A 2003 World Bank review of the accounting and auditing environment in Bangladesh noted that national practices were not in line with internationally acceptable standards and suffered from "institutional weaknesses in regulation, compliance, and enforcement of standards and rules." The World Bank therefore recommended improving the accounting and auditing framework by adopting International Financial Reporting Standards (IFRSs) without any modifications and setting up an independent oversight body for enforcing international standards. According to a comparative analysis of national standards with IFRSs conducted by the South Asian Federation of Accountants (SAFA) for five South Asian countries including Bangladesh, the Institute of Chartered Accountants of Bangladesh (ICAB) adopted most IFRSs as Bangladesh Accounting Standards. However, the national standards are modified to reflect local legal requirements. The 2007 ICAB self-assessment confirmed that Bangladesh adopted international standards with modifications. These national standards are mandatory for all listed companies and recommended for other entities. The SAFA analysis added that the ICAB is making efforts to eliminate the differences with the international equivalents. As of 2007, Bangladesh had adopted 31 IFRSs and 5 were under review.

General Overview

The World Bank's review of the accounting and auditing environment in Bangladesh led to the publication of the Report on the Observance of Standards and Codes (ROSC) in May 2003. International Financial Reporting Standards (IFRSs) (formerly known as International Accounting Standards, or IASs) and International Standards on Auditing (ISAs) were used as the benchmarks for assessing national standards. As pointed out in the report, Bangladeshi accounting and auditing practices were not in line with internationally acceptable standards and suffered from "institutional weaknesses in regulation, compliance, and enforcement of standards and rules" (cover page). The World Bank consequently made recommendations to the Bangladeshi government which included, but were not limited to, improving the accounting and auditing framework by adopting international standards without any modifications and setting up an independent oversight body to enforce IFRSs and ISAs. It also recommended developing a simplified reporting framework for small and medium-sized entities (SMEs). At the time of the World Bank assessment, only 16 Bangladesh Accounting Standards (BASs) existed.

According to the IAS Plus website, as of July 2007, Bangladesh adopted 31 IFRSs as BASs. However, these national standards are modified to reflect local legal requirements. The South Asian Federation of Accountants (SAFA) conducted a comparative analysis of national standards with IFRSs for five South Asian countries including Bangladesh. In this analysis the SAFA concluded that "[in Bangladesh] while formulating the Accounting Standards, the Technical and Research Committee of the Council of the Institute tries to integrate the International Accounting Standards (IAS) with the local laws, conditions and practices. During the process of revision of existing Accounting Standards, all-out efforts are being made to narrow down (and, if possible, eliminate) differences with the corresponding IAS" (p. 14). The 2007 self-assessment prepared by the Institute of Chartered Accountants of Bangladesh (ICAB) confirmed that Bangladesh adopted international standards with adaptations to ensure compatibility with the national legal environment and relevance with regard to applicability in the national context. According to the SAFA report, BASs are mandatory for listed companies and are recommended for all other entities.

The legal framework for Bangladeshi accounting and reporting requirements as described in the World Bank assessment of 2003 consists of the Companies Act of 1994. The World Bank noted that some accounting requirements specified in the Act were incompatible with international standards and "the formats for presentation of financial statements and requirements on disclosures prescribed in the Act need updating or removing" (p. 1). The enforcement of the provisions of the Companies Act is conducted by the Office of the Registrar of Joint Stock Companies (RJSC). However, the World Bank noted that the "RJSC has no technical capacity to identify accounting and auditing violations; in most cases it does not even enforce timely filing of annual audited financial statements" (p. 6).

Listed companies are regulated by the Securities and Exchange Commission (SEC) and comply with SEC accounting and disclosure requirements. Per the SEC rules, all listed companies are legally required to follow BASs. The ICAB, in a March 2007 self-assessment, confirmed that "the Securities & Exchange Rules of 1987 require that the financial statements of an issuer of a listed security shall be prepared in accordance with the applicable IASs" (pp. 72-73). However, the World Bank assessment pointed out that even though the SEC was working towards improving the quality of financial reporting, it lacked trained staff to monitor compliance with the specified requirements.

The Bangladesh Bank regulates the banking sector and, empowered by the Companies Act and the Bank Companies Act of 1991, sets accounting and auditing requirements. According to the IAS Plus website, "the Bank Company Act of 1991 mandates reporting formats and disclosure based on BAS 30, which is similar to IAS 30." However, IAS 30 was replaced by IFRS 7 in 2005 and the latter has not been adopted in Bangladesh. The World Bank also pointed out that "the banking regulator has no mechanism to monitor and enforce accounting and financial reporting requirements" (p. 7). The Bangladesh Bank also regulates nonbanking financial institutions. Governed by the Insurance Act of 1938, the Chief Controller of Insurance regulates the insurance sector. However, the World Bank noted that both the Banking Act and the Insurance Act do not mandate the use of BASs or IFRSs. Moreover, the World Bank pointed that "accounting and disclosure requirements under the Insurance Act lead to significant deviations from IAS requirements" (p. 8).

Established by Bangladesh Chartered Accountants Order of 1973, the ICAB is the national accounting and auditing standard-setter and regulator of the accounting profession. Although the ICAB does not have a legal mandate for setting accounting standards, it has a standard-setting committee which, according to the World Bank, "selects particular IAS as the basis for drafting BAS" (p. 6). The World Bank recommended strengthening the capacity of the ICAB and improving professional education and training arrangements. The ICAB and the Institute of Cost and Management Accountants of Bangladesh are listed as members on the International Federation of Accountants website. The ICAB is also a member of the SAFA and the Confederation of Asian and Pacific Accountants.

The Principles

IFRS 1: First-time Adoption of International Financial Reporting Standards (effective 2006)

ID

According to the 2007 IAS Plus update and the SAFA comparison, adoption of IFRS 1 is under review by the ICAB.

IFRS 2: Share-based Payment (effective 2005)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IFRS 2 (effective 2005) was adopted as Bangladesh standard in July 2006 and has been effective from January 2007. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IFRS 3: Business Combinations (effective 2004)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IFRS 3 (effective 2004) was adopted as Bangladesh standard in December 2005 and has been effective from January 2007. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IFRS 4: Insurance Contracts (effective 2006)

ID

According to the IAS Plus website update of August 2007, adoption of IFRS 4 is under review by the ICAB.

IFRS 5: Non-current Assets Held for Sale and Discontinued Operations (effective 2005)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IFRS 5 (effective 2005) was adopted as Bangladesh standard in December 2005 and has been effective from January 2007. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IFRS 6: Exploration for and Evaluation of Mineral Resources (effective 2006)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IFRS 6 (effective 2006) was adopted as Bangladesh standard in July 2006 and has been effective from January 2007. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IFRS 7: Financial Instruments: Disclosures (effective 2007)

II

There is insufficient publicly available information that addresses this principle.

IAS 1: Presentation of Financial Statements (effective 2007)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 1 (effective 2007) was adopted as BAS in July 2006 and has been effective from July 2006. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 2: Inventories (effective 2005)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 2 (effective 2005) was adopted as BAS in July 2006 and has been effective from July 2006. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 7: Cash Flow Statements (effective 1994)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 7 (effective 1994) was adopted as BAS in January 1986 and became effective from January 1994. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 8: Accounting Policies, Changes in Accounting Estimates and Errors (effective 2005)

II

According to the IAS Plus website Update of August 2007, the latest version of IAS 8 was adopted as BAS in July 2006 and has been effective ever since However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 10: Events after the Reporting Period (effective 2005)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 10 (effective 2005) was adopted as BAS in July 2006 and has been effective ever since. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 11: Construction Contracts (effective 1995)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 11(effective 1995) was adopted as BAS in January 1990 and became effective from January 1999. IAS 11 was subsequently amended. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 12: Income Taxes (effective 2001)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 12 (effective 2001) was adopted as BAS in January 1990 and became effective from January 1998. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 14: Segment Reporting (effective 1998)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 14 (effective 1998) was adopted as BAS in July 2003 and has been effective from January 2004. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 16: Property, Plant and Equipment (effective 2005)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 16 (effective 2006) was adopted as BAS in July 2006 and has been effective ever since. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 17: Leases (effective 2005)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 17 (effective 2005) was adopted as BAS in July 2006 and has been effective ever since. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 18: Revenue (effective 1995)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 18 (effective 1995) was adopted as BAS in January 1993 and became effective from January 1995. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 19: Employee Benefits (effective 2006)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 19 (effective 2006) was adopted as BAS in July 2003 and became effective from January 2004. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 20: Accounting for Government Grants and Disclosure of Government Assistance (effective 1984)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 20 (effective 1984) was adopted as BAS in November 1998 and became effective from January 1999. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 21: The Effects of Changes in Foreign Exchange Rates (effective 2005)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 21(effective 2006) was adopted as BAS in July 2006 and has been effective ever since. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 23: Borrowing Costs (effective 1995)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 23 (effective 1995) was adopted as BAS in July 2006 and has been effective ever since. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 24: Related Party Disclosures (effective 2005)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 24 (effective 2006) was adopted as BAS in July 2006 and has been effective ever since. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 26: Accounting and Reporting by Retirement Benefit Plans (effective 1998)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 26 (effective 1998) was adopted as BAS in July 2003 and became effective from January 2004. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 27: Consolidated and Separate Financial Statements (effective 2005)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 27 (effective 2005) was adopted as BAS in July 2006 and has been effective ever since. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 28: Investments in Associates (effective 2005)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 28 (effective 2005) was adopted as BAS in July 2006 and has been effective ever since. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 29: Financial Reporting in Hyperinflationary Economies (effective 1990)

NC

According to the IAS Plus website update of August 2007, IAS 29 has not been adopted.

IAS 31: Interests in Joint Ventures (effective 2005)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 31(effective 2005) was adopted as BAS in July 2006 and has been effective ever since. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 32: Financial Instruments: Disclosure and Presentation (effective 2005)

ID

According to the SAFA comparison, IAS 32 is under review.

IAS 33: Earnings per Share (effective 2005)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 33 (effective 2005) was adopted as BAS in July 2006 and has been effective ever since. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 34: Interim Financial Reporting (effective 1999)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 34 (effective 1994) was adopted as BAS in December 1998 and has been effective since January 1999. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 36: Impairment of Assets (effective 2004)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 36 (effective 2004) was adopted as BAS and became effective from January 2004. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 37: Provisions, Contingent Liabilities and Contingent Assets (effective 1999)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 37(effective 1999) was adopted as BAS in December 2003 and has been effective since January 2004. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 38: Intangible Assets (effective 2004)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 38 (effective 2006) was adopted as BAS and became effective from January 2005. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 39: Financial Instruments: Recognition and Measurement (effective 2006)

ID

According to the IAS Plus website Update of August 2007, IAS 39 has not been adopted yet and is under ICAB review.

IAS 40: Investment Property (effective 2005)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 40 (effective 2005) was adopted as BAS in July 2006 and has been effective ever since. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.

IAS 41: Agriculture (effective 2003)

II

According to the 2007 IAS Plus Update and the SAFA comparison, IAS 41(effective 2003) was adopted as BAS in July 2006 and has been effective ever since. However, Bangladeshi standards are modified to ensure compatibility with national legal requirements and there is no information as to the extent of differences between national and international requirements.