Submitted to: Madam Ayesha Fareed

Submitted by:

Ayesha Khan Mohammad (M.com)

Komal Anwar (M.com)
Sabiha Arshad (BS)
Syeda Rizwana (M.com)
Syed Mohammad Faizan (M.com)

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 Table of Contents:

Acknowledgement:.........................................................................................................3
Executive Summary::..................................................................................................... 4
Introduction:................................................................................................................... 5
Company profile:............................................................................................................6
Accounting Assumption:................................................................................................7
Qualitative characteristic of accounting information:................................................... 8
1. Relevance:...................................................................................................................9
2. Comparability:.......................................................................................................... 14
3. Consistency:..............................................................................................................15
4. Conservatism:........................................................................................................... 15
5. Materiality:............................................................................................................... 15
6. Full Disclosure:........................................................................................................ 16
Accounting convention:............................................................................................... 16
Time period:..................................................................................................................17
Historical cost:..............................................................................................................17
Matching Principle:...................................................................................................... 17
Revenue Recognition:.................................................................................................. 17
References:................................................................................................................... 18

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Acknowledgement:
To make this report, we had to take the help and guidelines of my teacher as well as
group mates, who deserve a greatest gratitude. The completion of this project gives us
much knowledge, so we would like to show our great gratitude towards ma’am Ayesha,
for giving us such good guidelines to do this project. We would also like to expand our
deepest gratitude to all those who have directly and indirectly guided us in writing this
report.

We are highly indebted to Ma’am Ayesha Fareed for her guidance as well as for
providing necessary information regarding the project.

We have had put lots of effort in this project but still, it would not have been possible
without the kind support and help of my teacher as well as my class mates who have
willingly helped us out with their abilities and have made valuable comment
suggestions, which made it possible to understand the project and gave us an
inspiration to improve our assignment. We would also like to extend our sincere thanks
to everybody who directly or indirectly helped us out in writing this report.

Thanking you.

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Executive Summary
Accounting and reporting for the environment has become increasingly relevant to
enterprises. Moreover, how the environmental performance of an enterprise affects its
financial health is of growing concern to investors, creditors, governments, and the
public at large. The Annual/Financial Report of a company is the principal way in
which stakeholders keep themselves informed of the activities, progress and future
plans of a company, although currently there is no standard way of presenting
environmental information and no analytical standards for their interpretation.The
study aims to operationalize financial reporting quality in terms of the qualitative
characteristics (QCs) as stated by the Accounting and Auditing Organization of
Financial Institutions standards, as well as to investigate their association with earnings
quality (EQ) and banking performance.

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Introduction:

NIB Bank was a Pakistani bank which was based in Karachi, Pakistan. It was formed in
2003 as a result of merger of IFIC Bank and the National Development Leasing
Corporation (NDLC), and this newly formed entity was called the NDLC-IFIC Bank
(NIB).
The bank was established through the efforts of Khuwaja Iqbal Hassan and Sultan Ali
Allana (now Chairman, HBL). In 2004, soon after NIB's creation, Fullerton Financial
Holdings a subsidiary of Temasek Holdings acquired a majority stake in the bank. This
was one of the largest Direct Foreign Investment in Pakistan at that time.
Fullerton Financial Holdings at that time, had stakes in banks across Asia and ran
highly successful SME and Commercial businesses. Their models were adopted in NIB
Bank and the Pakistan banking industry saw its first structured commercial and SME
lending programs.
As of Dec 31, 2015 NIB Bank had a paid up capital of PKR 103 billion and total assets
of PKR 243 billion. The bank had presence in 52 cities in Pakistan with over 170
branches connected online. NIB Bank had around 3,000 employees and its head office
was in the city of Karachi. NIB Bank's main business units included Retail Banking,
Commercial Banking, Corporate and Investment Banking and Treasury Services. The
Bank competed with all other major banks operating in Pakistan.
NIB bank ceased its operations in Pakistan with effect from July 7, 2017 and its assets
now stand amalgamated into MCB. By the end of 2016, NIB’s Profit after tax stood at
Rs 1.420 billion compared with Rs 2.617 billion last year. The bank deposits fell to Rs
97 billion from Rs 130 billion. Its advances stood at Rs. 87 billion by end of 2016 as
compared to Rs 110 billion.
NIB Bank had been facing tough times for the past many years failing to stand with
sustainable profitability in the highly competitive industry. With the merger of
operations with MCB Bank, the shareholders and sponsors of the bank will gain good
margins going forward. NIB loaded up its balance sheet to the brim with advances, to
the point where non-performing loans (NPLs) became a major impediment in its efforts
to post big profits.

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Company Information:

Board of Directors Teo Cheng San, Roland Chairman

Tejpal Singh
Hora Director
Lee Boon
Huat Director
Lee Ah
Boon Director
Asif
Jooma Director
Najmus Saquib Hameed Director
Muhammad Abdullah Yusuf Director
Atif R. Director &
Bokhari President/CEO
Board Audit Committee Muhammad Abdullah Yusuf Chairman
Lee Ah
Boon Member
Najmus Saquib Hameed Member
Tejpal Singh
Board Risk Management Committee Hora Chairman
Asif
Jooma Member
Lee Boon
Huat Member
Atif R.
Bokhari Member
Board Nomination & Remuneration Lee Boon
Committee Huat Chairman
AsiJooma Member
Atif R.
Bokhari Member

Company Secretary Ather Ali Khan

Chief Financial Officer Yameen Kerai
Registered Office First Floor, Post Mall
F-7 Markaz, Islamabad
Head Office PNSC Building
M.T. Khan Road
Karachi-74000
UAN: +9221 111 333 111
Email & URL Email : info@nibpk.com
URL : www.nibpk.com
State Life Building No. 3
Dr. Ziauddin Ahmed Road
Karachi-75530
UAN: +9221 111 000 322
Auditors M/s. KPMG Taseer Hadi & Co.
Chartered Accountants
Advocates
Credit Rating Long Term : AA-
Short Term : A1+
Rating Agency : PACRA

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Accounting Assumption
Business Entity

Business entity concept This concept assumes that, for accounting purposes, the
business enterprise and its owners are two separate independent entities. Thus, the
business and personal transactions of its owner are separate. Economic entity
assumption. The transactions of a business and those of its owners are not
intermingled. In our case NIB Bank is public Limted Company.
A public limited company is a voluntary association of members that are
incorporated and, therefore has a separate legal existence and the liability of whose
members is limited. Public limited companies are listed on the stock exchange
where it's share/stocks are traded publicly.

Going Concern Assumption

This concept states that a business firm will continue to carry on its activities for an
indefinite period of time. Simply stated, it means that every business entity has
continuity of life. Thus, it will not be dissolved in the near future. This is an important
assumption of accounting, as it provides a basis for showing the value of assets in the
balance sheet.
For example, a company purchases a plant and machinery of Rs.100000 and its life
span is 10 years. According to this concept every year some amount will be shown as
expenses and the balance amount as an asset. Thus, if an amount is spent on an item
which will be used in business for many years, it will not be proper to charge the
amount from the revenues of the year in which the item is acquired. Only a part of the
value is shown as expense in the year of purchase and the remaining balance is shown
as an asset.

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Qualitative Characteristics of Accounting Information (NIB):

The characteristics can be viewed as a hierarchy of qualities. Relevancy and reliability

are the two primary qualities that make the accounting information useful for decision
making. If either is missing completely from a piece of information, the information
will not be useful. Other qualities include comparability, consistency, and cost-benefit
relationship. Decision Makers and understandability Decision makers vary widely in
the types of decisions they make, how they make decisions, the information they
already possess or can obtain from other resources, and their ability to process the
information. For information to be useful there must be a link between decision makers
and the decisions they make. This link, understandability, is the quality of information
that permits reasonably informed users to perceive its significance.

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 1. Relevance:

Be relevant to investors, creditors, and others for investment, credit, and similar
decisions, accounting information must be capable of making a difference in a decision.
Relevant information should have predictive value, feedback value, and timeliness.
Relevant information helps decision makers make predictions about future; it has
“Predictive Value”. Relevant information also helps decision makers confirm or correct
prior expectations; it has “Feedback Value”. Usually, information does both at once,
because knowledge about the outcome of actions already taken will generally improve
decision makers’ abilities to predict the results of similar future actions. Without
knowledge of the past, the basis for a prediction will usually be lacking. And without
an interest in the future, knowledge of the past is useless. To be relevant, information
also must be timely “Timeliness”. This means the information must be available to a
decision maker before it loses its capacity to influence decisions. Information that is
not available when it is needed or becomes available only long after it has value for
future action is useless. Some examples of relevant information of a company which
can effect investment are decisions are discussed, here are the examples of NIB bank.

i. Cash Balance:
2015 2014

In hand
Local currency 7.1 2,358,571 1,805,021
Foreign currencies 310,768 240,467
With State Bank of Pakistan in
Local currency current accounts 7.2 5,276,404 4,274,385
Foreign currency current account 7.3 398,016 376,812
Foreign currency deposit accounts 7.4 1,259,094 1,070,337
With National Bank of Pakistan in local currency
current accounts 449,690 296,653
10,052,543 8,063,675
BALANCES WITH OTHER BANK

In Pakistan in current accounts 34,638 164,020

Outside Pakistan
– in current accounts 1,573,777 405,116
– in deposit account 36,671 24,723
1,645,086 593,859
Provision against doubtful balances 8.1 – (6,431)
1,645,086 587,428

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ii. Lendings:

LENDINGS TO FINANCIAL INSTITUTIONS:

Call money lending 9.2 300,000 –

Repurchase agreement lendings (Reverse Repo) 9.3 & 9.4 1,299,044 7,699,646
1,599,044 7,699,646
9.1 Particulars of lendings
In local currency 1,599,044 7,699,646
In foreign currencies – –
1,599,044 7,699,646

INVESTMENTS

Investments by type:
2015 2014

Held by Given as Total Held by Given as Total

Bank Collateral Bank Collateral

Note (Rupees in ‘000)

Available-for-sale securities

Market Treasury Bills 10.2 9,503,429 64,470,814 73,974,243 6,961,506 7,119,226 14,080,732

25,161,14
Pakistan Investment Bonds 10.2 10,214,316 336,127 10,550,443 4,779,679 7 29,940,826

Defense Savings Certificates 10.3 - 2,730 2,730 - 2,730 2,730

Sukuk Bonds 10.4 1,127,921 - 1,127,921 433,433 - 433,433

Cumulative Preference shares 10.5 55,178 - 55,178 55,178 - 55,178

Ordinary shares / Certificates in

listed companies / modarabas 10.6 21,180 - 21,180 31,722 - 31,722

Ordinary shares of unlisted
companies 10.7 57,860 - 57,860 65,726 - 65,726

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Term Finance Certificates 10.8 & 10.9 587,607 49,908 637,515 877,673 271,268 1,148,941

21,567,491 64,859,579 86,427,070 13,204,917 32,554,371 45,759,288

Held-to-maturity securities

Pakistan Investment Bonds 10.2 6,668,959 - 6,668,959 6,693,345 - 6,693,345

Term Finance Certificates 10.8 & 10.9 9,954 - 9,954 10,072 - 10,072

6,678,913 - 6,678,913 6,703,417 - 6,703,417

Associates 10.10 & 10.15 2,699,218 - 2,699,218 3,333,607 - 3,333,607

Subsidiaries 10.11 & 10.15 724 - 724 2,479,066 - 2,479,066

Investments at cost 30,946,346 64,859,579 95,805,925 25,721,007 32,554,371 58,275,378

Provision for diminution in
value of investments 10.12 & 10.13 (183,808) - (183,808) (192,265) - (192,265)

Investments - net of provisions 30,762,538 64,859,579 95,622,117 25,528,742 32,554,371 58,083,113

Surplus on revaluation of

available-for-sale securities - net 23 19,087 102,245 121,332 384,031 1,476,963 1,860,994

Net investments 30,781,625 64,961,824 95,743,449 25,912,773 34,031,334 59,944,107

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 Advances:

Write-Offs:

iii. Operating Fixed Expenses:

iv. Capital Work in Process:

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v. Assests Held for Sale and discontinued operations:

Advances, deposits, advance rent and other prepayments:

vi. Bills payable:

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vii. Borrowings:

2. Comparability:

Accounting information about an enterprise is extremely useful if it can be compared to accounting

information about other enterprises. Comparability results when different enterprises apply the same
accounting treatment to similar events. Compliance with international accounting standards helps to
enhance comparability.
For example; these other assets of Nib 2015 and 2014 can be compared easily.

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3. Consistency:
Consistency means conformity from period to period with unchanging policies and procedures.
Conformity can be achieved be applying the same accounting treatment to similar events from period
to period. It does not mean that an enterprise can’t switch form one accounting method to another if
the new method is justified and is preferable. The enterprise should disclose the reasons and the effect
of such change.

4. Conservatism:
Accounting conservatism is a principle that requires company accounts to be prepared with caution
and high degrees of verification. All probable losses are recorded when they are discovered, while
gains can only be registered when they are fully realized.

5. Materiality:
Materiality Principle or materiality concept is the accounting principle that concern
about the relevance of information, and the size and nature of transactions that report in
the financial statements.The main objective of the materiality principle is to provide
guidance for the accountant to prepare the entity’s financial statements.And the most
important thing is to make sure that information using by shareholders and investors is
sufficient enough for them in making the correct decision.The information, size, and
nature of transactions are considered material if the omission or error of it could
potentially lead to the decision of users of financial information.

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6. Full Disclosure:

The full disclosure principle is a concept that requires a business to report all necessary
information about their financial statements and other relevant information to any
persons who are accustomed to reading this information. Here in this example it is
cleared that tax payment also includes deferred payment.

Effects on Financial Reporting:

Full disclosure affects the financial reporting procedures of privately held businesses in
two main ways. Unlike cash basis accounting, revenues are recognized as soon as a
sale is made, regardless of when the business receives payment. Advances are an
example.

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Accounting Conventions
Time Period Assumption.

The financial results reported by a business should cover a uniform and consistent
period of time. If this is not the case, financial statements will not be comparable
across reporting periods.
The time period principle (or time period assumption) is an accounting principle
which states that a business should report their financial statements appropriate to a
specific time period.These periods can be quarterly, half yearly, annually, or any other
interval depending on the business' and owners' preference.NIB Bank uses One year
time period for reporting.

Historical Cost
Accounting cost concept states that all assets are recorded in the books of accounts at
their purchase price, which includes cost of acquisition, transportation and installation
and not at its market price. It means that fixed assets like building, plant and machinery,
furniture, etc are recorded in the books of accounts at a price paid for them. For
example, a machine was purchased by bank for Rs.500000. An amount of Rs.1,000
were spent on transporting the machine to the factory site. In addition, Rs.2000 were
spent on its installation. The total amount at which the machine will be recorded in the
books of accounts would be the sum of all these items i.e. Rs.503000. This cost is also
known as historical cost.

Matching Principle
Dual aspect is the foundation or basic principle of accounting. It provides the very basis of recording
business transactions in the books of accounts. This concept assumes that every transaction has a dual
effect, i.e. it affects two accounts in their respective opposite sides. Therefore, the transaction should
be recorded at two places. It means, both the aspects of the transaction must be recorded in the books
of accounts. For example, goods purchased for cash has two aspects which are (i) Giving of cash (ii)
Receiving of goods. These two aspects are to be recorded. Thus, the duality concept is commonly
expressed in terms of fundamental accounting equation : Assets = Liabilities + Capital The above
accounting equation states that the assets of a business are always equal to the claims of
owner/owners and the outsiders. This claim is also termed as capital or owners equity and that of
outsiders, as liabilities or creditors’ equity. The knowledge of dual aspect helps in identifying the two
aspects of a transaction which helps in applying the rules of recording the transactions in books of
accounts. The implication of dual aspect concept is that every transaction has an equal impact on
assets and liabilities in such a way that total assets are always equal to total liabilities.

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Revenue Recognition

This concept states that revenue from any business transaction should be included in
the accounting records only when it is realised. The term realisation means creation of
legal right to receive money. Selling goods is realisation, receiving order is not.In NIB
Bank these are revenue source. Interest on loans,Interest on investments, Fees income,
Forex operations, Commission on third party products

References:

file:///C:/Users/dell/Downloads/NIB%20-%202015%20NIB%20bank%20Ltd.Text.Marked.pdf/

https://en.wikipedia.org/wiki/NIB_Bank/

https://propakistani.pk/2017/07/07/nib-bank-no/

https://www.dawn.com/news/1179749/nib-bank-striving-to-get-out-of-the-woods/

https://economictimes.indiatimes.com/wealth/save/smart-things-to-know-about-sources-of-income-for
-a-bank/articleshow/54377370.cms?utm_source=contentofinterest&utm_medium=text&utm_campaig
n=cppst

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