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Executive SummaryThe report began with a brief overview of the purpose and reason behind preparing it. We have chosen a private limited bank named “Mutual Trust Bank Limited” for the reporting purpose. The Mutual Trust Bank is a full service scheduled commercial bank. The bank is primarily driven with a view of creating opportunities and pursuing market niches. The report mainly deals with “Financial analysis based on accounting framework of Bangladesh”. It covers almost all necessary information of the respective topic.
The consolidated financial statement of Mutual Trust Bank for the year ended 2011 have been prepared where BAS rule of presentation of financial statement , inventories, cash flow statement, accounting policies, event after reporting period, income tax, leases, PPE, revenue, employee benefits ,effect of changes in foreign exchange rate, borrowing costs, consolidated and separate financial statement, earning per share, interest financial reporting, provision, investment property are applied.
In this consolidated financial statement for the financial statements of disclosure and operating segments BFRS rules have been applied.
The introductory part ended with the scopes & confinements of the assigned subject. The next segment of the report started with an elaborate overview of financial statement of the bank including its establishment related information, their products, mission, vision, principles of accounting framework they follow to prepare the consolidated financial statement. All the relevant information related with accounting rules applied during preparing consolidated financial statement are shown as notes.
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1.1. Origin of the Report
This report is prepared as an assignment for our Financial Accounting and Reporting (F-201)
course. While preparing the report, we gave our best effort to incorporate the theoretical aspect
of the subject while emphasizing on the practical implementation of the various strategic efforts
that we learned in our course.
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1.2. Objective of the report
The Objective of our report are-
To fulfill the partial requirement of our course of Financial Accounting and Reporting. To achieve the deep knowledge about Bangladesh Accounting Standards . To gain practical knowledge of the implications of BFRS regarding the business.
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1.3. Methodology
We used the information that we collected from the company website and Mutual Trust Bank Ltd. annual report.
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1.4. Limitations of the study
The limitations are-
Lack of Experience Lack of knowledge Time management
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1.0. What is financial accounting?Financial accounting is a process of identifying measuri8ng and communicating economic information of an entity to others so that they may make decisions on the basis of those information and assess the stewardship of management.
There are two framework
framework of accounting. Conceptual Regulatory framework of reporting.
1.1. GAAP (Generally accepted accounting Principles)
It defines some guideline that must be followed to prepare financial statement.
1.2. International regulatory framework
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IASC Foundation
IASB foundation--Sac
IFRIC
1.3. Regulatory Framwork
Regulatory Framework is influenced by-
1. Company act 19942. BSEC Rules 3. Bangladesh Bank circular4. Income Tax ordinance 19845. VAT 1991
1.4. Conceptual framework
It is a coherent system of interrelated objectives and fundamental principles.
It is a framework that prescribes the nature function and limits of accounting and FS.
Conceptual framework covers:
1. Objectives of FS2. Users and their specific information needs3. Underlying assumption4. Element of FS5. Recognition and measurement of element of FS6. Concept of capital and cassspital maintenance.
1.5 BAS 1 Presentation of Finacial Statements
1.5.1. ObjectiveBAS 1 presentation of financial statements prescribes the basis for the presentation of financial
statements so as to ensure comparability with:
The entity’s own financial statements of previous products, and the financial statements of
other entities.
BAS 1 must be applied to all general purpose financial statements prepared in accordance with
BFRSs, i.e. those intended to meet the needs of users who are not in a position to demand
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reports tailored to their specific needs. BAS 1 is concerned with overall considerations about
the minimum content of a set of financial statements; detailed rules about recognition,
measurement and disclosures of specific transactions are then contained in other standards.
Whilst the terminology used was designed for profit-oriented business, it can be used, with modification, for not-for profit activities.
1.5.2 Purposes of financial statementsThe objectives of general purpose fniancial statements s to provide information about the financial position, financial performance and cash flows of an equity that is useful to a wide range of users in making economic decisions.They also show the results of management stewardship of the resources of the entity.
In order to achieve this information is provided about the following aspects of the entity’s result:
Assets Liabilities Equity Income and expense Other changes in equity, and Cash flows
1.5.3.Overall considerationsMuch of the material in this section details the specific application of the general principles dealt with in the BFRS Framework. These include:
1.5.4 Fair presentationRequires the faithful representation of the effects of transactions, other events and conditions in accordance with the definitions and rcognition criteria for asstes, liabilities, income and expenses set out in the framework.
Compliance with BFRS is presumed to result in financial statements that achieve a fair presentation.
BAS 1 expends in this principle as follows:
compliance with BFRS should be disclosed
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financial statements can only be described as complying with BFRS if they comply with all the requirementsof BFRS.
use of inappropriate accounting policies cannot be be rectified either by disclosure or explanatory material.
1.6 Bases of accountingThere are four bases of accounting.
1.6.1. Going concernIt means that an entity is normally viewed as continuing operation for the forseeable future. Financial statements are prepared on the going concern basis unless management either intends to liquidate or to cease trading or has no realistic alternative but to do so.
On this basis no time limit over which management will chase slow payers. The measurement of non-current assets is made on the basis that can be utilized
throughout their planned life.
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Accural Basis
Going concern basis
Cash basis
Break up basis
1.6.2. Accrual basis of accountingItems are recognozed as assets, liabilities, equity, income and expenseswhen they satisfy the
definitions and recognition criteria for those elements in the framework.
Sales are recorded in the period in which the risks and reward of ownership pass from
seller to buyer, not when the seller received full payment.
Expenses are recorded on the period when the goods or services are consumed, not when
they are paid for.
1.6.3. Cash basisAlthough it is bases of accounting but the cash basis of accounting is not used in the preparation of a company balance sheet. Under this assumption only effect s of cash transactions are recorder .
Sales are recognized when we get full payment Under the cash basis there is no term ‘’ depreciation’’.
Notes: It is not used in the preparation of a company balance sheet and income statement , though it is part of bases.
1.6.4 Break-up basisManagement has the intention/ need to liquidate the business.
All assets and liabilities would be classified as current rather than non-current. Assets would be valued on the basis of the recoverable amount on sale.
Notes: Although it is a part of bases if it faces some financial difficulties such a sale is needed the cash to pay its creditors. Here this is the case an the alternative method of accounting must be used ( in accordance with BAS 1 presentation of financial statement. In this circumstances the financial statements will be prepared on a break-up basis.
1.7 Consistency of preparation
To maintain consistency, the presentation and classification of items in the financial statements should stay tha same from one period to the next. There are two exceptions to this:
There is a significant change in the nature and operations or a review of the financial statements presentation which indicates a more appropriate presentation.
A change in presentation is required by a BFRS.
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Where a change of presentation and classification is made, figures for the previous period must be restatedon the new basis, unless this is impracticable.
1.8 Materiality and aggression
Omissions or misstatementof items are materialif they could, individually or collectively, influence the economic decisions of users taken on the basis of the financial statements. Materiality depends on the size and nature of the omission or misstatement judged in the surrounding circumstances.
The assesment of an item as material or immaterial may affect its treatment in the financial statements. For example, the incoame stateament of a business will show the expenses incurred by the business grouped under suitable captions. However, in the case of very small expenses it may be appropriate to lump them together under a caption such as ‘sundry expenses’ , because a more detailed breakdown would be inapproriate for such immaterial amounts.
1.9 Offsetting
BAS 1 does not allow assets and liabilities to be offset against each other unless such a treatment is required or permitted by another BFRS.
Income and expenses can be offset only when:
A BFRS requires or permits it, gains, losses and related expenses arising from the same/similar transactions are not
material( in aggregate).
1.10 Comparative information
BAS 1 requires comparative information to be disclosed for the previous period for all numerical information, unless another BFRS permits/requires otherwise. Comparatives should also be given in narrative information where relevant to an understanding of the current period’s financial statements.
Comparatives should be reclassified when the presentation or classification of items in the financial statements is amended.
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1.11 Disclosure of accounting policies
There should be a specific section for accounting policies in the notes to the financial statements and the following should be disclosed there.
Measurement bases used in preparing the financial statements Each specific accounting policy necessary for a proper understanding of the financial
statements.
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2.0 Incorporation of Mutual Trust Bank
The Company was incorporated as a Public Limited Company in 1999, under the Companies Act
1994, with an Authorized Share Capital of BDT 1,000,000,000 divided into 10,000,000 ordinary
shares of BDT 100 each. At present, the Authorized Share Capital of the company is BDT
10,000,000,000 divided into 1,000,000,000 ordinary shares of BDT 10 each.
The Company was also issued Certificate for Commencement of Business on the same day and
was granted license on October 05, 1999 by Bangladesh Bank under the Banking Companies Act
1991 and started its banking operation on October 24, 1999. As envisaged in the Memorandum
of Association and as licensed by Bangladesh Bank under the provisions of the Banking
Companies Act 1991.
2.1Companies Mission
The bank aspire to be the most admired financial institution in the country, recognized as a
dynamic, innovative and client focused company, that offers an array of products and services in
the search for excellence and to create an impressive economic value.
2.2 companies Vision
Mutual Trust Bank's vision is based on a philosophy known as MTB3V. The company envision
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MTB to be:
One of the Best Performing Banks in Bangladesh
The Bank of Choice
A Truly World-class Bank
2.3 Subsidiaries:
The subsidiaries of Mutual Trust Bank are shown below:
2.3.1 MTB Securities Limited (MTBSL)
MTBSL is engaged in buying and selling of securities for its customer and margin loan is
extended to the customer against their margin for investment in their listed companies. The
require margin level is monitored daily and margin loan is provided as per established
guidelines. It also undertake investment for the banks fund in the capital market. Separate
Financial Statement of MTB Securities Limited has been drawn up in the report.
2.3.2. MTB Exchange (UK) Limited (MTB UK)
In August 19, 2010 accordance approval to the bank for opening a fully owned subsidiary
company in the named of MTB Exchanged (UK) Limited. The company was incorporated in
June 14,2010 under the company act 2006 of UK with the registration number 7282261 as a
private company limited by share.
The main activities of the exchange house are to carry on the remittance business and to
undertake and participate in transactions, activities and operations commonly carried on or
undertake by remittance and exchange houses. Separate financial Statement of MTB Exchange
(UK) Limited has been drawn up in the reports.
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2.3.3 MTB Capital Limited (MTBCL)
The bank obtained permission to embark upon mercantile Banking from the Bangladesh
Securities and Exchange Commission (BSEC) dated December ^, 2010 under the Sceruties and
Exchange Commission Act ,1993. The operation has started as on April 17, 2011. Separate
Financial statements have been drawn up in the reports.
MTBCL offers the following services to the market:
a) Discretionary and non Discretionary Portfolio Management services to both the retail and
institutional investors under different product lines.
b) Issue Management services to medium and large corporate houses to manage their initial
Public Offer (IPO), secondary offerings, debt issuance and right issuance .
c) Underwriting services for both debt and equity issues.
Besides, MTBCL develops various investment schemes suiting varying objectives and
constractions of different investor classes.
2.4. MTB Financial Highlight 2014
Total operating Profit: Operating profit before provision for 2014 stood at BDT 2,6303 million,registering a positive
28.50% growth over the previous year(BDT 2,026 million)
Net profit after Tax:Net profit After tax (NPAT) stood at BDT 962 million in 2014, which was 67.74% higher then
2013(BDT 573 million)
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Loans and advances:MTB risk assets (loans and advances) increased to BDT 77141 million including Offshore
Banking Unit (OBU) and margin loans, which was 29.54% higher than 2013(BDT 59548
million)
Return on Equity:Return on average shareholder EQUITY went up from the previous year due to increase in Net
Profit After Tax (NPAT) in 2014.
Total Deposits:MTB Deposits in 2014 increased to BDT 97106 million, registering a growth of 15.09% over
2013(BDT 84373 million)
Net asset value:Net asset value (NAV) per share increased to 22% which was 12.95% higher than 2013.
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3.0. Financial StatementsFinancial statements are the means of communicating the information to the people or users or others. These are the accountants summary of performance of an entity over a particular period of time and its financial position at a point of time.
A set of financial statements is a structured representation of the financial performance and financial position of a business and how its financial position changed over time.It is the ultimate output of an accounting information system and has following six components:
1. Balance Sheet (Statements of Financial Position)
2. Income Statement (Statements of Financial Performance)
3. Statement of Cash Flows
4. Statement of Changes in Equity
5. Notes and Other Disclosures
Financial statements are better understood in context of all other components of the financial statements. For example a balance sheet will communicate more information if we have the related income statement and the statement of cash flows too.
3.1 Purposes of Financial Statements:
The objective of financial statements is to provide information about the financial position, financial performance and cash flows of an entity, to others to make economic decisions. They also show the results of management stewardship of the resources of the entity.
To achieve this information is provided about the following aspects of the entity’s results:
Assets Liabilities Equity Income and expenses Other changes in equity and Cash flows
Additional information is contained in the notes.
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3.2 Balance Sheet (Statements of Financial Position)
A balance sheet also known as the statement of financial position tells about the assets, liabilities
and equity of a business at a specific point of time. It is a snapshot of a business.
A balance sheet is an extended form of the accounting equation. An accounting equation is:
Assets = Liabilities + Equity
Assets are the resources controlled by a business, equity is the obligation of the company to its
owners and liabilities are the obligations of parties other than owners.
A balance sheet is named so because it lists all resources owned by the company and shows that
it is equal to the sum of all liabilities and the equity balance.
Rules of preparing balance sheet according to BAS 1 -
BAS 1 guidelines on the format of the balance sheet
BAS 1 specifies that certain items must be shown on the face of the balance sheet
It requires other information to presented on the face of the balance sheet or in the notes
It requires both assets and liabilities must be separately classified as current and non-
current
3.2.1 Format of balance sheet
BAS 1 suggests a format for the balance sheet. But it does not prescribe the order or format in
which the items listed should be presented.
The format of balance sheet is given below which is consistent with the minimum requirements
of BAS 1.
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……………………..Ltd
Balance Sheet as at (date)
AssetsNon-current assets Property, plant and equipment Intangibles Investments
Current assets Inventories Trade and receivables Investments Cash and cash equivalents
Non-current assets held for sale
Total assets
Equity and liabilities Capital and reserves Ordinary share capital Preference share capital Share premium account Revaluation reserve General reserve Retained earningsEquity
Non-current Liabilities Preference share capital(redeemable) Finance lease liabilities Borrowings
Current liabilities Trade and other payables Taxation Provisions Borrowings Finance lease liabilities
Total equity and liabilities
TK
XXXXXX
XXX
XXX
X X
TK
XXXX
XX
XXXXXXX
X
X
X
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3.2.2 Information must be appeared on the balance sheet
BAS 1 specifies various items which must appear on the face of the balance sheet.
• Property, plant and equipment
• Investment property
• Intangibles assets
• Financial assets
• Investments accounted for using the equity method
• Assets classified as held for sale
• Inventories
• Trade and other receivables
• Cash and cash equivalents
• Provisions
• Trade and payables
• Financial liabilities
• Issued capital and reserves
3.2.3 Information presented on the face of the balance sheet or in the notes
Certain information may be presented either on the face of the balance sheet or in the notes to the financial statements.
These include:
Further classification of line items. Details about each class of share capital. Details about each reserve within equity.
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3.2.4 Distinction between Current/ non-current assets and liabilities
A entity must present current and non-current assets and liabilities as separate classifications on the face of balance sheet. This is to separate currents assets from fixed assets and amounts due within one year from amounts due after more than one year.
Foe all businesses which have a clearly identifiable operating cycle, it is the current/non-current presentation.
In either case, the entity should disclose any portion of an asset or liability which is expected to be recovered after more than twelve months.
3.3 Income Statement (Statements of Financial Performance)
Income statement is a summary of a management's performance as reflected in the profitability )
of an organization over a certain period. It itemizes the revenues and expenses of past that led to
the current profit or loss, and indicates what may be done to improve the results.
In contrast to a balance sheet, an income statement depicts what happened over a month, quarter,
or year. It is based on a fundamental accounting equation (Income = Revenue - Expenses) and
shows the rate at which the owners equity is changing for better or worse. Along with balance
sheet and cash flow statement it forms the basic set of financial information required to
manage an organization also called earnings report, operating statement, or profit and
loss account.
Rules of preparing income statement according to BAS 1 -
BAS 1 suggests two formats for the income statement
Bas 1 specifies that certain items must be shown on the face of the income statement
3.3.1 Format of income statement
BAS 1 suggests two possible formats for the income statement. The difference between them being the classification of expenses:
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By function By nature
As income statement classifying expenses by function is more common in practice, we presented a format of this type of income statement.
……………………..Ltd
Income statement for the Year ended (date)
Revenue
Cost of sales
Gross profit
Other operating income
Distribution costs
Administrative costs
Profit or loss from operations
Finance cost
Investment income
Profit or loss before tax
Income tax expense
Profit or loss for the period
TK
X
(X)
X
X
(X)
(X)
X
(X)
X
X
(X)
X
X
3.3.2 Information presented in income statement
The standard lists the following as the minimum to be disclosed on the face of the income statement
• Revenue
• Finance costs
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• Share of profits and losses of associates for using the equity method
• Income tax expense
• Profit or loss
3.3.3 Information presented either on the income statement or in the notes
These include
Exceptional items
These are material items of income and expense which should be disclosed separately. These include:
Write downs of inventories to NRV Write down of property, plant and equipment to recoverable amount Disposals of property, plant and equipment Disposals of investments Discontinued operations Litigation settlements Other reversals of provisions
3.4 Statement of changes in equity
A statement of changes in equity can be explained as a statement that can changes in equity for corporation features be created for partnerships, sole proprietorships, or corporations. It is framed as a straightforward measure of financial performance. The key purpose of this statement is to summarize the activity in take equity accounts for a certain period. Sole proprietorships and partnerships follow a similar format for their statements of changes in equity. On the contrary, the statement of changes in equity for a corporation features a slightly different format.
The statement of changes in equity shows the total recognized income and expenses for the period.
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3.4.1. Example of statement of changes in equity
An imaginary example of statement of changes in equity is given below:
……………………..Ltd
Statement of changes in equity for the Year ended (date)
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3.4.2. Information presented in the statement of changes in equity
As per BAS 1, the statement of changes in equity is one of the five components of complete
financial statements counting income statement, balance sheet, statement of changes in equity,
notes to financial statements, and cash flow statements. According to IAS, the statement must
include:
Profit or loss for the specific period
Every item of income and expenditure for the period which is specified directly in the
equity, rather than in the income statement
Total income and expense for the period specified (evaluated as the sum of (I) & (II)),
representing individually the total amounts attributable to equity holders of minority
interest besides the parent holder
The effects of changes in the accounting policies and rectification of errors for each
component of equity where these have been recognized during the period in accordance
with BAS 8.
3.5 Statement of cash flow
A statement of cash flows is a financial statement which summarizes cash transactions of a
business during a given accounting period and classifies them under three heads, namely, cash
flows from operating, investing and financing activities. It shows how cash moved during the
period by indicating whether a particular line item is a cash inflow or cash out-flow. The term
cash as used in the statement of cash flows refers to both cash and cash equivalents. Cash flow
statement provides relevant information in assessing a company's liquidity, quality of earnings
and solvency. All entities are required to prepare a statement of cash flow in compliance with
BAS 7.
3.5.1 Benefits of statement of cash flow
Cash flow statements should be used in conjunction with the rest of the financial statements. It
shows:
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the changes in net assets
the entity’s financial position
the entity’s ability to adapt to changing circumstances and opportunities
3.5.2 Presentation of a cash flow statement
Cash flows are classified as
1. Cash Flows from Operating Activities
This section includes cash flows from the principal revenue generation activities such as sale and
purchase of goods and services. Cash flows from operating activities can be computed using two
methods. One is the direct method and the other indirect method. AS 7 prefers direct methods but
does not require it. The standard gives the following example of cash flows from operating
activities:
Cash receipts from the sale of goods and rendering of services.
Cash receipts from royalties, fees, commissions and other revenue.
Cash payments to suppliers for goods and services
Cash payments to and on behalf of employees.
2. Cash Flows from Investing Activities
Cash flows from investing activities are cash inflows and out-flow related to activities that are
derived from acquisition and disposal of noncurrent assets.
The standard gives the following examples of cash flows which must arise under this heading.
Cash payment to acquire property, plant and equipment, intangibles and other non-
current assets.
Cash receipt from sales property, plant and equipment, intangibles and other non-current
assets.
Cash payment to acquire equity or debt of other entities.
Cash receipt from sale of equity or debt of other entities.
Interest received
Dividend received
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3. Cash Flows from Financing Activities
Cash flows from financing activities are the cash flows related to transactions with stockholders
and creditors such as issuance of share capital, purchase of treasury stock, dividend payments
borrowing of the entity etc.
The standard gives the following examples of cash flows which must arise under this heading.
Cash proceeds from issuing shares
Cash payments to owners to acquire or redeem the entity’s shares.
Cash proceeds from issuing debentures, loans, notes, bonds, mortgage and other short
term and long term borrowings.
Repayment of capital of amount borrowed under finance leases.
Dividends paid
3.5.3. Example of a cash flow statement
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Here is an example of cash flow statement
Cash flow statement
Year ended 31 December 2007
Cash flows from operating activities
Cash generated from operations
Interest paid
Income tax
Net cash flows from operating activities
Cash flows from investing activities
Purchase of property, plant and equipment
Proceeds from sales property, plant and equipment assets
Interest received
Dividend received
Net cash flows from investing activities
Cash flows from financing activities
Cash proceeds from issuing shares
Cash proceeds from issuing long term borrowings
Dividend paid
Net cash flows from financing activities
Net increase in cash and cash equivalents
Cash and cash equivalents at the beginning period
TK
2,730
(270)
(900)
(900)
20
200
200
250
250
(1290)
TK
1560
(480)
(790)
290
120
410
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Cash and cash equivalents at the ending period
3.6 Notes to the financial statements
These will amplify the information given in the balance sheet, income statement and statement of changes in equity. To some extent the contents of the notes will be determined by the level of detail shown on the face of the statements.
3.6.1 Disclosure of accounting policies
The accounting policies section should describe the following• The measurement basis used in preparing the financial statements.• The other accounting policies used as required for a proper understanding of
the financial statements.• The judgments, apart from those involving estimations, made by management
in applying the accounting policies.
3.6.2 Other disclosures
An entity must include in the notes:
The amount of dividends proposed or declared before the financial statements
were authorized for issue but not recognized as a distribution to equity holders
during the period, and the amount per share.
The amount of any cumulative preference dividends not recognized.
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2014 2013Property and Asset BDT BDTCash 8,926,888,089 7,154,414,979In Hand(including foreign currency) 1,585,807,377 1,701,001,828With Bangladesh Bank and its agent bank(including foreign currency) 7,341,080,712 5,453,413,151Balance with other bank and institutions 1,970,213,215 1,370,713,131In Bangladesh 1,695,331,911 1,057,504,237Outside Bangladesh 274,881,304 313,208,894Money at call and short notice 460,000,000Investments 20,406,057,886 25,626,432,399Government 18,479,093,705 23,806,295,142Others 1,926,964,181 1,820,137,257Loans and advance 75,707,231,791 58,301,814,393Loans, cash credit, overdrafts etc 73,507,181,276 56,707,855,895Bills purchased and discounted 2,200,050,515 1,593,958,498Fixed asset including premisesFurniture and fixture 2,369,772,934 2,334,968,565Other assets 6,325,650,624 5,483,787,674Non-Banking asset - -Total property and assets 115,708,814,538 100,732,131,141Liabilities and capitalsBorrowing from other banksFinancial institutions and agents 2,702,826,026 2,637,966,323
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4.1 Statement of financial position
Statement of financial position of Mutual Trust Bank is provided here,
Mutual Trust BankBalance Sheet
As at December 31, 2014
Deposit and other accounts 97,270,633,407 84,640,395,660Current deposit and other accounts 17,426,479,105 11,631,835,517Bills payable 1,284,280,568 779,790,179Saving deposit 14,384,269,440 11,097,954,735Fixed deposit 49,411,783,655 48,426,499,552Deposit products 14,763,820,639 12,704,315,678Other liabilities 6,428,217,471 5,471,461,983Subordinated deposit 2,500,000,000 2,500,000,000Total liabilities 108,901,676,904 95,249,823,966Capital/Shareholder's equityPickup capital 3,077,633,060 2,797,848,240Statutory capital 2,276,079,020 1,917,204,582Foreign currency translation gain/loss - -General reserve 276,777,324 276,777,324Retained earnings 653,371,964 328,737,703Total shareholder's equity 6,804,137,635 5,482,307,176Total liabilities and shareholder's equity 115,705,814,538 100,732,131,141
Workings:
1. Cash2014 2013
In hand 1585807377 1701001828
Balance with Bangladesh Bank 7341080712 5453413151
8926888089 7154414979
2. Cash in hand2014 2013
local currency 1575957930 1685118328
Foreign Currency 9849447 15883500
1585807377 1701001828
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3. Fixed asset 2014 2013
Land 104253000 104253000
Immovable property 995326830 995326830
Furniture & fixtures 1093022070 968869940
Office equipment 1075968599 922560915
Motor vehicles 54649664 48382748
Blocks and periodicals 423974 423974
Intangible assets 70367646 80471004
Leased assets 48455000 48455000
Total cost 3442466783 3168743411
Less: Accumulated depreciation 1072693849 833774846
Book value at the end of the year 2369772934 2334968565
4. Retained earnings2014 2013
Opening Balance 328737703 284769050
Add. Profit for the year 963293518 578181250
Less. Bonus share issue (279784819) (254349840)
Less. Transferred to Statutory reserve (358874438) (279862757)
Closing balance 653371964 328737703
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4.2 Statement of financial performance
Statement of financial statement of Mutual Trust Bank is provided here,
Mutual Trust Bank Ltd.Profit and Loss Account
For the year ended December 31, 2014
2014 2013Particulars BDT BDTInterest income 9,426,970,071 8,675,511,888less: interest paid on deposit and borrowing etc. 7,910,059,642 7,997,883,744Net interest income 1,516,910,429 677,628,144Income from investments 2,608,301,690 2,603,854,730Commission, Exchange and Brokerage 704,561,402 628,696,332Other operating income 375,563,211 347,061,067
3,688,426,302 3,579,612,129Total operating income 5,025,336,732 4,257,240,272less: Operating expenditureSalary and allowance 1,493,841,751 1,138,200,598Rent, tax, insurance and electricity 480,218,233 432,273,845Legal expense 3,160,564 1,563,657Postage, stamps and telephone 15,567,614 16,553,109Printing, stationery and advertisement 104,089,036 84,956,292Managing Director's remuneration 14,999,333 14,039,333Director's fee 1,409,750 775,000Audit fees 943,000 930,000Depreciation on and repair to bank's property 291,679,656 256,152,998Other expenditure 573,828,105 487,950,114Total operating expenses 2,879,737,043 2,433,394,946Profit before provision 2,325,599,689 1,823,845,327less: provisions against loans and advancesincluding off balances sheet items 427,530,521 455,899,298less: provisions against investment in quoted shares 101,227,502 99,147,985
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less: provision against other asset 2,469,480 -Total provision 531,227,503 555,047,283Profit before tax 1,794,372,186 1,268,798,044less: income tax expenses 831,078,668 690,616,793Net profit after tax 963,293,519 578,181,251Retained surplus brought forward 328,737,702 284,769,049
1,292,031,221 862,950,300AppropriationBonus share issued/cash dividend during the year 279,784,820 254,349,840Transferred to statutory reserve 358,874,438 279,862,757
638,659,258 534,212,597Retained surplus carried forward 653,371,964 328,737,703
Workings:
1. Operating profit
2014 2013
Income
Interest, discount and similar income 11812779293 11044680014
dividend income 175243794 202115290
Fee, commission and brokerage 493916030 421361068
Gain less losses arising from investment securities 47248674 32571314
Gain less losses arising from dealing in foreign currencies 210645372 207335264
Other operating income 375563211 347061067
13115396374 12255124017
Expenses:
Interest, fee and commission 7910059642 7997883744
Administrative expenses 2014229282 1689291833
Other operating expenses 624975247 509723965
Depreciation on banking assets 240532514 234379148
10789796685 10431278690
Operating profit 2325599689 1823845327
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2. Income from investments 2014 2013
Interest on treasury bill 440337473 555858509
Interest on treasury bond 1932473953 1790553549
Reverse REPO 1572 12653
Gain/(loss) on investment in shares 47248674 32571314
Dividend From subsidiary 119000000 143175000
Prize bond 1000 (500)
Dividend on investment in shares 56243794 58940290
Other investment 12995224 22743915
2608301690 2603854730
3. Rent, tax, insurance, electricity etc. 2014 2013
Rent 325858657 301091647
Rent and taxes 2775936 1455158
Insurance 65351577 55648604
Power & electricity 85025283 71302014
Lease Rent 1206780 2740422
480218233 432237845
4. Depreciation and repairs of bank’s property 2014 2013
Immovable property 23846023 24457479
Furniture & fixture 73164650 70400480
Office equipments 129719254 127935032
Motor vehicles 4171591 1955161
Books & periodicals - -
Leasehold Property 9630996 9630996
240532514 234379148
Repairs on Bank's property 51147142 21773850
291679656 256152998
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4.3. Statement of cash flow
Statement of cash flow of Mutual Trust Bank is provided here,
Mutual Trust Bank Ltd.
Statement of Cash Flow
For the year ended December 31, 2014
2014 2013A) Cash flow from operating activities: BDT BDTInterest received 11,979,027,967 11,077,251,327Interest paid on deposits, borrowings etc. (8,019,471,385) (8,043,638,749)dividend income 56,243,794 202,115,290Fees and commission income 493,916,030 424,247,393Recoveries of loans previously written off 7,336,952 5,900,000Cash paid to employees as salaries and allowances (1,376,905,411) (1,051,662,832Advance income tax paid (743,208,639) (6,410,672,568)Cash received from other operational income 569,967,287 545,610,005cash paid for other operational expenses (1,218,363,444) (1,041,775,867)Cash flow from operating activities before changes innet current asset 1,748,543,150 1,476,979,300Changes in net current asset:Investment in treasury bond 1,166,859,424 (143,180,401)Loans and advances (17,118,095,808) (2,928,773,435)Other asset (155,279,203) (310,542,342)Customer's deposit 12,739,649,490 9,317,421,013Borrowing from other banks, financial institutions & agents 64,859,703 (3,324,253,677)Other liabilities 54,975,581 14,725,790
(3,247,030,813) 2,625,396,947Net cash flow from operating activities (1,498,487,663) 4,102,376,247B) Cash flow from investing activitiesInvestments in shares and bonds (106,436,924) 10,938,958Purchase of premises & fixed asset(net) (284,517,293) (310,552,780)Net cash from investing activities (390,954,217) (299,613,822)C) Cash flow from financing activitiesNet cash flow from investing activities - -D) Net increase in cash and cash equivalents (1,889,441,881) 3,802,762,425E) Effects of changes of exchange rates in cash - -
Page 39 of 72
and cash equivalent
F) Opening cash and cash equivalents 14,043,036,405 10,240,273,980Closing cash and cash equivalents(D+E+F) 12,153,594,524 14,043,036,405The above cash and cash equivalents include:Cash in hand 1,585,807,377 1,701,001,828Balance with Bangladesh Bank and its agent bank 7,341,080,712 5,453,413,151Balance with other banks and financial organizations 1,970,213,215 1,370,713,131Money at call and short notice - 460,000,000Treasury bill 1,253,329,821 5,055,134,895Prize bond 3,163,400 2,773,400
12,153,594,524 14,043,036,405
Working:
1. Received from other operational income 2014 2013
Exchange21064537
2 207335264Postage charge recoveries 3165323 5555763Telephone and telegram charge recovery 55740 37750Handing charge 3170783 5395250
Service charge11057283
4 97572090SWIFT charge recovery 8571523 15779848Early settlement and loan processing fees 6877096 6089054Incidental charges 275350 187065Locker charge 2977297 2734690VISA ATM 2288113 1565754Margin A/C maintenance income 26961 1710Management fees 59020186 49645702Charges against cards 63173540 45790119VISA POS 11562443 8193974Miscellaneous income 87584725 99725972
569967286 545610005
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4.4 Comparative analysis:
Property plant and equipment:
Property plant and equipment are the tangible assets which are held for use in the production or supply of goods or services, for rental to others or for administrative purposes.
BAS 16 provides guidance on the accounting treatment of property plant and equipment.
Recognition: According to BAS 16 property plant and equipment should be recognized when
future economic benefit will flow to the entity and the item’s cost can be measured reliably.
Measurement: According to BAS 16 property plant and equipment should be measured at cost
initially and subsequent cost should be measured at fair value.
Comparison: Property plant and equipment of Mutual Trust Bank is land & building, which is
recognized at cost at the time of acquisition and subsequently measured at fair value.
So we can say Mutual Trust Bank complies with BAS 16 to record property plant and
equipment.
Depreciation:
Bas 16 requires that a systematic basis should be used to allocate the depreciable amount over
assets useful life. A number of methods are introduced. They are Straight line method, reducing
balance method or sum of year digit method.
Comparison: Depreciation is charged at the following rates on reducing balance method on all
fixed assets other than motor vehicles and leased assets.
Category of fixed assets Rates of depreciation
Land Nil
Immovable property 2.50%
Furniture and fixtures 10%
Office equipments 20%
Motor vehicles 20%
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Books and periodicals 10%
Leasehold assets 20%
Intangible assets 20%
Lease:
Lease is an agreement whereby the lessor conveys to the lessee in return for a payment or series
of payments the right to use an asset for an agreed period of time. Accounting treatment of lease
should be complies with BAS 17. According to BAS 17 there are two types of lease financial
lease and operating lease.
Comparison:
Asset under finance leases of Mutual Trust Bank are recognized as asset of the bank at their fair
value at the date of acquisition or if lower at the present value of the minimum lease payments.
The corresponding liability to the lessor is included in the balance sheet as a finance lease
obligation. Finance charges are charged against income.
So we can say Mutual Trust Bank complies with BAS 17 to account leases.
Contingent liabilities and assets:
Contingent liabilities and assets are accounted in accordance with BAS 37.
Comparison: The bank recognized provision only when it has a present obligation as a result of
past events and it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and when a reliable estimate of the obligation can be made.
So we can say Mutual Trust Bank complies with BAS 37 to account contingent liabilities and
assets.
Other liability is recognized in the balance sheet according to the guideline of Bangladesh Bank
and BAS 37 and internal policy of the banks. Provisions and accrued expenses are recognized in
the financial statements when the bank has a legal or constrictive obligation as a result of past
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event, and it is probable that an outflow of resources embodying economic benefits will be
required to settle the obligation and a reliable estimate can be made of the amount of the
obligation.
Revenues:
Revenues are the income arising in the normal course of activities.
BAS 18 provides guidance on the accounting treatment of revenues.
Recognition: According to BAS 18 revenue should be recognized when future economic benefit
will flow to the entity and the benefit can be measured reliably.
Measurement: According to BAS 18 revenue should be measured at the fair value of the
consideration received.
Comparison: Revenue for this year of Mutual Trust Bank has been recognized according to the
provision of BAS 18 as well as Bangladesh Bank guidelines.
Interest income has been recognized on accrual basis.
Investment income has been recognized on accrual basis. Capital gain on investment in shares
is also included in investment income. Capital gain is recognized when it is realized.
Fees and commission on bills discounted, purchased and others are recognized at the time
realization.
So we can say Mutual Trust Bank complies with BAS 18 to record revenues.
Cash flow statement
1) Cash flow statement has to prepare in accordance with BAS 7.
2) According to BFRSs cash flow statement can be presented either in direct method or in
indirect method. The presentation is selected to present these cash flows in a manner that is
most appropriate for the business or industry. The method is applied consistently.
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3) According to Bangladesh Bank as per BRPD circular no. 14 dated 25 June 2003, cash flow
should be a mixture of direct and indirect method.
Comparison:
Here the statement of cash flows of the Mutual Trust Bank has been prepared in accordance with
BAS 7, Statement of cash flows and under the guideline of Bangladesh Bank BRPD circular no.
14 dated 25 June 2003.
The statement shows the structure of changes in cash and cash equivalents during the financial
year.
So we can say the bank complies with BAS 7 to prepare cash flow statement.
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5.0. What is a group?In simple term group is created where one company, the parent (P) buys shares in another company, the subsidiary (S), such that the parent company controls the subsidiary. A group may include one or many subsidiaries.
Shareholders
P Ltd.
S1 S2 S3
5.1. What is a subsidiary?Asubsidiary is an entity, including an unincorporated entity such as a partnership, that is controlled by another entity.
5.2. Why form a group?A business may operate in several different markets with different characteristics. These different markets will present different different issues for management to address in terms of operations and finance and so on.
It would be possible for different activities to be carried out within a single limited company, where separate divisions could be established for each activity. The owners would then receive one set of accounts for that company reflecting all its activities.
Alternatively, each activity could be carried out within a separate company, each of which controlled by the parent.
There are a number of reasons why the business might be structured this way.
Accountability of each group of managers can be made more precise, as they can be
identified more easily with the activities of the subsidiary which employes them.
Financing may be made easier, as lenders can see audited financial statements for the
individual company for which they are provoding finance.
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The assets of one subsidiary can be pledged as security for its borrowings, leaving the
assets of other subsidiaries unpledged.
Disposal of a business may be easier.
5.3. The Consolidation ConceptThe consolidated financial statements can be said as the combined financial statements of a
parent company and its subsidiaries. Because consolidated financial statements present an
aggregated look at the financial position of a parent and its subsidiaries, they help to measure the
overall health of an entire group of companies or organizations as opposed to one company's
stand-alone position. Consolidated financial statements present the financial position and results
of operations for a parent (controlling entity) and one or more subsidiaries (controlled entities) as
if the individual entities actually were a single company or entity. Consolidated financial
statements are generally considered to be more useful than the separate financial statements of
the individual companies when the companies are related.
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Whether the subsidiary is acquired or created, each individual company maintains its own
accounting records, but consolidated financial statements are needed to present the companies
together as a single economic entity for general-purpose financial reporting. Some facts of
Consolidation-
Consolidation is done by Parent Entity.
Consolidation should be denominated by Parent’s reporting currency.
Any periodicity gap should be neutralized.
Non-Controlling Interests should be properly addressed.
Mostly Equity Method is used for Consolidation. - Approaches should be selected
appropriately.
5.4. The effect of Consolidated Financial StatementConsolidated financial statements are presented primarily for the benefit of the investors,
creditors, and other resource providers of the parent. Significantly, consolidated financial
statements often represent the only means of obtaining a clear picture of the total resources of the
combined entity that are under the control of the parent company. Consolidated financial
statements report the financial results of the parent company and all of its subsidiary companies
in one combined report. Some companies own just one subsidiary, while others own many
subsidiaries. The consolidated financial statement includes just one set of financial results. As
each subsidiary reports its financial results to the parent, the accounting staff at the parent
company gathers the individual financial results, eliminates intercompany financial transactions
and consolidates the numbers into one statement. Several benefits exist for companies who create
consolidated financial statements. The Consolidated Financial Statement has following benefits-
1. Broad Picture: The basic advantage when consolidating financial statements is the broad
picture it gives. Investors do not want to go through several different financial statements to add
up information and find out how the corporation is doing overall. The consolidated statements
provided by the parent company accomplish the task automatically and make an excellent
reference point for shareholders, leaders and anyone interested in how all the different parts of
the business are functioning as a whole.
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2. Proper Balancing: Consolidating financial statements also lets a corporation effectively
balance its appearance to outside parties. For example, during one period a parent company may
lose revenue and perform poorly, but the subsidiaries may perform very well and increase
revenues. The consolidated statement will balance the poor parent's performance with thepositive
subsidiary performance, allowing the company to show that through its diversification it
remained profitable.
3. Exclusions: According to consolidated financial statement guidelines, a corporation can also
exclude certain divisions from the statements. This is also an advantage; because it allows
investors to see -- and companies to show -- that some financial aspects are not long term. For
example, subsidiaries are exempt if the parent company's ownership of them is temporary or if
the control of the company does not actually rest with the majority owner, which can happen
through bankruptcy.
4. Less Paperwork: Another benefit of consolidated financial statements is the reduced amount
of paperwork created for the statements. When a parent company owns multiple subsidiaries, a
set of financial statements exists for each individual company. Each set of financial statements
includes four separate reports. If a parent company owns nine subsidiaries, the complete set of
individual financial statements includes 40 reports. If the parent company consolidates the
financial statements, the set of financial statements only includes four reports.
5. Simplified: Consolidated financial statements also provide a simplified view of the
organization's results. When one subsidiary sells products to another, it creates an intercompany
transaction. One company records a sale, while another company records a purchase. The sale
and purchase cancel each other out from the complete organization perspective. Consolidated
financial statements eliminate these transactions and simplify the financial statements.
6. Necessity: Consolidated financial statements are required by most governments as an accurate
representation of a parent company's financial activity. In general, tax laws require that a single
accounting entity be represented out of the net resources and operating results of all the divisions
that a company owns. As a result, many companies have become used to producing consolidated
statements for governments, investors and internal analysis.
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7. Efficiency: One of the main advantages of the consolidated financial statement is efficiency.
Instead of examining the financial statements of each company in a network of dozens of
companies, an investor or an executive can examine a single financial statement to determine the
financial health of the entire network. Nevertheless, consolidated financial statements are usually
considerably more complex than stand-alone financial statements.
8. Fraud Prevention: Another primary gain for consolidated financial statements is the
prevention of fraud against investors. Without the requirement that parent companies consolidate
their financial statements, companies could easily bury losses from undermperforming divisions
and product lines in a web of subsidiaries and cross-shareholdings. In this case, underperforming
or failing subsidiaries could be draining the finances of the parent company to the point of near
bankruptcy, yet this state of affairs would not become apparent by reading the parent company's
stand-alone financial statement.
The ultimate benefit of consolidated financial statements should be ease of understanding and
analysis of a company's financial condition for investors, creditors, vendors and anyone else who
needs to know how secure the company is with respect to being able to pay its bills and continue
as a profitable enterprise. However, a more sinister benefit of consolidated finances is that they
can be manipulated to hide financial problems. It is extremely difficult to ascertain from these
statements whether there are hidden problems and exactly where they are in the enterprise.
Without consolidated financial statements the process of evaluating a company for investment or
financing purposes would be a long complex affair that might altogether miss important assets or
liabilities. In fact, many of the arguments that occur between company management, accounting
and auditing at year end involve how the consolidation of reports should be done in order to give
the most accurate picture of the company's financial health. It is the auditor's job to make sure
this consolidation of accounting reports accurately reflects the true condition of the company.
5.5. Boundaries of Consolidated Financial StatementWhile consolidated financial statements are useful, their limitations also must be kept in mind.
Some information is lost any time data sets are aggregated; this is particularly true when the
information involves an aggregation across companies that have substantially different operating
Page 49 of 72
characteristics. Because subsidiaries are legally separate from their parents, the creditors and
stockholders of a subsidiary generally have no claim on the parent, nor do the stockholders of the
subsidiary share in the profits of the parent. Therefore, consolidated financial statements usually
are of little use to those interested in obtaining information about the assets, capital, or income of
individual subsidiaries. The following clauses are the boundaries of Consolidated Financial
Statements-
1. Lack of Subsidiary Information: The nature of consolidated financial statements is that a
group of companies is viewed as one entity. By this assumption's nature, the details of the
individual companies are not presented. In some cases, this is not important, as some subsidiaries
may not be material to the entire company's operations and results. In other cases, the
amalgamation of financial results can hide unprofitable subsidiaries and ventures. While the
company in whole may be performing well, consolidated statements may not show the entire
picture.
2. Elimination of Intercompany Transactions: Generally accepted accounting principles
require the elimination of intercompany transactions upon consolidation. Because of this rule,
investors are unable to ascertain the flow of funds between subsidiaries. This could be important
in determining which sections of the company are viable in the long term. Furthermore, in
situations where subsidiaries operate using different functional currencies, these eliminations can
lead to complex accounting and tax issues that may be in accordance with accounting principles,
but may be confusing to even seasoned investors.
3. Higher Group Materiality: When looking at a company on a consolidated basis, the
threshold for determining if accounting misstatements are material is generally higher. For
example, if a company had 10 subsidiaries that each had $1 million in annual sales, a $10,000
sale would be more important to those subsidiaries on an individual basis than to the group as a
whole. Because of this, companies and auditors need to implement controls to ensure that the
financial statements are fairly presented taken as a whole. This may mean that companies need to
reconsider an appropriate level of accuracy in the financial statements to reflect an acceptable
amount of misstatement. Many times this amount is in between the subsidiary and group level of
accuracy.
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4. Significant Influence vs. Control: A major limitation in the presentation of consolidated
financial statements is the creation of loopholes related to the consolidation of joint ventures,
variable interest entities, and other special purpose entities. While revisions in accounting
standards have started to address these issues, the rules of consolidation have allowed
unscrupulous companies to hide billions of dollars of debt from investors over the last couple of
decades, by creating entities that they do not directly control, but only influence. While the
accounting for these entities is complex, investors should be aware that the phenomenon exists
and should be vigilant if the performance of their investment appears too good to be true.
5. Masks Poor Performance: When income statements are brought together and reported on a
consolidated basis, the revenues, expenses and net profit are presented as combined figures. This
can hide any profitability issues with one or more of the companies. For example, if a subsidiary
lost a substantial amount of money in the year as a result of poor sales, financial statement
readers may not see that information if the loss is combined with profits of the parent company.
6. Hides Inter-company Sales: All inter-company transactions are removed in a consolidation.
On one hand, this presents a truer view of the companies by showing only financial activity with
non-related parties. However, it also hides the level of inter-company transactions. If related
companies spend most of their time and resources selling products or services in the group, an
outside investor will not be able to assess transfer prices or profit-shifting in the group. Both of
these things can be manipulated by companies and can affect income taxes. Consolidation hides
the extent of the inter-company activity.
7. Skews Financial Ratios: One way that investors assess the viability of a company is by its
ratios. Ratios are comparisons between financial statement lines. For example, the current ratio is
current assets divided by current liabilities. This ratio tells investors how well the company will
be able to pay its near-term obligations. In a consolidated financial statement, each company's
assets, liabilities and income are combined. Financial ratios based on combined numbers may not
be representative of each company's ratios. If one of the companies has a high level of debt
compared to the equity of the owners, that leverage would be hidden in a consolidated statement.
Consolidated financial statements do not always give a more accurate picture of the financial
health of an enterprise because the individual accounting reports from the subsidiaries do not
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show up anywhere but in the notes section of the consolidated finances. This makes it possible to
hide problems in the subsidiary reports, which is how Enron managed to hide the losses and
liabilities some of its failed projects generated. It just buried them in obscure subsidiaries created
for the purpose of hiding certain financial problems.
5.6. Financial Statements for SubsidiaryA company whose voting stock is more than 50% controlled by another company, usually
referred to as the parent company or holding company. A subsidiary is a company that is partly
or completely owned by another company that holds a controlling interest in the subsidiary
company. If a parent company owns a foreign subsidiary, the company under which the
subsidiary is incorporated must follow the laws of the country where the subsidiary operates, and
the parent company still carries the foreign subsidiary's financials on its books (consolidated
financial statements). For the purposes of liability, taxation and regulation, subsidiaries are
distinct legal entities. Though a Consolidated Financial Statement shows a broad picture of a
company, the parent and the subsidiary both are responsible to prepare their own separate
financial statements according to the rules of recording. Separate financial statements are helpful
to reveal the true environment of each of the subsidiary. Investors can understand which one is
more profitable and which one is not. Consolidated Financial Statements are not able to view the
real state, the just shows the combined picture of the company. So, each separate entity is
responsible to prepare & publish their financial statements.
5.7. Accounting PrinciplesThe key issue underlying group accounts is therefore the need to reflect the economic substance
of the relationship between the companies where one has control over another, which together
comprise a group.
Producing consolidated accounts that present the group as though it were a single economic
entity reflects the economic substance.
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5.8. The effect of ConsolidationGroup accounts consolidate the results and net assets of group members to represent the group to the parent's shareholders as a single economic entity. This reflects the economic substance and contrasts with the legal form, where, each company is a separate legal form.
5.9. Control
Usually holding of over 50% of shares in S will give P control of S.
The control means the ability to direct financial and operating policies of S with a view to
gaining economic benefits from its activities.
In an individual company, the assets are under the direct control of the company. In a group, the
subsidiary's assets are under indirect control through the parent's control of the subsidiary.
5.10. OwnershipEquity is the residual amount found by deducting all the entity's liabilities from all the entity's assets. It also described as ownership interest.
In an individual Company's accounts, there is only ownership interest, in a group it os possible for the parent to have control of a subsidiary without owning 100% of it.
That part of S's net assets and results included in the consolidation which is not owned by P is
owned by minority interest (MI)
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parent
controls
(>50%)
Subsidiary
5.11. Reflecting control and ownership in group accountsWhen preparing the consolidated accounts, P's control of S and the ownership interest of P and
MI in S need to be reflected.
Group accounts reflect both control and ownership.
Consolidated Balance Sheet (CBS) CU
Assets X
(P + S (100%)-intra-group items)
Control X
Ownership
Capital and Reserves
Share capital (P only) X
Reserves
(P + P% × S post-acquisition) X
Attributable to equity holders of P X
Minority Interest X
(M% × S's net assets)
Equity X
Liabilities X
X
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CBS
Shows resources under group's control as a single entity ; and
Shows ownership split between
Parent co'sshare
Minority interest share
5.12. Sample of Consolidated Balance Sheet
A sample of Consolidated Balance Sheet is given below-
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Consolidated Income Statement CU
Revenue X
(P + S (100%) - intra-group items)
Profit after tax (PAT) (Control) X
Ownership
Attributable to:
Equity holders of P X
Minority Interest (M% of S's PAT) X
xOwnership: P% = P's share: MI% = MI share
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CIS
Shows revenue and expenses under group's control as a
single entity and
Shows PAT split between
Parents co's share Minority interest share
5.13. Sample of Consolidated Income Statement A sample of Consolidated Income Statement is given below-
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Page 58 of 72
6.1. Consolidated Balance Sheet of MTBConsolidated Balance Sheet
31st, December, 20142014 2013
Property and AssetsCash 8933605158 7169407855In Hand (including Foreign Currency) 1592524446 1715994704With Bangladesh Bank its agent Bank 7341080712 5453413151Balance with Other Banks and Financial Institutions 2173783801 1633866234In Bangladesh 1898902497 1320667340Outside Bangladesh 274881304 313208894Money at Call and Short Notice 460000000Investments 20767846269 25824406855Government 18479093705 23806295142Others 2288752564 2018111713Loans and Advances 77140918049 59548362590Loans, Cash Credit Overdrafts, etc. 74940867534 57954404092Bills Purchased and Discouted 2200050515 1593968498Fixed Asset including Premises, Furniture & Fixture 2488892429 2458193366Other Assets 4795916269 4078312273Non-Banking AssetTotal Property and Assets 116300961975 101172549174
Liabilities and CapitalBorrowing from others 2702826026 2637966323Deposit and Other Accounts 97106323435 84372740788Current Deposit and Other Accounts 17262269133 11509180645Bills Payable 1284280568 779790179Savings Deposit 14384269440 11097964735Fixed Deposit 49411783655 48281499552Deposit Products 14763820639 12704315678Other Liabilities 7221285354 6212685051Subordinated Dept 2500000000 2500000000Total Liabilities 109530434816 95723392162Capital/Shareholder's EquityPaid up Capital 3077633060 2797848240Statutory Reserve 2276079020 1917204582Revaluation Reserve 520276266 161739327Foreign Currency 2344209 1070995General Reserve 276777324 276777324Retained Earnings 617298134 294423377Total Shareholder's Equity 6770408013 5449063845
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Minority Interest 119147 93167Total Liability and Shareholder's Equity 116300961975 101172549174
Workings
1) Consolidated Investment
2014 2013Government InvestmentMutual Trust Bank Ltd. 18479093705 23806295142MTB Securities Ltd. - -MTB Capital Ltd. - -MTB Exchange Ltd - -
18479093705 23806295142Other InvestmentsMutual Trust Bank Ltd. 1926964181 1820137257MTB Securities Ltd. 194901851 181555582MTB Capital Ltd. 166886532 16418874MTB Exchange Ltd. - -
2288752564 201811171320767846269 25824406855
2) Consolidated Fixed Assets including premises, furniture and fixtures
Mutual Trust Bank Ltd.
2014
2369772934
2013
2334968565MTB Securities Ltd. 109461778 111522217MTB Capital Ltd. 6923097 8083165MTB Exchange Ltd. 2734620 8619419Consolidated net book value 2488892429 2458193366
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3) Advance Income Tax
2014 2013Opening Balance 2257716624 1616649356Less: Adjustment made during the year - -Add: Payment during the year 743208639 641067268Closing Balance 300925263 2257716624
4) Consolidated Advance Income Tax
2014 2013Mutual Trust Bank Ltd. 3000925263 2257716624MTB Securities Ltd. 49385089 51929594MTB Capital Ltd. 4184386 3075711MTB Exchange Ltd. - -
3054494738 2312721929
5) Consolidated other assets
2014 2013Mutual Trust Bank Ltd. 6325650624 5483787674Less: Investment in Subsidiary -1548395800 -1548395800
4777254824 3935391874MTB Securities Ltd. 125080450 243964420MTB Capital Ltd. 11042348 40680573MTB Exchange Ltd. 1538647 1450407Less: Intra-group receivable and payable -119000000 -143175000
18661445 1429204004795916269 4078312273
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6) Consolidated other liabilities
2014 2013Mutual Trust Bank Ltd. 6428217471 5471461983MBT Securities Ltd. 858890116 824049743MTB Capital Ltd. 58424994 62561915MTB Exchange Ltd. -5247227 -2213590Less: Intra-group receivable and payable -119000000 -143175000
7221285354 6212685051
7) Retained Earnings
Opening Balance2014
3287377032013
284769050Add: Profit made during the year 963293518 578181250Less: Bonus share issued during the year -279784819 -254349840Less: Transferred to Statutory Reserve -358874438 -279862757
Closing Balance 653371964 328737703
8) Consolidated Retained Earnings
Opening Balance2014
2944233772013
255237061Add: ConsolidatedProfit made during the year 961534013 573231688Less: Bonus share issued during the year -279784819 -254349840Less: Transferred to Statutory Reserve -358874438 -279862757
617298134 294256152Add: Subsidiaries profit - 2116176Less: Foreign currency loss - -1948951
617298134 294423377
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6.2. Consolidated Income Statement of MTBConsolidated Income Statement
31st December,2014
2014 2013Interest income 9716735358 8984990174less: Interest paid on Deposit and Borrowing etc. 7881712195 7957130247Net Income 1835023163 1027859927Income From Investments 2492377440 2466231850Commision, Exchange and Brokerage 949044250 766744340Other Operating Income 448337545 358150727
3889759234 3591126917Total Operating Income 5724782398 4618986844less: Operating Expenditure:Salary and Allowance 1480618517 1208377316Rent, Tax, Insurance and Electricity 525227662 477223454Legal Expense 3160564 1900320Postage, Stamps and Telephone 16801240 18169003Printing, Stationery and Advertisement 105723591 87257490Managing Director's Remuneration 14999333 14039333Director's Fee 1409750 775000Audit Fee 1449419 1396061Depreciation 305146481 269728113Other Expenditure 667087417 514259686Total Operating Expense 3121623975 2593125777Profit Before Provision 2603158423 2025861067Less: Provision against Loans and Advances 427530521 455899298Less: Provision against Investment 243760404 170647985Less: Provision against Other Asset 2469480Total Provision 673760405 626547283Profit Before Tax 1929398019 1399313784Less: Income Tax Expense 967838025 826061583Net Profit After Tax 961559993 573252201
Attributable to:Shareholders of the Bank 961534013 573231689Minority Interest 25980 20512
961559993 573252201
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Workings
1) Income Statement
2014 2013Income:Interest, Discount and similar income 11812779293 11044680014Dividend income 175243794 202115290Fee, commission and brokerage 493916030 421361068Gain less losses arising from investment securities 47248674 32571314Gain less losses arising from dealing in foreign currencies 210645372 207335264Other operating Income 375563211 347061067
13115396373 12255124017Expenses:Interest, fee and commission 7910059642 7997883744Administrative expenses 2014229282 1689291833Other operating expenses 624975247 509723965Depreciation on Banking Assets 240532514 234379148
10789796685 104312786902325599689 1823845327
2) Consolidated Interest Income
2014 2013Mutual TRUST Bank Limited(note-21.01) 9426970071 8675511888MTB Securities Limited 539800779 658715793MTB Capital Limited 18192875 3950393MTB Exchange (UK) Limited - -less:Intragroup interest income (loans) -268228367 -353187900
9716735358 8984990174
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3) Income from Investments
2014 2013Interest on treasury bill 440337473 555858509Interest on treasury bond 1932473953 1790553549Reverse REPO 1572 12653Gain/loss on investment in shares of quoted companies 47248674 32571314Dividend from subsidiary 119000000 143175000Prize bond 1000 -500Dividend on investment in shares 56243794 58940290Other investments 12995224 22743915
2608301690 2603854730
4) Consolidated Income From Investments
2014 2013Mutual Trust Bank Limited 2608301690 2603854730MTB securities Limited - -MTB Capital Limited 3075750 5552120MTB Exchange(UK) Limited - -Dividend paid by MTB securities and capital -119000000 -143175000
2492377440 2466231850
5) Consolidated other operating income
2014 2013Mutual Trust Bank Limited 375563211 347061067MTB Securities Limited 63357972 33873059MTB Capital Limited 37864704 18217320MTB Exchange (UK) Limited - -Less: Intra-group their operating income -28448342 -41000719
448337545 358150727
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6) Consolidated rent, taxes, insurance, electricity, etc.
2014 2013Mutual Trust Bank Ltd 480218233 432273845MTB Securities Ltd. 35594060 35656766MTB Capital Ltd. 2722817 3103656MTB Exchange Ltd. 6692552 6189187
525227662 477223454
7) Consolidated depreciation and repair of assets
2014 2013Mutual Trust Bank Ltd. 291679656 256152998MTB Securities Ltd. 11144137 11217691MTB Capital Ltd. 1275233 1492005MTB Exchange Ltd. 1047456 865418
305146481 269728113
8) Consolidated other expenditure
2014 2013Mutual Trust Bank Ltd. 573828105 487950114MTB Securities Ltd. 86640904 22544131MTB Capital Ltd. 3438746 1022112MTB Exchange Ltd. 3179662 2743329
667087417 514259686
9) Earning Per Share
Net Profit After Tax2014
9615599932013
573252200Number of Ordinary Shares Outstanding 307763306 307763307Earning Per Share 3.13 1.86
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Basis of Consolidation of operations of subsidiaries
The financial statements of the company and its subsidiary has been consolidated in accordance with Bangladesh Accounting Standard 27 "Consolidated and Separate Financial Statements". The consolidation of the financial statement has been made after elimination all material inter company balance, income, expense arising from inter company transactions.
The total profit of the company and its subsidiary are shown in the consolidated statement of comprehensive income with the portion of profit after taxation. All assets and liabilities of the company and of its subsidiary is shown in the consolidated statement of financial position. The consolidated financial statements are prepared to a common financial year ended 31 December 2014.
Comparison:
Here the Consolidated Financial Statements of the Mutual Trust Bank has been prepared in
accordance with BAS 27.
The statements shows the financial position of parent as well as subsidiary
So we can say the bank complies with BAS 27 to prepare consolidated financial statement.
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Conclusion
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The financial statement of the bank are prepared under the historical cost convention, on the going concern basis and in accordance with the first schedule of bank company 1991 as amended by international financial reporting standards adopted Bangladesh financial reporting standards (BFRS) and Bangladesh Accounting Standards (BAS). Mutual Trust Bank complies with following standards-
The consolidated financial statements include the financial statements of Mutual Trust Bank Limited, off shore banking units and its subsidiaries, MTB securities limited, MTB capital limited and MTB exchange UK. The consolidated financial statement have been prepared in
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accordance with the Bangladesh accounting standard, consolidated and separate financial statements..
All the intra-group transactions, balances, income and expenses are eliminated on consolidation. Profit and loss resulting from transaction is also eliminated. Investments in securities have been
shown in equity. Investments in market securities have been shown at cost or market price whichever is lower on an aggregate portfolio basis under Bangladesh Accounting Standards (BAS) “accounting for standards”.
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8.0. Appendix
Reference
1) http://www.mutualtrustbank.com/
2) Manual Study
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