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Banks of Reference: AB Bank Limited Dhaka Bank Limited Jamuna Bank Limited One Bank Limited Mercantile Bank Limited
Report on
Topic: Financial Statement and Notes to the Financial Statement Course Code: ACC 403 Course Title: Auditing
Submitted To:
Md. Golam Sharoar Lecturer, Dept. Business Administration
Submitted by: NAME S M Manirul Islam MD. Zamidul Islam Md. Yasin Khan Md. Nurannabi Islam Md. Awlad Hossain Md. Kawsar Hossain Batch: 37 F
Submission Date:
July 20, 2010 To Golam Saroar Lecturer, Stamford University Bangladesh Dear Sir
I have great pleasure to replace before our practical financial report on some listed bank. We have and studied different function of five commercial bank of Bangladesh was assigned to submit a report on Financial Statement and Notes to the Financial Statement To prepare this report, we have gathered what we believe to be most complete information available. Much of the information has been collected reading Annual Reports Of listed bank, articles, newspaper, etc. related to the bank area. The experience we have gathered during this period will remain as an invaluable asset of immense useful of our life. We have worked hard preparing this report and we hope it will satisfy our report requirement. We will be always available for answering any query on the report. We request you to excuse us me for any mistake that may occur in the report despite our best effort. Thanking you Sincerely yours Md. Zamidul Islam Md. Nurannabi Islam Md. Awlad Hossain Md. Yasin Khan Md. Kawsar Hossain S M Monirul Islam Batch: BBA (37F)
Acknowledgement
We are very glad that in spite of many limitations we have completed the report successfully. Preparing this report, we received cordial and sincere from many concerns. First of all wish to thank the immeasurable grace and profound kindness of the Almighty Allah, the supreme authority of the universe. From first inception until the final completion of the report, the success of this study rests not on us alone but on the contribution of many persons who have inspired, influence, and guided our work. We express our deep sense gratitude and sincere appreciation to our course teacher Mr. Golam Sarwar, you guide us prepare such a report. During our report preparing period we worked in different like department organizational vision and mission, management, account and book keeping, different types of note to the financial statement. We want to give special thanks to every person of those departments for their required support, encouragement, guidelines as well as generous comments and suggestion despite their very busy schedule. Our thanks also go to our friends for their support. We are also quietly and heartily indebted to our presents that always inspire, encourage and support us to pursue such study. Finally, we want to extend our deep gratitude to our course teacher Mr. Golam Saroar for his guidance and special supervision during our work
Preface
Banking sector owes a pivotal importance in the economy of any country through its vibrant functions. This is the deep seated motivator that geared up us to prepare the report. Moreover, the practice and familiarity learned during this tenure would also attest very helpful and alleviating in the awaiting proficient life. This report is an upshot of our two weeks on AB Bank Ltd, Dhaka Bank Ltd, Jamuna Bank Ltd, One Bank Lt, Mercantile Bank Ltd. These Banks posse an imperative importance in the banking sector in Bangladesh. These always remain the center of hustles in business activities. These always endow with great covenant of rally round in terms of funds and services at all epochs of its dynamism. Although, a derisory period of two weeks is not enough to learn the complex operations of the bank yet we made industrious efforts to converse them comprehensively in this report. Particularly, we have remunerated more accents on study of distinguishing features and services of these banks. we have made maximum venture to elaborate this report with the material read, listened and observed. We have strong belief that this report will guide and ease the readers to understand the operations of banking system and more prominently have good knowledge about these Banks, These are the most trusty and leading banks in Bangladesh. Dear Sir, we hope that you will appreciate our report and sense that reading our report is not like to waste the time in any respect.
Table of Content
Chapter: 1.1 Acknowledgement 4 1.2 Prefaces. 5 1.3 Executive Summary. 7
Chapter:2.1
Background of the Report.. 8 Objective of the Report 8 Methodology of the report 9 Limitations of the report 9 Background of the bank. 10 Corporate Mission and Vision. 15 Balance Sheet 18 Profit and Loss Account 24 Cash Flow Statement 30 Statement of Changes in Equity.37 Liquidity Statement 41
3.2
Chapter:4.1
Chapter:5.1 Notes to the Financial Statement44 Chapeter:6.1 Conclusion 58 6.2 Reference and Bibliography 59
Executive summary
The banking structure in Bangladesh comprises of the following types, Bangladesh Bank, Commercial Bank of Bangladesh; Exchange Banks, Saving banks, Cooperative banks, specialized credit institutions. The Bangladesh bank is the Central bank of the country. The network of bank branches now covers a very large segment of national economy. The Bangladesh Bank issues the shares of these periodically. Bank employees and other common peoples can also purchase these shares and earn profit. To open an account the customer has to meet the general banking manager with an introducer. The procedure begins with the punching of account opening form to the customer file i.e. customers master file. Before closing any account, bank send letter to the account hold for informing him that his account is going to be closed. There is need an approval form higher authority to close any account. Current deposits are those which are payable to bank whenever demanded by the customer. Bank does not pay any profit on current deposits. The following are the financial products/services of PLS Account, Saving Account, Term deposit and Foreign currency accounts. In remittance department Bank also have instruments for transferring of money, Telegraphic Transfer, Mail Transfer. In cash department both deposits and withdrawals go side by side. This department works under the CD In charge and deals with cash deposits and payments. This department maintains the following sheets, books, and ledger of account cash received voucher sheet. Cash paid voucher sheet, Paying-in-slip, Cheque Book, Cash balance book. The clearing in banks is being done through NIFT (National Institute of Facilitation Technology). Bank provides this facility to the people who need advance money to meet their requirement. Party dealing with other banks financial condition of borrower business and as a first step credit proposal is being made.
The main objective of the study is to get a clear idea about the Financial Statement and Notes to the Financial Statement. To apply the theoretical knowledge into practical area. To gather practical knowledge. To analyze the financing system of the bank and to find out if banks have any field to improve upon and greater contribution towards the countrys economy. To examine the profitability and productivity of the bank To familiarize the working hour, values and environment of the bank.
Secondary Sources:
Annual Report of the bank Web site of the bank Newspaper
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approach in the financial world; an approach, which like its new logo is based on bonding, and trust. The bank has developed its logo considering the contemporary time. The new logo represents our cultural Sheetal pati as it reflects the bonding with its clientele and fulfilling their every need. Thus the new spirit of AB is Bonding. The Logo of the bank is primarily red, as red represents velocity of speed and purity. Our new logo innovates, bonding of affiliates that generate changes considering its customer demand. AB Bank launched the new Logo on its 25th Anniversary year. AB Bank commits to nation to take a lead in the Banking sector through not only its strong financial position, but also through innovation of products and services. It also ensures creating higher value for its respected customers and shareholders. The bank has focused to bring services at the doorstep of its customers, and to bring millions into banking channels those who are outside the mainstream banking arena. Innovative products and services were introduced in the field of Small and Medium Enterprise (SME) credit, Womens Entrepreneur, Consumer Loans, Debit and Credit Cards (Local & International), ATMs, Internet and SMS Banking, Remittance Services, Treasury Products and Services, Structured Finance for Corporate, strengthening and expanding its Islamic Banking activities, Investment Banking, specialized products and services for NRBs, Priority Banking, and Customer Care. The Bank has successfully completed its automation project in mid 2008. It envisages enabling customers to get banking services within the comfort of their homes and offices. AB Bank has continuously invests into its biggest asset, the human resource to drive forward with its mission to be the best performing bank in the country. The bank has introduced Dress Code for its employees. Male employees wear designed ties and females wear Sharee or Salwar Kamiz, all the dresses are consisted with the unique AB Bank logo. AB is recognized as the peoples choice, catering to the satisfaction of its cliental. Their satisfaction is ABs success.
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capital of Tk. 1,000 million and paid up capital of Tk. 100 million. The paid up capital of the Bank stood at Tk 2,659,597,763 as on March 31, 2010. The total equity (capital and reserves) of the Bank as on March 31, 2010 stood at Tk 6,036,368,754. The Bank has 52 Branches, 6 SME Service Centers, 6 CMS Units, 1 Offshore Banking Unit across the country and a wide network of correspondents all over the world. The Bank has plans to open more Branches in the current fiscal year to expand the network. The Bank offers the full range of banking and investment services for personal and corporate customers, backed by the stateofthe-art technology and a team of highly motivated Professionals. As an integral part of our commitment to Excellence in Banking, Dhaka Bank now offers the full range of real-time online banking services through its all Branches, ATMs and Internet Banking Channels. Dhaka Bank Ltd. is the preferred choice in banking for friendly and personalized services, cutting edge technology, tailored solutions for business needs, global reach in trade and commerce and high yield on investments.
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At present the Bank has real-time centralized Online banking branches (Urban & Rural) throughout the Country having smart IT-Backbone. Besides these traditional delivery point, the bank has ATM of its own, sharing with other partner banks & Consortium throughout the Country. The operation hour of the Bank is 10:00 A.M. To 6:00 P.M. from Sunday to Thursday with transaction hour from 10:00 A.M. to 4:00 P.M. The Bank remains closed on Friday including govern
THIRD GENERATION PRIVATE COMMERCIAL BANK OBL is a private sector commercial bank dedicated in the business line of taking deposits from public through its various saving schemes and lending the fund in various sectors at a higher margin. However, due attention is given in respect of risk undertaking, risk from public through its various saving schemes and lending the fund in various sectors at a higher margin. However, due attention is given in respect of risk undertaking, risk hedging and if not appropriately hedged, reflection of the same in pricing. In the financing side, the bank's major concentration is in trade finance covering about 20.88% of total financing as on YE2006 which is mainly a short-term investment. The banks financing concentrate in both, working capital finance and long-term finance. OBL has major concentration of financing in medium and large industries. Since the short-term finance carries low risk compared to long-term finance; the financing strategy of OBL will assist the bank to keep the risk at minimal. While financing the industrial sector, the major concentration of the bank appeared to be in the textile and RMG sector; both the above sectors cover 30.89% of the total portfolio. OBL also involved in cement construction and transport sector financing. In the investment portfolio, OBL have substantial investment in quoted and non-quoted shares of different organization including some very prospective financial institutions. The bank has shown its acumen in reducing its exposure from ship scrapping sector, steel re-
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rolling where the bank had investment earlier. With the increase in exposure to RMG, the bank has increased its non-funded business income substantially. With an age of only 8 years, the OBL has taken initiative to launch IT based banking products like ATM facilities, E-banking etc that are praiseworthy.
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Financial Statement
4.1 Balance Sheet
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Balance Sheet as at December 31, 2009 PROPERTY AND ASSETS Cash Cash in hand (Including Foreign Currencies) Balance with Bangladesh Bank and Sonali Bank Limited (Including Foreign Currencies) Balance with Other Banks and Financial Institutions In Bangladesh Outside Bangladesh Money at Call and Short Notice Investments Government Others Loans and Advances Loans, Cash Credit, Overdraft etc. Bills Purchased and Discounted Fixed Assets Including Premises,Furniture and Fixtures Other Assets Non-Banking Assets Total Assets LIABILITIES AND CAPITAL Liabilities Borrowings from other Banks, Financial Institutions and Agents Deposits and other Accounts Current Accounts and Other Accounts Bills Payable Savings Bank Deposits Fixed Deposits Deposits Under Schemes Other Liabilities Total Liabilities 10 1,842,825,721 2,326,325,000 5 6 9,664,722,134 9,175,729,563 488,992,571 6,264,705,100 5,681,107,430 583,597,670 4 2009 (BDT) 4,790,155,210 498,486,173 4,291,669,037 1,017,865,437 764,122,864 253,742,573 2008 (BDT) 4,374,119,340 443,342,558 3,930,776,782 3 27,911,508 177,928,388 149,983,120
Notes 3
7 48,295,546,954 43,419,362,481 7.A 44,574,237,307 38,787,868,658 7.B 8 9 3,721,309,647 1,032,825,043 1,365,400,824 4,631,493,823 682,999,856 859,623,164 -
66,166,515,602 55,928,721,449
11 55,553,083,656 46,374,178,835 11.1 11.2 11.3 7,425,229,434 789,044,669 4,392,947,478 5,831,638,360 677,763,825 3,020,870,440
11.4 19,215,499,453 17,501,418,866 11.5 23,730,362,622 19,342,487,344 12 4,474,354,484 3,758,123,882 61,870,263,861 52,458,627,717
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Capital/ Shareholders' Equity Paid-up Capital Statutory Reserve Other Reserves Surplus in Profit & Loss Account Total Shareholders' Equity Total Liabilities and Shareholders' Equity OFF BALANCE SHEET ITEMS CONTINGENT LIABILITIES Acceptances and Endorsements Letters of Guarantee Irrevocable Letters of Credit Bills for Collection Other Contingent Liabilities Total 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 TOTAL OFF-BALANCE SHEET ITEMS INCLUDING CONTINGENT LIABILITIES (A+B) 21,757,173,131 19,917,861,121 B A 17 17.1 17.2 17.3 17.4 8,054,757,500 4,161,302,647 8,546,632,687 56,785,690 937,694,607 8,157,477,000 3,640,902,808 7,281,346,277 73,305,882 764,829,154 13.1 14 15 16 2,158,413,400 1,555,373,902 105,410,663 477,053,776 4,296,251,741 1,798,677,900 1,222,833,902 86,769,523 361,812,407 3,470,093,732
66,166,515,602 55,928,721,449
21,757,173,131 19,917,861,121
4.2
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Mercantile Bank Ltd. Profit and Loss Account For the year ended December 31, 2009
Notes Interest Income Less : Interest Paid on Deposits, Borrowings etc. Net Interest Income Investment Income Commission, Exchange and Brokerage Other Operating Income Total Operating Income Salaries and Allowances Rent, Taxes, Insurance, Electricity, etc. Legal Expenses Postage, Stamps, Telecommunication etc. Stationery, Printings, Advertisements etc. Chief Executive's Salary and Fees Directors' fees Auditors' Fees Depreciation & Repair of Fixed Assets Other expenses Total Operating Expenses Profit before Provision Provision against Classified Loans Provision against Unclassified Loans Other Provisions 12.5 12.5 12.5 27 28 26 23.1 22 23 24 25 18.4
2009 (BDT)
2008 (BDT) 5,106,008,463 4,045,970,142 1,060,038,321 520,333,916 917,199,841 333,960,039 1,771,493,796 2,831,532,117 611,587,111 155,724,646 5 ,045,236 27,045,459 6 3,499,399 6 ,450,000 2 ,163,600 500,000 74,617,737 303,383,441 1,250,016,629 1,581,515,488 117,958,107 77,174,000 104,700,000
20 1,059,887,629 21 425,089,853 2,181,640,680 3,491,910,760 807,198,037 184,168,069 7,994,350 27,205,921 82,341,385 6,450,000 4,055,400 709,000 96,423,954 363,666,775 1,580,212,891 1,911,697,869 159,621,000 80,300,000 9,000,000
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Total Provisions Total Profit before Taxes Provision for Taxation Net Profit after Taxation Retained Surplus brought forward from previous year Appropriations Statutory Reserve Retained Surplus Earning Per Share (EPS) 29 12.4
248,921,000 1,662,776,869 855,260,000 807,516,869 2,076,907 809,593,776 332,540,000 477,053,776 809,593,776 37.41
299,832,107 1,281,683,381 665,800,000 615,883,381 2,266,026 6 18,149,407 256,337,000 361,812,407 618,149,407 28.53
These Financial Statements should be read in conjunction with the annexed notes (1 to 38)
See annexed auditors' report to the Shareholders of date. sd/Ahmed Zaker & Co. Chartered Accountants Dhaka, February 15, 2010 sd/Basu Banerjee Nath & Co. Chartered Accountants
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Mercantile Bank Limited For the year ended December 31, 2009 2009 (BDT) A. Cash Flows From Operating Activities Interest Received Interest Paid Fees and Commission Received Payment to the Employees Payment to suppliers Income Tax Paid Received from other operating activities Exchange Gain Other Operating Income Payment for other operating activities Rent, Taxes, Insurances and Electricity Legal Expanses Postage, Stamps and Telecommunication Auditors' Fees Repair and Maintenance Chief Executive's Salary and Fees Directors' Fees Other Expenses Operating profit before changes in Operating Assets and Liabilities Increase / Decrease in Operating Assets and Liabilities Loans and Advances to other Banks Loans and Advances to Customers Other Assets (Item-wise) Advance Deposits Stock of Stationery Suspense Account Stamps in Hand Advance Rent Excise Duty (375,768,145) ( 138,572) (3,349,021) (246,553,307) (98,143) (56,804,386) (325,165,611) (1,000,588) (10,414,961) (23,985,407) (881,385) (88,559,508) 42,400 (4,674,471,704) (5,316,085,710) 6,539,977,880 488,656,221 (807,198,037) (82,233,119) (687,994,874) 1,001,161,940 571,157,810 430,004,130 (607,226,990) (181,530,859) (7,994,350) (26,386,862) ( 709,000) (16,433,744) (6,450,000) (4,055,400) (363,666,775) 1,690,592,822 5,423,137,314 459,036,752 (486,587,111) (63,499,399) (638,616,891) 788,994,91 458,155,089 330,839,823 (386,477,514) (154,613,531) (5,045,236) (27,045,459) (500,000) (11,329,772) (6,450,000) (2,163,600) (179,329,916) 1,671,122,577 (4,154,550,199) (3,424,865,486) 2008 (BDT)
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Clearing Adjustment DD paid without advice Premium on Bond Mercantile Bank General Account Adjusting Account Debit Deposit from other Banks Deposit from Customers Other Liabilities on account of Customers Other Liabilities Net Cash Received from Operating Activities B. Cash Flows From Investing Activities Sale proceeds of Fixed Assets Dividend Received Purchase/Sale of Property, Plant and Equipment Purchase/Sale of Shares Other Investment activities Net Cash from Investing Activities C. Cash Flows from Financing Activities Receipts from Issue of Loan Capital & Debt Securities Paid for Repayment of Loan and Debt Securities Received by Issue of Share Dividend Paid Net Cash from Financing Activities D Net Increase/(Decrease) of Cash and Cash Equivalent (A+B+C) Effect of Exchange Rate Changes on Cash & Cash Equivalent E Opening Cash & Cash Equivalent
4,600,611,932
1,060,902,535
10,383,138,278
9,322,235,743
F Closing Cash & Cash Equivalent (D+E)* 14,983,750,210 10,383,138,278 These Financial Statements should be read in conjunction with the annexed notes (1 to 38)
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See annexed auditors' report to the Shareholders of date. sd/Ahmed Zaker & Co. Chartered Accountants sd/Basu Banerjee Nath & Co. Chartered Accountants
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4.5
Liquidity Statement
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Bangladesh economy has been experiencing a rapid growth since the '90s. Industrial and agricultural development, international trade, inflow of expatriate Bangladeshi workers' remittance, local and foreign investments in construction, communication, power, food processing and service enterprises ushered in an era of economic activities. Urbanization and lifestyle changes concurrent with the economic development created a demand for banking products and services to support the new initiatives as well as to canalize consumer investments in a profitable manner. A group of highly acclaimed businessmen of the country grouped together to responded to this need and established Dhaka Bank Limited in the year 1995. The Bank was incorporated as a public limited company under the Companies Act. 1994. The Bank started its commercial operation on July 05, 1995 with an authorized capital of Tk. 1,000 million and paid up capital of Tk. 100 million. The paid up capital of the Bank stood at Tk 2,659,597,763 as on March 31, 2010. The total equity (capital and reserves) of the Bank as on March 31, 2010 stood at Tk 6,036,368,754. The Bank has 52 Branches, 6 SME Service Centers, 6 CMS Units, 1 offshore Banking Unit across the country and a wide network of correspondents all over the world. The Bank has plans to open more Branches in the current fiscal year to expand the network.
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The Bank offers the full range of banking and investment services for personal and corporate customers, backed by the stateofthe-art technology and a team of highly motivated Professionals. As an integral part of our commitment to Excellence in Banking, Dhaka Bank now offers the full range of real-time online banking services through its all Branches, ATMs and Internet Banking Channels. Dhaka Bank Ltd. is the preferred choice in banking for friendly and personalized services, cutting edge technology, tailored solutions for business needs, global reach in trade and commerce
Jamuna Bank Limited was incorporated in Bangladesh on 2nd April in the period
2001 as a public Limited Company under Companies Act, 1994. The Bank within the stipulations laid down by the Bank Companies Act, 1991 and directives as received from Bangladesh Bank and applicable to it from time to time provides all types of commercial banking services. The Bank has fifty four (54) branches (including 2 Islamic Banking Branches) and four (4) SME centers, with no overseas branches as at December 31, 2009.
ONE Bank Limited was incorporated in May, 1999 With the Registrar of Joint Stock
Companies under the Companies Act. 1994, as a commercial bank in the private sector. The Bank is pledge-bound to serve the customers and the community with utmost dedication. The prime focus is on efficiency, transparency, precision and motivation with the spirit and conviction to excel as ONE Bank in both value and image. The name 'ONE Bank' is derived from the insight and long nourished feelings of the promoters to reach out to the people of all walks of life and progress together towards prosperity in a spirit of oneness.
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The financial statements of the Company are made up to 31 December each year, and are prepared under the historical cost convention and in accordance with first schedule of Bank Companies Act (BCA) 1991 as amended by Bangladesh Bank (Central Bank) BRPD Circular No.14 dated 25 June 2003, other Bangladesh Bank circulars, International Financial Reporting Standards adopted as Bangladesh Accounting Standards (BAS), the Companies Act 1994,the listing Regulations of the Stock Exchanges, the Securities and Exchange Rule 1987 and other laws and rules applicable in Bangladesh on a going concern basis. b) Islamic Banking: The bank operates Islamic Banking in two branches designated for the purpose in complying with the rules of Islamic shariah. The operations of Islamic Branches are accounted for and the financial statements of the branches are prepared as per Bank Companies Act 1991, Bangladesh Accounting Standards (BAS) and Financial Accounting Standard issued by the Accountancy & Auditing organization for Islamic Financial Institutions for which a separate set of books and records are being maintained. A separate balance sheet, income statement and a statement of profit paid on deposits are shown in Annexure - Fand the figures appearing in the annexure have been incorporated in the respective heads of these financial statements as recommended. c) Off-shore Banking Unit: The Off-shore banking unit maintains its accounting records in USDfrom which accounts are prepared according to the Bank Companies Act 1991, Bangladesh Accounting Standards and other applicable directives issued by
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Bangladesh Bank. Dl Capital Market Services: Dhaka Bank also performs brokerage operation through its six units under the license issued by Securities & Exchange Commission (SEC), Dhaka, Bangladesh. The unit maintains its accounting record through consolidation with Head Office General Ledger. e) SME Service Center: SME Service Centers of Dhaka Bank limited maintain its accounting records in the general ledger of their parent branches. The main functions of SME Service Centers are to render services only for receiving application, disbursement, monitoring, and recovery of SMEJRetail loans. They also serve the customers for opening of account, payments of foreign remittance etc. f) Central Processing Center (CPC): Dhaka Bank established the Central Processing Center for Trade & Credit Operations. The center maintains its accounting records in the general ledger of the respective branches. The import/Export related processing & Credit Operations are centrally controlled and monitored by the CPC for efficient and effective decision-making and reduction of cost as well.
The financial statements of the Bank are prepared on a going concern basis under historical cost convention and in accordance with First Schedule (Sec- 38) of Bank Companies Act, 1991 as amended by Bangladesh Bank (Central Bank) BRPD Circular No. 14 dated June 25, 2003, other Bangladesh Bank circulars, International Financial Reporting Standards adopted as Bangladesh Accounting Standard (BAS), the Companies Act, 1994, the Listing Rules of the Stock Exchange, the Securities and Exchange Rule 1987 and other laws and regulations applicable in Bangladesh.
These financial statements were prepared using GAAP, primarily based on Statement of Federal Financial Accounting Standards (SFFAS). Under these principles: Expenses are generally recognized when incurred. Nonexchange revenues, including taxes, duties, fines, and penalties, are recognized when collected and adjusted to the change in net measurable and legally collectable amounts receivable. Related refunds and other offsets, including those that are measurable and legally payable, are netted against nonexchange revenue. NOTES TO THE FINANCIAL STATEMENTS Exchange (earned) revenues are recognized when the Government provides goods and services to the public for a price. Exchange revenues include user charges such as admission to Federal parks and premiums for certain Federal insurance. The basis of accounting used for budgetary purposes, which is primarily on a cash and obligation basis and follows budgetary concepts and policies, differs from the basis of accounting used for the financial statements which follow GAAP. See the Reconciliations of Net Operating Cost and Unified Budget Deficit in the Financial Statements section. Beginning in fiscal year 2009, the Government has implemented the requirements of SFFAS No. 31, Accounting for Fiduciary Activities. This statement requires the Government to distinguish fiduciary activities from all other activities of the Government. For further information related to fiduciary activities, see Note 25Fiduciary Activities. In addition, fiscal year 2008 financial statements are not allowed to be restated to distinguish fiduciary activities from all other activities of the Government.
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The financial statements of the Bank have been prepared under historical cost convention except investments which are measured at present value and in accordance with "First Schedule" of the Bank Companies Act, 1991 as amended under sub-section 38(4) of the Act, relevant Bangladesh Bank Circulars, International Accounting Standards (IAS) and International Financial Reporting Standards (IFRS) adopted by the Institute of Chartered Accountants of Bangladesh (ICAB) and named as Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting Standards (BFRS), the Companies Act, 1994, the Securities and Exchange Rules, 1987 and other rules and regulations applicable in Bangladesh.
A Banking software system 'FlEXCUBE' produces consolidated Balance Sheet and Profit & loss Account including Offshore Banking and Islamic Banking operation. These consolidated records are maintained at the Head Office of the Bank based on which these financial statements have been prepared. 1.3 Loans and Advances Interest is calculated on daily product basis but charged and accounted for quarterly on accrual basis. Interest on classified loans is kept in interest suspense account as per Bangladesh Bank guidelines and such interest is not accounted for as income until realized from borrowers. Interest is not charged on bad / loss loans as per instructions of Bangladesh Bank. Provision for loans and advances is made on the basis of year-end review by the management and of instructions contained in Bangladesh Bank BCD Circular No.34 dated1611111989; BCD Circular No.20 dated 2711211994, BCD Circular No.12dated 04/0911 995, BRPD Circular No.16 dated 0611211 998 and BRPD Circular No.09 dated 14/05/2001. A provision of Tk.674, 883,819 has been made during the year 2009 which has been found to be adequate. The total volume of non-performing loan is Tk.2, 946.14 million as of 31 December 2009.
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The financial statements of the Bank have been prepared on the basis of the consolidated statements of affairs and income and expenditure account of all branches and head office .
A separate set of records for consolidation of the statement of affairs and income & expenditure account of the branches are maintained at the head office of the Bank based on which these Financial Statements have been prepared.
The financial statements of the Bank have been prepared on the basis of the consolidated statements of affairs and income and expenditure account of all branches and head office.
5.04 Investments
AB Bank Limited:
Nature of Investments FDR Shares in CDBL Mutual Fund
All investment securities are initially recognized at cost, being fair value of the consideration given, including acquisition charges associated with the investment. Premiums are amortized and discounts accredited, using the effective yield method and are taken to discount income. The valuation method of investments used is: Investments which have fixed or determinable payments and are intended to be held to maturity, are classified as held to maturity. These investments are subsequently measured at amortized cost, less any provision for impairment in value. Amortized cost is calculated by taking into account any discount or premium on acquisition. Any gain or loss on such investments is recognized in the statement of income when the investment is derecognized or impaired as per IA5-39 " Flnandal Instruments: Recognition and Measurement.
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Investment values and classifications are assessed under the Bangladesh Accounting Standards (BAS) 25 Accounting for Investments which is shown below: Items Assessment of Accounting Govt. Treasury Bills Market value Prize Bond & Other Bonds Cost price Shares & Debentures Cost or market price whichever is lower
Securities and investments are classified as held-to-maturity, available-for-sale, and trading securities and investments. Held-to-maturity securities and investments are reported at amortized cost, net of unamortized premiums and discounts. Available-for-sale securities and investment are reported at fair value with unrealized.
The preparation of Consolidated Financial Statements and Financial Statements of the Bank requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates. Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions of accounting estimates are recognized in the period in which the estimate is revised and in the future periods affected if applicable.
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The preparation of Financial Statements in conformity with Accounting Standards and statutory requirement requires the use of critical accounting estimates. It also requires management to exercise its judgment in the process of applying accounting policies. The areas involving a higher degree of judgment or complexity or areas where assumptions and estimates are significant to the Financial Statements are described in the following: - Note 19.6: Income Taxes - Note 20.0: Deferred Taxation - Note 35.0: Depreciation - Other Contingent Liabilities - Liquidity Statement
The preparation of financial statements requires management to make judgments, estimates and assumptions that affect the application of accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from these estimates.
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AB Bank Limited:
Foreign currency transactions are converted into equivalent Taka currency at the ruling exchange rates on the respective date of such transactions as per BAS- 21 The Effects of Changes in Foreign Exchange Rates. Assets and liabilities in foreign currencies as at 31 December 2009 have been converted into Taka currency at the average of the prevailing buying and selling rates of the relevant foreign currencies at that date except "Balances with other Banks and Financial Institutions" which have been converted as per directives of Bangladesh Bank vide its circular no. BRPD (R) 717/2004-959 dated 21 November 2004. Differences arising through buying and selling transactions of foreign currencies on different dates of the year have been adjusted by debiting /crediting exchange gain or loss account.
Foreign currency transactions are converted into equivalent Taka currency using the ruling exchange rates on the dates of respective transactions. Assets and liabilities as at 31 December 2009 in foreign currencies are translated into Taka currency at the prevailing selling and buying rates of the concerned foreign currencies of that day. Difference arising through transactions of foreign currencies buying and selling on different dates of the year has been adjusted by debiting I crediting to the Profit & loss Account.
Transaction in Foreign Currencies are translated into Bangladesh Taka and recorded at the ruling Exchange rates applicable on the dates of transaction and are in accordance with Bangladesh Accounting Standards (BFRS/BAS) 21 The Effects of Changes in Foreign Exchange Rates.
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Foreign currency transactions are converted into Taka using the exchange rates prevailing on the dates of respective transactions. In terms of instructions contained in Bangladesh Bank's Letter No. BRPD(R) 717/2004-959 dated 21 November 2004, foreign currency assets and liabilities are translated into Taka at the weighted average rate as determined by Bangladesh Bank . Gains and losses arising
4.07 Cash Flow Statement AB Bank Ltd: Cash Flow Statement is prepared principally in accordance with
BAS- 7 Cash Flow Statement under direct method as per the guidelines of BRPD Circular No.14 dated 25 June 2003. The Cash Flow Statement shows the structure of and changes in cash and cash equivalents during the financial year. It reported cash flows during the period classified by operating activities, investing activities and financing activities.
One Bank Ltd: BAS 1 Presentation of Financial Statements requires that a cash flow
statement is to be prepared as it provides information about cash flows of the enterprise that is useful in providing users of Financial Statements with a basis to asses the ability of the enterprise to generate cash and cash equivalents and the needs of the enterprise to utilize those cash flows. Cash flow statement has been prepared under the direct method for the year, classified by operating, investing and financing activities as prescribed in paragraph 10 and 18(a) of BAS 7.
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4.08 Statement of Changes in Equity AB Bank Ltd: Statement of Changes in Equity is prepared principally in
accordance with BAS- 1 Presentation of Financial Statements and under the guidelines of Bangladesh Bank BRPD Circular No.14 dated 25 June 2003.
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4.09 Statement of Liquidity AB Bank Ltd: The basis of the Liquidity Statement of assets and liabilities as on
the reporting date is given below: Particulars Balance with other banks and financial institutions Investments Loans and advances Fixed assets Other assets Borrowing from other banks, financial institutions and agents Deposits and others accounts Other liabilities Basis used Maturity term Respective maturity terms Repayment schedule basis Useful life Realization/ amortization basis Maturity/ repayments terms Maturity term Payments/ adjustments schedule basis
Dhaka Bank Ltd: The liquidity statement has been prepared in accordance
with the remaining maturity grouping of the value of the assets and liabilities as on 31 December 2009 and under the guidelines of Bangladesh Bank BRPD Circular No.14 dated 25th June 2003.
Jamuna Bank Ltd: The liquidity statement has been prepared in accordance
with the remaining maturity grouping of the value of the assets and liabilities as on 31st December, 2009.
One Bank Ltd: The liquidity statement of assets and liabilities as on the
reporting date has been prepared on residual maturity term as per the following bases: a) Balance with other banks and financial institutions, money at call and short notice etc. are on the basis of their maturity term. b) Investments are on the basis of their maturity. c) Loans and advances and lease receivables are on the basis of their repayment / maturity schedule. d) Fixed assets are on the basis of their useful life. e) Other assets are on the basis of their realization/adjustment. f) Borrowing from other banks, financial institutions and agents are as per their maturity repayment term. g) Deposits and other accounts are on the basis of their maturity term and past trend of withdrawal by the depositors. h) Other long term liabilities are on the basis of their maturity term. i) Provisions and other liabilities are on the basis of their payment /adjustment schedule.
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5.10 Risk Management AB Bank Ltd: Risk is defined as uncertainties resulting in adverse variations of
profitability or in losses, financial or otherwise. The risk management of the Bank covers core risk areas of banking viz, credit risk, liquidity risk, market risk that includes foreign exchange risk, interest rate risk, equity risk, operational risk and reputation risk. The objective of the risk management is that the bank evaluates and takes well calculative business risks and thereby safeguarding the banks capital, its financial resources and profitability from various business risks through its own measures and through implementing Bangladesh Bank's guidelines and following some of the best practices as under: A. Credit risk B. Operating risk C. Market risk i) Foreign exchange risk ii) Interest rate risk iii) Equity position risk D. Liquidity risk E. Risk arising from money laundering
Dhaka Bank Ltd: The Bank has established effective risk management for
steady and stable growth of the Bank in accordance with the guidelines of Bangladesh Bank. The Risk Management of the Bank covers following five core risk areas of banking: i) Credit Risk ii) Foreign Exchange Risk iii) Assets - Liability Management iv) Prevention of Money laundering v) Internal Control and Compliance
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The prime objective of the risk management is that the bank takes credit and business risks while safeguarding the Bank's interest from the possibility of losses, financial or otherwise. The Bank's risk management ensures internal control and compliance are adhered by all branches and divisions of Head Office. The Bank has Management Committee (MANCOM), Asset liability Committee (AlCO), Cost Containment Committee and Credit Risk Management Committee for assessment of credit risk, foreign exchange risk, market risk, money laundering risk, reduction of operating cost etc. at Head Office level on regular basis. Above that, the Executive Committee and Audit Committee comprising of members of the Board of Directors conduct the Risk Assessment at Board level.
Jamuna Bank Ltd: The risk Management of Jamuna Bank Limited evolves
identification, measurement, monitoring and controlling risks to ensure that: The Banks risk exposure is within the limits established by Board of Directors. The Banks risk taking decisions are in line with the business strategy and objectives set by Board of Directors of the Bank as well as Bangladesh Bank guidelines. The Banks risk taking decisions are explicit and clear. Sufficient capital as a buffer is available to take risk. The Risk Management of the Bank covers following five core risk areas of banking: Market Risk: Credit Risk Liquidity Foreign exchange risk Interest rate risk:
One Bank Ltd: In the ordinary course of business, the Bank is exposed to a variety
of risks the most important of which are credit risk, operational risk, and solvency risk. These risks are being identified, measured and monitored through various control mechanisms across the Bank in order to assess the quality of products offered. Credit Risk Liquidity Risk Operational Risk
Jamuna Bank Ltd: The risk is defined as the possibility of losses, financial or
otherwise. The Risk Management of the Bank covers 6 (Six) Core Risk Areas of banking industries i.e. Investment Risk Management, Foreign Exchange Risk Management, Asset Liability Management, Prevention of Money Laundering, Internal Control and Compliance and Information & Communication Technology Risk.
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Conclusion
A bank is an economic institution whose main aim to earn profit exchange of money and credit instruments. It is a service oriented as well as profit oriented organization. To perform those two functions simultaneously, the bank divides its operations mainly in tree parts- General Banking, Loans and Advances, and Foreign Exchange. Bank also invests their money into different financial securities and also in different types projects to diversify risk and getting more profit. The five reference bank are the most leading private bank commercial bank in banks having a spread network and lots of branches across Bangladesh and plan to open many more branches to cover important commercial areas in Bangladesh. With a wide a range of modern corporate and consumer financial products these banks have been operating and have achieved public confidence as a sound, stable, and trustworthy Banks. We have completed our study in five banks named AB Bank Ltd, Dhaka Bank Ltd, Jamuna Bank Ltd, One Bank Ltd, and Mercantile Bank Ltd. During our study period we found here a good job environment and also got a lot of cooperation from every department and every person. It is a great task to prepare a report on many bank and at this moment we feel very happy to complete the report. We found that reference five bank gained success very early because they have a very strong backup to provide financial as well as administrative support. Within a very short time these banks have become very popular to all types of business persons. Business people are also very interested to deal with this bank. They gained success from the beginning of their operation and were capable enough to hold the success year after year.
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BIBLIOGRAPHY
Annual Report, 2009, AB Bank Ltd. Annual Report, 2009, Dhaka Bank Ltd. Annual Report, 2009, Jamuna Bank Ltd. Annual Report, 2009, One Bank Ltd. Annual Report, 2009, Mercantile Bank Ltd. Web Site of the AB Bank Ltd, Dhaka Bank Ltd, Jamuna Bank Ltd, One Bank Ltd, and Mercantile Bank Ltd. A Training Program Book by BIBM Www.Google.com
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