Financial accounting

Report on
Compliance of Relevant Accounting Standards 
Of ACI company LTD.

Submitted to
Kawser Ahmed Shiblu
Assistant professor
Department of finance
Jagannath university.

Submitted by
Group-5
Sl Name Id
No.
1 Mohammad Abu Rayhan B190203002
Saiket
2 Nowroz Nafiz Tinan B190203018
3 Maisha fahmida Riya B190203040
4 Saiful Islam Apu B190203058
5 Md. Naeem ul Fahim B190203061
6 Afia Fariha B190203065
7 Farjana Akter Eti B190203075
8 Md. Nahid Hasan B190203076
9 Hafiza Akhter B190203084
10 Afia Saiara B190203086

Letter of Transmittal
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24 April, 2022

Kawser Ahmed Shiblu, FMVA

Assistant Professor
Department of Finance
Jagannath university, Dhaka
Sub: Submission of the Report.
Dear sir,
With due respect, we would like to inform you that, we are the student of
Department of Finance. It is our great pleasure to inform you that we
Have got a chance to submit a report on “Compliance of Relevant Accounting
Standards in Food & Allied Sector of Bangladesh - A Study on “ACI Company
limited “As a requirement for course named Financial Accounting, course no:
2105. We therefore pray and hope that you would be kind enough to accept this
report and bless us heartily.
Sincerely yours
Group-5
B.B.A. 14Th Batch
2nd Year 1st semester
Department of finance
Jagannath university, Dhaka

Acknowledgement

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All praises are due to Almighty Allah, the supreme authority of this universe who has
enabled us to submit the report in time for the course named Financial Accounting.
We express our cordial sense of appreciation, thanks, authentic gratitude and profound
regards to our honorable supervisor Kawser Ahmed Shiblu, Assistant Professor, Department
of Finance, Jagannath University, Dhaka for his scholastic direction, pleasant support,
constant encouragement, precious guidance, overall management and continuous importance
throughout the thesis work.
It’s a great pleasure to us to express reflective gratitude and cordial admiration to our dearly
loved parents, well wishers and friends for their ever-ending wish, affections, support,
sacrifice, inspiration, encouragement and continuous endorse in the long process of creating
our academic career which can never be repaid.

Executive Summary

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Financial Report is an important part of a company. There are some world and locally
recognized standard which need to follow a company to prepare their financial report. IFRS,
BFRS, IAS, BAS etc are some relevant standard to help us to prepare a financial report. As a
part of our project work, we are assigning to work with ACI Foods Limited.
ACI was established as the subsidiary of Imperial Chemical Industries (ICI) in the then East
Pakistan in 1968. After independence the company has been incorporated in Bangladesh on
the 24th of January 1973 as ICI Bangladesh Manufacturers Limited and also as Public
Limited Company. This Company also obtained listing with Dhaka Stock Exchange on 28
December, 1976 and its first trading of shares took place on 9 March, 1994. Later on 5 May,
1992, ICI plc divested 70% of its shareholding to local management. Subsequently the
company was registered in the name of Advanced Chemical Industries Limited. Listing with
Chittagong Stock Exchange was made on 22 October 1995.

 Objectives:

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There isn’t just one best method for evaluating business performance. Every business may
differ slightly in operation, environment and methodology, which leaves many trial and error
opportunities. Financial statement analysis provides a primary foundation for evaluating
business performance and adapts to every business.
Therefore , there is a necessity of a general guideline of preparing financial reportings .
Therefore there is a set up of
Worldwide standard setting board IASB( International Accounting standards board) which
refers IFRS ( International
Financial reporting standards) previously known as IAS(International Accounting
standards) .
targeted entity We have tried to compliance these standards with our ACI LTD.

 Primary objectives:
The main objective of this report is to analyse financial statement of ACI food Ltd. To find
out the compliance of Relevant Accounting standards Whether they follow or not.

 Secondary objectives:
There are also other objectives which are :
 To know about International accounting standards
 To know about financial statement compliant with Relevant Accounting standards.
 To apply our theoretical knowledge with an entity.
Relative

 Scope of the study:

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The study behind “Relative compliance of accounting standards in food sector of
Bangladesh” - A study on ACI food Ltd. has covered over all analysis by which we can
Know about the accounting standards followed by “ACI Food LTD. ”

 Introduction
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(a)Accounting standard’s:
An accounting standard is a common set of principles, standards, and procedures that define
the basis of financial accounting policies and practices.

(b)Understanding accounting standards (FASB, GAAP, IFRS, IAS):

 Financial Accounting Standards Board (FASB)

The Financial Accounting Standards Board is a private, non-profit organization whose
purpose is to develop and improve the way financial accounting standards are issued for
publicly traded companies. It does so by working with various partners in order to determine
what should be considered for their statements, education stakeholders, and issue
Statements of Financial Accounting Standards (SFASs).

Accounting standards are the guidelines companies use to report information, such as
financial conditions and results of operations, in their annual reports.

The FASB follows a set of standards known as Generally Accepted Accounting Principles
(GAAP). GAAP refers to the rules and regulations that are the foundation for how companies
report financial information.

 Generally Accepted Accounting Principles (GAAP)

Generally accepted accounting principles (GAAP) refer to a common set of accounting
principles, standards, and procedures issued by the Financial Accounting Standards
Board (FASB). Public companies in the U.S. must follow GAAP when their accountants
compile their financial statements. Generally accepted accounting principles (GAAP) refer
to a common set of accounting principles, standards, and procedures issued by the Financial
Accounting Standards Board (FASB). Public companies in the U.S. must follow GAAP
when their accountants compile their financial statements. GAAP helps govern the world of
accounting according to general rules and guidelines. It attempts to standardize and regulate

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the definitions, assumptions, and methods used in accounting across all industries. GAAP
covers such topics as revenue recognition, balance sheet classification, and materiality.

The ultimate goal of GAAP is to ensure a company's financial statements are complete,

consistent, and comparable. This makes it easier for investors to analyze and extract useful
information from the company's financial statements, including trend data over a period of
time. It also facilitates the comparison of financial information across different companies.

GAAP follows ten principles, which are:

1. Regularity: Adherence to GAAP as a standard

2. Consistency: Application of the same standards throughout reporting
3. Sincerity: Recording an accurate and impartial report of a company’s financial
situation
4. Permanence of methods: Using the same standards whenever financial reports
are filed
5. Non-compensation: Reporting both positives and negatives, without the
expectation of debt compensation
6. Prudence: Using only fact based, empirical data, rather than speculation
7. Continuity: Assuming that the business will continue to operate when
valuing assets
8. Periodicity: Entries are distributed across appropriate periods of time
9. Materiality: Delivering full disclosure in financial reports
10.Utmost good faith: Remaining honest when compiling financial reports

 International Financial Reporting Standards (IFRS)

IFRS specify in detail how companies must maintain their records and report their expenses
and income. They were established to create a common accounting language that could be
understood globally by investors, auditors, government regulators, and other interested
parties.

The standards are designed to bring consistency to accounting language, practices, and
statements, and to help businesses and investors make educated financial analyses and
decisions.

They were developed by the International Accounting Standards Board, which is part of the
not-for-profit, London-based IFRS Foundation. The Foundation says it sets the standards to
“bring transparency, accountability, and efficiency to financial markets around the world."

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  International Accounting Standards (IAS)
International Accounting Standards (IAS) are older accounting standards issued by the
International Accounting Standards Board (IASB); an independent international standard-
setting body based in London. The IAS were replaced in 2001 by International Financial
Reporting Standards (IFRS). International accounting is a subset of accounting that
considers international accounting standards when balancing books. International
Accounting Standards (IAS) were the first international accounting standards that were
issued by the International Accounting Standards Committee (IASC), formed in 1973. The
goal then, as it remains today, was to make it easier to compare businesses around the
world, increase transparency and trust in financial reporting, and foster global trade and
investment.

Globally comparable accounting standards promote transparency, accountability, and

efficiency in financial markets around the world. This enables investors and other market
participants to make informed economic decisions about investment opportunities and risks
and improves capital allocation. Universal standards also significantly reduce reporting and
regulatory costs, especially for companies with international operations and subsidiaries in
multiple countries.

 Accounting standards in Bangladesh

Accounting standards determines the country's accounting regulations and policies
comparable information which helps the investor in making better decisions.
Accounting Standards (AS) are basic policy documents. Their main aim is to ensure
transparency, reliability, consistency, and comparability of the financial statements.
Accounting Standards mainly deal with four major issues of accounting, namely

 Recognition of financial events

 Measurement of financial transactions
 Presentation of financial statements in a fair manner
 Disclosure requirement of companies to ensure stakeholders are not
misinformed

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  Institute of Chartered Accountants in Bangladesh (ICAB)
The Institute of Chartered Accountants of Bangladesh (ICAB) is the National
Professional Accountancy Body in Bangladesh, established under the Bangladesh. ICAB has
adopted most of the International Accounting Standards (IASs) and International Financial
Reporting Standards (IFRSs) as Bangladesh Accounting Standards (BASs) and
Bangladesh Financial Reporting Standards (BFRSs).

Our Vision
To support enterprise, corporate governance, and sustainable growth in the business
environment in Bangladesh through widely respected professional and globally renowned
accountants

Our Mission

To promote and regulate high quality financial reporting and auditing in Bangladesh. Also
develop and maintain the competence of professional accountants and enhance the reputation
of the accounting profession in all sectors of the economy

The sole regulator of accountants and auditors in Bangladesh under the Bangladesh
Chartered Accountants Order of 1973 was the Institute of Charted Accountants (ICAB).
There are many mandatory requirements included in the ICAB:

1. Determining if you are qualified for membership in the institute

2. Being able to see the initial and continuing professional development of its
members
3. Having professional examinations conducted
4. Establishing and maintaining a quality assurance review system
5. Being able to license auditors
6. Maintaining and publishing of its members qualified to practice as accountants
and auditors
7. Investigating and disciplining its members for misconduct professionally
8. Allowing them to set accounting and auditing standards

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  Bangladesh Financial Reporting Standards (BFRS)
The Institute of Chartered Accountants of Bangladesh (ICAB) prescribes Financial
Reporting Standards which are known as Bangladesh Financial Reporting Standards (BFRS).
Bangladesh Accounting Standards (BAS) are also included in BFRS. International
Accounting Standards and International Financial Reporting Standards which are issued by
the International Accounting Standards Board are what the BFRS models on. For listed
companies under the Securities and Exchange Commission (SEC) rules, adopted BFRS are
legally enforceable

 Bangladesh Accounting Standards (BAS)

The principle of International Accounting Standards (IAS) which is taken by Institute of
Chartered Accounting of Bangladesh (ICAB) is known as Bangladesh Accounting Standards.
It is taken in 2001.

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  Difference between IFRS and GAAP
The primary difference between the two systems is that IFRS is principle-based and GAAP
is rules-based. GAAP is a set of accounting guidelines and procedures, used by the
companies to prepare their financial statements. IFRS is the universal business language
followed by the companies while reporting financial statements. Use of Last in First out
(LIFO) is not permissible as per IFRS which is not in the case of GAAP. Development Cost
is treated as an expense in GAAP, while in IFRS, the cost is capitalised provided the
specified conditions are met. Inventory reversal is strictly prohibited under GAAP, but IFRS
allows inventory reversal subject to specified conditions that are fulfilled.

 Difference between IFRS and BFRS

International Financial Reporting Standards (IFRS) are a set of accounting rules for the
financial statements of public companies that are intended to make them consistent,
transparent, and easily comparable around the world. They were issued by the London-
based Accounting Standards Board (IASB) and address record keeping, account reporting,
and other aspects of financial reporting. On the other hand, Bangladesh Financial
Reporting Standards (BFRS) The Financial Reporting Standards prescribed by the Institute of
Chartered Accountants in Bangladesh (ICAB) are known as Bangladesh Financial Reporting
Standards (BFRS, including Bangladesh Accounting Standards, BAS). BFRS and are
closely modelled on International Accounting Standards and International Financial
Reporting Standards issued by the International Accounting Standards Board.

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 Company profile

 Historical Overview
ACI Ltd. was established as the subsidiary of Imperial Chemical Industries (ICI) in
the then East Pakistan in 1968. After independence, the company was incorporated
in Bangladesh in 1973 as ICI Bangladesh Manufacturers Limited as a public
limited company. In 1992, the company was divested t local management and the
name of the company changed to Advanced Chemical Industries Limited (ACI
Ltd.).
ACI Ltd. is the first company in Bangladesh to achieve ISO S001in 1995 for
quality management and also the first company to achieve IS 14000 in 2000 for
environmental management system. ACI Ltd. is also the first company from
Bangladesh to become the honorable member of United Nation Global Impact
(UNGC).

 Mission
ACI’s mission is to enrich the quality of life of people through responsible
application of knowledge, skills and technology. ACI is committed to the pursuit of
excellence through world- class products, innovative processes and empowered
employees to provide the highest level of satisfaction to its customers.

 Vision
To achieve the mission, ACI Limited will -
 Endeavor to attain a position of leadership in each category of its businesses.
 Attain a high level of productivity in all its operations through effective and
efficient use of resources, adoption of appropriate technology and alignment
with our core competencies.
 Develop its employees by encouraging empowerment and rewarding innovation.

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  Promote an environment for learning and personal growth of its employees.
 Provide products and services of high and consistent quality, ensuring value for
money to its customers.
 Values
ACI Limited maintains the following values for own-self and consumers.
 Quality;
 Customer Focus;
 Fairness;
 Transparency;
 Continuous Improvement
 Innovation.

List of Underlying Companies (Subsidiaries)

Company % of Share
Sl. Activities
Name Holding
ACI Formulations Manufacturing & marketing of number of
1. 53.48
Limited agrochemical and consumer products
Manufacturing & marketing of edible packed
2. ACI Salt Limited 77.67
Salt
Processing, Packing and Marketing of wheat
ACI Pure Flour
3. 95.00 flour
Limited
Products
ACI Foods Manufacturing & Marketing different types of
4. 95.00
Limited spices and other food products.
Managing Media solutions and similar services
Creative for
5. Communication 60.00 different clients including television
Limited commercials and other advertisement and
promotion related activities.

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 Manufacturing & Marketing of Plastic Products,
Premiaflex
flexible printing and other ancillary business
6. Plastics 87.32
associated
Limited
with plastic and flexible printing.
ACI Motors Business of buying, selling, Importing, and
7. 67.50
Limited assembling of vehicles of both agricultural and

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 nonagricultural use including supplying spare
part and providing service facilities for vehicles.
ACI Logistics
8. 76.00 Operating retail chain stores across the country.
Limited

ACI Chemicals Manufacturing, formulating and packaging of

9. 75.00
Limited pesticides, fertilizers, plant nutrients

ACI Edible Oils Trading of crude and refined edible oils, food
10. 85.00
Limited grade chemicals
INFOLYTX
Developing of computer software, e-commerce,
11. Bangladesh 60.00
information technology
Limited
ACI Agrolink Manufacturing, formulating and packaging of
12. 90.00
Limited pesticides, fertilizers, plant nutrients
ACI HealthCare Trading of pharmaceutical products for regulated
13. 92.94
Limited marketing
ACI Biotech
14. 80.00 Producing of pharmaceutical products
Limited

List of Underlying Companies (Joint Ventures)

Company % of Share
Sl. Activities
Name Holding
ACI Godrej
Manufacturing and marketing of quality Poultry,
1. Agrovet 50.00
Aqua, Cattle Feed and Day-Old Chicks
Private Limited
Tetley ACI
2. (Bangladesh) 50.00 Processor, blender and marketer of tea products.
Limited
Asian Consumer Manufacturing and marketing of coconut oil,
3. Care 50.00 hair, oil shampoo and other products under the
Private Limited brand name “Dabur”.

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List of Underlying Company (Associate)
Company % of Share
Sl. Activities
Name Holding
Stochastic Logic
1. 20.00 Operating financial software and financial firm
Limited

Financial Statement Analysis of ACI Limited

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Financial statement analysis is the process of reviewing and analyzing a company’s financial
statement to make better economic decision. These statements include the income statement,
balance sheet, statement of cash follow, and a statement of changes in equity. Financial
statement analysis is a method or process involving specific techniques for evaluating risks,
performance, financial health and future prospect of an organization.

Users of the financial statement analysis:

 Stakeholders.
 Credit and equity investors.
 The public.
 Decision maker within the company.
 The managing committee.
 The regulatory authorities.

Tools of financial statement analysis:

 Horizontal analysis: Evaluate a series of financial statement data over period of time.
 Vertical analysis: Evaluate financial statement data by expressing each item in a
financial statement as a percentage of base amount.
 Ratio analysis: Express the relationship among selected items of financial statement
data.

 Financial Statement Analysis of ACI Limited using different tools of

financial statement analysis:

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Horizontal analysis:

Advanced Chemical Industries Limited

Statement of Financial Position
Increase(decrease) During 2021
       
30 30
In Taka Note June ,2021 June,2020 Amount Parcentage
Assets          
Property, plant and
equipment 8 12960524391 10664953300 2295571091 22%
Right of use asset 9 506002819 499939927 6062892 1%
Investment 10 3139924178 2950640117 189284061 6%
intangible assets 11 2806963 3785456 -978493 -26%
Biological assets 12 17778109 10914869 6863240 63%
Deferred tax assets 23 88780615 214067035 -125286420 -59%
Non- current assets   16715817075 14344300704    
           
Inventories 13 6773319558 4976119509 1797200049 36%
Trade receivables 14 2910514412 3881479422 -970965010 -25%
Other receivables 15 543148332 374562251 168586081 45%
Intercompany receivables 16 20142238769 19146539217 995699552 5%
Advance, deposit and
payments 17 87270802 743851475 -656580673 -88%
Cash and cash equivalents 18 1672219768 787826245 884393523 112%
Current assets   32128711641 29910378119    
Total assets   48844528716 44254678823    
           
Equity          
Share capital 19 631102500 573729555 57372945 10%
Share premium   402310367 402310367 0 0%
Reserves 20 5165967572 3511867965 1654099607 47%
Retain earnings   12693654845 10933326291 1760328554 16%
Total equity   18893035284 15421234178    
           
Liabilities          
Employee benefits 21 1123745409 1081292596 42452813 4%
Long term bank loan 22 1044719565 571815927 472903638 83%

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 Lease liabilities 9 378647480 388549474 -9901994 -3%
Non-current liabilities   2547112454 2041657997    
           
Bank overdraft 24 1681372914 1081292596 600080318 55%
Loans and borrowing 25 17068609497 571815927 16496793570 2885%
Lease liabilities current
portion 9 175644292 388549474 -212905182 -55%
Trade payable 26 1371346761 2041657997 -670311236 -33%
Other payables 27 3071295827 2502962921 568332906 23%
Unclaimed dividend account 28 118208225 12134376165 -12016167940 -99%
Inter company payables 29 4269065083 141728247 4127336836 2912%
Current tax liabilities 30 408838379 542619434 -133781055 -25%
2679178664
Current liabilities   28164380978    
44254678823
Total equity and liabilities 488445287116

Vertical analysis:

Advanced Chemical Industries Limited

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 Statement of Financial Position
30
In Taka Note 30 June.2021 Percentage June,2020 Percentage
Assets          
Property, plant and equipment 8 12960524391 78% 10664953300 74%
Right of use asset 9 506002819 3% 499939927 3%
Investment 10 3139924178 46% 2950640117 59%
intangible assets 11 2806963 0% 3785456 0%
Biological assets 12 17778109 3% 10914869 3%
Deferred tax assets 23 88780615 0% 214067035 1%
Non- current assets   16715817075   14344300704  
           
Inventories 13 6773319558 21% 4976119509 17%
Trade receivables 14 2910514412 6% 3881479422 9%
Other receivables 15 543148332 2% 374562251 2%
Intercompany receivables 16 20142238769 63% 19146539217 64%
Advance, deposit and
payments 17 87270802 14% 743851475 2%
Cash and cash equivalents 18 1672219768 5% 787826245 3%
Current assets   32128711641   29910378119  
Total assets   48844528716   44254678823  
           
Equity          
Share capital 19 631102500 3% 631102500 3%
Share premium   402310367 2% 402310367 2%
Reserves 20 5165967572 27% 5165967572 27%
Retain earnings   12693654845 67% 12693654844 67%
Total equity   18893035284   18893035283  
           
Liabilities          
Employee benefits 21 1123745409 44% 1081292596 53%
Long term bank loan 22 1044719565 41% 571815927 28%
Lease liabilities 9 378647480 23% 388549474 36%
Non-current liabilities   2547112454 2041657997 2041657997  
           

Bank overdraft 24 1681372914 45% 1081292596 40%

Loans and borrowings 25 17068609497 22% 571815927 21%
Lease liabilities current portion 9 175644292 18% 388549474 15%
Trade payable 26 1371346761 79% 2041657997 76%
Other payables 27 3071295827 93% 2502962921 93%

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Unclaimed dividend account 28 118208225 43% 12134376165 53%
Intercompany payables 29 4269065083 5% 141728247 5%
Current tax liabilities 30 408838379 20% 542619434 20%
2679178664
Current liabilities 28164380978
Total equity and liabilities   488445287116 44254678823  

Horizontal analysis:

Advanced Chemical Industries Limited

Income Statement
        Increase or (Decrease)

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 During2021
 
Note 30 30 Amount Percentage
In Take June,2021 June ,2020
Net sales revenue 31 25730275822 23201977018 2528298804 11%
- - -
Cost of sales 32 14358293150 12496872476 1861420674 15%
Gross profit   11371982672 10705104542 666878130 6%
           
Administrative, selling and
distributions expense 33 -8346599497 -7966492864 -380106633 5%
Other income 34 518248791 482198559 36050232 7%
Operating profit   3543631966 3220810237 322821729 10%
           
Net finance cost 35 -294475492 -750563708 456088216 -61%
Profit before contribution to
WPPF   3249156474 2470246529 778909945 32%
           
contribution to WPPF 27.1 -162457824 -123512326 -38945498 32%
Profit before tax   3086698650 2346734203 739964447 32%
           
Income tax          
current tax expense 36 -774358844 -741842330 -32516514 4%
Deferred tax income(expense)   -24556667 114028061 -138584728 -122%
Profit after tax   2287783139 1718919934 568863205 33%

Vertical analysis:

Advanced Chemical Industries Limited

Income Statement

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 In Take Note 30 June,2021 30 June,2020
    Amount Percent Amunt Percent
           
Net sales revenue 31 25730275822 100% 23201977018 100%
Cost of sales 32 -14358293150 -56% -12496872476 -54%
Gross profit   11371982672 44% 10705104542 46%
           
Administrative, selling and distributions
expense 33 -8346599497 -32% -7966492864 -34%
Other income 34 518248791 2% 482198559 2%
Operating profit   3543631966 14% 3220810237 14%
           
Net finance cost 35 -294475492 -1% -750563708 -3%
Profit before contribution to WPPF   3249156474 13% 2470246529 11%
           
contribution to WPPF 27.1 -162457824 -1% -123512326 -1%
Profit before tax   3086698650 12% 2346734203 10%
           
Income tax          
current tax expense 36 -774358844 -3% -741842330 -3%
Deferred tax income(expense)   -24556667 0% 114028061 0%
Profit after tax   2287783139 9% 1718919934 7%

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  BFRS and BAS compliances analysis
Now we will comply those listed standards by describing them briefly and by
tagging them with ACI Ltd.’s reporting’s.
1 IAS 1 This standard sets out the overall requirements complied
Presentation of for financial statements, including how they
Financial should be structured, the minimum
Statements requirements for their content and overriding
concepts such as going concern, the accrual
basis of accounting and the current/non-current
distinction. The standard requires a complete
set of financial statements to comprise a
statement of financial position, a statement of
profit or loss and other comprehensive income,
a statement of changes in equity, and a
statement of cash flows.

 BAS 1-Presentation of Financial Statements

It requires complete presentation of financial statements, guideline and structure of making the
statement, and minimum requirement for the contents of financial statements. It requires 5 major
components of financial statements-

• Statement of Financial Position

• Statement of Profit and Loss and Other Comprehensive Income

• Statement of Cash Flows

• Statement of Changes in Equity

• Notes to The Financial Statements

ACI Ltd. has done its’ reporting’s based on those 5 major statements. It has also prepared these 5
statements for the year end to provide information to the resource providers. Its’ financial statements
are given below:

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Statement of Financial Position:

Statement of Profit and Loss and Other Comprehensive Income:

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Statement of Changes in equity:

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Statement of Cash Flows:

Besides those, ACI Ltd. has also given notes for clearing the items in appendix part
of its’ annual report.

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2 BAS 2 This standard defines inventories as assets complied
Inventories that are:

held for sale in the ordinary course of

business, in the process of production for
such sale, or in the form of materials or
supplies to be consumed in the production
or rendering of services.

BAS 2 requires that those assets considered

inventory be recorded at a lower cost or net
realizable value.

 BAS 2-Inventories

Explanation: Inventories except materials in transit are measured at the lower of cost and net
realizable value. The cost of inventories is based on the weighted average method, and includes
expenditure incurred in acquiring the inventories, production or conversion costs and other
costs incurred in bringing them to their existing location and condition. In the case of
manufactured inventories and work-in-progress, cost includes an appropriate share of
production overheads based on normal operation capacity.
Inventory valuation
At year end the Company and the Group as a whole reported inventory of Tk. 1,278 million –
approximately 23% of total assets – of goods held in depots, central warehouse and factories.
Inventories are carried at lower of cost and net realizable value. The Group provides provision
for obsolescence or slow-moving based on age analysis of inventories. This methodology relies
upon assumptions made in determining appropriate provisioning amount to inventory
balances. Therefore, it has been considered as key area of auditor’s judgment.

 BAS 3 Consolidated Financial Statements Superseded in 1989 by BAS 27 and BAS 28

3 BAS 3 Consolidated Financial Statements were Not complied
Consolidated Superseded in 1989 by BAS 27 and BAS 28
Financial
Statements
Superseded in
1989 by BAS 27
and BAS 28

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  BAS 4 Depreciation Accounting

4 BAS 4 This Standard deals with depreciation Not complied

Depreciation accounting and applies to all depreciable
Accounting assets. Depreciable assets are assets that- (i)
are expected to be used during more than
one accounting period; and

(ii) have a limited useful life; and

(iii) are held by an enterprise for use in the

production or supply of goods and services,
for rental to others, or for administrative
purposes and not for the purpose of sale in
the ordinary course of business.

 BAS 5-Information to Be Disclosed in Financial Statements

5 BAS 5 All relevant information must be disclosed. complied
Information to “Relevant” means any context that may
Be Disclosed in impact a financial statement’s reliability.
Financial
The disclosures can be required by generally
Statements
accepted accounting principles or voluntary
per management decisions.

Types of disclosures include accounting

changes, accounting errors, asset
retirement, insurance contract
modifications, and noteworthy events.

Accounting policies and estimation for preparation of financial statements: The Company
follows International Financial Reporting Standards (BFRSs) and International Accounting
Standards (BASs) along with local regulations applicable for preparation of financial statements.
Detail description of accounting policies and estimation used for preparation of the financial
statements of the Company are disclosed in the notes 4 and 6 to the financial statements.

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  BAS 6-Accounting Responses to Changing Prices

6 BAS 6 Superseded by BAS 15, which was Non-complied

Accounting withdrawn in December 2003
Responses to
Changing Prices

 BAS 7-Statement of cash flow

7 BAS 7 Statement BAS 7 Statement of cash flow is to require complied

of cash flow the presentation of information about the
historical changes in cash and cash
equivalents of an entity by means of a
statement of cash flows, which classifies
cash flows during the period according to
operating, investing, and financing activities.

Statement of Cash Flows shows entity’s ability to generate cash flow from operation. Users use
this for evaluating long term sustainability
BAS-7 prescribes how to present information in a statement of cash flows about how an entity’s
cash and cash equivalents changed during the period. Cash comprises cash on hand and bank
deposits. Cash equivalents are short-term, highly liquid investments that are readily convertible
to known amounts of cash and there can be an insignificant risk of changes in value.
This statement is classified into 3 categories:

 Cash Flows from Operating Activities- arising from principal revenue generating
activities. One item of this is cash generated from operation. It can be presented
either in direct method or in indirect method. ACI Ltd. uses direct method.

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  BAS 8 Accounting Policies, Changes in Accounting Estimates and Errors

8 BAS 8 BAS 8 Accounting Policies, Changes in complied

Accounting Accounting Estimates and Errors is applied in
Policies, Changes selecting and applying accounting policies,
in Accounting accounting for changes in estimates, and
Estimates and reflecting corrections of prior period errors.
Errors
The standard requires compliance with any
specific BFRS applying to a transaction,
event or condition, and provides guidance
on developing accounting policies for other
items that result in relevant and reliable
information. Changes in accounting policies
and corrections of errors are generally
retrospectively accounted for, whereas
changes in accounting estimates are
generally accounted for on a prospective
basis.

BAS 8 was reissued in December 2005 and

applies to annual periods beginning on or
after 1 January 2005.

Significant accounting policies

The accounting policies set out below have been applied consistently to all periods presented in
these financial statements.
Set out below is an index of the significant accounting policies, the details of which are available

32 | P a g e
 on the current and following pages:
1. Current versus non-current classification
2. Offsetting
3. Basis of consolidation
4. Revenue from contracts with customers
5. Foreign currency transactions
6. Employee benefits
7. Finance income and finance costs
8. Income tax
9. Biological assets
10. Investment
11. Inventories
12. Property, plant and equipment
13. Intangible assets and goodwill
14. Leases
15. Financial instruments
16. Share capital
17. Provisions
18. Impairment
19. Going concern
20. Contingencies
21. Statement of cash flows
22. Earnings per share (EPS)
23. Events after the reporting period
24. Dividends
25. Materiality and aggregation

 BAS 9 The accounting for research and development involves those

activities

9 BAS 9 The BAS 9 The accounting for research and complied

accounting for development involves those activities that
research and create or improve products or processes.
development The core accounting rule in this area is that
involves those expenditures be charged to expenses as
activities incurred.

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 ACI Animal Genetics started its journey with the objective to increase the income of dairy farmers of
Bangladesh through application of genetic technology. The current average milk production can be
increased significantly through the application of quality semen. The business has already established a
state-of-the-art Animal Genetics Research and Development Centre situated at Gazipur. The
management team of ACI Animal Genetics consists of experienced Livestock sector specialists. This
business is poised to grow rapidly.

 BAS 10 Events after the reporting period

10 BAS 10 Events BAS 10 Events after the reporting period is Not complied
after the to prescribe: (a) when an entity should
reporting period adjust its financial statements for events
after the reporting period; and (b) the
disclosures that an entity should give about
the date when the financial statements were
authorized for issue and about events after
the reporting period.

 BAS 11 Construction Contracts

11 BAS 11 Construction contracts provide Complied

Construction requirements on the allocation of contract
Contracts revenue and contract costs to accounting
periods in which construction work is
performed.

Buildings

ACI Limited has various civil constructions including Existing 05-storied office building, Pre-Fabricated
shed building, 07- storied R.C.C factory building, and the Single storied sub- station building comprising
total 568,232 square feet floor area. The construction year of these buildings are in different time period
between 1995 to 2019 with different expected life between 25 years and 50 years depending upon the
condition of buildings.

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 Approach and Methodology:

Buildings are revalued on the basis of Depreciated Replacement Cost and was conducted with the
assistance of an external expert surveyor. However, we estimate that the written down value of
buildings BDT 779,677,955 as on 30 June 2021 approximates the Fair Value. No upward valuation is
done for the buildings.

 BAS 12-Income Taxes (1996)

12 BAS 12 Income BAS 12 Income Taxes implements a so-called Complied

Taxes 1996 'comprehensive balance sheet method' of
accounting for income taxes which
recognizes both the current tax
consequences of transactions and events
and the future tax consequences of the
future recovery or settlement of the carrying
amount of an entity's assets and liabilities.

Objective of BAS 12
The objective of BAS 12 (1996) is to prescribe the accounting treatment for income taxes.

 Income tax
Income tax expense comprises current and deferred tax. It is recognized in profit or loss except to the
extent that it relates to items recognized directly in equity or in OCI (Other Comprehensive Income).

(i) Current tax

Current tax comprises the expected tax payable or receivable on the taxable income or loss for the year
and any adjustment to tax payable or receivable in respect of previous years. The amount of current tax
payable is the best estimate of the tax amount expected to be paid that reflects uncertainty related to
income tax, if any. Current tax assets/liabilities are offset if certain criteria are met. It is measured using
tax rates enacted or substantively enacted at the reporting period. The applicable tax rate for ACI
Limited is currently 22.5%.

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 (ii) Deferred tax

Deferred tax asset or liability is recognized in respect of temporary differences between the carrying
amounts of assets and liabilities for financial reporting purposes and the amounts used for taxation
purposes. Deferred tax is not recognized for:- temporary differences on the initial recognition of assets
or liabilities in a transaction that is not a business combination and that affects neither accounting nor
taxable profit or loss;- temporary differences related to investments in subsidiaries to the extent that
the Group is able to control the timing of the reversal of the temporary difference and it is probable that
they will- taxable temporary differences arising on the initial recognition of goodwill. Deferred tax assets
are recognized for unused tax losses, unused tax credits and deductible temporary differences to the
extent it is probable that future taxable profits will be available against which they can be used.
Deferred tax assets are reviewed at each reporting date and are reduced to the extent that it is no
longer probable that the related tax benefit will be realized; such reductions are reversed when the
probability of future taxable profits improve. The Group’s existing accounting policy for uncertain
income tax treatments is consistent with the requirements in IFRIC 23 Uncertainty over Income Tax
Treatments, which became effective on 1 January 2019.

 BAS 13 Presentation of Current Assets and Current Liabilities

13 BAS 13 Current assets and liabilities appear on a Complied

Presentation of company's balance sheet and include cash,
Current Assets cash equivalents, accounts receivable, stock
and Current inventory, marketable securities, pre-paid
Liabilities liabilities, and other liquid assets. Current
liabilities are typically settled using current
assets.

ACI company LTD. shows their current assets and current liabilities properly in their balance sheet and
consolidated balance sheet properly to show their asset and liability after a certain period of time. Those
are.

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  BAS 14-Segment Reporting

14 BAS 14 Segment BAS 14 Segment Reporting requires Complied

Reporting reporting of financial information by a
business or geographical area. It requires
disclosures for 'primary' and 'secondary'
segment reporting formats, with the primary
format based on whether the entity's risks
and returns are affected predominantly by
the products and services it produces or by
the fact that it operates in different
geographical areas

(i) Basis for segmentation

The Group has the following strategic business units, which are its reportable segments. These business
units offer different products and services, and are managed separately because they require different
technology and marketing strategies.

Reportable segments Operations

1. Pharmaceuticals Buying, manufacturing, marketing and selling of pharmaceutical and

health care products in home and abroad.

2. Animal Health Buying, manufacturing, distributing and selling of veterinary and

fisheries products.

3. Consumer Brands Buying, manufacturing, marketing and selling of consumer products.

4. Crop Care and Public Health Buying, manufacturing, marketing and selling of crop protection

items.

5. Motors Buying and selling of agricultural equipment.

6. Pure Flour Buying, milling, processing, packaging, marketing and selling of

wheat flour products.

7. Retail Chain Facilitating modern self-service shopping option to customers.

8. Salt Buying, manufacturing, marketing and selling of vacuum evaporated

free flow iodized salt.

9. Foods Buying, manufacturing, processing, marketing and selling of food

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items including spices and snack items.

10. Premia flex Plastics Buying, manufacturing, processing, marketing and selling of plastic

products.

11. HealthCare Buying, manufacturing, processing, marketing and selling of

pharmaceutical products for regulated markets, especially for USA.

Operating results of all segments are regularly reviewed by the Group's managing director to

make decisions about resources to be allocated to the segment and to assess its performance,

and for which discrete financial information is available.

Other operations include the manufacture and distribution of edible oil, managing media

solutions, the formulation and packaging of pesticide, fertilizer, seeds, livestock, fisheries and

other plant nutrients, and the manufacture and distribution of paints and herbal products. None

of these segments met the quantitative thresholds for reportable segments for the year ended on

30 June 2021. Inter-segment pricing is determined on an arm's length basis.

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  BAS 15 Information Reflecting the Effects of Changing Prices

15 BAS 15 The objective of BAS 15 is to specify Not complied

Information disclosures reflecting the effects of changing
Reflecting the prices on the measurements used in the
Effects of determination of an enterprise's results of
Changing Prices operations and its financial position.

 BAS 16 Property, Plant, and Equipment

16 BAS 16 Property, The objective of BAS 16 is to prescribe the Complied

Plant, and accounting treatment for property, plant,
Equipment and equipment. The principal issues are the
recognition of assets, the determination of

39 | P a g e
 their carrying amounts, and the depreciation
charges and impairment losses to be
recognized in relation to them.

It describes the recognition, measurement, and disclosure of property, plant, and equipment. PPE are
the tangible assets which are held for using in production, supply of goods or services, for rental to
others or for administrative purpose and are used over more than one year or ne period.

An item of PPE can be recognized in financial statements, if the following conditions are met-

 It is probably that the economic benefits associated with the item will flow to the entity in
future
 The cost of the item can be measures reliably

Initially, the PPE’s should be valued or measured at cost which includes purchase price with all import
duties and non-refundable taxes, cost directly attributable to bring the asset to condition and location
necessary for its’ intended use.

Subsequently, entity can value it either in cost model or in revaluation model. ACI Ltd. has used
revaluation model in reporting PPE.

 BAS 17-Leases

17 BAS 17 Leases The objective of BAS 17 (1997) is to Complied

prescribe, for lessees and lessors, the
appropriate accounting policies and

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 disclosures to apply in relation to finance
and operating leases.

Leases are recognized as right-of-use assets and corresponding liabilities at the inception of a contract
and measured in accordance with BFRS 16. The right-of-use assets are depreciated over the shorter of
the asset’s useful life and the lease term on a straight-line basis.

At the commencement date, lease liabilities are measured at an amount equal to the present value of
the lease payments for the underlying right-of-use assets during the lease term. The lease payments are
discounted using the interest rate implicit in the lease, if that rate can be readily determined, or the
Company’s incremental borrowing rate. Each lease payment is allocated between the liability and
finance cost.

Payments associated with all short-term leases (with a lease term of 12 months or less) and certain
leases of all low-value assets are recognized on a straight-line basis as an expense in profit or loss.

 The Group has rent agreements for depots, warehouses, outlets, and other uses for the
business. Rent agreements having non-cancellable (either by agreement or in substance) tenor
of 12 months or more have been charged through right of use assets. Short term rent
agreements have been charged directly as expense. Information about such leases for which the
Group is a lessee is presented below:

 BAS 19 Employee Benefits

19 BAS 19 BAS 19 prescribes the accounting for all Complied

Employee types of employee benefits except share-

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 Benefits based payment, to which BFRS 2 applies-

Short-term employee benefits (to be settled

within 12 months, other than termination
benefits)

These are recognized when the employee

has rendered the service and are measured
at the undiscounted amount of benefits
expected to be paid in exchange for that
service.

Post-employment benefits (other than

termination benefits and short-term
employee benefits) that are payable after
the completion of employment

Plans providing these benefits are classified

as either defined contribution plans or
defined benefit plans, depending on the
economic substance of the plan as derived
from its principal terms and conditions.

Other long-term benefits

These are all employee benefits other than

short-term employee benefits, post-
employment benefits and termination
benefits. Measurement is similar to defined
benefit plans.

Termination benefits

Termination benefits are employee benefits

provided in exchange for the termination of
an employee’s employment.

Employee benefits

(i) Short-term employee benefits: Short-term employee benefits are expensed as the related service is
provided. A liability is recognized for the amount expected to be paid if the Group has a present legal or
constructive obligation to pay this amount as a result of past service provided by the employee and the
obligation can be estimated reliably.

(ii) Defined contribution plan (provident fund)

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 The Group operates a recognized provident fund scheme where employees contribute 8% of their basic
salary with equal contribution by the Group. The provident fund is considered as defined contribution
plan being managed by a Board of Trustees.

(iii) Defined benefit plan (gratuity)

The Group operates gratuity scheme, provision in respect of which is made annually covering all
permanent eligible employees. The Employees' Gratuity Fund is being considered as defined benefit
plan. The scheme has become a recognized gratuity fund during the year ended 30 June 2021.Defined
benefit plan is a retirement benefit plan under which amounts to be paid as retirement benefits are
determined by reference to employees' earnings and year of services. The rate used to discount post-
employment benefit obligations is determined by reference to the rate stated in the actuarial report.
Actuarial valuation of gratuity scheme has been made as on 30 June 2021 by independent actuarial
valuer to assess the adequacy of the liabilities provided for the schemes, which concluded that the
provision kept for gratuity scheme is sufficient.

(iv) Workers' profit participation fund

The Group operates funds for workers as "Workers' Profit Participation Fund" and 5% of the profit
before charging such expense have been transferred to this fund as per section 234 of the Labor Act
2006 (amended in 2013).

The group has followed employee benefit standards and written that part on their annual report to
show how much they contribute in their employee remuneration. Those are given below.

 BAS 19 Employee Benefits (2011)

20 BAS 19 The objective of BAS 19 is to prescribe the Complied

Employee accounting and disclosure for employee
Benefits (2011) benefits, requiring an entity to recognize a
liability where an employee has provided
service and an expense when the entity
consumes the economic benefits of
employee service. [BAS 19(2011).2]

Summary of BAS 19 (2011)

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 Amended version of BAS 19 issued in 2011

BAS 19 Employee Benefits (2011) is an amended version of, and supersedes, BAS 19 Employee Benefits
(1998), effective for annual periods beginning on or after 1 January 2013. The summary that follows
refers to BAS 19 (2011). Readers interested in the requirements of BAS 19 Employee Benefits (1998)
should refer to our summary of BAS 19 (1998).

Changes introduced by BAS 19 (2011) as compared to BAS 19 (1998) include:

Introducing a requirement to fully recognize changes in the net defined benefit liability (asset) including
immediate recognition of defined benefit costs, and require disaggregation of the overall defined
benefit cost into components and requiring the recognition of remeasurements in other comprehensive
income (eliminating the 'corridor' approach) Introducing enhanced disclosures about defined benefit
plans Modifications to the accounting for termination benefits, including distinguishing between
benefits provided in exchange for service and benefits provided in exchange for the termination of
employment, and changing the recognition and measurement of termination benefits Clarification of
miscellaneous issues, including the classification of employee benefits, current estimates of mortality
rates, tax and administration costs and risk-sharing and conditional indexation features Incorporating
other matters submitted to the BFRS Interpretations Committee.

Objective of BAS 19 (2011)

The objective of BAS 19 is to prescribe the accounting and disclosure for employee benefits, requiring an
entity to recognize a liability where an employee has provided service and an expense when the entity
consumes the economic benefits of employee service. [BAS 19(2011).2]

 BAS 20 Accounting for Government Grants and Disclosure of Government

Assistance

21 BAS 20 The objective of BAS 20 is to prescribe the Complied

Accounting for accounting for, and disclosure of,
Government government grants and other forms of
Grants and government assistance.
Disclosure of
Government
Assistance

The company make available the detailed disclosures on its website as required under the listing
regulations of the concerned stock exchange(s). Compliance Audit certification and its disclosure is
shown in the Annual Report.

 BAS 21-The Effects of Changes in Foreign Exchange Rates

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22 BAS 21 The The objective of BAS 21 is to prescribe how Complied
Effects of to include foreign currency transactions and
Changes in foreign operations in the financial
Foreign statements of an entity and how to translate
Exchange Rates financial statements into a presentation
currency. [BAS 21.1] The principal issues are
which exchange rate(s) to use and how to
report the effects of changes in exchange
rates in the financial statements. [BAS 21.2]

Objective of BAS 21

The objective of BAS 21 is to prescribe how to include foreign currency transactions and foreign
operations in the financial statements of an entity and how to translate financial statements into a
presentation currency. [BAS 21.1] The principal issues are which exchange rate(s) to use and how to
report the effects of changes in exchange rates in the financial statements. [BAS 21.2]

Transactions in foreign currencies are translated at the exchange rate prevailing on the date of
transactions. Monetary assets and liabilities denominated in foreign currencies are translated at
exchange rates prevailing at the date of statement of financial position. Foreign currency differences are
generally recognized in the statement of profit and loss. Non-monetary items that are measured in
terms of historical cost in a foreign currency are translated using the exchange rate at the date of
transactions.

A reasonably possible strengthening (weakening) of foreign currency against functional currency at

reporting date would have affected the measurement of financial instruments denominated in a foreign
currency and affected equity and profit or loss by the amounts shown below. This analysis assumes that
all other variables, in particular interest rates, remain constant and ignore any impact of forecast sales
and purchase.

 BAS 22-Business Combinations

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23 BAS 22 Business The objective of BAS 22 (Revised 1993) is to Not complied
Combinations prescribe the accounting treatment for
business combinations. The Standard covers
both an acquisition of one enterprise by
another (an acquisition) and also the rare
situation where an acquirer cannot be
identified (a uniting of interests).

 BAS 23 Borrowing Costs

24 BAS 23 The objective of BAS 23 is to prescribe the Not complied
Borrowing Costs accounting treatment for borrowing costs.
Borrowing costs include interest on bank
overdrafts and borrowings, finance charges
on finance leases, and exchange differences
on foreign currency borrowings which are
regarded as an adjustment to interest costs

 BAS 24-Related Party Disclosures

<

25 BAS 24 Related The objective of BAS 24 is to ensure that an Complied

Party Disclosures entity’s financial statements contain the
disclosures necessary to draw attention to
the possibility that its financial position and
profit or loss may have been affected by the
existence of related parties and by
transactions and outstanding balances with
such parties.

Objective of BAS 24

The objective of BAS 24 is to ensure that an entity's financial statements contain the disclosures
necessary to draw attention to the possibility that its financial position and profit or loss may have been
affected by the existence of related parties and by transactions and outstanding balances with such
parties.

Related parties

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 A related party is a person or entity that is related to the entity that is preparing its financial statements
(referred to as the 'reporting entity') [BAS 24.9].

(a) A person or a close member of that person's family is related to a reporting entity if that person:

(i) has control or joint control over the reporting entity; (ii) has significant influence over the reporting
entity; or (iii) is a member of the key management personnel of the reporting entity or of a parent of the
reporting entity.

(b) An entity is related to a reporting entity if any of the following conditions applies:

(i) The entity and the reporting entity are members of the same group (which means that each parent,
subsidiary and fellow subsidiary is related to the others). (ii) One entity is an associate or joint venture of
the other entity (or an associate or joint venture of a member of a group of which the other entity is a
member). (iii) Both entities are joint ventures of the same third party. (iv) One entity is a joint venture of
a third entity and the other entity is an associate of the third entity. (v) The entity is a post-employment
defined benefit plan for the benefit of employees of either the reporting entity or an entity related to
the reporting entity. If the reporting entity is itself such a plan, the sponsoring employers are also
related to the reporting entity. (vi) The entity is controlled or jointly controlled by a person identified in
(a). (vii) A person identified in (a)(i) has significant influence over the entity or is a member of the key
management personnel of the entity (or of a parent of the entity). (viii) The entity, or any member of a
group of which it is a part, provides key management personnel services to the reporting entity or to the
parent of the reporting entity.

BAS 25-Accounting for investments

26 BAS 25 BAS 26 Accounting and Reporting by Retirement Complied

Accounting for Benefit Plans outlines the requirements for the
investments preparation of financial statements of retirement
benefit plans. It outlines the financial statements
required and discusses the measurement of
various line items, particularly the actuarial
present value of promised retirement benefits for
defined benefit plans.

Objective of BAS 26

The objective of BAS 26 is to specify measurement and disclosure principles for the reports of
retirement benefit plans. All plans should include in their reports a statement of changes in net assets
available for benefits, a summary of significant accounting policies and a description of the plan and the
effect of any changes in the plan during the period

Defined benefit plan (gratuity)

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 The Group operates gratuity scheme, provision in respect of which is made annually covering all
permanent eligible employees. The Employees' Gratuity Fund is being considered as defined benefit
plan. The scheme has become a recognized gratuity fund during the year ended 30 June 2021.benefit
plan is a retirement benefit plan under which amounts to be paid as retirement benefits are determined
by reference to employees' earnings and year of services. The rate used to discount post-employment
benefit obligations is determined by reference to the rate stated in the actuarial report. Actuarial
valuation of gratuity scheme has been made as on 30 June 2021 by independent actuarial valuer to
assess the adequacy of the liabilities provided for the schemes, which concluded that the provision kept
for gratuity scheme is sufficient.

 BAS 26- Accounting and Reporting by Retirement Benefit Plans

27 BAS 26 BAS 26 Accounting and Reporting by Retirement Not complied

Accounting and Benefit Plans outlines the requirements for the
Reporting by preparation of financial statements of retirement
Retirement benefit plans. It outlines the financial statements
Benefit Plans required and discusses the measurement of various
line items, particularly the actuarial present value of
promised retirement benefits for defined benefit
plans.

 BAS 27 Separate Financial Statements (2011)

28 BAS 27 Separate BAS 27 Separate Financial Statements (as amended in Complied

Financial 2011) outlines the accounting and disclosure
Statements requirements for 'separate financial statements',
(2011) which are financial statements prepared by a parent,
or an investor in a joint venture or associate, where
those investments are accounted for either at cost or
in accordance with BAS 39 Financial Instruments:
Recognition and Measurement or BFRS 9 Financial
Instruments. The standard also outlines the accounting
requirements for dividends and contains numerous
disclosure requirements

The company have audited the consolidated financial statements of ACI Formulations Limited and its
subsidiaries (the “Group”) as well as the separate financial statements of ACI Formulations Limited (the
“Company”), which comprise the consolidated and separate statements of financial position as at 30
June 2021, and the consolidated and separate statements of profit or loss and other comprehensive
income, consolidated and separate statements of changes in equity and consolidated and separate
statements of cash flows for the year then ended, and notes to the consolidated and separate financial

48 | P a g e
 statements, including a summary of significant accounting policies. In our opinion, the accompanying
consolidated and separate financial statements give true and fair view of the consolidated financial
position of the Group and the separate financial position of the Company as at 30 June 2021, and of its
consolidated and separate financial performance and its consolidated and separate cash flows for the
year then ended in accordance with the International Financial Reporting Standards (BFRSs).

29 BAS 27 . BAS 27 Consolidated and Separate Financial Complied

Consolidated and Statements outlines when an entity must consolidate
Separate another entity, how to account for a change in
Financial ownership interest, how to prepare separate financial
Statements statements, and related disclosures. Consolidation is
based on the concept of 'control' and changes in
ownership interests while control is maintained are
accounted for as transactions between owners as
owners in equity.

Objectives of BAS 27

BAS 27 has the twin objectives of setting standards to be applied:

In the preparation and presentation of consolidated financial statements for a group of entities under
the control of a parent; and in accounting for investments in subsidiaries, jointly controlled entities, and
associates when an entity elects, or is required by local regulations, to present separate (non-
consolidated) financial statements.

 Their opinion on the consolidated and separate financial statements does not cover the other
information and we do not express any form of assurance conclusion thereon. In connection
with our audit of the consolidated and separate financial statements, our responsibility is to
read the other information and, in doing so, consider whether the other information is
materially inconsistent with the consolidated and separate financial statements or our
knowledge obtained in the audit or otherwise appears to be materially misstated. If, based on
the work we have performed, we conclude that there is a material misstatement of this other
information, we are required to report that fact. We have nothing to report in this regard.

 BAS 28 Investments in Associates and Joint Ventures (2011)

30 BAS 28 BAS 28 Investments in Associates outlines the Not

Investments in accounting for investments in associates. An associate is complied
Associates and an entity over which an investor has significant
Joint Ventures influence, being the power to participate in the financial
(2011) and operating policy decisions of the investee (but not
control or joint control), and investments in associates

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 are, with limited exceptions, required to be accounted
for using the equity method.

BAS 28- Investments in Associates

31 BAS 28 BAS 28 Investments in Associates outlines the accounting Complied

Investments in for investments in associates. An associate is an entity
Associates over which an investor has significant influence, being the
power to participate in the financial and operating policy
decisions of the investee (but not control or joint control),
and investments in associates are, with limited
exceptions, required to be accounted for using the equity
method.

BAS 28 applies to all investments in which an investor has significant influence but not control or joint
control except for investments held by a venture capital organization, mutual fund, unit trust, and
similar entity that are designated under BAS 39 to be at fair value with fair value changes recognized in
profit or loss. [BAS 28.1]

The ACI Limited's interests in equity-accounted investees comprise interests in associates and joint
ventures. Associates are those entities in which ACI Limited has significant influence, but not control or
joint control, over the financial and operating policies. A joint venture is an arrangement in which ACI
Limited has joint control, whereby ACI Limited has rights to the net assets of the arrangement, rather
than rights to its assets and obligations for its liabilities. Interests in associates and the joint ventures are
accounted for using the equity method. They are initially recognized at cost.

 BAS 29 Financial Reporting in Hyperinflationary Economics

32 BAS 29 Financial BAS 29 'Financial Reporting in Hyperinflationary Not

Reporting in Economies' requires the financial statements of any entity complied
Hyperinflationary whose functional currency is the currency of a
Economics hyperinflationary economy to be restated for changes in
the general purchasing power of that currency so that the
financial information provided is more meaningful.

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  BAS 30 Disclosures in the Financial Statements of Banks and Similar
Financial Institutions

33 BAS 30 The objective of BAS 30 is to prescribe appropriate Not

Disclosures in the presentation and disclosure standards for banks and Complied
Financial similar financial institutions (hereafter called 'banks'),
Statements of which supplement the requirements of other Standards.
Banks and Similar The intention is to provide users with appropriate
Financial information to assist them in evaluating the financial
Institutions position and performance of banks, and to enable them
to obtain a better understanding of the special
characteristics of the operations of banks.

 BAS 31- Interest in Joint Ventures

34 BAS 31 Interest in BAS 31 Interests in Joint Ventures sets out the accounting Complied
Joint Ventures for an entity's interests in various forms of joint ventures:
jointly controlled operations, jointly controlled assets, and
jointly controlled entities. The standard permits jointly
controlled entities to be accounted for using either the
equity method or by proportionate consolidation.

BAS 31 applies to accounting for all interests in joint ventures and the reporting of joint venture assets,
liabilities, income, and expenses in the financial statements of venturers and investors, regardless of the
structures or forms under which the joint venture activities take place, except for investments held by a
venture capital organization, mutual fund, unit trust, and similar entity that (by election or requirement)
are accounted for as under BAS 39 at fair value with fair value changes recognized in profit or loss. [BAS
31.1]

The ACI Limited's interests in equity-accounted investees comprise interests in associates and joint
ventures. Associates are those entities in which ACI Limited has significant influence, but not control or
joint control, over the financial and operating policies. A joint venture is an arrangement in which ACI
Limited has joint control, whereby ACI Limited has rights to the net assets of the arrangement, rather
than rights to its assets and obligations for its liabilities. Interests in associates and the joint ventures are
accounted for using the equity method. They are initially recognized at cost.

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  BAS 32 Financial Instruments Presentation
<

35 BAS 32 Financial BAS 32 Financial Instruments: Presentation outlines the Complied

Instruments accounting requirements for the presentation of financial
Presentation instruments, particularly as to the classification of such
instruments into financial assets, financial liabilities and
equity instruments. The standard also provide guidance
on the classification of related interest, dividends and
gains/losses, and when financial assets and financial
liabilities can be offset.

Objective: The stated objective of BAS 32 is to establish principles for presenting financial instruments
as liabilities or equity and for offsetting financial assets and liabilities. [BAS 32.1]

Non-derivative financial instruments comprise investments in shares and term deposit, trade
receivables, other receivables, intercompany receivables, cash and cash equivalents, trade payables,
other payables, intercompany payables, share capital and interest-bearing borrowings.

ACI company LTD. Shows the fair value and the financial risk management in their annual report which
indicates the proper use of their financial instruments.

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BAS 33 earnings per share
36 BAS 33 earnings per share
BAS 33 deals with the calculation and Complied
presentation of earnings per share (EPS). It
applies to entities whose ordinary shares or
potential ordinary shares (for example,
convertibles, options and warrants) are publicly
traded. Non-public entities electing to present
EPS must also follow the Standard

Objective of BAS 33

The objective of BAS 33 is to prescribe principles for determining and presenting earnings per share
(EPS) amounts to improve performance comparisons between different entities in the same reporting
period and between different reporting periods for the same entity. [BAS 33.1]

Earnings per share (EPS)

The ACI Limited and the Group presents its basic earnings per share (EPS) for its ordinary shares. Basic
EPS is calculated by dividing the profit or loss attributable to ordinary shareholders of the ACI
Limited/Group by the weighted average number of ordinary shares outstanding during the year. Diluted
EPS is determined by adjusting the profit or loss attributable to the ordinary shareholders and the
weighted average number of ordinary shares outstanding for the effects of all dilutive potential ordinary
shares, if any.

This has been shown on the face of profit or loss and computation of EPS is stated in note 37.

 BAS 34 interim financial reporting

37 BAS 34 interim financial BAS 34 applies when an entity prepares Complied

reporting an interim financial report, without
mandating when an entity should prepare
such a report.

Objective: The objective of BAS 34 is to prescribe the minimum content of an interim financial report
and to prescribe the principles for recognition and measurement in financial statements presented for
an interim period

The ACI company’s Board’s statement to the effect that no bonus share or stock dividend has been or
shall be declared as interim dividend.

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  BAS 35 discontinuing operations
<

38 BAS 35 discontinuing BAS 35 is to establish principles for Not Complied

operations reporting information about discontinuing
activities (as defined), thereby enhancing
the ability of users of financial statements
to make projections of an enterprise's cash
flows, earnings-generating capacity and
financial position, by segregating
information about discontinuing activities
from information about continuing
operations. The Standard does not
establish any recognition or measurement
principles in relation to discontinuing
operations – these are dealt with under
other BAS. In particular, BAS 35 provides
guidance on how to apply BAS
36 Impairment of Assets and BAS
37 Provisions, Contingent Liabilities and
Contingent Assets to a discontinuing
operation.

 BAS 36 impairment of assets

39 BAS 36 impairment of the core principle in BAS 36 is that an asset Complied

assets must not be carried in the financial
statements at more than the highest amount
to be recovered through its use or sale. If the
carrying amount exceeds the recoverable
amount, the asset is described as impaired.

It requires that an asset must not be carried in the financial statements at more than the highest
amount to be recovered through its use or sale. If the carrying amount exceeds the recoverable amount,
the asset is called as impaired. Recoverable amount is lower of fair value less cost to sell, and value in
use. Value in use means present value of expected future cash flows from that asset.

The impairment of an asset which is to be disposed of is lower of cost or net realizable value. And
depreciation will not be charged till disposal.

Fortunately, there is no impairment of the assets at the reporting date of ACI Ltd.

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  BAS 37 Provisions, Contingent Liabilities and Contingent Assets

40 BAS 37 Provisions, BAS 37 Provisions, Contingent Liabilities Not Complied

Contingent Liabilities and Contingent Assets outlines the
and Contingent Assets accounting for provisions (liabilities of
uncertain timing or amount), together
with contingent assets (possible assets)
and contingent liabilities (possible
obligations and present obligations that
are not probable or not reliably
measurable). Provisions are measured at
the best estimate (including risks and
uncertainties) of the expenditure
required to settle the present obligation,
and reflects the present value of
expenditures required to settle the
obligation where the time value of
money is material.

 BAS 38 Intangible Assets

41 BAS 38 Intangible AS 38 Intangible Assets outlines the accounting Complied

Assets requirements for intangible assets, which are
non-monetary assets which are without
physical substance and identifiable (either
being separable or arising from contractual or
other legal rights). Intangible assets meeting
the relevant recognition criteria are initially
measured at cost, subsequently measured at
cost or using the revaluation model, and
amortised on a systematic basis over their
useful lives (unless the asset has an indefinite
useful life, in which case it is not amortised).

It describes on recognizing, measuring of intangible assets.

Intangible asset is an identifiable noon monetary asset without physical substances. This type of assets
will arise from legal or contractual rights or settlement and the asset must be separable from the entity.

Initially, intangibles are recorded at cost which includes purchase price and expenditures incurred to
ready to use. Subsequently, there should be an impairment test and then asset will be recorded based
on carrying amount and recoverable value.

ACI Ltd. has only one intangible of its’ own and that is software and at the reporting date there is no
impairment. Therefore, intangible is valued by carrying amount.

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  BAS 39-Financial Instruments: Recognition and Measurement

42 BAS 39 Financial BAS 39 Financial Instruments: Recognition and Complied

Instruments: Measurement outlines the requirements for
Recognition and the recognition and measurement of financial
Measurement assets, financial liabilities, and some contracts
to buy or sell non-financial items. Financial
instruments are initially recognized when an
entity becomes a party to the contractual
provisions of the instrument, and are classified
into various categories depending upon the
type of instrument, which then determines the
subsequent measurement of the instrument
(typically amortized cost or fair value). Special
rules apply to embedded derivatives and
hedging instruments.

BAS 39 requires financial assets to be classified in one of the following categories: [BAS 39.45]

 Financial assets at fair value through profit or loss

 Available-for-sale financial assets

 Loans and receivables

 Held-to-maturity investments

Those categories are used to determine how a particular financial asset is recognized and measured in
the financial statements

BAS 39 recognizes two classes of financial liabilities: [BAS 39.47]

 Financial liabilities at fair value through profit or loss

 Other financial liabilities measured at amortized cost using the effective interest method

ACI company shows their financial assets and liabilities as per to their instruments.

 BAS 40-Investment Property

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43 BAS 40 Investment BAS 40 Investment Property applies to the Non Complied
Property accounting for property (land and/or buildings)
held to earn rentals or for capital appreciation
(or both). Investment properties are initially
measured at cost and, with some exceptions.
may be subsequently measured using a cost
model or fair value model, with changes in the
fair value under the fair value model being
recognized in profit or loss

 BAS 41 Agriculture
44 BAS 41 Agriculture BAS 41 Agriculture sets out the accounting for Non Complied
agricultural activity – the transformation of
biological assets (living plants and animals)
into agricultural produce (harvested product of
the entity's biological assets). The standard
generally requires biological assets to be
measured at fair value less costs to sell.

Now we will describe BFRS standards with the help of financial reporting of ACI Ltd.

 BFRS-3 (BUSINESS COMBINATION)

It describes recognition, measurement, and disclosure for business combination. It -

 recognizes and measures in its’ financial statements the assets and liabilities acquired,
and any interest of other entities

 recognizes and measures the goodwill acquired in the business combination or a gain
from a bargain purchase

 determines what information to disclose to enable users of the financial statements to

evaluate the nature and financial effects of the business combination

As business are combined through contracts, therefore, there will arise Goodwill. Goodwill will be
calculated- cost of purchase less share of net assets at acquisition of other entities less impairment too
date.

ACI Ltd. is such an entity which has combined its’ business with 14 subsidiary companies, 3 joint venture
companies, and 1 associate company. It measures goodwill according to the standard.

Consolidated intangibles

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Consolidated PPE

Consolidated trade receivables

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Consolidated Inter-company receivables

Consolidated Advances, deposits, and prepayments

Consolidated Cash and cash equivalents

Consolidated Revaluation reserve

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Consolidated Employee benefits

Consolidated Long-term bank loans

 BFRS-10 (Consolidated Financial Statements)

It describes principles for presenting and preparing consolidated financial statements when an entity
controls one or more other entities.

Then combinedly they are called group. Who gets control by purchasing more than 50% share of ther
entities over others is called parent company. Who is controlled by parent cmpany is called subsidiary
company.

The standard says to keep two financial statements- one for parents’ own, another for group named

as consolidated financial statements.

ACI Ltd. has 14 subsidiaries and it has prepared consolidated financial statements:

 Consolidated Statement of Financial Position

 Consolidated Statement of Profit and Loss and Other Comprehensive Income

 Consolidated Statement of Cash Flows

 Consolidated Statement of Changes in Equity

 Notes to The Financial Statements

The consolidated statements of ACI Ltd. are given in next pages

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  BFRS-13 (Fair Value Adjustment)

It recommends to report the items in fair value. Fair value is the amount which is expected to be
recovered through sale or disposal on that reporting date. Fair value is such a price that would be
received to sell an asset or paid to transfer a liability in an orderly transaction between market
participants at the measurement date.

Depreciation is a cost allocating method over the estimated time period of that asset. And entity charges
depreciation based on fair value.

ACI Ltd. has valued its items based on fair value and it has used different depreciation percentage based
on items.

Consolidated PPE based on fair value measurement

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  Brief summary of BAS and BFRS compliance
From the analysis we can say that Mercantile Insurance Co. Ltd. has maintained most of the applicable
rules of BAS and BFRS. They have complied 27 standards of BAS and 3 standards of BFRS. Among the 27
BAS standards BAS-1,7,16,27,28, 36, 38 are prominent for their financial works and they have properly
shown those parts.

 Conclusions
The financial statement of the company presents a true and fair value of the company’s state of affairs,
result of its operations, cash flows and changes in equity. Proper books of accounts required by law have
been maintained. Appropriate accounting standards according to our learning have been followed in
formulating the financial statements and accounting estimates were reasonable and prudent.

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