Financial Statement Analysis of

Advanced Chemical Industries Limited (ACI

Ltd.)
Based on
Accounting Standards
 Financial Statement Analysis of
Advanced Chemical Industries Limited (ACI Ltd.)
Based on
Accounting Standards

Prepared for:

Mohammad Salahuddin Chowdhury, FCA

Assistant Professor
Department of Finance
Faculty of Business Studies
University of Dhaka

Prepared by:
Group 3
Class of 2020
Section: C (23rd Batch)
Department of Finance
University of Dhaka

Sl. No. Name ID

1. Md. Ashad Ull Haque Akash 23-033

2. Sazid Hasan 23-040

3. Badsha Farhad 23-079

4. Rokshana Akter 23-115

5. Md. Shah Alam Talukder 23-134

Date of Submission: July 10, 2018

 Letter of Transmittal

July 10, 2018

Mohammad Salahuddin Chowdhury, FCA

Assistant Professor
Department of Finance
Faculty of Business Studies
University of Dhaka

Subject: Submission of the report titled “Financial Statement Analysis of ACI Ltd. based on
Accounting Standards”

Dear Sir:

With great pleasure and honor, I, on behalf of my group, am submitting the report on “Financial
Statement Analysis of ACI Ltd. based on Accounting Standards”

We have collected as much information from ACI Ltd.’s annual report as possible for this report
on our topic and we have tried to comply our learning of accounting standards with the financial
reporting of ACI Ltd. Above all, we have tried to follow the instructions that you have given us.

We would like to thank you for providing us with the opportunity to prepare this report.

Sincerely yours,

Md. Ashad Ull Haque Akash

Class of 2020
ID: 23-033

On the behalf of
Group-3
Section-C
BBA 23rd Batch
Department of Finance
Faculty of Business Studies
University of Dhaka
 Table of Contents
Executive Summary.......................................................................................................................v
Chapter 1: Introduction................................................................................................................6
Objectives of the study................................................................................................................6
Methodologies of the study.........................................................................................................6
Scope of the study........................................................................................................................6
Limitations of the study...............................................................................................................6
Chapter 2: Entity Overview..........................................................................................................7
Historical Overview.....................................................................................................................7
Mission........................................................................................................................................7
Vision...........................................................................................................................................7
Values..........................................................................................................................................8
List of Underlying Companies (Subsidiaries).............................................................................8
List of Underlying Companies (Joint Ventures)..........................................................................9
List of Underlying Company (Associate)..................................................................................10
Chapter 3: Financial Reporting Standards...............................................................................11
Chapter 4: Compliance with IAS Standards.............................................................................12
IAS-1 (Presentation of Financial Statements)...........................................................................12
IAS-7 (Statement of Cash Flows)..............................................................................................16
IAS-16 (Property, Plant, and Equipment-PPE).........................................................................17
IAS-27 (Separate Financial Statements)....................................................................................18
IAS-28 (Investments in Associates and Joint Ventures)...........................................................18
IAS-36 (Impairment of Assets).................................................................................................19
IAS-38 (Intangible Assets)........................................................................................................19
Chapter 5: Compliance with IFRS Standards..........................................................................20
IFRS-3 (Business Combination)................................................................................................20
IFRS-10 (Consolidated Financial Statements)..........................................................................26
IFRS-13 (Fair Value Adjustment).............................................................................................30
Chapter 6: Conclusion.................................................................................................................31
References.....................................................................................................................................32
 Executive Summary
Business is run by financing. These financing comes from resource provider. However, resource
provider needs information to evaluate across the companies to provide resource to the entity.
Therefore, there is a need of general guideline and standards which will be followed by entities
to prepare financial reporting.
International Accenting Standards Board (IASB) has set up some standards which is very much
easier and flexible to follow for the entities. It develops International Financial Reporting
Standards (IFRS) which was previously named as International Accounting Standards (IAS).
Throughout the report we have tried to describe some of these standards from our learning and
tried to find compliance of these standards with a local company- Advanced Chemical Industries
Limited (ACI Ltd.).

v
 Chapter 1: Introduction
Accounting is the process of identifying, measuring, and communicating information about an
entity to the interested users such as lenders and investors who will provide resource to the entity
to accomplish its objective.
However, there are many entities running their operation around the world. That’s why it is quite
hard for resource provider to compare the entities in one manner. Therefore, there is a necessity
of a general guideline of preparing financial reporting’s. Therefore, there is set up a worldwide
standard setting board IASB (International Accounting Standards Board) which refers IFRS
(International Financial Reporting Standards) previously known as IAS (International
Accounting Standards).
We have tried to compliance these standards with our targeted entity ACI Ltd.

Objectives of the study

 To know the standards
 To learn about how these standards compliances with reality
 To apply our theoretical knowledge with an entity

Methodologies of the study

 Financial statements of ACI Ltd.
 Our theoretical knowledge

Scope of the study

 We have only studied on the compliance the standards with this entity not a bigger analysis

Limitations of the study

 Our disability of analysis financial statements as we are just learning and trying to find
the reality
 Lack of practical knowledge
 Lack of higher knowledge about these standards

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 Chapter 2: Entity
Overview

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.
 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.

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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.
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

8
 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”.

9
List of Underlying Company (Associate)

Company % of Share
Sl. Activities
Name Holding
Stochastic Logic
1. 20.00 Operating financial software and financial firm
Limited

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 Chapter 3: Financial Reporting Standards
The key standard setting board is International Accounting Standards Board (IASB). IASB is
responsible for developing IFRS (International Financial Reporting Standards). IFRS is used in
more than 115 countries, as it is very much flexible and easy to use to set up information for
users. IFRS was previously known as IAS (International Accounting Standards).
Here, according our theoretical knowledge we will describe these standards with our entity’s
financial Statement in two categories- IFRS Standards and IAS Standards.

IAS Standards Standards Name

IAS-1 Presentation of Financial Statements

IAS-7 Statement of Cash Flows

IAS-16 Property, Plant, and Equipment

IAS-27 Separate Financial Statements

IAS-28 Investments in Associates and Joint Ventures

IAS-36 Impairments of Assets

IAS-38 Intangible Assets

IFRS Standards Standards Name

IFRS-3 Business Combinations

IFRS-10 Consolidated Financial Statements

IFRS-13 Fair Value Measurement

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 Chapter 4: Compliance with IAS Standards
Now we will comply those listed standards by describing them briefly and by tagging them with
ACI Ltd.’s reporting’s.

IAS-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:

12
Statement of Financial Position:

Statement of Profit and Loss and Other Comprehensive Income:

13
Statement of Changes in equity:

14
Statement of Cash Flows:

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

15
IAS-7 (Statement of Cash Flows)
Statement of Cash Flows shows entity’s ability to generate cash flow from operation. Users use
this for evaluating long term sustainability
IAS-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.

 Cash Flows from Investing Activities- arising from purchase of property, plant, and
equipment, full disposal inflow of property, plant, and equipment, capital market
investment, dividend income etc.

16
  Cash Flows from Financial Activities- arising from sources of finance to the entity,
dividend paid etc.

IAS-16 (Property, Plant, and Equipment-PPE)

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.

17
IAS-27 (Separate Financial Statements)
It requires if an entity will run activities with subsidiaries, associates, and joint ventures entities,
the entity should disclose its financial statements separated from those subsidiaries, associates,
joint ventures entities. This helps users to find the real picture of the parent company so that they
can take significant decisions to provide resources to the entity.
ACI Ltd. has all of those undying companies. And its’ separated financial statements has already
given in IAS-1 section (page no. 11 in this report).

IAS-28 (Investments in Associates and Joint Ventures)

Investments Criteria Accenting Treatment

Associates Significant influence Equity Method

Joint Ventures Join Control Equity Method with some limitations

Significant influence will come by purchasing (20%-49%) share of another company where join
control will come by purchasing exactly 50% share. ACI Ltd has 3 joint venture companies and
1 associate companies. It has used equity method for reporting its’ investments on those 4
companies.

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IAS-36 (Impairment of Assets)
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.

IAS-38 (Intangible Assets)

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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 Chapter 5: Compliance with IFRS Standards
Now we will describe IFRS standards with the help of financial reporting of ACI Ltd.

IFRS-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

20
Consolidated PPE

Consolidated inventories

Consolidated trade receivables

21
Consolidated Inter-company receivables

Consolidated Advances, deposits, and prepayments

Consolidated Cash and cash equivalents

22
Consolidated Revaluation reserve

Consolidated Employee benefits

Consolidated Long-term bank loans

23
Consolidated Deferred tax liabilities

Consolidated Bank overdraft

Consolidated Short-term loan

24
Consolidated Trade payables

Consolidated Other payables

Consolidated Current tax liabilities

25
IFRS-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:

26
27
28
29
IFRS-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

30
 Chapter 6: Conclusion
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.

31
 References
Advanced Chemical Industries Limited (ACI Ltd.). (2016-17). Annual Report. Dhaka,
Bangladesh: Advanced Chemical Industries Limited (ACI Ltd.).
IFRS (International Financial Reporting Standards). (2018, July 06). List of IFRS standards.
Retrieved from IFRS Standards: https://www.ifrs.org/issued-standards/list-of-standards/

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