Volume : XV
Issue : 1
January - March 2013
Secretarial Practices for Good Governance
Institute of Chartered Secretaries of Bangladesh A Statutory Body Under an Act of Parliament
Institute News
INSTITUTE ACTIVITIES January - March 2013 The first quarter has been full of activities at the Institute. MEETINGS INTERNAL Council Meeting The 17th Meeting of the Council of the Institute was held during the first quarter of 2013. Discussions and reviews were held regarding the performance of the various Standing and Sub-Committees of the Institute. Action Plan for the year 2013 had been finalized.
A Council Meeting in progress
Education Committee In the Meeting of the Education Committee reviews were made on the various activities under the committee and many important decisions regarding the Action Plan were finalized for the year ahead.
Follow-up Meeting and Dinner Party for 4th National Convention A follow-up Meeting was held for the 4th National Convention on Sunday, February 10, 2013 at the Institute’s premises. The Meeting was presided over by Mohammad Sanaullah FCS, President, ICSB. In the Meeting the contributions from the various Members of the Institute were highlighted and lauded by the Members of the Organizing Committee for the 4th National Convention & 4th Convocation. The Meeting also discussed the overall success of the Convention and the responses thereafter. After considerable reviews of the several aspects of the National Convention and Convocation program, along with a detailed review of the financial statements of the program it was unanimously agreed that the programs had been successful and beneficial for the development of the Institute and its Members, and that a lot of significant views had been generated from the Technical Sessions of the Convention. After the reviews the President of the Institute announced the contributions brought forth by the various Members of the Institute in order to make the 4th National Convention and 4th Convocation more successful. The President thereafter presented the Institute.
Annual Picnic Committee 2013 Several Meetings of the Annual Picnic Committee 2013 were held in order to make the Picnic successful. Later the committee organized a splendid Picnic for the Members of the Institute. Company Law Review Committee The Company Law Review Committee met a number of times during the quarter in order to review the draft of the new Companies Act and many important recommendations have been made.
Members at the Follow-up Meeting for the 4th National Convention and Convocation
contributing Members with crests of appreciation. The Meeting was followed by a dinner party organized at the premises of the THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
07
Institute News
counseled the students about the significance of Company Secretaries to establish corporate governance and also corporate expectations from the new generation of management personnel. Observance of corporate principles in adverse situations, need of team work in management, innovation in business and academic practices along with the application of wisdom in modern management has been the major input for students from the orientation program. Senior Vice President Md. Shahid Farooqui FCS receiving crest from the President for his contribution
Inauguration of the 31st Batch of Chartered Secretaries The Inauguration Program of the 31st Batch of Chartered Secretary was held on Saturday, February 09, 2013, at 3: 00 pm at BIAM Auditorium, New Eskaton, Dhaka. Students who had passed the Admission Test, Viva Voce, and the screening process earlier in January 2013 were the participants of this Inauguration Ceremony. Mohammad Sanaullah FCS, President of ICSB, inaugurated the program and congratulated the students on being selected to study in Chartered Secretary program. The President highlighted the profession of Chartered Secretaries, on how it is a noble, challenging, and highly rewarding profession in the corporate world. He also said that the Chartered Secretary profession is now a demanding and worthwhile profession and spoke about the greatly diverse opportunities for the profession in the corporate sector of Bangladesh. The President mentioned that Chartered Secretaries are high-ranking professionals with a diverse set of skills, unique among many professions. Chartered Secretaries are trained in corporate law, finance, governance and company secretarial practice. Chartered secretaries are the focal point for independent advice about the conduct of business, Among others, Md. Shahid Farooqui FCS, Senior Vice President, M. Naseemul Hye, Vice President, and Md. Monirul Alam FCVS, Treasurer of the Institute also spoke and
08
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
Office Bearers and Council Members at the Inauguration of the 31st Batch
On the very first day the students were enlightened about what the corporate sector expected from them, and on the measures to achieve excellence through both academic pursuit and corporate experience. In conclusion, the Chairman of the Education Committee of the Institute gave the vote of thanks on behalf of the Institute. Professional Training Program on “Internal Audit & Control Environment� The Institute organized this two days training program on March 8 and 9, 2013. The program was designed keeping in view the importance of Internal Audit & Control Environment in corporate management. The program was particularly suitable for senior and mid level executives engaged in Internal Audit and Compliance, Accounts & Finance and Management and, in particular, for executives directly handling Internal Audit issues. The sessions were conducted by Mohammad Sanaullah FCS, President, ICSB , Nasir U. Ahmed FCA, FCS, Former President,
Institute News
ICAB & Partner, Saha Mazumder & Co., Chartered Accountants.
Annual Report. The sessions were conducted by Mohammad Sanaullah FCS, Md. Shahid Farooqui FCS, Senior Vice President, ICSB, and General Manager & Company Secretary, The Ibn Sina Pharmaceutical Industry Ltd., Nasir U. Ahmed FCA, FCS, Former, President, ICAB & Partner, Saha Mazumder & Co., Chartered Accountants, Md. Abul Kalam, Director, Bangladesh Securities and Exchange Commission (BSEC).
Students of the 31st Batch at the Inauguration Ceremony at BIAM Auditorium
A significant number of participants in this training session was from renowned national and Multinational Corporate levels as well as from Banks, Stock Exchange, Investment Corporation. Participants at the training for Standardization of Annual Reports
A significant number of participants in this training session were from renowned national and multinational corporate levels as well as from Banks, Insurance Companies, and Investment Corporations.
Participants with the Course Director at the training for Internal Audit & Control Environment
Professional Training Program on “Standardization of Annual Reports� The Institute organized this two days training program from 15th March to 16th March, 2013.The program was designed keeping in mind the importance of Standardization of Annual Reports in corporate management. The program was particularly suitable for Senior and Mid-Level Executives, especially Company Secretaries and Corporate Executives of public as well as private companies to enable them to be familiar with the preparation and presentation of Standard
Participants with the Course Director at the training for
Standardization of Annual Reports
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
09
Institute News
Continuing Professional Development (CPD) Program
“Application of IFRS in Preparation of Financial Statements” & “Chartered Secretary in Practice: New Perspective” By Raihan Hadi, Assistant Secretary, ICSB Institute of Chartered Secretaries of Bangladesh (ICSB) held two Continuing Professional Development (CPD) Programs on Saturday, March 23, 2013 at the Conference Hall, Business Faculty, University of Dhaka. The CPD programs were on “Application of IFRS in preparation of Financial Statements” and “Chartered Secretary in Practice: New Perspective”. A large number of Members of ICSB participated in the Program.
Session Chairmen, Keynote Presenters and Discussants at the CPD Program
Session I: Application of IFRS in preparation of Financial Statements Financial Statements are an integral part of any business organization in the world. International Financial Reporting Standards (IFRS) are designed as a common global language for business affairs so that company accounts are understandable and comparable across international boundaries. They are a consequence of growing international shareholding and trade and are particularly important for companies that have dealings in several countries. They are progressively replacing the many different national accounting standards. IFRS provides the guidelines or rules that are to be followed by accountants to maintain books of accounts which are comparable, understandable, reliable and relevant as per the users internal or external. The Chairman for this session was Prof. Md. Helal Uddin Nizami, Commissioner, Bangladesh Securities
10
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
& Exchange Commission (BSEC), and the official discussant for the session was Prof. Dr. Feroz I. Faruque FCS, Visiting Professor of International Finance & Business, American University, Tajikistan. The noteworthy presentation on “Application of IFRS in preparation of Financial Statements” was by Mohammad Moshiur Rahman FCA, ACS, Head of Finance and Company Secretary, Syngenta Bangladesh Limited. Mohammad Moshiur Rahman FCA, ACS stated the importance of applying the International Financial Reporting Standards (IFRS) in preparing financial statements with much emphasis on the application of the Bangladesh Financial Reporting Standards (BFRS) as well. He also stressed on how the application of such standards will help in creating higher accountability and transparency for businesses, thus making reports more credible and acceptable. Session II: Chartered Secretary in Practice: New Perspective Independent or Private Practice for Chartered Secretaries is becoming more and more popular nowadays. In its pursuit of developing skilled and bona fide Chartered Secretaries, the topic of this session was the first of its kind for ICSB. Mohammad Sanaullah FCS, Director & Company Secretary, SINGER Bangladesh Ltd. and President, ICSB, was the Session Chairman for this session. The presentation on “Chartered Secretary in Practice: New Perspective” was delivered by M. Naseemul Hye FCS, Executive Director & Company Secretary, Bashundhara Group. The official discussant for the sessions was S. Abdur Rashid FCS, Practicing Chartered Secretary, SARashid & Associates.
Institute News In his wonderful Keynote presentation M. Naseemul Hye FCS emphasized on the new traits Chartered Secretaries have to maintain in order to establish good corporate governance. He also highlighted on how the new Secretarial Practice Guidelines will help Chartered Secretaries in Practice, in developing and ensuring a much better practice. He highlighted the changing scenarios of modern day businesses and their strategies with the application of new technologies, and how a Practicing Chartered Secretary has to be well
acquainted with such scenarios to be in continuous development. Qualitative discussions were held between the participating Members for each session and thereafter the Session Chairmen summed up the session with valuable remarks on the presentations. The Members lauded both the topics of the Program as highly useful for their development. The Program ended with a Vote of Thanks from Md. Monirul Alam FCS, Treasurer, ICSB.
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
11
Institute News
A Picnic of a Lifetime Khalid Mohammad Sharif ACS
The Annual Picnic of ICSB is such an event in a year that offers an opportunity to its members to spend a day packed with enjoyment, games, fun and cultural events among their own family members. According to the nature of job, the Chartered Secretaries have to maintain a year through busy schedule involving meetings, compliances and deadlines. Since the annual picnic is the only event where members may include their family members and it is an opportunity to strengthen harmony among them, nobody wants to miss it. The members of this institute are familiar with one another and there is a long tradition that ICSB picnic usually takes place in a family environment. This year the day was February 01, 2013 and the “HASNA HENA” spot at Pubail (8 km from Tongi Flyover) was selected for ICSB picnic. THE SPOT When we reached the picnic spot around 7.00 a.m., we noticed that the volunteers of different sub-committees of the Picnic were already there preparing themselves for their duty. Members from different locations reached the spot using their own transportation. The place was quite big with plenty of trees, large playing field, rest houses and most importantly there was a small lake at the middle of the spot with a boat waiting for cruising! BREAKFAST We enjoyed our breakfast at a nice natural cottage with winter cakes, parata, chicken curry and tea/coffee.
12
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
SPORTS When four picnic buses arrived at the spot around 10.30 a.m., the place turned into a festive mood. Children with angelic faces were running, shouting and playing around. Couples enjoyed cruising by
boat at the lake. There were sports and fun events for the members and children. Members enthusiastically participated in the football and other competitions. The team “Jamuna” won the football championship. A large number of children participated in their respective competitions i.e., ‘race’, ‘spoon-marble race’ and ‘memory test’. The female participants of the picnic overwhelmingly took part in the ‘pillow-passing’ game. The special event for all –“Dress as you like” also entertained everyone. LUNCH Members took their lunch after the “Jummah” prayer. The dishes of lunch were delicious. Special thanks to Md. Shahid Farooqui FCS, Sr. Vice-President of ICSB for his overall supervision of the food and beverage. Though he was assigned with food and beverage sub-committee as an advisor, he assumed overall responsibility of the event. CULTURAL EVENTS The cultural program was quite lively and it was well participated by all. At the very beginning, children who wanted to perform instantly presented their performances and all of them were appreciated with prizes. Professional performers from a music team sang some beautiful songs but more importantly there were few surprise performances. The son and daughter of M Nurul Alam FCS rendered two songs beautifully and entertained all. Mohammad Iqbal Chowdhury ACS also
Institute News
surprised all by singing two very beautiful songs of old days. Md. Atiqur Rahman Talukder ACS played a tune of Tagore songs with his harmonica. Apart from above performances, Md. Selim Reza FCS, Imrul Ahmed FCS, Itrat Husain FCS and Mrs. Itrat Husain (Parveen Sultana) also rendered beautiful songs. In between the performances, the Sr. Vice-President of ICSB, Md. Shahid Farooqui commented that the TV channels may conduct a musical talent hunting program to find true musical talent among the members of ICSB. Everyone supported him with warm clapping.
of 48 gifts were distributed including the 1st prize, a Digital Camera. A.T.M. Tahmiduzzaman ACS conducted the raffle draw part spontaneously within the time constraint.
RAFFLE DRAW This was an exciting part of the picnic. A total
RETURN After Maghrib prayers we returned from the memorable picnic with warm feeling in our heart and still we cherish every bit of that good memory.
The day of the picnic was full of life and members from all age groups dedicated themselves to savoring every moment of it. CONCLUSION Mohammad Sanaullah FCS, the President of ICSB, conveyed thanks and gratitude to the Members who make the picnic a success.
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
13
Institute News
CONGRATULATIONS TO NEWLY ELEVATED FELLOW MEMBERS IN 2013 The Council has elevated ten Associate Members to Fellow Members. The newly elevated Fellow Members are:
F-0131
F-0136
Md. Kazi Mahabub Murshed ACA, FCS Finance Director American International School, Dhaka
Mohammad Abdullah Al Mamun FCS FAVP & Senior Manager – Board Secretariat Eastern Bank Limited
F-0132
F-0137
Md. Jakir Hossain FCS Company Secretary BIO Group
Md. Kausar Alam FCMA, FCS Group Chief Financial Officer RahimAfrooz (BD) Limited
F-0133
F-0138
Md. Hasan Imam FCS Deputy General Manager BASIC Bank Limited
Reza-Ur-Rahman Mahmud ACA, FCS Finance Manager – Finance Division DHL Worldwide Express (Bangladesh) Pvt. Ltd.
F-0134
F-0139
Nitai Pada Saha FCMA, FCS Head of Finance & Accounts RahimAfrooz Renewable Energy Limited
Muhammad Hasanur Rahman Rakib FCS Deputy General Manager Grameenphone Ltd.
F-0135 Mohammad Solaiman Uddin FCS Assistant General Manager (F & A) Partex Rotor Mills Ltd.
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
15
Institute News
CONGRATULATIONS TO NEW ASSOCIATE MEMBERS During 2012 the following Chartered Secretaries were admitted as Associate Members of the Institute: A-0283
A-0290
Md. Lokman Hossain ACS Executive Officer – Share Department Social Islami Bank Limited
Mohammad Ashraf Uddin Chowdhury ACS Assistant General Manager (F & A) Navana Limited
A-0284
A-0291
Fardose Jahan ACS Company Secretary Fidelity Assets & Securities Company Limited
Shahadat Hossain Chowdhury ACS Company Secretary & Chief Accountant Huawei Technology (BD) Ltd.
A-0285
A-0292
Sabbirul Haque Chowdhury ACS Principal Officer – Board Secretariat Phoenix Finance & Investments Ltd.
Mohammad Delowar Hossain ACS Deputy Director Bangladesh Securities & Exchange Commission (BSEC)
A-0286
A-0293
Md. Zakir Hossain ACS Sr. Officer (Audit Division) Pubali Bank Limited
Md. Shiful Islam ACS Senior Executive – Corporate Governance & Financial Reporting (Compliance Department) Dhaka Stock Exchange Limited
A-0287 Muhammed Moshiur Rahman ACS Head of Finance Syngenta Bangladesh Limited
SUCCESS GREETINGS A-0239
A-0288 Muhammad Aminur Rahman ACS Deputy Manager – Finance Ascent Group
A-0289 Mohammad Mahtab Uddin ACS Assistant Vice President Mercantile Bank Ltd.
16
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
Md. Humayun Kabir ACS Assistant Vice President and Company Secretary (C.C.) of SIBL has recently been promoted to Company Secretary of the Bank.
CSIA News
New President (2013) of CSIA Peter Turnbull B.Com, LLB, FCIS, FAICD, is the newly elected President of CSIA with more than 25 years’ experience in commercial law and e x e c u t i v e management. His experience includes Group Company Secretary, General Counsel, Director and General Manager roles with ASX Top 50 companies, regulatory authorities in Australia and Hong Kong and government owned corporations. He has particular expertise in corporate law, technology commercialization, corporate governance and risk management, strategic planning, mergers and acquisitions and commercial negotiation and dispute resolution. Current directorships and positions include: • Chairman, The Queensland Facility for Advanced Bioinformatics (University of Queensland • Director, Holiday Retreats Australia Group • Director, Chartered Secretaries Australia Limited • President and Australian Representative, Corporate Secretaries International Association (Geneva) • Councilor and Australian Representative, Institute of Chartered Secretaries and Administrators (London) He is the Chairman of the Calix Corporate Governance Committee and Audit and Risk Management Committee and a member of the Remuneration and Nominations Committee. The key issues for CSIA in 2013 are: a) Strategic Planning - development of a new Strategic Plan for the next 3 years (2013 – 2015), b) Management - Enhancing CSIA’s internal management capability, c) New Members – continuing to recruit new members from around the world, d) Revenue – maximising CSIA’s revenue base
from both membership and sponsorship initiatives, e) Progressing Key Projects including: • The “Company Secretaries Toolkit”, • World Trade Organisation recognition, • Continuing the development and communication of CSIA’s “Universal Corporate Governance Principles”, • Convening conferences or roundtable events with themes and educational opportunities which will benefit CSIA’s members. CSIA Executive Committee for 2013 Turning to CSIA for 2013, the CSIA Executive Committee as elected for this year is as follows: Executive Committee Honorary Officers
APPOINTEE
MEMBER COUNTRY
President Vice-President Treasurer
Peter Turnbull Australia Carina Wessels South Africa Grace Tan Singapore Dr. Cheah Foo Secretary Malaysia Seong Executive Committee Members Immediate Past Nesar Ahmad India President Past President April Chan Hong Kong/China Executive Committee Kathy Coombs USA Member Executive Committee Member
Pious Manamike
Zimbabwe
Strategic Priorities CSIA was established in 2010 as a non-profit organisation committed to improving the recognition and understanding of the practice of corporate secretaryship and the role of the corporate secretary and to work to improve governance standards in general. CSIA is an inclusive and global organisation with eighteen member organisations (representing some 100,000 corporate secretaries and governance professionals) making up its membership base at this stage. CSIA has achieved a range of positive outcomes since 2010 which include the development of a range of governance related principles and guidelines, holding successful conferences and roundtable events and campaigning for greater recognition by global regulators of the important role played by corporate secretaries. THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
17
Article
Application of IFRS in preparation of Financial Statements By M. Moshiur Rahman FCA, ACS Introduction to IFRS International Financial Reporting Standards (IFRS): Previously known as IAS International Accounting Standards Board (IASB, formerly IASC) committed to developing a single set of high-quality, global accounting standards Wide global application IFRS mandatory for EU listed companies from 2005 IFRS either permitted or required in over 100 countries Brazil, India, China, Korea, Canada adopting or converging But Japan adoption plans delayed, USA plans on hold Primary guidance is standards (IFRS’s / IAS’s) Supported by interpretations from International Financial Reporting Interpretations Committee (IFRIC, formerly SIC) IFRS – Guidance When No Specific Standard Exists: When IFRS standards do not cover specific issues, companies should consider: Guidance and requirements in the standards dealing with similar and related issues The conceptual framework of the IASB Most recent pronouncements of other standard-setting bodies that use a similar conceptual framework Accepted industry practice, to the extent that they do not conflict with the standards, interpretations and the “Framework”. New IFRSs and adoption dates Published, adoption in 2013
To be published, adoption 2015 (-16)
Joint Ventures (IFRS 11)
Financial Instruments: IAS 39 replacement Revenue Recognition
Consolidation (IFRS 10) Disclosures of interests in other companies (IFRS 12) “How to” Fair value (IFRS 13) Employee benefits (IAS 19 Revised)
18
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
Leases
Convergence – why bother? Effective functioning of capital markets requires: Investor understanding of financial statements Investor trust in financial statements Divergence reduces understanding: increased compliance cost Reconciliation between IFRS and national GAAP Higher audit fees Divergence reduces trust: Higher investor risk premium - cost of capital for issuers Convergence – criteria for success? Both sets of standards to be converged are: Complete Of high quality Widely accepted and used Reasonably comparable, with any differences: Transparently disclosed Understood and accepted by investors Consistently interpreted and applied in practice SEC removed US GAAP reconciliation requirement for foreign private issuers in 2007 Some common principles underlying recent IFRSs Use objective evidence not management intentions Greater use of fair values instead of historical cost Reduce or eliminate alternatives where possible Income statement = closing balance sheet – opening balance sheet Convergence with US GAAP Bring off balance sheet items on to balance sheet Control model instead of risks and rewards Fairly presented Only full compliance with IFRS pronouncements results in fairly presented IFRS financial statements IFRS can vary from local accounting/tax laws,
Article
e.g: Accruals vs. cash basis Bad debt recognition Substance over Form Failure to follow IFRS could lead to material misstatement in financial statements Why shall we prepare financial statements following IFRS? Corporate Governance Guideline: As per BSEC NOTIFICATION of 07 August 2012, No. EC/CMRRCD/2006-158/134/Admin/44 1.5 The Directors’ Report to Shareholders: (xi) The financial statements prepared by the management of the issuer company present fairly its state of affairs, the result of its operations, cash flows and changes in equity. (xii) Proper books of account of the issuer company have been maintained. (xiii) Appropriate accounting policies have been consistently applied in preparation of the financial statements and that the accounting estimates are based on reasonable and prudent judgment. (xiv) International Accounting Standards (IAS)/Bangladesh Accounting Standards (BAS)/International Financial Reporting Standards (IFRS)/Bangladesh Financial Reporting Standards (BFRS), as applicable in Bangladesh, have been followed in preparation of the financial statements and any departure there-from has been adequately disclosed. CA 1994 Sec.189: Authentication of balance sheet, profit and loss account, etc:Every balance sheet, and every profit and loss account or income and expenditure account shall be signed on behalf of the Board of Directors(i) in the case of banking company, by the manager, or managing agent, if nay, and, where there are more than three directors of the company, by at least three of those directors or, where there are not more than three directors, by all the directors; (ii) in the case of any other company, by its managing agent, manager or secretary, if any, and by not less than two directors of the
company one of whom shall be the managing director where there is one. Management's responsibility for the financial statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Bangladesh Financial Reporting Standards (BFRS), the Companies Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatements, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors' responsibility Audit Opinion: Auditor give their opinion whether the financial statements have been prepared in accordance with Bangladesh Financial Reporting Standards (BFRS), give a true and fair view of the state of the company's affairs and whether the results of its operations and cash flows for the year then ended and comply with the Companies Act 1994, the Securities and Exchange Rules 1987 and other applicable laws and regulations. Applicable Standards in Bangladesh • IAS 1: Presentation of Financial Statements • IAS 2: Inventories • IAS 7: Statement of Cash Flows • IAS 8: Accounting Policies, Changes in \ Accounting Estimates and Errors • IAS 10: Events After the Reporting Period • IAS 11: Construction Contracts • IAS 12: Income Taxes • IAS 16: Property, Plant and Equipment • IAS 17: Leases • IAS 18: Revenue • IAS 19: Employee Benefits • IAS 20: Accounting for Government Grants and Disclosure of Government Assistance • IAS 21: The Effects of Changes in Foreign THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
19
Article
Exchange Rates • IAS 23: Borrowing Costs • IAS 24: Related Party Disclosures • IAS 26: Accounting and Reporting by Retirement Benefit Plans • IAS 27: Separate Financial Statements • IAS 28: Investments in Associates • IAS 31: Interests In Joint Ventures • IAS 32: Financial Instruments: Presentation • IAS 33: Earnings Per Share • IAS 34: Interim Financial Reporting • IAS 36: Impairment of Assets • IAS 37: Provisions, Contingent Liabilities and Contingent Assets • IAS 38: Intangible Assets • IAS 39: Financial Instruments: Recognition and Measurement • IAS 40: Investment Property • IAS 41: Agriculture • IFRS 1: First-time Adoption of International Financial Reporting Standards • IFRS 2: Share-based Payment • IFRS 3: Business Combinations •IFRS 4: Insurance Contracts • IFRS 5: Non-current Assets Held for Sale and Discontinued Operations • IFRS 6: Exploration for and Evaluation of Mineral Assets • IFRS 7: Financial Instruments: Disclosures • IFRS 8: Operating Segments • IFRS 10: Consolidated Financial Statements • IFRS 11: Joint Arrangements • IFRS 12: Disclosure of Interests in Other Entities • IFRS 13: Fair Value Measurement ** IFRS for SMEs (Small and Medium Size Entities) IAS 1: Presentation of financial statements The objective of IAS 1 is to set out the basis for the presentation of financial statements and to ensure comparability with previous periods and with other entities. The standard identifies a minimum content of what should be included in a set of financial statements as well as guidelines as to their structure, although rigid formats are not prescribed. IAS 2: Inventories Inventories can take a number of different
20
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
forms which include assets purchased and held for resale in the ordinary course of business, raw materials, partly processed assets and finished goods that have undergone the full production process. IAS 2 applies to all types of entity but some types of inventory are excluded from IAS 2, for example: 1. Work in progress arising under construction contracts (dealt with by IAS 11 Construction contracts); 2. Financial instruments (dealt with by IAS 32 Financial instruments: presentation and IAS 39 Financial instruments: recognition and measurement); and 3. Biological assets related to agricultural activities and agricultural produce at the point of harvest (dealt with by IAS 41 Agriculture). IAS 7: Statement of cash flows The objective of IAS 7 is to provide information about the historical changes in cash, and cash equivalents, of an entity. This information is presented via a statement of cash flows that classifies cash flows under the headings of: • operating activities; • investing activities; and • Financing activities. The preparation of a statement of cash flows as part of an entity’s financial statements is required of all entities, with no exceptions. IAS 8: Accounting policies, changes in accounting estimates and errors The objective of IAS 8 is to enhance the relevance, reliability and comparability of financial statements, and it should be applied by an entity to select and apply its accounting policies. In addition, IAS 8 should be applied where an entity changes its accounting policies or estimates, and for the correction of errors arising in prior periods. IAS 10: Events after the reporting period The objective of IAS 10 is to provide guidance as to how to deal with events that occur after the end of the reporting period but before the date on which the financial statements are
Article
authorized for issue by the directors. These are described as “events after the end of the reporting period”. IAS 10 makes a distinction between events that occur during this period which should be adjusted for in the financial statements and those that should instead only be disclosed. IAS 11: Construction contracts The objective of IAS 11 is to prescribe the accounting treatment of the revenues receivable and costs incurred in a construction contract. IAS 11 defines a construction contract as one specifically negotiated for the construction of an asset, for example a building, pipeline or ship, or a combination of assets that are closely related in terms of their design, technology and function or their ultimate purpose or use. Services that are directly related to the construction of an asset, for example project management, meet the definition of a construction contract, as does a contract for the demolition of an asset. The dates on which a construction contract starts and ends usually fall in different accounting periods, so the principal concern is how to allocate revenue and costs to the different accounting periods to reflect the reality of the construction activity as it takes place. IAS 11 applies only to the contractor, i.e. the entity carrying out the work; it does not apply to the customer for whom the work is being carried out. The customer will usually account for the constructed asset in accordance with IAS 16 Property, plant and equipment. IAS 12: Income taxes The objective of IAS 12 is to prescribe the accounting treatment for income taxes. The term ‘income taxes’ is wide and covers all domestic and foreign taxes which are based on an entity’s taxable profits, as well as other taxes such as a withholding tax which is payable when an entity pays a dividend.
IAS 12 concerns two different taxation issues: 1. Current tax: this is defined as the amount of income tax payable, or recoverable, by an entity in respect of its taxable profit, or loss, for a period. 2. Deferred tax: this is an accounting measure rather than a tax levied by government; it represents tax payable or recoverable in future accounting periods in relation to transactions which have already taken place. IAS 16: Property, plant and equipment IAS 16's objective is to set out the accounting treatment for PPE. The principal issues in accounting for PPE and addressed in IAS 16 are the recognition of assets, the determination of their carrying amounts and the charging of depreciation. The standard should be applied in accounting for all PPE except where another international standard specifically requires a different approach to be applied. IAS 17: Leases IAS 17 sets out the appropriate accounting treatment and disclosures for lease transactions in the financial statements of an entity; it should be applied in accounting for all lease transactions except those that are specifically identified below. IAS 17 sets out the accounting requirements for both leasees and leasers. IAS 17 identifies transaction:
two
types
of
lease
• A finance lease which “is a lease that transfers substantially all the risks and rewards incident to ownership of an asset. Title may or may not eventually be transferred”; and • an operating lease which is “a lease other than a finance lease”. IAS 18: Revenue Revenue is simply income that arises in the course of the ordinary activities of the entity and is often known by different names, including sales, turnover, fees, interest, dividends and royalties.
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
21
Institute News
IAS 19: Employee benefits IAS 19 should be applied by all entities in accounting for the provision of all employee benefits, except those to which IFRS 2 applies. The standard applies regardless of whether the benefits have been provided as part of a formal contract. Employee benefits are all forms of consideration, for example cash bonuses, retirement benefits and private health care, given to an employee by an entity in exchange for the employee’s services. IFRIC 14 IAS 19 – The Limit on a defined benefit asset, minimum funding requirements and their interaction was published to address the significantly different practices that entities were following in their treatment of the effect of a minimum funding requirement on the amount of a defined benefit asset recognized. IAS 20: Accounting for government grants and disclosure of government assistance IAS 20 sets out the accounting requirements when an entity receives a form of government assistance. The reference to ‘government’ is quite wide and includes, for example, government agencies and similar local, national or international bodies. IAS 20 does not deal with: • the issues that arise in accounting for government grants in financial statements reflecting the effect of changing prices; • the accounting treatment of tax-related government assistance; • government participation in the ownership of the enterprise; or • Government grants received in relation to an entity’s agricultural activities and accounted for in accordance with IAS 41 Agriculture. IAS 21: The effects of changes in foreign exchange rates An entity may carry on foreign activities either by conducting transactions in foreign currencies, for example purchasing a non-current asset from an overseas supplier, exporting goods to an overseas customer or arranging a loan in a foreign currency, or by
22
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
having foreign operations, for example a subsidiary or branch located overseas. In addition, an entity may choose to present its financial statements in a foreign currency. The objective of IAS 21 is to prescribe how to include foreign currency transactions and foreign operations in the financial statements of an entity, and how to translate financial statements into a different currency for presentation purposes. IAS 23: Borrowing costs The objective of IAS 23 is to set out the accounting treatment for borrowing costs. The principal issue is whether finance costs on borrowings incurred during the construction of an asset are, in effect, part of the cost of the asset. The recognition of borrowing costs as part of the cost of the related asset is known as ‘capitalizing’ such costs. IAS 24: Related party disclosures The principal objective of IAS 24 is to ensure that an entity's financial statements contain the disclosures necessary to draw attention to the possibility that its financial position, and profit or loss, may have been affected by the existence of related parties and by related party transactions. IAS 24 not only requires transactions with key management personnel, for example the directors, to be disclosed, but also ensures that important information about the rewards and incentives available to them are clearly set out in the financial statements. Knowledge of related party transactions, any outstanding balances with a related party and the nature of related party relationships may affect the assessment of an entity's operations by users of the financial statements. Such assessments are likely to include the risks and opportunities facing an entity. Related party relationships are, however, a normal feature of commerce and business, so IAS24 does not attempt to prevent such relationships or impute revised values to related party transactions.
Recommendations from ICSB in the new Companies Act 2013
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
55
Recommendations from ICSB in the new Companies Act 2013
56
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
Recommendations from ICSB in the new Companies Act 2013
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
57
Recommendations from ICSB in the new Companies Act 2013
58
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
Recommendations from ICSB in the new Companies Act 2013
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
59
Recommendations from ICSB in the new Companies Act 2013
60
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
Recommendations from ICSB in the new Companies Act 2013
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
61
Recommendations from ICSB in the new Companies Act 2013
62
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
Recommendations from ICSB in the new Companies Act 2013
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
63
Recommendations from ICSB in the new Companies Act 2013
64
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
Recommendations from ICSB in the new Companies Act 2013
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
65
Recommendations from ICSB in the new Companies Act 2013
66
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
Recommendations from ICSB in the new Companies Act 2013
THE CHARTERED SECRETARY J A N U A R Y- M A R C H 2 0 1 3
67