Financial Statement Analysis

BAS and BFRS

PREPARED BY

S M SAMIUL ISLAM 34045

MUHD. SAJIDUR RAHMAN 34050
ASHIKUL ISLAM 34060

PREPARED FOR

MR. MOHAMMAD SALAHUDDIN CHOWDHURY

ASSISTANT PROFESSOR,
DEPARTMENT OF FINANCE (EMBA PROGRAM),
UNIVERSITY OF DHAKA.

DATE OF SUBMISSION: 27DECEMBER 2016

Letter of Transmittal

27 December 2016
Mr. Mohammad Salahuddin Chowdhury,
Assistant professor,
Department of Finance (EMBA Program),
University of Dhaka.

Re: Financial Analysis of the Financial Statements of Delta Brac Housing Finance
Corporation Limited for the year ended 2015-2016

Dear Sir,
We are pleased to present this report which is based on our study on Financial
Analysis of the Financial Statements of Delta Brac Housing Finance Corporation
Limited for the Year of 2015-2016 in according with BAS and BFRS.
We are very much thankful to you for assigning us with such type of practical work
that has enhanced our knowledge and experience.

Sincerely Yours,

S M Samiul Islam __________________

Muhd. Sajidur Rahman __________________

Ashikul Islam __________________

Executive Summary
This report has been prepared as a study on Financial Statements of Delta Brac Housing

Finance Corporation Limited (DBH), which is a Dhaka Stock Exchange (DSE) enlisted Financial

Institution (FI), for the Year of 2015-2016 based on Bangladesh Accounting Standard (BAS) and

Bangladesh Financial Reporting Standard (BFRS).

Our prime goal was to pinpoint the grey areas of the Financial Statements of DBH where they

used manifold BAS & BFRS and to what extent they comply. We have browsed through the

company website, DSE websites, and importantly ICAB websites for collecting secondary data to

enrich our understanding. We understood that being a Financial Institution DBH has to comply

with Bangladesh Bank (BB) as well in addition to BAS and BFRS. It came out that DBH follows

most of the BASs and BFRSs applicable to the company. Those BAS and BFRSs, DBH does not

follow is either not applicable for the company or DBH follows special regulation imposed by

Bangladesh Bank.
 Table of Contents
CHAPTER 1.0
INTRODUCTION
1.1 Rationale............................................................................................................................1
1.2 Objectives..............................................................................................................................2
1.3 Methodology..........................................................................................................................3
1.3.1 Data analysis and interpretation.....................................................................................3
1.4 Limitations of the Report........................................................................................................4

CHAPTER 2.0
COMPANY OVERVIEW
Qualitative
2.0.1 Corporate Profile.................................................................................................................5
2.0.2 Mission................................................................................................................................6
2.0.3 Vision..................................................................................................................................6
2.0.4 Strategic Objectives............................................................................................................7
2.0.5 Competitive Strengths........................................................................................................8
2.0.6 Core Values........................................................................................................................9

CHAPTER 2.1
Quantitative
COMPANY OVERVIEW
2.1.1 Operational and Financial Highlights................................................................................10
2.1.2 Financial Highlights as required by Bangladesh Bank.....................................................11
2.1.3 Historical Record of Dividend Payments..........................................................................12
2.1.4 Financial Performance......................................................................................................13

CHAPTER 3.0
FINANCIAL STATEMENTS
 3.1 Balance Sheet.....................................................................................................................16
3.2 Profit and Loss Account.......................................................................................................18
3.3 Statement of Changes in Equity..........................................................................................20
3.4 Cash Flow Statement..........................................................................................................22

CHAPTER 4.0
SIGNIFICANT ACCOUNTING CONCEPTS
4.1 Statement of Compliance....................................................................................................24
4.1.1 Objective....................................................................................................................24
4.1.2 Purpose.........................................................................................................................24
4.1.3 Considerations..............................................................................................................25
4.1.4 Balance sheet...............................................................................................................26
4.1.5 Income Statement.........................................................................................................26
4.1.6 Statement of Changes in Equity...................................................................................26
4.1.7 Cash Flow Statement....................................................................................................27
4.1.8 Functional and presentation currency...........................................................................27
4.1.9 Use of estimates and judgments..................................................................................27

CHAPTER 5.0
ACCOUNTING STANDARDS
5.1 Bangladesh Accounting Standard (BAS)............................................................................28
5.2 Bangladesh Financial Reporting Standards........................................................................30

CHAPTER 6.1
ANALYSIS
BAS APPLICATION
6.1.1 BAS 1: Presentation of Financial Statements..................................................................31
6.1.2 BAS 2: Inventories............................................................................................................31
6.1.3 BAS 7: Statement of Cash Flows.....................................................................................31
6.1.4 BAS 8: Accounting Policies, Changes in Accounting Estimates and Errors....................32
6.1.4 BAS 10: Events after the Reporting Period......................................................................32
 6.1.5 BAS 11: Construction Contracts.......................................................................................32
6.1.6 BAS 12: Income Taxes.....................................................................................................32
6.1.7 BAS 16: Property, Plant and Equipment..........................................................................33
6.1.7 BAS 17: Leases................................................................................................................33
6.1.8 BAS 18: Revenue.............................................................................................................34
6.1.9 BAS 19: Employee Benefits.............................................................................................35
6.1.10 BAS 20: Accounting of Government Grants and Disclosure of Government Assistance
...................................................................................................................................................35
6.1.11 BAS 21: The Effects of Changes in Foreign Exchange Rates.......................................36
6.1.12 BAS 23: Borrowing Costs...............................................................................................36
6.1.13 BAS 24: Related Party Disclosure..................................................................................36
6.1.14 BAS 26 Accounting and Reporting by Retirement Benefit Plans...................................37
6.1.15 BAS 27 Separate Financial Statements.........................................................................37
6.1.16 BAS 28 Investment in Associates...................................................................................37
6.1.17 BAS 31 Investment in Joint Ventures.............................................................................37
6.1.18 BAS 32 Financial Instruments: Presentation..................................................................37
6.1.19 BAS 33 Earnings Per Share...........................................................................................38
6.1.20 BAS 34 Interim Financial Reporting...............................................................................38
6.1.21 BAS 36 Impairment of Assets........................................................................................38
6.1.21 BAS 37 Provision, Contingent Liabilities and Contingent Assets...................................39
6.1.22 BAS 38 Intangible Assets...............................................................................................40

CHAPTER 6.2
ANALYSIS
BFRS APPLICATION...............................................................................41
6.2.1 BFRS 2: Share Base Payment.........................................................................................41
6.2.2 BFRS 3: Business Combination.......................................................................................41
6.2.3 BFRS 4: Insurance Contracts...........................................................................................41
6.2.4 BFRS 5: Non-Currents Assets held for sale and discontinued operation........................41
6.2.5 BFRS 6: Exploration for and Evaluation of Mineral Resources.......................................41
 6.2.6 BFRS 7: Financial Instruments: Disclosure......................................................................41
6.2.7 BFRS 8: Operating Segment............................................................................................41
6.2.8 BFRS 10: Consolidated Financial Statements.................................................................42
6.2.8 BFRS 11: Joint Arrangements..........................................................................................42
6.2.8 BFRS 12: Disclosure of Interests in other Entities...........................................................42
6.2.9 BFRS 13: Fair Value Measurement..................................................................................42
6.2.10 BFRS 14: Regulatory Deferral Accounts........................................................................42

CHAPTER 7.0
BRIEF SUMMARY OF BAS and BFRS APPLICATION
7.1 Summary of BAS Compliance.............................................................................................43
7.2 Summary of BFRS Compliance..........................................................................................44

CHAPTER 8.0

COMMENTS and CONCLUSION

8.1 Comments...........................................................................................................................45
8.2 Conclusion...........................................................................................................................45

CHAPTER 9.0
REFERENCES
 CHAPTER 1.0
INTRODUCTION
1.1 Rationale

The primary rationale of the report is to relate our academic knowledge on Accounting and
Financial Statement analysis with the annual financial statement of Delta Brac Housing Finance
Corporation Limited (DBH).

In this report we have tried to scrutinize how DBH prepared their financials, which international
and local financial standards they followed; whether there is any discrepancy or not, and if so
then to what extent it is.

In our thorough analysis we have concentrated on the variance between the standard financial
criteria DBH used in preparing their financial statements and the binding requirements of
Bangladesh Accounting Standard (BAS) and Bangladesh Financial Reporting Standards
(BFRS).
1.2 Objectives

The key objective of the study is to present the core accounting standards that all the existing
companies in Bangladesh must follow in accordance with BAS and BFRS and then make a
nexus in between the conceptual and regulatory framework of BAS-BFRS and financial
statements of DBH.

Moreover, some secondary objectives of this study are-

1. To explain the nature of financial reporting.

2. To explain and demonstrate the differences between Non-Bank Financial Institution
(NBFI) criteria and accounting standards requirements.
3. To explain the purpose and principles underlying in various section of BAS and
appropriate BFRSs.
1.3 Methodology

Our study was primarily relied on Secondary research and hereinafter we gathered information
from reliable sources available online as follows-

1. Different trustworthy and reliable websites.

2. Journals available online.
3. Annual financial reports of DBH, collected from DBH company website.
4. BAS and BFRS framework collected from ICAB website.

1.3.1 Data analysis and interpretation

Data have been analyzed based on BAS and BFRS. Furthermore, some statistical and chart
graphs have been used for easy and better representation of data.
1.4 Limitations of the Report

On our way in completing this study, we have encountered some deleterious experiences without
which our study was supposed to be more smooth and concentrated. Some of them are as
follows-

Time Constrain.
Scarcity of reliable information relevant to the study.
Data Insufficiency at online.
Credibility check of the information presented online.
 CHAPTER 2.0
C O M PA N Y O V E R V I E W
Qualitativ
e

2.0.1 Corporate Profile

Delta Brac Housing Finance Corporation Ltd. (DBH) is the pioneer, largest and specialist in
Housing Finance Institution in the private sector of the country. After commencing operation in
1996 the company has registered commendable growth in creating home ownership in Dhaka
and other major cities of the country. At the same time, the company has been playing an active
role in promoting the real estate sector to the large cross sections of prospective clients who had
but yet unfulfilled dream of owning a home.
Among all Banks and Financial Institutions of Bangladesh only DBH has been rated the highest
AAA credit rating for ten consecutive years. The level of credit rating provides a very important
indication of the financial safety, security and strength of the concerned Bank or Financial
Institution and is particularly relevant to its depositors and other investors such as shareholders
and lenders.

2.0.2 Mission
To strengthen the society of the country by continually expanding home ownership.

2.0.3 Vision

To be the leading financial institution in the country with satisfied customers and employees and
to generate value for shareholders while contributing to the wellbeing of the society.
2.0.4 Strategic Objectives

Focus on building deep and long-standing relationships with clients, customers as well as
real-estate developers, and constantly look to improve the quality of products and
services.

Focus on developing human resource talents.

Ensure balanced growth with a disciplined approach to the management of risks and
costs.

Ensure adequate capital and liquidity to sustain business over the long term.
2.0.5 Competitive Strengths

DBH is the major player in the housing finance sector in Bangladesh since 1997 and remains
one of the leading non-bank financial institutions. Today, it is an acclaimed brand for a high level
of customer service; and respected for ethics, values and corporate governance.

DBH has developed an attractive suite of products that cater to all customer segments, with
primary focus to strengthen the society by expanding home ownership. By leveraging the
understanding of customers from different economic segments, it is today in a position to
extend a range of products and services in loans as well as deposits through specialized
team members. Thus, DBH provides one stop facility for customer needs.
2.0.6 Core Values
 CHAPTER 2.1
C O M PA N Y O V E R V I E W
Quantitat
ive

2.1.1 Operational and Financial Highlights

2.1.2 Financial Highlights as required by Bangladesh Bank
2.1.3 Historical Record of Dividend Payments

The Company started its journey in early 1997 and was able to pay the dividend to its
shareholders since 2000. The historical record of payment of dividend is given hereunder as
general disclosure to the stakeholders of the Company.
2.1.4 Financial Performance
 CHAPTER 3.0
F I N A N C I A L S TAT E M E N T S

3.1 Balance Sheet

The balance sheet is also referred to as the statement of financial position. The balance sheet
presents a company's financial position at the end of a specified date. Some describe the
balance sheet as a "snapshot" of the company's financial position at a point (a moment or an
instant) in time.
The Balance Sheet of the DBH presents the actual financial position at the end of 30 June 2016
and 30 June 2015. We observed Total Assets and Total Liability and Total Equity of DBH from
the year of 2013. We have found some fluctuation in Total Asset and Total Liability & Equity
which are graphically represented hereby-
 Balance Sheet Summary

As at June 30 2015 As at June 30 2016

3.2 Profit and Loss Account

An Income statement/Profit and Loss Account is statement that measures a company's financial
performance over a specific accounting period. Financial performance is assessed by giving a
summary of how the business incurs its revenues and expenses through both operating and
non-operating activities. It also shows the net profit or loss incurred over a specific accounting
period, typically over a fiscal quarter or year.
The income statement measures the financial performance of the DBH over the period
of 2014-2015 & 2015-2016. We observed operating profit before provision, Profit before tax and
profit after tax of DBH from the year from assessing the annual report. We have found some
which are graphically represented hereby:
3.3 Statement of Changes in Equity

Statement of Changes in Equity, often referred to as Statement of Retained Earnings details the change in owners' equity over an
accounting period by presenting the movement in reserves comprising the shareholders' equity.

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Page 24 of 45
After observing the changes in Equity Statement we have pinpointed an upward slope in
equity, which is being represented graphically here-

Total Equity

3,608,751,394

Total Equity

3,170,916,416

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3.4 Cash Flow Statement

A cash flow statement, also known as statement of cash flows, is a financial statement that
shows how changes in balance sheet accounts and income affect cash and cash equivalents,
and breaks the analysis down to operating, investing and financing activities.

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We observed the cash and cash equivalents of DBH from 2015 to 2016 assessing the annual
report. We have found some fluctuation in the cash and cash equivalents which are being
portrayed graphically here-

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Cash and Cash Equivalents

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Page 29 of 45
 CHAPTER 4.0
S I G N I F I C A N T

ACCOUNTING CONCEPTS
4.1 Statement of Compliance

Financial statements provide information about-

Financial Position.
Financial Statements.
Cash flows.

4.1.1 Objective

BAS 1 (presentation of financial statements) prescribes the basis for the presentation for
financial statements, so as to ensure comparability with:

The entitys own financial statement of previous periods; and

The Financial statement of other companies.

BAS 1 must be applied to all general purpose financial statements prepared in accordance
with BFRS. BAS 1 is concerned with overall considerations about the minimum content of a
set of financial statements. Whilst the terminology used was designed for profit-oriented
businesses, it can be used with modifications, for non-for-profit activities.

4.1.2 Purpose

The general purpose financial statements is to provide information about-

Financial position
Financial performance and cash flow
Management stewardship.

In order to accomplish the above, information is provided about the following aspects of the
entitys results:

Assets
Liabilities
Equity
Income and expenses
Other changes in equity
Cash flows.
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 4.1.3 Considerations

Considerations that should be complied with in the specific applications of the financial
statements of the general principles include-

Fair presentation.
Going concern.
Accrual Basis.
Materiality.

a. Fair presentation:

Fair representation requires the faithful representation of the effects of transactions, other
events and conditions in accordance with the definitions and recognition criteria for assets,
liabilities, income and expenses out in the framework.

b. Going concern:

It is an underlying assumption in the accounting framework. It means that an entity is

normally viewed as continuing in operation for the foreseeable future. It must look at least 12
months into the future from balance sheet date to see if the entity is a going concern.

c. Accrual Basis of Accounting:

It is also an underlying assumption in the framework. According to it items are recognized as

assets, liabilities, equity, income and expenses when they satisfy the recognition criteria for
those elements in the framework. To comply with the recognition requirements, they should
be-

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i. Recognized when they occur.
ii. Recorded in the financial statements of the period to which they relate.
iii. Profits and revenue must be matched against the expenditure incurred in earning it.

d. Materiality and aggregation:

Amounts which are immaterial can be aggregated with amounts of a similar nature or
function and need not to be presented separately.

Materiality: Omissions or misstatement of items are material if 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 size or nature of the item, or a combination of both could be
the determining factor. Here-

An error too trivial to influence financial decision is immaterial.

Determination of an items materiality is Subjective exercise.
The assessment of an item as material or immaterial may affect its Treatment in
financial Statements.

4.1.4 Balance sheet

The balance sheet tells whether the company can pay its bills on time, its financial flexibility
to acquire capital and its ability to distribute cash in the form of dividends to the company's
owners.

The top of the balance sheet has three items: (1) the legal name of the entity; (2) the title
(i.e., balance sheet or statement of financial position); and (3) the date of the statement.
Importantly, the financial position presented is always for the entity itself, not its owners. And
the balance sheet is always for a specific point in time: instead of just a date of, say,
December 31, 20XX, it would be more accurate to write December 31, 20XX, 11:59:59, or
any particular moment on the 31st.

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4.1.5 Income Statement

The income statement (also known as the profit and loss statement or P&L) tells both the
earnings and profitability of a business. The P&L is always for a specific period of time, such
as a month, a quarter or a year. Because a company's operations are ongoing, from a
business perspective these cut-offs are arbitrary, and they result in many of the problems in
income measurement. Nevertheless, periodic income statements are essential, because they
allow users to compare results for the company over time and to the results of other firms for
the same period. Depending on the industry, year over year comparisons that eliminate
seasonal variables may be especially useful.

BAS 1 suggests two possible formats for the income statement, the different between them
being the classification of expenses:

By function, or
By nature

4.1.6 Statement of Changes in Equity

A separate Statement of Changes in Stockholders' (or Owners) Equity is also prepared that
reconciles the various components of OE on the balance sheet for the start of the period with
the same items at the end of the period. The statement recognizes the primacy of OE for
investors and other readers of financial statements.

4.1.7 Cash Flow Statement

The cash flow statement tells you the sources and uses of cash during the period (in fact, the
term "sources and uses statement" is a synonym). It also provides information about the
company's investing and financing activities during the period.

The format of a cash flow statement is typically:

Net cash flow from operating activities (sales, inventories, rent, insurance, etc.)

Cash flow from investing activities (e.g. buying and selling equipment)

Cash flow from financing activities (e.g. selling common stock, paying off long-term debt)

Exchange rate impact

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 Net increase (decrease) in cash

Cash and equivalents at start of period

Cash and equivalent at end of period

Schedule of non-cash financing and investing activities (e.g. conversion of bonds)

4.1.8 Functional and presentation currency

Financial statements need to be presented in a particular currency, which is the company's

functional currency except as indicated. Figures need to be rounded off to the nearest
currency.

4.1.9 Use of estimates and judgments

The preparation of financial statements require management to make judgments, estimates

and assumptions that affect the application of accounting policies and reported amounts of
assets, liabilities, income and expenses, estimates. Assumptions also require for disclosure
of contingent assets and contingent liabilities at the date of financial statements. Such
estimate and assumptions are made on historical experience and other factors that are
considered reasonable under the required circumstances. Actual results may differ from
these estimates.

Estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to

accounting estimates are recognized in the period in which the estimates is revised and in
any future periods affected.

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 CHAPTER 5.0
A C C O U N T I N G S TA N D A R D S
[BAS AND BFRS]
5.1 Bangladesh Accounting Standard (BAS)

Adaptation Status of International Accounting Standards (IASs) by ICAB as Bangladesh

Accounting Standards (BFRS) as on 1 January 2013.

Page 28 of 45
BAS No. BAS Title BAS Effective Date

1 Presentation of Financial Statements on or after 1 Jan 2010

2 Inventories on or after 1 January 2007

7 Statement of Cash Flows on or after 1 January 1999

Accounting Policies, Changes in Accounting
8 on or after 1 January 2007
Estimates and Errors
Events after the Reporting
10 on or after 1 January 1999
Period
11 Construction Contracts on or after 1 January 1999

12 Income Taxes on or after 1 January 1999

16 Property, Plant & Equipment on or after 1 January 2007

17 Leases on or after 1 January 2007

18 Revenue on or after 1 January 2007

19 Employee Benefits on or after 1 January 2013

Accounting of Government Grants and
20 on or after 1 January 1999
Disclosure of Government Assistance
The Effects of Changes in Foreign Exchange
21 on or after 1 January 2007
Rates
23 Borrowing Costs on or after 1 January 2010

24 Related Party Disclosures on or after 1 January 2007

Accounting and Reporting by Retirement
26 on or after 1 January 2007
Benefit Plans
27 Separate Financial Statements on or after 1 January 2013

28 Investments in Associates and Joint Ventures on or after 1 January 2013

Financial Reporting in Hyperinflationary
IAS 29 on or after 1 January 2015
Economics
31 Interest in Joint Ventures on or after 1 January 2007

32 Financial Instruments: Presentation on or after 1 January 2010

33 Earnings per Share on or after 1 January 2007

34 Interim Financial Reporting on or after 1 January 1999

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Page 30 of 45
 CHAPTER 6.1
A N A LY S I S
B AS A PPL I C AT I O N
6.1.1 BAS 1: Presentation of Financial Statements

The financial statements have been prepared on a going concern basis and accrual method
under historical cost convention and therefore did not take into consideration of the effect of
inflation.

The preparation and presentation of the financial statements and the disclosure of information
have been made in accordance with the DFIM circular no. 11 dated 23rd December 2009 in
conformity with Bangladesh Accounting Standards (BAS) and Bangladesh Financial Reporting
Standards (BFRS), the Companies Act 1994, the Financial Institutions Act 1993, Securities and
Exchange Rules 1987, the listing rules of Dhaka and Chittagong Stock Exchanges.

6.1.2 BAS 2: Inventories

The provisions furnished in the BAS 2 regarding inventories can be applied in all cases except
the following:

Work in progress under construction contracts;

Financial instruments;
Biological assets.

Therefore, in this case DBH is fully unable to apply BAS 2 and so DBH did not follow the
provisions of BAS 2.

After analyzing the related financial statements of DBH, we consider loans and advances as the
inventories of this company. The rationale behind this is that DBH falls under the category of
servicing industries.

According to the annual report of DBH for the year 2016, we found total amount of loans and
advances is 33,578,603,761Taka. In 2015, the total amount of loans and advances is
29,248,299,327 Taka. In fact, in 2016, total amount of loans and advances was increased by
15%.

6.1.3 BAS 7: Statement of Cash Flows

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The cash flow statement is prepared using the direct method as stipulated in Bangladesh
Accounting Standard - 7 "Statement of Cash Flows" and in compliance with the instruction of
Bangladesh Bank.

6.1.4 BAS 8: Accounting Policies, Changes in Accounting Estimates and Errors

In accordance with BAS 8 and Bangladesh Securities & Exchange Commissions Notification
no. SEC/CMRRCD/2006-158/134/ Admin/44 dated August 7, 2012 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.

6.1.4 BAS 10: Events after the Reporting Period

BAS 10 Events after the Reporting Period prescribes when an entity should adjust its financial
statements for events after the reporting period and the disclosures that an entity should give
about the date when the financial statements were authorized and about events after the
reporting period.

According to the observed Annual Report, DBH complied BAS 10 and most precisely no
material events had happened after Balance Sheet date, which could affect the values reported
in the financial statements.

6.1.5 BAS 11: Construction Contracts

Since DBH is a Financial Institution, BAS 11 is not compatible with the business nature,
therefore BAS 11 has not been applied by DBH.

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6.1.6 BAS 12: Income Taxes

Current tax
Provision for income tax has been made at best estimate keeping in view the provisions of
Income Tax Ordinance 1984 and amendments made thereto from time to time. Applicable rate of
income tax for the company is 40%.

Deferred tax
Pursuant to BAS - 12 "Income Taxes" deferred tax is provided using the asset & liability method
for all temporary timing differences arising between the tax base of assets and liabilities and
their carrying value for financial reporting purposes. Tax rate prevailing at the balance sheet date
is used to determine deferred tax as the same rate is expected to be applicable at the time of
settlement/adjustment of deferred tax asset or liability.

6.1.7 BAS 16: Property, Plant and Equipment

a. Recognition
In pursuant to BAS 16 "Property, plant and equipment" the cost of an item of property,
plant and equipment is recognized as an asset if, and only if it is probable that future
economic benefits associated with the item will flow to the entity, and the cost of the item
can be measured reliably.

Fixed assets have been accounted for at cost less accumulated depreciation. Cost
includes expenditure that is directly attributable to the acquisition of the items.

Subsequent costs of enhancement of an existing assets are recognized as a separate

asset, only when it is probable that future economic benefits associated with the item will
flow to the company and the cost of such items can be measured reliably. All other
expenditures are charged to the Profit & Loss account during the financial period in which
they are incurred.

b. Depreciation

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 Fixed assets are recorded at historical cost less accumulated depreciation as per BAS-16
"Property, Plant and Equipment". Depreciation is charged on straight line method using
the following rates on all fixed assets:

c. De-recognition

An item of property, plant and equipment is de-recognized on its disposal. Sale price of
fixed assets are determined on the basis of fair value of the assets. Gain or loss on sale
of assets are recognized in profit & loss account as per provision of BAS 16 Property,
Plant & Equipment. Such gain or loss is determined as the difference between sales
proceeds and carrying amount of the asset.

6.1.7 BAS 17: Leases

No lease financing have been found in the observed annual report, therefore DBH has not
applied the BAS 17 Lease in the annual report 2015-2016.

6.1.8 BAS 18: Revenue

DBH has been complied with the BAS 18. BAS 18 related with the recognition of revenue. The
proper reasoning behind this compliance is given bellow:

a. Interest Income/Profit Received:

Interest income from loans and advances is accrued on a time basis, by reference to the
principal outstanding and at the effective interest rate applicable, which is the rate that
exactly discounts estimated future cash receipts through the expected life of the financial
asset (Loans and advances) to that assets net carrying amount.

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 All other interest income is recognized on accrual basis except interest of the loan
accounts considered as non-performing. Interest income is suspended and full provision
is made against the interest receivables on all non-performing loans when the
installments are outstanding for more than six months or any other accounts which are
considered doubtful of recovery on the basis of judgment of the management.

b. Fees and Commission Income:

Receipt of loan processing/servicing fees and other fees are recognized as income on the
date of receipt while the refund there against, if applicable, are set off with income during
the year of refund.

c. Dividend Income and profit/(loss) on sale of marketable securities

Dividend income is recognized on accrual basis when the right to receive income is
established. Profit or loss arising from the sale of securities is accounted for only when
shares are sold in the market and profit is realized and loss is incurred.

d. Interest /Profit paid and other expenses:

The interest/profit paid on deposits, borrowings and other expenses are recognized on
accrual basis.

e. Grant from IFC

As per BAS 20," Accounting for Government Grants and Disclosure of Government
Assistance" the grant is recognized in profit and loss account on a systematic basis over
the period in which the entity recognized as expenses the related cost for which the
grants are intended to compensate.

6.1.9 BAS 19: Employee Benefits

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 a. Gratuity scheme
The Company has a funded gratuity scheme for all eligible employees who complete
minimum 5 years of confirmed service with the Company. Required amount of gratuity is
calculated on the basis of last basic pay depending on the length of service for every
completed year as well as proportionate to the fraction period of service as of the
respective financial year. This scheme is approved by the National Board of Revenue
(NBR) and administered by an independent Board of Trustees. Actuarial valuation of the
gratuity scheme was made in 2015 to assess the adequacy of the liability for the scheme
as per Bangladesh Accounting Standard - 19 "Employee Benefits".

Following benefits are payable on retirement, death or leaving service:

Less than 5 year of confirmed service Nil

Confirmed service between 5 and 10 years - One month's last drawn basic pay for
every completed year of service.
On completion of 10 years confirmed service and above - Two month's last drawn
basic pay for every completed year of service.

Maximum benefits - 50 times basic pay

b. Contributory provident fund

The Company has a contributory provident fund for its regular employees. The fund is
approved by the National Board of Revenue (NBR), administered separately by a Board
of Trustees and is contributed equally by the Company and the employees.

6.1.10 BAS 20: Accounting of Government Grants and Disclosure of Government

Assistance

Grant from IFC

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During the year under Audit Company received a grant from IFC under the agreement of
"Performance Based Grant Initiative (PBGI)" between IFC and DBH for the purpose of
expanding its target market segment to include informal sector borrowers and expand outreach
to lower and middle income target segments.

Subjects to the terms and conditions during the year DBH received from IFC $30,000 (in 2014-
15: $90,000) equivalent BDT 2,317,500 (in 2014-15 BDT 6,930,000).

As per BAS 20," Accounting for Government Grants and Disclosure of Government Assistance"
the grant is recognized in profit and loss account on a systematic basis over the period in which
the entity recognized as expenses the related cost for which the grants are intended to
compensate.

6.1.11 BAS 21: The Effects of Changes in Foreign Exchange Rates

DBH has properly applied the BAS 21 as per note 2.27 (Page 103) of the annual report 2015-
2016.

6.1.12 BAS 23: Borrowing Costs

BAS 23, i.e. Borrowing Costs requires that borrowing costs directly attributable to the acquisition,
construction or production of a 'qualifying asset' (one that necessarily takes a substantial period
of time to get ready for its intended use or sale) are included in the cost of the asset. Other
borrowing costs are recognized as an expense.

As per note 2.27 (page 103) of the DBH annual report for the year 2015-2016, BAS 23 is Not
Applicable (N/A).

6.1.13 BAS 24: Related Party Disclosure

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As per Bangladesh Accounting Standards (BAS) 24 "Related Party Disclosures", parties are
considered to be related if one of the party has the ability to control the other party or exercise
significant influence over the other party in making financial and operating decisions. The
Company carried out transactions in the ordinary course of business on an arms length basis at
commercial rates with its related parties.

The company has entered into transactions with other entities in normal course of business that
fall within the definition of related party as per Bangladesh Accounting Standard - 24 Related
Party Disclosures. The terms of related party transaction are not significantly different from
those that could have been obtained from third parties. The significant related party transactions
are as follows:

IAS 23 Borrowing Costs requires that borrowing co sts direct ly attributable to the acquisition, const ruction or p roductio n of a 'qualifying asset' (one that necessarily takes a substantial period of time to get ready for its intended use or sale) are inclu ded in the cost of the asset. Other borrowing costs are recognised as an expense.

6.1.14 BAS 26 Accounting and Reporting by Retirement Benefit Plans

No Accounting and Reporting by Retirement Benefit Plans has been found in the observed
annual report, therefore DBH has not applied the BAS 26 in the annual report 2015-2016.

6.1.15 BAS 27 Separate Financial Statements

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No Separate Financial Statement has been found in the observed annual report, therefore
DBH has not applied the BAS 27 in the annual report 2015-2016.

6.1.16 BAS 28 Investment in Associates

No Investments in Associates has been found in the observed annual report, therefore DBH
has not applied the BAS 28 in the annual report 2015-2016.

6.1.17 BAS 31 Investment in Joint Ventures

No Investments in Joint Ventures has been found in the observed annual report, therefore DBH
has not applied the BAS 31 in the annual report 2015-2016.

6.1.18 BAS 32 Financial Instruments: Presentation

BAS 32 Standard has not been complied with DBH. Because of being a Financial Institution,
DBH follows Bangladesh Banks special guideline on this issue.

6.1.19 BAS 33 Earnings Per Share

Earnings Per Share (EPS) has been calculated in accordance with Bangladesh Accounting
Standard - 33 "Earnings Per Share"

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No diluted earnings per share is required to be calculated for the year as there was no
convertible securities for dilution during the year.

6.1.20 BAS 34 Interim Financial Reporting

BAS 34, i.e. Interim Financial Reporting applies when an entity prepares an interim financial
report, without mandating when an entity should prepare such a report. Permitting less
information to be reported than in annual financial statements (on the basis of providing an
update to those financial statements), the standard outlines the recognition, measurement and
disclosure requirements for interim reports.

DBH complies BAS 34 as per note 2.27 (Page 103) appropriately.

6.1.21 BAS 36 Impairment of Assets

BAS 36, i.e. Impairment of Assets seeks to ensure that an entity's assets are not carried at more
than their recoverable amount (i.e. the higher of fair value less costs of disposal and value in
use). With the exception of goodwill and certain intangible assets for which an annual
impairment test is required, entities are required to conduct impairment tests where there is an
indication of impairment of an asset, and the test may be conducted for a 'cash-generating unit'
where an asset does not generate cash inflows that are largely independent of those from other
assets.

In addition to the provision made for loans and advances based on the guideline of Bangladesh
Bank, DBH reviews its loans and advances portfolio on monthly basis to assess whether any
further allowances/ write back for impairment should be provided in the income statement as per
BAS 36. The judgments by the management is required in the estimation of these amounts and
such estimations are based on assumption about a number of factors though actual results may
differ, resulting in future changes to the provisions.
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6.1.21 BAS 37 Provision, Contingent Liabilities and Contingent Assets

Provision:

a. Loans and Advances

In addition to the provision made for loans and advances based on the guidelines of
Bangladesh Bank, the Company's policy is to make provision for the loans and advances to
cover the principal amount in respect of non-performing loans when installments are
outstanding for more than six months and any other overdue accounts on the basis of
management's assessment where there are possibilities of impairment in future. The
Company has made adequate provision which is more than the minimum regulatory
requirement.

b. Tax

Provision for income tax has been made at best estimate keeping in view the provisions
of Income Tax Ordinance 1984 and amendments made thereto from time to time.
Applicable rate of income tax for the company is 40%

Contingency Liability and Contingency Assets:

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The company does not recognize contingent liability and contingent assets but discloses the
existence of contingent liability in the financial statements. A contingent liability is possible
obligation that arises from past events whose existence will be confirmed by the occurrence or
non-occurrence of uncertain future events not within the control of the company or present
obligation that is not recognized because outflow of resources is not likely or obligation cannot
be measured reliably.

The said amount claimed by the tax authority for the assessment year 2004-05 and 2005-06
assessed by disallowing statutory reserve and simple interest charged on net tax payable as per
assessment order.

Consequently, there is a contingent liability for the above amounts which have not been
recognized as liability in anticipation of consequential relief would be granted in favor of the
Company like the previous and subsequent years. However, DBH has enough tax provision to
cover the above amount, if any liability arises in future.

6.1.22 BAS 38 Intangible Assets

In accordance with BAS 38 "Intangible assets", intangible assets (computer software) are
recorded at historical cost less accumulated amortization. Amortization is calculated on straight
line method using the rate at 20% (estimated five years useful life).

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Page 43 of 45
 CHAPTER 6.2
A N A LY S I S
B F R S A P P L I C AT I O N
DBH management has followed the principles of BFRS consistently in the preparation of the
financial statements to that extent as applicable to the financial institution. Some of the
standards have not been complied with, about which Bangladesh Bank has special guideline.

6.2.1 BFRS 2: Share Base Payment

Not Applicable for Delta Brac Housing Finance Corporation Limited. [Annual Report, 2015-2016,
Note 2.27, Pg. 103]

6.2.2 BFRS 3: Business Combination

Not Applicable for Delta Brac Housing Finance Corporation Limited. [Annual Report, 2015-2016,
Note 2.27, Pg. 103]

6.2.3 BFRS 4: Insurance Contracts

Not Applicable for Delta Brac Housing Finance Corporation Limited. [Annual Report, 2015-
2016, Note 2.27, Pg. 103]

6.2.4 BFRS 5: Non-Currents Assets held for sale and discontinued operation
Not Applicable for Delta Brac Housing Finance Corporation Limited. [Annual Report, 2015-2016,
Note 2.27, Pg. 103]

6.2.5 BFRS 6: Exploration for and Evaluation of Mineral Resources

Not Applicable for Delta Brac Housing Finance Corporation Limited. [Annual Report, 2015-2016,
Note 2.27, Pg. 103]

6.2.6 BFRS 7: Financial Instruments: Disclosure

This BFRS standard has not been complied with by DBH since for this particular issue DBH
follows Bangladesh Banks special guideline.

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6.2.7 BFRS 8: Operating Segment

Not Applicable for Delta Brac Housing Finance Corporation Limited. [Annual Report, 2015-2016,
Note 2.27, Pg. 103]

6.2.8 BFRS 10: Consolidated Financial Statements

Not Applicable for Delta Brac Housing Finance Corporation Limited. [Annual Report, 2015-2016,
Note 2.27, Pg. 103]

6.2.8 BFRS 11: Joint Arrangements

Not Applicable for Delta Brac Housing Finance Corporation Limited. [Annual Report, 2015-2016,
Note 2.27, Pg. 103]

6.2.8 BFRS 12: Disclosure of Interests in other Entities

Not Applicable for Delta Brac Housing Finance Corporation Limited. [Annual Report, 2015-2016,
Note 2.27, Pg. 103]

6.2.9 BFRS 13: Fair Value Measurement

Not Applicable for Delta Brac Housing Finance Corporation Limited. [Annual Report, 2015-2016,
Note 2.27, Pg. 103]

6.2.10 BFRS 14: Regulatory Deferral Accounts

Not Applicable for Delta Brac Housing Finance Corporation Limited. [Annual Report, 2015-2016,
Note 2.27, Pg. 103]

Page 42 of 45
Page 43 of 45
 CHAPTER 7.0
B R I E F S U M M A RY O F
B AS a nd BF R S A PPL I C AT I O N
7.1 Summary of BAS Compliance

Page 43 of 45
7.2 Summary of BFRS Compliance

** DBH management has followed the principles of BAS & BFRS consistently in the preparation
of the financial statements to that extent as applicable to the financial institution. Some of the
standards have not been complied with, about which Bangladesh Bank has special guideline.

N/A = Not applicable

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Page 45 of 45
 CHAPTER 8.0
COMMENTS and
CONCLUSION
8.1 Comments

In our overall opinion after analyzing the BAS and BFRS standards, the financial
statements of the company prepared in accordance with Bangladesh Financial Reporting
Standards (BFRS), gave us a true and fair view of the state of the Financial Position of
the company as at 30 June 2016

The financial position of the company as at 30 June 2016 and the profit for the year
ended have been properly reflected in the financial statements and the financial
statements have been drawn up in conformity with the Financial Institutions Act, 1993 and
in accordance with the accounting rules and regulations issued by the Bangladesh Bank.

Adequate provisions have been made for advances and other assets which are, in our
opinion doubtful of recovery.

8.2 Conclusion

The study of the financial statement of Delta Brac Housing Finance Corporation Limited was
done on the basis of the principles of Bangladesh Accounting Standards (BAS) and Bangladesh
Financial Reporting standards (BFRS) to prepare an effective financial analysis for the year of
2015-2016.

The whole report finds out how much of the accounting treatments of the company DBH has
been done on congruence with the compliance with the BAS and BFRS. Here, we have found
out that almost all of the accounting treatments of DBH was done on the basis of the BAS and
BFRs and also the company has gained much more recognition from the Credit Rating Agency
of Bangladesh for having a good and transparent accounting presentation in its annual report.

The study was performed with impeccable efficiency on the basis of the data available and the
company on an overall basis was a healthy financially capable and investable one. Therefore,
we are aspiring of the reports sufficient efficiency which can also work as an informative
resource for further study on such sector in future as a trustable secondary data source.

Page 45 of 45
Page 46 of 45
 CHAPTER 9.0
REFERENCES
 References

Bangladesh Accounting Standards (BAS); Volume-2 (BAS 1- BAS 27)

Bangladesh Accounting Standards (BAS); Volume-3 (BAS 28- BAS 41)

Annual Report of Delta Brac Housing Finance Corporation Limited 2015-2016

Institute of Chartered Accountants of Bangladesh (1999b), International Accounting Standards,

Present Status, Institute of Chartered Accountants of Bangladesh, Dhaka.

Harper, David. "Advanced Financial Statement Analysis". Investopedia. N.p., 2016. Web. 23
Dec. 2016. <http://www.investopedia.com/university/financialstatements/>

DBH:: Delta Brac Housing Finance Corporation Ltd., Home Loan, Apartment Loan, Home
Construction Loan, Housing Plot Loan, Home Extension Loan, Home Improvement Loan,
Flexi Plus Home Loan, DBH Platinum Deposit, Annual Income Deposit, Monthly Income
Deposit, Quarterly Income Deposit, Cumulative Deposit, Flexible Fixed Deposit, Profit First
Deposit, Easy Way Deposit, Children's Deposit, Easy Home Deposit". Deltabrac.com. N.p.,
2016. Web. 23 Dec. 2016. < https://www.deltabrac.com/home.php>

Display Company Information". Dsebd.org. N.p., 2016. Web. 23 Dec. 2016. <
http://www.dsebd.org/displayCompany.php?name=DBH>

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