March 21, 2023
DHAKA – Banks and non-banks in Bangladesh are not properly following the International Financial Reporting Standard (IFRS) and so, the real picture is not seen in their financial reports, said Md Hamid Ullah Bhuiyan, chairman of Financial Reporting Council (FRC).
The FRC is an independent oversight body that aims to bring trust, credit worthiness, transparency and accountability in the audited reports and accounting of publicly listed companies.
“If they [financial institutions] followed the IFRS properly, then their assets would erode 40 per cent due to the carry over classified loans,” he added.
At present, financial institutions in the country operate in line with the central bank’s directives while the IFRS is not followed.
Bhuiyan yesterday made these comments while speaking at CMJF Talk, organised by the Capital Market Journalists’ Forum (CMJF) at its office in Dhaka.
“The classified loans are being carried forward year after year. However, there is very little possibility to get back the fund,” the FRC chairman said.
Borrowers now reschedule loans by paying a very minimal amount and then borrow from other banks. As a result, the other banks also face the same problem.
“The classified loans are being carried forward year after year. However, there is very little possibility to get back the fund,” the FRC chairman said
“We are requesting the central bank to make the banks bound to follow the IFRS. But we did not get any positive signal yet,” he added.
Bhuiyan then said many companies make money from the capital market by manipulating their financial reports with general investors falling victim. So, the FRC plans to work on listed companies after getting the adequate manpower.
In order to ensure transparency in financial reporting, the FRC is going to enlist auditors. If they commit any wrongdoing, then they too will be punished.
Besides, no auditor will be allowed to make a report public without vetting from the FRC, he said, adding that if any company’s revenue crosses Tk 50 crore, then it will be considered a public interest entity.
There are around 3,400 such entities at present. Apart from these, around 2,500 microcredit organisations have been operating in Bangladesh under the FRC’s radar.
The FRC will form separate panel auditors for banks, insurance companies, and listed companies that would have the sole authority to audit them.
Bhuiyan also expressed pessimism about the response from the insurance sector as they did not agree to follow the IFRS.
Life insurance companies do not form any profit and loss accounts, keeping only revenue accounts instead.
However, the keeping of such accounts is mandatory as per the International Accounting Standard regardless of a company’s nature.
“We requested them, but none responded yet,” he said.
The FRC is now working to form necessary regulations and recruit adequate manpower. When all this is in hand, it will then work in full swing and people will get the benefit, Bhuiyan added.
Ziaur Rahman, president of the CMJF, and Abu Ali, secretary general, were present.