The country's audit watchdog has formed two working groups to set accounting rules in line with the international financial reporting standards (IFRS) to further standardise the accounting practices here.
The Financial Reporting Council (FRC) Bangladesh, an independent oversight body, has formed the groups as companies deviate from the accounting standards in preparing their financial statements.
Local accountants prepare financial statements by applying different methods of accounting, guided by their ill-motives in many cases.
Many follow the direct cash flow method of accounting with some others going by the indirect method.
On the other hand, some do accounting based on their cash flows and others do it on the accrual cash flow basis.
Besides, the regulators concerned like the Bangladesh Bank and the Bangladesh Securities and Exchange Commission (BSEC) instruct the companies time to time to include or exclude some financial matters that impact the financial statements. Such instructions also go against the IFRS.
The existing provisioning by banks against their loans also is not commensurate with the IFRS, FRC sources said.
The London-based International Accounting Standards Board (IASB) issues IFRS specifying how companies must maintain their accounts and do their financial reporting. The standards also define the types of transactions and other events impacting financial statements.
The standards have been set to create a common accounting language so that financial statements are consistent irrespective of companies or countries.
The FRC, formed under the Financial Reporting Act (FRA) 2015, believes preparation of financial statements in compliance with the IFRS will have a positive impact on the financial market here.
"It will have a positive impact on the financial market and help attract foreign direct investment into the country," said M Anwarul Karim, Executive Director for Standard Setting at the FRC, while talking to the FE on Tuesday.
He said the IASB sets principle-based rules. That's why they need to be adopted locally so that financial statements are consistent, transparent and comparable with those around the world.
He said two working groups have been formed to review the standards, identify the implementation challenges and provide interpretation and clarifications to the users and accountants.
"The group is to communicate implementation challenges and give other feedbacks to the international issuers - IASB of IFRS Foundation."
Mr Karim also said they would identify the local laws' dispersal from the IFRS and work with other regulators to minimise the deviations.
The FRC Bangladesh met with its working group on Monday to discuss the deviation and ways to minimise it, said one person who was present there.
He said regulators in some cases ask them to go by some rules that do not comply with the IFRS.
Even they give instructions that do not mean anything, he added.
However, he said, the two groups would work on three IFRS principles-9, 15 and 16.
The IFRS 9 deals with the accounting for financial instruments.
The IFRS 15 provides guidance on accounting for revenue from contracts with customers.
The IFRS 16 provides guidance on accounting for leases.
The FRC Bangladesh has given the groups until November next to submit their recommendations.
The nine members of one of the working groups are Zakir Hossain FCA, Abdul Hamid FCA, Md. Abu Khair Hasanul Hasif Sowdagar FCA, Sujan Kumar Saha FCA, SK. Md. Tarikul Islam FCA, Mohammad Redwanur Rahman FCA, Mohammad Nuruzzaman FCA, Saiful Huq FCA and Md Lutfar Rahman FCA.
The other group comprises chartered certified accountants. They are Arifur Rahman Shohag, Md. Shahriar Rana, Riaduzzaman Ridoy, Asiful Islam, Mahbub Alam Boshir, Mohammed Tabarok Hossain, Md. Sohel, Nahyan Imam, and Md. Sayem Tanzeer.
They will acclimatise locally the International Accounting Standard (IAS) 2, IAS 7 and IAS 10.
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