations, and the fair value recognition of derivatives on balance sheets. The
International Financial Reporting Standards (IFRS) can increase comparability across borders
and across global industries, as well as with global peers and competitors.

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Appendix I (A) - The International Accounting Standards (IAS) have been adopted by the ICAB
as Bangladesh Accounting Standards (BAS)

IAS/BAS Title of Adopted IAS as BAS Effective Date

Applicable on or after
1 Presentation of Financial Statements 1 Jan 2007
2 Inventories 1 Jan 2007
7 Statement of Cash Flows 1 Jan 1999
8 Accounting Policies, Changes in Accounting 1 Jan 2007
Estimates and Errors
10 Events After the Reporting Period 1 Jan 1999
11 Construction Contracts 1 Jan 1999
12 Income Taxes 1 Jan 1999
16 Property, Plant and Equipment 1 Jan 2007
17 Leases 1 Jan 2007
18 Revenue 1 Jan 2007
19 Employee Benefits 1 Jan 2004
20 Accounting for Government Grants and Disclosure of 1 Jan 1999
Govt Assc
21 The Effects of Changes in Foreign Exchange Rates 1 Jan 2007
23 Borrowing Costs 1 Jan 2010
24 Related Party Disclosures 1 Jan 2007
26 Accounting and Reporting by Retirement Benefit 1 Jan 2007
Plans
27 Consolidated and Separate Financial Statements 1 Jan 2010
28 Investments in Associates 1 Jan 2007
29 Financial Reporting in Hyperinflationary Economics Not adopted
31 Interests in Joint Ventures 1 Jan 2007
32 Financial Instruments: Presentation 1 Jan 2010
33 Earnings per Share 1 Jan 2007
34 Interim Financial Reporting 1 Jan 1999
36 Impairment of Assets 1 Jan 2005
37 Provisions, Contingent Liabilities and Contingent 1 Jan 2007
Assets
38 Intangible Assets 1 Jan 2005
39 Financial Instruments: Recognition and Measurement 1 Jan 2010
40 Investment Property 1 Jan 2007
41 Agriculture 1 Jan 2007

The minimal line items are shown on the face of the statement of financial situation according to
International Accounting Standard-1, with my studied company below the checklist–

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Kattali Textile Limited:

IAS/BAS Title of Adopted IAS as BAS Effective Date

Applicable on or after
1 Presentation of Financial Statements 1 Jan 2007
2 Inventories 1 Jan 2007
7 Statement of Cash Flows 1 Jan 1999
12 Income Taxes 1 Jan 1999
16 Property, Plant and Equipment 1 Jan 2007
18 Revenue 1 Jan 2007
33 Earnings per Share 1 Jan 2007

Appendix I (B) - The International Accounting Standards Board (ICAB) has adopted the
International Financial Reporting Standards (IFRS) as Bangladesh Financial Reporting Standards
(BFRS)

SL # IFRS /BFRS Title of Adopted IFRS as BFRS Effective Date

Applicable on or after
1 BFRS 1 First-time Adoption of IFRS 1 Jan 2009
2 BFRS 2 Share-based Payment 1 Jan 2007
3 BFRS 3 Business Combinations 1 Jan 2010
4 BFRS 4 Insurance Contracts 1 Jan 2010
5 BFRS 5 Non-current Assets Held for Sale and 1 Jan 2007
Discontinued Operations
6 BFRS 6 Exploration & evaluation of Mineral Resources 1 Jan 2007
7 BFRS 7 Financial Instruments: Disclosures 1 Jan 2010
8 BFRS 8 Operating Segments 1 Jan 2010
9 BFRS 9 Financial Instruments Not Adopted
10 BFRS 10 Consolidated Financial Statements 1 Jan 2013

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 11 BFRS 11 Joint Arrangements 1 Jan 2013
12 BFRS 12 Disclosure of Interests in Other 1 Jan 2013
Entities
13 BFRS 13 Fair Value Measurement 1 Jan 2013

IFRS for SMEs for BFRS for SMEs (Small Medium Size Entities) with effective date on 1 Jan
2013.

The minimal line items are shown on the face of the statement of financial situation according to
IFRS, with my studied company below the checklist–

Kattali Textile Limited:

SL # IFRS /BFRS Title of Adopted IFRS as BFRS Effective Date

Applicable on or after
1 BFRS 1 First-time Adoption of IFRS 1 Jan 2009
2 BFRS 2 Share-based Payment 1 Jan 2007
8 BFRS 8 Operating Segments 1 Jan 2010
13 BFRS 13 Fair Value Measurement 1 Jan 2013

Task 2:

The statement of financial position must have line items that present the following amounts,
according to International Accounting Standards 1 (IAS-1):

(1) Property, plant and equipment.

(2) Investment property.

(3) Intangible assets.

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(4) Financial assets (excluding amounts shown under 5, 8 and9).

(5) Investments accounted for using the equity method.

(6) Biological assets.

(7) Inventories.

(8) Trade and other receivables.

(9) Cash and cash equivalents.

(10) The total of assets classified as held for sale and assets included in disposal groups classified
as held for sale in accordance with IFRS 5.

(11) Trade and other payables.

(12) Provisions.

(13) Financial liabilities (excluding amounts shown under 11 and 12).

(14) Liabilities and assets for current tax, as defined in IAS 12Income Taxes.

(15) Deferred tax liabilities and deferred tax assets, as defined in IAS 12.

(16) Liabilities included in disposal groups classified as held for sale in accordance with IFRS 5.

(17) Non-controlling interests, presented within equity.

(18) Issued capital and reserves attributable to equity holders of the parent.

When additional line items, headings, and subtotals are essential to an understanding of the
entity's financial status, an entity must present them in the statement of financial position
(including by disaggregating the line items indicated in paragraph 54 of IAS 1). When an entity
offers subtotals in the manner described above, those subtotals must:

(a) Be comprised of line items made up of amounts recognised and measured in accordance with
IFRS.

(b) Be presented and labelled in a manner that makes the line items that constitute the subtotal
clear and understandable.

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(c) Be consistent from period to period, in accordance with paragraph 45 of IAS 1; and

(d) Not be displayed with more prominence than the subtotals and totals required in IFRS for the
statement of financial position.

Information to be included in the notes or on the front of the statement of financial situation.
Further subclassifications of the line items reported must be disclosed, either on the face of the
statement of financial position or in the notes, in a manner relevant to the entity's operations. The
degree of detail offered in subclassifications is determined by the size, nature, and function of the
amounts involved, as well as the IFRS criteria. According to the IAS, an organization must
disclose the following information, either on the face of the statement of financial position, in the
statement of changes in equity, or in the notes:

(1) For each class of share capital:

(a) The number of shares authorised;

(b) The number of shares issued and fully paid, and issued but not fully paid;

(c) Par value per share, or that the shares have no par value;

(d) A reconciliation of the number of shares outstanding at the beginning and at the end of the
period;

(e) The rights, preferences and restrictions attaching to that class including restrictions on the
distribution of dividends and there payment of capital;

(f) Shares in the entity held by the entity or by its subsidiaries or associates; and

(g) Shares reserved for issue under options and contracts for the sale of shares, including the
terms and amounts.

(2) A description of the nature and purpose of each reserve with inequity.

Task 3:

The following are the line items that must be provided on the face of the statement of
financial position:
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1. Property, plant and equipment.

2. Investment property.

3. Intangible assets.

4. Financial assets.

5. Investments accounted for using the equity method.

6. Biological assets.

7. Inventories.

8. Trade and other receivables.

9. Cash and cash equivalents.

10. Assets held for sale.

11. Trade and other payables.

12. Provisions.

13. Financial liabilities.

14. The current tax liabilities as well as the current tax assets, as defined in the IAS 12.

15. The deferred tax liabilities as well as the deferred tax assets, as defined in the IAS 12.

16. The liabilities included in the disposal groups.

17. Non-controlling interests, presented within the equity.

18. Issued capital as well as the reserves attributable to owners of the parent.

Task 4:

Provision is a liability that is calculated with a high degree of accuracy. Provisioning calculation
= expected loss x probability of loss.

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As a result, we need to know the expected loss and the probability of loss in order to calculate
the provision for liabilities. There is a current application that most likely demands a resource
outflow, and a solid estimate of the amount of obligation may be made.

-a provision is recognized.

There is a potential or current responsibility that, to my knowledge, will not necessitate a

resource outflow.

-No provision is recognized

There is a potential duty or a current commitment with a low possibility of a resource outflow.

-No provision is recognized

It's also crucial to understand the difference between liabilities and obligations. There is a
liability provision. Liability refers to a current responsibility deriving from past events that
entails a resource outflow and can be measured.

A contingent liability is a potential or current obligation that cannot be measured or does not
include a resource outflow. It's a conceivable duty, which indicates that if something happens
more often than not, there's a 50 percent risk of losing money.

Task 5:

The IAS 18 primarily covers when to recognize revenue and how to measure it. The revenue is
the gross inflow of economic advantages during the period deriving from the entity's usual
activities, primarily when those inflows result in increases in the equity, excluding rises
attributable to the contributions of equity participants.

The accounting for revenue deriving from the following transactions and occurrences is
governed by IAS 18-

1. The sale of the goods.

2. The rendering of services as well as.

3. The use by others of the entity assets yielding interest and the royalties as well as the
dividends.

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When it is likely that future economic advantages will flow to the entity, and those benefits can
be evaluated accurately, revenue is recognized.

The IAS 18 generally outlines the conditions under which those criteria will be met and, as a
result, revenue will be recognized. It also includes instructions on how to apply the criteria in
practice. The revenue is calculated using the fair market value of the consideration received and
receivable.

Kattali Textile Limited

Balance Sheet

Details 30 June-2020 30 June-2019

Non Current Assets 864,064,685 808,478,875
Property, Plant & Equipment 776,748,244 775,774,559
Capital Work In Process 87,316,441 32,704,316
Current Assets 1,224,685,544 1,120,289,790
Inventories 327,051,201 281,393,223
Account Receivables 443,892,457 435,234,849
Advances, Deposits and Prepayments 168,169,625 80,133,082
Cash and Cash Equivalents 285,572,261 323,528,636
Total Assets 2,088,750,229 1,928,768,665
Shareholder's Equity & Liabilities
Shareholder's Equity 1,898,121,933 1,763,164,058
Share Capital 1,076,900,000 979,000,000
Other Comprehensive Income 58,897 -
Retained Earnings 821,163,036 784,164,058
Non-Current Liabilities 45,900,084 37,254,176
Deferred Tax 44,984,320 36,244,110
Long Term Luan (Long Term Portion) 915,764 1,010,066
Current Liabilities 144,728,213 128,350,430
Long term Loan (Current Portion) 456,000 456,000
Accounts Payable 3,547,854 3,673,793
Liabilities For Expenses 101,433,853 77,409,995
Liablities for Workers Profit Participation Fund 9,373,860 17,946,080
Short Term Loan 29,916,646 28,864,563
Total Shareholder's Equity & Liabilities 2,088,750,229 1,928,768,665

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 Net Assets Value Per Share (NAV) 17.63 18.01

Task 6:

The liquidity position of the company:

Ratios 2019-2020
Current Ratio = Current 1,224,685,544/144,728,213
Assets/Current Liabilities = 8.46 : 1
Quick Ratio = (Current Assets - (1,224,685,544-327,051,201)/ 144,728,213
Inventories)/Current Liabilities = 6.20 : 1
Net Working Capital = Current 1,224,685,544-144,728,213
Assets-Current Liabilities = 1,079,957,331

The company’s Current ratio has increased from last year which means their liabilities has
decreased in 2020. However current ratio is still in the safe range which is greater than the actual
ratio. Their ratio is also increased from the last year which mean their inventories has increased.
The drastic changes are in net working capital which has increased very significantly.

Task 7:

The solvency position of the company:

Ratios 2019-2020
Debt to total Assets 190,628,297/2,088,750,229
= Total Liabilities/Total assets = 0.0913
Long-term Debt to Assets 915,764/2,088,750,229
= Long Term Debt/Total Assets = 0.00044

The debt-to-asset ratio is the percentage of total assets provided by creditors. The higher the
ratio, the higher the degree of leverage (DoL) and, as a result, the danger of financial failure.
From the above calculation, we can see that the debt- to asset ratio is 0. 0913 which indicates a
low degree of financial leverage. About 9.1% of the assets are financed by external sources

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which indicates a significant risk of bankruptcy. The company will be able to repay its long-term
debt on time without problem. Creditors, on the other hand, assess the ratio to calculate how
much debt the company already has and if it can repay it, which determines whether new loans
will be provided to the company.

Task 8:

The composition of shareholders’ equity section of the company is:

Shareholders' equity (SE) is analyzed by investors and corporate accounting professionals to

assess how a firm uses and manages initial investments, as well as to estimate company
valuation. Entire firm assets less total company liabilities is how shareholders' equity is
computed. However, there are various factors that go into calculating equity.

Capital reserve on merger, revaluation surplus, unrealized gain/(loss), and retained earnings are
all examples of excess issue price above face value of GDRs.

The share equity portion of Kattali Textile Limited includes share capital, share premium,
reserve, and retained earnings.

Ratios 2019-2020
Earnings Per Share (EPS) 154,537,875/108,060,000
= Net Income/ Number of Share = 1.43
Diluted earnings per share Not Applicable
P/E Ratio 33.41/1.43
= Share Price/Earnings Per Share = 23.36%

Diluted shares = No diluted EPS was required to be calculated for the year ended 30 June 2019-
2020 since there was no scope for dilution of shares.

Task 9:
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Conclusion:

According to our studied company, we can see Kattali Textile Limited,

Current ratio is in 2019-2020 is 8.46.

Quick ratio is in 2019-2010 is 6.20.

Debt to total assets is in 2019-2020 is 9.1%.

Long term debt to assets is in 2019-2020 is 0.04%.

Networking capital is in 2019-2020 is 1,079,957,331.

EPS is 1.43 and P/E ratio is 23.36% in 2019-2020.

References:

https://www.dsebd.org/displayCompany.php?name=KTL

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