On
Financial Reporting Practices of Dutch-Bangla
Bank Limited - A Case Study
Submitted To:
Dr.Milan Kumar Bhattacharjee
Professor
School of Business
University of Liberal Arts Bangladesh
Submitted By:
Md.Khairul Islam
ID: 093011104
Dept.: USB
Program: BBA
Major in Accounting
Letter of Transmittal
August 20, 2013
To
Dr.Milan Kumar Bhattacharjee,
Professor,
Business Administration
ULAB School of Business
University of Liberal Arts Bangladesh
Subject: Submission of Project Report on Financial Reporting Practices of DutchBangla Bank Limited - A Case Study.
Dear Sir,
With due respect, I am submitting my project report on Financial Reporting Practices of
Dutch-Bangla Bank Limited-A Case Study. I have to prepare this report after the completion
financial report. I have tried my level best to prepare this report as per required standard. It was
certainly a great opportunity for me to work on this report.
I would like to express gratitude from bottom of my heart to you to go through this report and
make your valuable comments. It would be very kind of you, if you please evaluate my
performance regarding this project report.
Yours sincerely,
Md.Khairul Islam
ID: 093011104
Dept.: USB
Program: BBA
Acknowledgement
At the beginning I would like to pay my gratitude to the almighty Allah for
giving me ability to work hard. I am also grateful to my parents who provided
me with the basic necessities of life since my early childhood.
Now I like to thank my honorable Sir Dr.Milan Kumar Bhattacharjee for
guiding me to opportunity to prepare this report & effortful supervision. He also
provided me some important advice and guidance for preparing such type of
new idea based report. Without his help this report could not have been a
comprehensive one.
I would like to express to my university faculty members they should be
produced the knowledge.
Finally, I like to say that, I have to prepare this project report in my own
experience to complete this report.
ii
Contents
Topic
Page No.
Chapter: 01
Introduction ...... 01
1.01: Rational of the Study .. 02
1.02: Objectives of the Study ....... 02
1.03: Methodology of the Study .......... 02
1.04: Scope of the Study .......... 03
1.05: Limitations of the Study ...........03
Chapter: 02
Theoretical Aspects . 04
2.01: Financial Statements ....... 05
2.02: Components of Financial Statements ....... 06-10
2.03: IAS ........ 10-13
2.04: BAS ........14-16
2.05: IFRS . ........ 17-20
iii
Chapter: 03
Practical Issues .... 21
3.01: Sample Enterprise at a Glance ....... 22
3.02: Analysis of Findings .... 23-30
3.03: BFRS .............. 31
3.04: Performance Evaluation ..... 31
3.05: SWOT Analysis ......... 32
Chapter: 04
Concluding Notes .... 33
4.01: Summarized Picture ....... 34
4.02: Recommendations .. 34
4.03: Conclusion ..... 34
Bibliography ... 35
iv
Executive Summary
The banking system increasing day by day of our country. The modern economic era to
develop in industrial and commercial sector without a banking system it is to quite
impossible. This report prepared to Financial Reporting Practices Of Dutch-Bangla Bank
Limited. Dutch-Bangla Bank is the second generation commercial private Bank. Dutch
Bangla Bank is the first and only local bank in Bangladesh to have an automated banking
system. The bank has spent over Tk. 1 Billion in automation upgrades (first bank in
Bangladesh to do so).This automation took place in 2003 whereby services of the bank were
available uniformly though any branch, ATM and internet. Dutch-Bangla Bank Limited is a
well prepared to and capable of meeting the demand for a broad range of banking services .It
has got adequate resources, both human and physical, to provide the customers with the best
possible services. All the branches are fully operational computer network which is currently
being implemented. In our country there are lots of organizations performed in the field of
social activities and by increased their profit earnings ratio, among them the Dutch-Bangla
Bank is best performing in this field. We have taken some data as like profit earnings ratio
from 2008 20012, net profit data from 2008 20012, dividend per share and expenditure of
Dutch-Bangla Bank Limited, which is expensed for the corporate social responsibility. Here,
we need to assign some numerals values that we discussed in our limitations.
Chapter: 01
Introduction
We have used both primary and secondary data. The sources of data may be stated as follows.
Primary sources:
Face to face conversation
Personal observation
Annual report of sample organization
Secondary sources:
Annual Reports of DBBL
Also from the web sites. www.dbbl.com.bd
Internet
File study
Statement of affairs
Bank Rate Sheet
It was very difficult to collect the information from time limitation period.
The bank employees are busy to their jobs, to the little time with consulted customers.
I carried out such as study for first time to inexperience to constraints of the study.
The required collected data are non-available.
All banks have their own secrecy that is not related to other with collected data for
interview the employees to disclose information of the confidentiality of the bank.
Chapter: 02
Theoretical Aspects
Statement of financial position: Statement of Financial Position, also known as the Balance
Sheet, presents the financial position of an entity at a given date. It is comprised of three main
components: assets, liabilities and owners equity.
Statement of comprehensive income: Comprehensive income is the change in equity (net
assets) of a business enterprise during a period from transactions and other events and
circumstances from non-owner sources. The statement of comprehensive income illustrates
the financial performance and results of operations of a particular company or entity for a
period of time.
Statement of changes in equity: A statement of changes in equity summarizes the
movement in the equity accounts during the year namely share capital, share premium,
retained earnings, revaluation surplus, unrealized gains on investments, etc. A statement of
changes in equity is an important component of financial statements since it explains the
composition of equity and how has it changed over the year.
Statement of cash flows: A cash flow statement, also known as statement of cash flows is a
financial statement that shows how changes in balance sheet accounts and income affect cash
and cash equivalents and breaks the analysis down to operating, investing, and financing
activities.
Balance sheet
Income statements
Statement of retained earnings
Statement of cash flow
Balance Sheet:
A financial statement that prepared a company's assets, liabilities and shareholders' equity for
the time period. The balance sheet is follows in this formula.
Assets = Liabilities + Shareholders' Equity
The standard company balance sheet has three parts: assets, liabilities and ownership equity.
The main categories of assets are usually listed first, and normally, in order of liquidity. On
the left side of a balance sheet, assets will typically be classified into current assets and noncurrent (long-term) assets.
Current Assets
A current asset on the balance sheet is an asset which can either be converted to cash in one
year or less. They can include cash, stocks and other liquid investment, short-term
government bonds or treasury bills, accounts receivable, inventory and expenses. For the
manufacturer clothing, inventory raw materials, work-in-progress and finished goods.
Accounts receivable, represents what your credit customers owe you if your firm extends
credit. In the deferred expense, the early payment is accompanied by a related, recognized
expense in the subsequent accounting period, and the same amount is deducted from the prepayment.
Non-current Assets
Long-term assets are ones the company will be hold for at least one year. For examples of
long-term assets are investments and property, plant, and equipment currently used?
Fixed assets: This category is the companys property, plant, and equipment. The
account includes long-term assets, such as a car, land, buildings, office equipment,
and computers.
Long-term investments: These investments are assets held by the company, such as
bonds, stocks, or notes.
Intangible assets: Identifiable long-term assets of a company having no physical
existence are called intangible assets. They include goodwill, patents, copyrights, etc.
Other Assets
The items included in the Other assets that can be classified of other assets. Some of the
items included are (long-term prepaid expenses), non-current receivables, assets in special
funds, deferred income taxes, property held for sale sufficiently different from assets included
in specific categories.
Current Liabilities
Current liabilities are the obligations that are reasonably expected to be liquidated either
through the use of current assets or current liabilities. Current liabilities include accounts
payable, wages payable, taxes payable, short-term loans and long-term debt that are due to
within one year.
Long-Term Liabilities
The long-term liabilities are obligations that are not reasonably expected to be liquidated that
are not due to at least one year. For example Bonds payable, notes payable are the long-term
liabilities.
Owners Equity
The owners equity (stockholders equity) is one of the most difficult sections to prepare and
understand. Component of include common stock, paid-in-capital, retained earnings and
capital stock.
Income Statements:
The income statement is called the statement of income or statement of earnings is the report
that measures to success of enterprise for a given period of time, such as one year. The
simplest equation to income is:
Net Income = Revenue-Expenses
Revenue refers to inflows of assets of entity settlements of its liabilities during a period of
producing goods, rendering services and other activities. Such as sales, fees, interest,
dividends and rents.
Income from other operations can be separated from income. The income can be described
by:
Net Income = Revenue Expenses + Gains - Losses
Net income from revenue, expense, capital gain, losses from natural disasters to refer to these
items. The income statement details income sources and expenses it can be show the net
income. For instance, most businesses will have salary and administration expense, utilities,
lease or mortgage expense and taxes. The net income, derived by subtracting total expenses
from total income.
Sales
A subsection presenting sales, discounts, allowances, returns and other related information to
arrive at the net amount of sales revenue.
Cost of Goods Sold
The cost of goods that were sold to produce the sales. The items should be including material
used, direct labor, utilities, equipment repairs etc.
Gross Profit
The gross profit is the total revenue subtracted by the cost of generating that revenue. Gross
profit to residual profit after selling a product or service and deducting the cost associated
with its production and sale. The gross profit on a product is computed as:
Sales - Cost of Goods Sold = Gross Profit
Operating Expenses
An operating expense, operating expenditure, operational expense, and operational
expenditure is an ongoing cost for running a product, business or system. This items are
include office salaries, insurance, advertising, sales commission and rent.
Depreciation
Depreciation is defined as the accounting process of allocating the cost of tangible assets to
expense in a systematic and rational manner to that period expected to benefit from the use of
the asset for useful life. Depreciation for accounting purposes refers the allocation of the cost
of assets to periods in which the assets are used. Depreciation expense affects the values of
businesses and entities because the accumulated depreciation disclosed for each asset will
reduce its book value on the balance sheet. Depreciation expense also affects net income.
Generally the cost is allocated as depreciation expense among the periods in which the asset
is expected to be used.
Operating Profit
The profit earned from a firm's normal course of operations. This value of computed by
operating expenses from gross profit.
Operating Profit = Operating Revenue - COGS - Operating Expenses - Depreciation &
Amortization
Net Profit before Taxes
A profitability measure that a company's profit before the company has to pay income tax.
This measure deducts all expenses from revenue including interest expenses and operating
expenses.
Income Tax
The total amount domestic and foreign federal, state and local tax based on income.
Net Profit after Tax
This is the 'bottom line' that you often Dividends are paid out of net profits after tax, and the
amount that isn't paid out is the retained profit the net profits of a company after tax.
Investing activities: They include making and collecting loans and acquiring and disposing
of investments (both debt and equity) and property, plant and equipment.
Financing activities: The financing activities are involved liability and owners equity. They
include obtaining resources from owners and providing them with a return on investment and
borrowing money from creditors and repaying the amounts borrowed.
10
Investing activities
Investing activities are the acquisition and disposal of long-term assets and other investments
not included in cash equivalents. The separate disclosure of cash flows arising from investing
activities to extent which expenditures have been made for resources intended to income and
cash flows.
Financing activities
Financing activities are activities that result in changes in the size and composition of the
contributed equity and borrowings of the entity. An entity shall report separately major
classes of gross cash receipts and gross cash payments arising from investing and financing
activities. Investing and financing transactions are not use of cash or cash equivalents shall be
excluded from a statement of cash flows.
11
An entity shall correct material prior period errors retrospectively in the first set of
financial statements authorized for issue after their discovery by:
a) Restating the comparative amounts for the prior period(s) presented in which the error
occurred.
b) If the error occurred before the earliest prior period presented, restating the opening
balances of assets, liabilities and equity for the earliest prior period presented.
12
The cost of an item of property, plant and equipment shall be recognized as an asset if,
and only if:
a) It is probable that future economic benefits associated with the item will flow to the
entity.
b) The cost of the item can be measured reliably.
An item of property, plant and equipment that qualifies for recognition as an asset shall be
measured at its cost. The cost of an item of property, plant and equipment is the cash price
equivalent at the recognition date.
The cost of an item of property, plant and equipment comprises:
a) Its purchase price, including import duties and non-refundable purchase taxes, after
deducting trade discounts and rebates.
b) Any costs directly attributable to bringing the asset to the location and condition
necessary for it to be capable of operating in the manner intended by management.
c) The initial estimate of the costs of dismantling and removing the item and restoring
the site on which it is located, the obligation for which an entity incurs either when
the item is acquired or as a consequence of having used the item during a particular
period for purposes other than to produce inventories during that period.
Measurement after recognition: An entity shall choose either the cost model or the
revaluation model as its accounting policy and shall apply that policy to an entire class of
property, plant and equipment.
Cost model: In cost model the fixed assets are carried at their historical cost less
accumulated depreciation and accumulated impairment losses.
Revaluation model: Revaluation of fixed assets is the process of increasing or decreasing
their carrying value in case of major changes in fair market value of the fixed asset.
Depreciation: Depreciation is the allocation to depreciable amount of an asset over its useful
life. Depreciable amount is the cost of an asset, or other amount substituted for cost, less its
residual value. An item of property, plant and equipment with a cost that is significant in
relation to the total cost of the item shall be recognized in profit or loss unless it is included in
the carrying amount of another asset.
Residual value: The residual value of an asset is the estimated amount that an entity would
currently obtain from disposal of the asset, after deducting the estimated costs of disposal in
the condition expected to useful life.
The carrying amount of an item of property, plant and equipment shall be
derecognized:
a) On disposal.
b) When no future economic benefits are expected from its use or disposal.
13
14
k)
l)
m)
n)
o)
p)
15
16
17
The IFRS exempts an insurer temporarily from some requirements of other IFRSs,
including the requirement to consider the Framework in selecting accounting policies
for insurance contracts. However, the IFRS:
a) Prohibits provisions for possible claims under contracts that are not in existence at the
end of the reporting period (such as catastrophe and equalization provisions).
b) Requires a test for the adequacy of recognized insurance liabilities and an impairment
test for reinsurance assets.
c) Requires an insurer to keep insurance liabilities in its statement of financial position
until they are discharged or cancelled, or expire, and to present insurance liabilities
without offsetting them against related reinsurance assets.
In particular, an insurer cannot introduce any of the following practices, although it
may continue using accounting policies that involve them:
a) Measuring insurance liabilities on an undiscounted basis.
b) Measuring contractual rights to future investment management fees at an amount that
exceeds their fair value as implied by a comparison with current fees charged by other
market participants for similar services.
c) Using non-uniform accounting policies for the insurance liabilities of subsidiaries.
The IFRS requires disclosure to help users understand:
a) The amounts in the insurers financial statements that arise from insurance contracts.
b) The nature and extent of risks arising from insurance contracts.
18
19
The following facts and circumstances indicate that an entity should test exploration
and evaluation assets for impairment (the list is not exhaustive):
a) The period for which the entity has the right to explore in the specific area has expired
during the period or will expire in the near future, and is not expected to be renewed.
b) Substantive expenditure on further exploration for and evaluation of mineral resources
in the specific area is neither budgeted nor planned.
c) Exploration for and evaluation of mineral resources in the specific area have not led to
the discovery of commercially viable quantities of mineral resources and the entity
has decided to discontinue such activities in the specific area.
d) Sufficient data exist to indicate that, although a development in the specific area is
likely to proceed, the carrying amount of the exploration and evaluation asset is
unlikely to be recovered in full from successful development or by sale.
20
Chapter: 03
Practical Issues
21
22
23
Taka
Taka
Interest income
Interest paid on deposits and borrowings etc.
Net interest income
Investment income
Commission, exchange and brokerage
Other operating income
Total operating income
Salary and allowances
Rent, taxes, insurance, electricity, etc.
Legal expenses
Postage, stamp, telecommunications, etc.
Stationery, printings, advertisements, etc.
Managing Directors salary and allowances
Directors fees
Auditors fees
Charges on loan losses
Depreciation and repair of banks assets
Other expenses
Total operating expenses
Profit before provision
Provision for loans and off-balance sheet exposures
Specific provision for loans
General provision for loans
General provision for off-balance sheet exposures
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Other assets
Non-banking assets
TOTAL ASSETS
Liabilities And Capital
Liabilities
Borrowings from other banks, financial institutions and
agents
Deposits and other accounts
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25
Note
2009
Taka
2008
Taka
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OFF-BALANCE SHEET ITEMS
Contingent liabilities
Acceptances and endorsements
Letters of guarantee
Irrevocable letters of credit
Bills for collection
Other contingent liabilities
Total contingent liabilities
Other commitments
Documentary credits and short term trade-related
transactions
Forward assets purchased and forward deposits placed
Undrawn note issuance and revolving underwriting
facilities
Undrawn formal standby facilities, credit lines and other
Commitments
Total other commitments
Total off-balance sheet items including contingent
liabilities
26
27
*
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2009
Taka
2008
Taka
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Amount in
Taka
2008
Percen
tage
(%)
Amount in
Taka
8,914,282,919
4,916,606,011
3,997,676,908
125,054,910
(427,953,563)
7,275,753,715
4,414,856,736
2,860,896,979
(40,680,418)
(66,315,248)
3,694,778,255
2,753,901,313
995,921,605
1,141,735,364
113,388,343
802,475,120
306,034,886
335,222,937
-------500,000,000
(164,777,063)
3,694,778,255
28
27%
31%
3%
22%
8%
9%
100%
708,937,053
913,733,473
93,477,839
355,215,788
216,087,899
466,449,261
-------500,000,000
(33,550,739)
2,753,901,313
Percen
tage
(%)
26%
33%
3%
13%
8%
17%
100%
8%
27%
To Dutch-Bangla Bank
Foundation
22%
To statutory reserve
31%
To depreciation
3%
To shareholders
26%
8%
To Dutch-Bangla Bank
Foundation
13%
To statutory reserve
33%
To depreciation
3%
To shareholders
29
30
BAS-1
BAS-2
BAS-7
Status of
compliance
by DBBL
Complied
Complied
Complied
BAS-8
Complied
BAS-10
BAS-11
BAS-12
BAS-14
BAS-16
BAS-17
BAS-18
BAS-19
Complied
Not applicable
Complied
Not applicable
Complied
Complied
Complied
Complied
BAS-20
Not applicable
BAS-21
BAS-23
BAS-24
BAS-26
Complied
Complied
Complied
Complied
BAS-27
Not applicable
BAS-28
Not applicable
BAS-30
Complied
BAS-31
BAS-32
BAS-33
BAS-34
BAS-36
BAS-37
BAS-38
BAS-39
BAS-40
BAS-41
Not applicable
Not applicable
Complied
Complied
Complied
Complied
Not applicable
Not applicable
Not applicable
Not applicable
BAS
Number
BFRS-3
Not applicable
Insurance Contracts
Non-current Assets Held for Sale and
Discontinued Operations
Exploration for and Evaluation of Mineral
Resources
BFRS-4
Not applicable
BFRS-5
Not applicable
BFRS-6
Not applicable
BFRS-7
Not applicable
Operating Segments
BFRS-8
Not applicable
Ratio Analysis
Gross Profit Ratio
Net Profit Ratio
Operating Ratio
Earnings Per Share
Current Ratio
Fixed Assets Ratio
Debt to Equity Ratio
Year
2008
2.00
1.06
0.98
54.78
0.13
1.36
18.16
Year
2009
2.33
1.30
1.04
75.85
0.21
1.16
17.23
31
Year
2010
1.92
1.13
1.00
10.01
0.15
1.27
13.45
Year
2011
1.83
0.96
0.92
10.77
0.20
1.24
12.79
Year
2012
1.61
0.74
0.69
11.57
0.22
1.50
13.36
Average
2%
1%
1%
33%
0.18%
1%
15%
32
Chapter: 04
Concluding Notes
33
4.02: Recommendations
The bank needs to clear their mission with appropriate objectives that will show a
different corporate image compare to other bank.
Have to make a new & competitive strategy that will be used for future growth of the
bank.
Must be focus on employees satisfaction like compensation, increment or bonus offer
that will motivate them to handle the customers with great care.
In the competitive market place the bank needs innovative products that will help to
compete in the market place.
To understand the customer about value offering the bank needs to do aggressive
campaign that helps to show the banks performance as well as the advantages which
DBBL wants to give the customer.
4.03: Conclusion
Dutch Bangla Bank (DBBL) is one of the leading banks in the banking sector of Bangladesh.
Through different offers it has been reached in the customer mind. It is bearing a great
reputation as service provider of potential customer. To maintain this culture the bank needs
different strategies in the competitive field because every moment they feel risk to loss their
position in the banking sector. But overall performance of this bank is good & to reach in
number one position it is works hard internally as well as externally it fulfills the customer
need.
34
Bibliography
35