Balance Sheet Reporting Practices by Listed Companies of

Bangladesh

Mohammad Farhad Hossain*

Mohammad Moniruzzaman Siddiquee**

Abstract:
This paper tries to find out balance sheet reporting practices by the listed companies in Bangladesh.
Among the non-financial companies, the most widely used balance sheet style follows the equation
as [NCA + (CA – CL) = E + NCL], (83 companies, 34%); followed by the style with equation [E +
NCL = NCA + (CA – CL)], (45 companies, 19%). Variation in balance sheet reporting is none in
financial sectors like banking, and insurance due to regulation. The variation is evident in non-
financial sectors as very high, even within the sector. Variation in use of balance sheet style is very
high in sectors like engineering, food and allied, and pharmaceutical. Both engineering and
pharmaceutical companies follow seven different types of balance sheet styles; the figure is six for
food and allied sector. Most of the listed companies of Bangladesh present their balance sheet in
English language (226 companies, 93%). 31st December is the most widely used balance sheet
reporting date (127 companies, 52%) followed by 30th June (97 companies, 40%). Most of the
companies use report format (203 companies, 84%). In the balance sheet assets are arranged as fixed
assets first with least liquid first and more liquid last, then current assets second with less liquid first
and most liquid last.

INTRODUCTION
It is true that comparisons of financial statements are vital to significant financial and operating results,
and to the determination of credit indices and cyclic trends. Choi and Levich (1991) in a survey of
institutional investors, corporate issuers, investment underwriters and market regulators in Germany,
Japan, Switzerland, the UK and the US concluded that the comparability of financial statements is
important to investors. However, the lack of uniform balance sheets and uniform principles has
questioned the purpose of financial reporting as evidenced by Choi and Levich (1991) that accounting
differences may affect balance sheet items and measures of capital adequacy or credit worthiness that
indirectly affect managerial decisions and firm valuation. As there are wide differences in financial
reporting around the world, discussions are going on about the harmonization of financial reporting from
regional and international paradigm. The pressure for international accounting harmonization is
constantly increasing because the products of accounting in one country are used in various other
countries (Nobes and Parker, 2002). Accounting harmonization has been viewed by its proponents as an
effective means of facilitating cross-border economic activities and of reducing overall costs of
compliance with different national accounting standards (Rivera, 1989; Choi and Levich, 1990; Fleming,
1991). However, opposing the idea accounting academics like Briston, 1978; Samuels and Oliga, 1982;
Ndubizu, 1984; Hove, 1986, 1989; Taylor, 1987; Goeltz, 1991; Hoarau, 1995 argued that accounting
harmonization represents an imposition of Western accounting concepts, with a particularly strong
Anglo-American bias, on settings in which these concepts are inappropriate and, consequently, harmful.

*
Associate Professor, Department of Business Administration, Jahangirnagar University, Savar, Dhaka-1342, Bangladesh
**
Lecturer, Department of Business Administration, Jahangirnagar University, Savar, Dhaka-1342, Bangladesh

Electronic copy available at: http://ssrn.com/abstract=1138104

Another criticism is that the fact that accounting is flexible in nature and can adopt to different number of
situations but if accounting standards are harmonized it is believed that they would not be flexible
enough and the standards set internationally cannot possibly fit for the wide range of national
circumstances, legal systems, stages of economic development, and cultural differences. Harmonization
of accounting standard could prove dangerous to the companies as the standards could cut profits and
inject volatility into the balance sheets of the companies (Parker, 2002). Despite the debate, it can easily
be inferred that if all companies use the same definitions and rules to communicate their financial
accounting information, not only the effectiveness of accounting information as a communication device
will be increased, but also user’s costs of understanding the data will be reduced.

A solid understanding of domestic reporting practices will help us move on to regional and international
accounting harmonization. Voon (undated) reported that as globalization works its way through local
economies via deregulation and modern market reforms, there is a need for the convergence of local
financial reporting standards with International Accounting Standard (IAS). Thus a study of country-
specific reporting practices may create an impact on the discussion on the accounting harmonization
attempt. Our study aims to explore the balance sheet reporting practice by the listed companies in
Bangladesh. The objective of this study is to find out the most widely used balance sheet reporting in
Bangladesh, which includes reporting formats, marshalling of assets, language of communication, etc.
around different industries or sectors classified by the Dhaka Stock Exchange (DSE) Ltd. The findings of
this study can be useful for the study of developing market accounting; and of course for any attempt of
accounting harmonization.

The discussions in this paper are arranged in following way. First, some literatures are discussed on the
issue of balance sheet reporting practices in different times and different regions. Then, in the subsequent
sections, methodology of this paper is discussed. A brief overview of the regulatory environment of
balance sheet reporting is discussed in the next section. Then, findings of this paper are discussed in the
next section followed by conclusions.

BALANCE SHEET REPORTING PRACTICES

As late as May 31, 1865, the annual report of the Boston and Maine Railroad exhibited in place of the
modern balance sheet a “Balance Account, after closing books.” Three classes of debit accounts
appeared: Construction Accounts (the cost of road and equipment), Property Accounts (supplies such as
wood, oil, iron rails, ties, and coal), and Asset Accounts (cash, notes, bills, prepaid insurance, and sundry
receivables). Two classes of credit accounts were brought out in strong relief: the Capital Stock Account
and Liabilities. A General Reserve Account (the undivided profits to date) was classified as a liability and
used to balance the statement. Before that their annual report, as of September 30, 1856, contained a
“Statement of Liabilities and Assets” with accounts classified in the order suggested by the title (Nelson,
1947).

Electronic copy available at: http://ssrn.com/abstract=1138104

Dicksee (1909) stated that under the Italian system of bookkeeping, which is still practiced in some old-
fashioned merchants' houses, it is the custom at every balancing, after the nominal accounts have been
closed, to transfer the balances of the real and personal accounts into one account, usually called in
England and the United States the ‘Balance Account,’ and in France the ‘Balance de Sortir,’ or ‘closing
balance’.” Although in some respects the “balance account” was similar to the “balance sheet”;
nevertheless, some fundamental differences were appearing – differences that involved more than
bookkeeping procedures, statement form, and terminology.

Sprague (1913) expressed his belief concerning the balance sheet’s importance stating that the statement
“may be considered as the groundwork of all accounting, the origin and terminus of every account” and
placed the assets in the left-hand register, and insisted that “the rights of others, or the liabilities, differ
materially from the rights of proprietor.” Although some companies issued annual reports at that time but
did not include balance sheets or, if balance sheets were included, the financial information was often
minimal. Even, at the beginning of the 20th century most companies did not classify balance sheets, and
in the statements of the few companies that did, there was no consistency in the grouping of items.
Dicksee (1909) warned that “nine out of ten published balance sheets include items under ‘Assets’ and
‘Liabilities’ which are certainly not either one.” Canning (1929) became disturbed over the differences in
definition and accounting practice and gave evidence of a deep conviction that a study of texts would not
bear sufficient fruit to yield a harvest of adequate understanding.

Foulke (1968) notes that it was after 1900 that public accounting firms commonly used the terms ‘current
assets’ and ‘current liabilities’. Earlier Foulke (1945) writes that the classification of current assets is
undoubtedly the most important classification in a balance sheet, as current assets largely determine the
going solvency of a business concern. Despite the lack of significant balance sheet classifications at the
beginning of the century, by 1940 the basic format for reporting current assets on the balance sheet had
been adopted. Instead of following British precedent established under the Companies Acts, the
American (or Continental Europe) balance sheet had its own characteristics, especially in regard to the
classification and position of current assets (Normand and Wootton, 2001). Although there was little
need for classified balance sheets immediately after the Civil War, it was impossible not to have them by
1940, because of the business world that was transforming from sole proprietorships with little need for
financial statements to corporations with regulatory requirements to provide basic financial statements to
their different stakeholders.

Besides current items, several accounting historians (Claire, 1945; Schiff, 1978; Vangermeersch, 1970,
1971/72, 1986; Reed, 1989) in investigating evolution of financial statements have concentrated on the
overall development of financial statements or upon the presentation and valuation of long-term assets on
the balance sheet. Vangermeersch (1979) examined in depth the changing role and format of the balance
sheet over the years.

3
Balance sheet presentation style differs from country to country with a few exceptions. For example, the
balance sheet in Japan is divided into sections on assets, liabilities, and net assets, and the section on net
assets is divided into owners’ equity and items other than owners’ equity. Owners’ equity is further
divided into paid-in capital, capital surplus, and earned surplus. In the UK, the vertical format balance
sheet typically shows two years figures, with a single column for each year. In the US, they tend to split
each year into two or three columns, with sub-totals for assets, liabilities and equity (they may call it
“capital”) in the right hand column; in some ways this makes it easier to see how the balance is arrived
at. However, European Union, Russia, and Australia have moved toward IFRS (International Financial
Reporting Standards) which has produced balance sheet with the items in a slightly different order, with
the capital or equity shown at the top of the liabilities, rather than at the bottom to balance out total assets
with total liabilities. Also some of the terms that appear in the balance sheet and profit and loss account
are changing: debtors and creditors, for example, will appear as receivables and payables. The move to
IFRS has also highlighted how there were differences in the way certain figures for the balance sheet
were calculated in different countries. Because of historical differences in the utility of accounting
information, each country attributes varying degrees of importance to each particular financial statement.
Between Continental and Anglo-American accounting systems there is a substantially different
understanding of the accounting function (Ding, Stolowy, and Tenenhaus, 2003). For example, the
Continental view is that the basic function of accounting is to provide evidence that a firm has complied
with judicial requirements and satisfied the various demands of tax authorities, macro-administration
bodies, investors, creditors, employees, etc. In Anglo-American countries, however, the purpose of
accounting function is seen more as the disclosure of economic information concerning an enterprise,
where, in most cases, financial ownership and operational management are separate.

METHODOLOGY
To understand how listed companies are disclosing information on specific issues (in our case, assets,
liabilities and equities), we reviewed the publicly available information (annual report) produced by 243
companies of different sectors enlisted with the DSE. The sample includes companies from all of the
sectors of DSE: Bank (25), Cement (8), Ceramics (4), Engineering (22), Finance and Investment (4),
Food and Allied (38), Fuel & Power (3), ICT (5), Insurance (26), Jute (3), Leasing (5), Leather (6),
Miscellaneous (13), Paper & Packaging (8), Pharmaceuticals & Chemicals (27), Services & Real Estate
(4), and Textile (42). The number in the parenthesis represents the distribution of companies under each
sector. We have excluded some firms due to the unavailability of annual reports. The annual reports for
each sample firm were obtained from the DSE.

To capture the practices of balance sheet presentation among the sample companies, we have identified
some issues, such as balance sheet style, asset marshalling, format of the balance sheet, balance sheet
date, Multinational/Local/Govt, Language (Bangla/English/Both). Balance sheet style implies basically
the presentation of accounting equation in the balance sheet. For example, a very common way of

4
preparing balance sheet in the textbooks is: [CA + NCA = (CL + NCL) + E], where CA stands for current
assets; NCA, non-current assets; CL, current liabilities; NCL, non-current liabilities; and E, equity. CL
and NCL are put in parenthesis, because these two are disclosed in total. We had identified several styles
of balance sheet presentation using variations in accounting equation. These styles are available in
Appendix B. This paper explores the various accounting equations in the balance sheets.

Asset marshalling refers to the sequence of listing the assets in the balance sheet. Two very extreme way
of asset marshalling is: (a) liquidity approach, where assets are listed as most liquid assets first and the
least liquid assets last; and (b) non-current (block) approach, where assets are listed as least liquid asset
first and the most liquid asset last. A variation of these two extremes is also available in practice. A list of
such possible variation is available in Appendix C. This paper explores the use of such variation in asset
marshalling in Bangladesh.

There are two very well-known types of formats in balance sheet presentation – report format and
account format. This paper explores the use of formats by the Bangladeshi firms. We had considered
ownership of the firm as another important factor to understand the reporting of balance sheet. We had
categorized the ownership as: multinational, local, and state-owned (or Govt.). Lastly, we focus on the
language, which is used to present the balance sheet; and the balance sheet reporting date. Before going
into the findings of this study, a discussion about the regulatory environment of financial reporting in
Bangladesh, and regulatory framework for balance sheet deemed necessary for a better understanding.

REGULATORY ENVIRONMENT OF FINANCIAL REPORTING IN BANGLADESH

Financial reporting and disclosure requirements for the registered companies in Bangladesh are governed
by the Companies Act, 1994. Banking institutions’ disclosure practices are regulated by the Bank
Companies Act 1991, Bangladesh Banks (Nationalization) Order 1972, Bangladesh Bank Order 1972,
Bangladesh Shilpa Bank Order 1972, Bangladesh Krishi Bank Order 1972, and Bangladesh Shilpa Rin
Sangstha Order 1972. The disclosure practices of the insurance companies are guided by the Insurance
Act, 1938 and the Insurance Corporations Act, 1973. Besides statutory regulations, the Securities and
Exchange Commission (SEC), the Registrar of Joint Stock Companies, and the Institute of Chartered
Accountants of Bangladesh (ICAB) play an important role in shaping the disclosure requirements from
time to time.

The Companies Act, 1994 provides basic requirements for accounting and reporting applicable to all
companies incorporated in Bangladesh. The Act provides the requirements for preparation and
publication of financial statements, disclosures, and auditing, among other provisions. However, in most
cases, the Act lacks clarity with regard to statutory requirements on disclosures in the financial
statements of the incorporated companies. It is silent about either Bangladesh Accounting Standards
(BAS) or International Accounting Standards (IAS/IFRS).

5
The SEC regulates financial reporting practices of listed companies. Listed companies are required to
comply with SEC accounting and disclosure requirements, despite inconsistencies with the requirements
of the Companies Act 1994. The SEC, in protecting investor interests, issues various rules that apply to
listed companies, including accounting and auditing requirements that, according to SEC Ordinance 1969
(Provision 2CC), supersede requirements set by the Companies Act. The Securities and Exchange Rules,
1987 require compliance with IAS/IFRS as adopted in Bangladesh, known as BAS.

The Bank Companies Act 1991 authorizes the Bangladesh Bank to regulate financial reporting by banks.
The Act prescribes the format of balance sheet and income statement, including disclosure requirements
that each bank must follow for regulatory reporting to the Banking Inspection Department of the
Bangladesh Bank. The same accounting and financial reporting rules are required to be followed by
banks in preparing financial statements for external users (World Bank, 2003). The Act mandates
reporting formats and disclosures based on BAS 30, which is similar to IAS 30. However, the Act is
silent about other BAS, and the result of compliance with BAS by banks is mixed.

Financial reporting and disclosure practices of insurance companies are regulated by the Insurance Act
1938. The Act specifies that insurance companies should submit their company’s annual audited financial
statements to the Chief Controller of Insurance within six months from the balance sheet date. However,
the Act does not mandate compliance with BAS. In practice, insurance companies often do not follow
BAS.

Income Tax Ordinance of 1984 also significantly influences the financial disclosure and reporting
practice of companies in Bangladesh. Many business entities design their accounting system as per the
requirements of the income tax law. Although there is no legal requirement on observance of tax
accounting rules in external financial reporting, those who prepare and audit financial statements
generally ensure that the accounting treatments that are acceptable to the taxation authorities are used not
only for tax reporting purposes but also for preparing the general-purpose financial statements.

REGULATORY FRAMEWORK FOR BALANCE SHEET REPORTING

Bangladesh Accounting Standards (BAS) 1 (ICAB, 2004), which is a localized re-explanation of
International Accounting Standard 1, explains the presentation of financial statements in details. As per
Para 49, balance sheet should be presented at least annually. Regarding the classification of assets and
liabilities, Para 53 of BAS 1 suggests each enterprise to determine, based on the nature of the operations,
whether or not to present current and non-current assets and current and non-current liabilities as separate
classifications on the face of the balance sheet. Para 55 allows an enterprise to show its net assets. Para
66 provides a list of items, which should be included in the balance sheet as line items. These items are:
(a) property, plant and equipment; (b) intangible assets; (c) financial assets (excluding amounts shown
under (d), (f) and (g)); (d) investments accounted for using the equity method; (e) inventories; (f) trade

6
and other receivables; (g) cash and cash equivalents; (h) trade and other payables; (i) tax liabilities and
assets as required by BAS 12 Income Taxes; (j) provisions; (k) non-current interest-bearing liabilities; (l)
minority interest, and (m) issued capital and reserves. Para 68 suggests no prescribed order or format in
which items are to be presented. The appendix of BAS 1 depicts one illustrative format of balance sheet
(Appendix A) which is labeled as Style 2 in this paper.

BAS 30 (ICAB, 2004) discusses the disclosures in the financial statements of banks and similar financial
institutions. As per Para 19 of BAS 30, the balance sheet should include following assets: (a) cash and
balances with the Bangladesh Bank and Sonali Bank; (b) Treasury bills and other bills eligible for
rediscounting with the central bank; (c) Government and other securities held for dealing purposes; (d)
Placements with, and loans and advances to, other banks; (e) Other money market placements; (f) Loans
and advances to customers; and (g) Investments securities; and the following liabilities: (a) Deposits from
other banks; (b) Other money market deposits; (c) Amounts owed to other depositors; (d) certificates of
deposits; (e) Promissory notes and other liabilities evidenced by paper; (f) Other borrowed funds.

FINDINGS
We have demonstrated our findings in order of balance sheet reporting date and language, balance sheet
presentation style and asset marshalling, and balance sheet format.

Date and Language of Balance Sheet Reporting

The listed companies in Bangladesh follow a wide range of reporting dates. 31st December is the most
widely used (127 companies, 52%) reporting date followed by 30th June (97 companies, 40%). A
complete list of number of companies in each sector is in Table 1. The column “modal sector” represents
the sector where most of the companies use a certain reporting date. For example, major sectors, which
use 30th June as balance sheet reporting date are, Food and Allied, Textiles, Pharma and Chemical, and
Engineering. Some non-traditional reporting dates are also in practice like, 31st March, 31st July, 31st
August, 30th September, and 31st October. Such non-traditional reporting dates accounts for 19
companies (8%).

Table 1: Balance Sheet Reporting Date of the Companies

Reporting Date Frequency Sector Modal Sectors
31-March 4 (2%) Textile (2), Engineering (1), Pharma & Chem (1) Textile (2)
30-June 97 (40%) Cement (2), Ceramics (4), Engineering (11), Finance Food & Allied (24),
& Investment (1), Food & Allied (24), Fuel & Power Textile (22), Pharma
(1), ICT (3), Jute (3), Leather (3), Misc (4), Paper & (13), Engineering
Pack (5), Pharma & Chem (13), Service & Real (11)
Estate (1), Textile (22)
31-July 1 (0.41%) Service & Real Estate (1) Service & Real Estate
(1)
31-August 3 (1%) Engineering (1), Food & Allied (1), Misc (1) Engineering (1),
Food & Allied (1),
Misc (1)
30-September 10 (4%) Cement (1), Food & Allied (3), Fuel & Power (1), Textile (4), Food &
Leather (1), Textile (4) Allied (3)

7
 31-October 1 (0.41%) Misc (1) Misc (1)
31-December 127 (52%) Bank (26), Cement (5), Engineering (9), Finance & Bank (26), Insurance
Investment (3), Food & Allied (10), Fuel & Power (26), Pharma (13),
(1), ICT (2), Insurance (26), Leasing (5), Leather (2), Textile (14)
Misc (7), Paper & Pack (3), Pharma & Chem (13),
Service & Real Estate (2), Textile (14)
Total 243
Source: This study result

Most of the listed companies in Bangladesh present their balance sheet in English language (226
companies, 93%) having a large representation from Textile, Food and Allied, Pharma and Chemical, and
Bank (Table 2). Ten companies use only Bangla (all local companies) and seven use both the languages
including two multinational companies.

Table 2: Balance Sheet Language

Language Frequency Sector Modal Sector
Bangla 10 (4%) Bank (4), Insurance (1), Leather (1), Paper & Pack (3), Bank (4)
Pharma & Chem (1)
English 226 (93%) Bank (19), Cement (8), Ceramics (4), Engineering (21), Textile (42)
Finance & Investment (4), Food & Allied (37), Fuel &
Power (1), ICT (5), Insurance (25), Jute (3), Leasing (4),
Leather (5), Misc (13), Paper & Pack (5), Pharma &
Chem (26), Service & Real Estate (4), Textile (42)
Both Bangla 7 (3%) Bank (2), Engineering (1), Food & Allied (1), Fuel & Bank (2), Fuel &
and English Power (2), Leasing (1) Power (2)
Total 243
Source: This study result

Balance Sheet Presentation Style and Asset Marshalling

We have identified 12 possible styles of balance sheet presentation in practice, and labeled those from 1
through 12 (Appendix 2). This labeling is according to our judgment. Style 1 is the so called American
presentation style, which is widely found in the American text books, widely used by major American
companies, and taught in most business schools of Bangladesh. Very surprisingly no listed companies of
Bangladesh use this style. Because of strict regulatory framework, all banking companies use Style 10
and insurance companies, Style 11. One important aspect of Style 10 is, off-balance sheet items are
integral parts of the balance sheet. Another important financial sector balance sheet style is Style 12,
mostly used by leasing and investment companies. Among the non-financial companies, the most widely
used style is Style 6 (83 companies, 34%) followed by Style 5 (45 companies, 19%). A significant
number of companies (25, 10%) use Style 2 (Table 3).

Only few sectors have uniformity in balance sheet reporting style. As mentioned earlier, financial sector
companies have most uniformity in this regard (Table 4). Among the significant non-financial sectors,
only Cement sector companies have satisfactory uniform balance sheet styles (Style 5 and 6). The other
major sectors are in complete free choice of balance sheet style. For example, one very significant sector,
Pharmaceuticals and Chemical, follows Style 2, 3, 4, 5, 6, 8, and 9 (Style 6 is followed by the majority
companies) (Table 4). Same applies to other major sectors like, Engineering, Service, and Textile. The

8
variation in the balance sheet presentation is basically because of rearrangements of the balance sheet
elements. Such rearrangements are depicted as balance sheet equations in table 7. From the different
rearrangements of balance sheet elements, focus of the balance sheet can be derived. Different balance
sheet styles found in this study focus on working capital, residual claim, net asset, long-term investment,
etc. either exclusively or in combination (Table 7).

We have labeled the asset marshalling in six different types (available in Appendix 3). Type 1 – fixed
assets first (with less liquid first and more liquid last) and current asset second (with less liquid first and
more liquid last) – is followed by most of the companies (184, 76%). This marshalling style is quite
contrary to the common practices by American companies. It should be mention that uniformity within
the sector is very high in choosing marshalling types.

The pair of marshalling type and balance sheet style is almost uniform in different sectors. For example,
when balance sheet Style 2, 3, 4, 6, 7, 8, and 9 are in practice marshalling Type 1 is uniformly used by all
the companies (Table 6). Only difference is Style 5 and 12; different marshalling types are used with
these balance sheet styles.

Table 3: Different Balance Sheet Presentation Styles Used by the Companies

Style No. of Sector Modal Sector
Companies
1 0 - -
2 25 (10%) Ceramics (1), Engineering (3), Food & Allied Textile (10)
(4), ICT (1), Leather (1), Paper & Pack (1),
Pharma & Chem (3), Service & Real Estate (1),
Textile (10)
3 8 (3%) Engineering (2), Food & Allied (3), Pharma & Food & Allied (3)
Chem (1), Finance & Investment (1), Service &
Real Estate (1)
4 8 (3%) Engineering (1), Food & Allied (1), Misc (1), Textile (3)
Pharma & Chem (2), Textile (3)
5 45 (19%) Cement (1), Ceramics (2), Engineering (9), Engineering (9)
Finance & Investment (2), Food & Allied (6),
Fuel & Power (2), Leather (3), Misc (2), Paper &
Pack (4), Pharma & Chem (8), Service & Real
Estate (1), Textile (6)
6 83 (34%) Cement (7), Ceramics (1), Engineering (6), Food Textile (21)
& Allied (18), ICT (4), Jute (3), Leather (2),
Misc (8), Paper & Pack (2), Pharma & Chem
(10), Service & Real Estate (1), Textile (21)
7 1 (0.41%) Paper & Pack (1) Paper & Pack (1)
8 15 (6%) Ceramics (1), Engineering (1), Food & Allied Food & Allied (6)
(6), Fuel & Power (1), Misc (2), Pharma & Chem
(2), Textile (2)
9 1 (0.41%) Pharma & Chem (1) Pharma & Chem (1) - ACI
Pharma
10 25 (10%) Bank (25) Bank (25)
11 26 (11%) Insurance (26) Insurance (26)
12 6 (2%) Finance & Investment (1), Leasing (5) Leasing (5)
Total 243
Source: This study result

9
Table 4: Sector-wise Balance Sheet Reporting Style
Industry Total Companies Modal Frequency of Alternative Styles in Use
under Study Balance Sheet Modal Style
Style
Bank 25 10 25 -
Cement 8 6 7 5
Ceramics 4 - - 2,5, 6, 8
Engineering 22 5 9 2, 3, 4, 5, 6, 8
Finance & Investment 4 5 2 3, 12
Food & Allied 38 6 18 2, 3, 4, 5, 8
Fuel & Power 3 5 2 8
ICT 5 6 4 2
Insurance 26 11 26 -
Jute 3 6 3 -
Leasing 5 12 5 -
Leather 6 5 3 2, 6
Misc 13 6 8 4, 5, 8
Paper & Pack 8 5 4 2, 6, 7
Pharma & Chemical 27 6 10 2, 3, 4, 5, 8, 9
Service & Real Estate 4 - - 2, 3, 5, 6
Textile 42 6 21 2, 4, 5, 8
Total 243
Source: This study result

Table 5: Asset Marshalling Practices

Marshalling Practices Frequency Sector Modal Sector
1 184 (76%) Cement (8), Ceramics (4), Engineering (22), Textile (42)
Finance & Investment (3), Food & Allied
(38), Fuel & Power (3), ICT (5), Jute (3),
Leasing (1), Leather (5), Misc (13), Paper &
Pack (7), Pharma & Chem (26), Service &
Real Estate (4), Textile (42)
2 6 (2%) Leasing (4), Leather (1), Pharma & Chem (1) Leasing (4)
3 1 (0.41%) Paper & Pack (1) Paper & Pack (1)
4 25 (10%) Bank (25) Bank (25)
5 26 (11%) Insurance (26) Insurance (26)
6 1 (0.41%) Finance & Investment (1) Finance &
Investment (1)
Total 243
Source: This study result

Table 6: Balance Sheet Presentation Styles with Asset Marshalling Practices

Balance Asset Frequency of Sector Modal Sector
Sheet Marshalling Combination
Presentation Practices
Styles
2 1 25 Ceramics (1), Engineering (3), Food & Textile (10)
Allied (4), ICT (1), Leather (1), Paper &
Pack (1), Pharma & Chem (3), Service &
Real Estate (1), Textile (10)
3 1 8 Engineering (2), Finance & Investment Food & Allied (3)
(1), Food & Allied (3), Pharma & Chem
(1), Service & Real Estate (1)
4 1 8 Engineering (1), Food & Allied (1), Misc Textile (3)
(1), Pharma & Chem (2), Textile (3)
5 1 Cement (1), Ceramics (1), Engineering Engineering (9)
(9), Finance & Investment (1), Food &
Allied (6), Fuel & Power (2), Leather (2),

10
 Misc (2), Paper & Pack (4), Pharma &
Chem (7), Service & Real Estate (1),
Textile (6)
2 Leather (1), Pharma & Chem (1)
6 Finance & Investment (1)
6 1 Cement (7), Ceramics (1), Engineering Textile (21)
(6), Food & Allied (18), ICT (4), Jute (3),
Leather (2), Misc (8), Paper & Pack (2),
Pharma & Chem (10), Service & Real
Estate (1), Textile (21)
7 3 Paper & Pack (1)
8 1 Ceramics (1), Engineering (1), Food & Food & Allied (6)
Allied (6), Fuel & Power (1), Misc (2),
Pharma & Chem (2), Textile (2)
9 1 Pharma & Chem (1)
10 4 Bank (25) Bank (25)
11 5 Insurance (26) Insurance (26)
12 1 Finance & Investment (1), Leasing (1)
2 Leasing (4) Leasing (4)
Source: This study result

Table 7: Balance Sheet Equation

Sl. Balance Equation Comments
Sheet Style
1 1 (CA + NCA) = (CL + NCL) + E Total investing and total financing focus. Investing at top;
residual claim at bottom.
2 2 NCA + CA = E + NCL + CL Total investing and total financing focus. Investing at top.
3 3 and 11 E + NCL + CL = NCA + CA Total investing and total financing focus. Residual claim
at top.
4 4 NCA + (CA – CL) = NCL + E Working capital, and long-term financing focus; residual
claim at bottom.
5 5 and 12 E + NCL = NCA + (CA – CL) Long-term financing, and working capital focus. Residual
claim at top.
6 6 NCA + (CA – CL) = E + NCL Working capital, and long-term financing focus. Long-
term investing at top.
7 7 (CA – CL) + NCA = E + NCL Working capital, and long-term financing focus.
8 8 [NCA + (CA – CL)] – NCL = E Net assets, and residual equity focus
9 9 E = NCA + (CA – CL) – NCL Residual equity, and net asset focus
10 10 CA + NCA = CL + NCL + E For banking companies. Off-balance sheet reporting
included.
Where,
CA = Current assets; NCA = Non-current assets; CL = Current liabilities; NCL = Non-current liabilities; E =
Equity
Source: This study result

Balance Sheet Format

Under standard accounting conventions balance sheet may be presented in two formats: the report form
(vertical presentation) and the account form (horizontal presentation). We have labeled the former as
Format 1 and the latter as Format 2. The balance sheet is most often presented in report form, with assets
listed above liabilities and owners’ equity. In the account form of balance sheet the assets section is
placed on the left and the liabilities and owners’ equity sections on the right. In some countries, the UK
and Ireland for example, a ‘multiple-step’ format is used, with a list of subsets of the three main
categories of assets, liabilities and shareholders’ equity and identification of managerially useful subtotals

11
by subtracting other relevant subcategories of assets and liabilities (Ding, Stolowy, and Tenenhaus,
2003). Nobes and Parker (2002) found that vertical format is used in the United Kingdom whereas
horizontal format is dominant in France and Spain.

This study found 203 companies (84%) use report format; remaining 40 companies (15%) use account
format (Table 8). Only the insurance sector companies are the majority users of account format. No
multinational company uses the account format. Table 9 lists the combination of balance sheet style and
the balance sheet format. Style 6 and format 1 makes the highest number.

Table 8: Presentation Format

Format Frequency Sector Modal Sector
Report Format 203 Bank (18), Cement (8), Ceramics (4), Engineering (19), Textile (42)
(1) (84%) Finance & Investment (4), Food & Allied (35), Fuel &
Power (3), ICT (5), Insurance (1), Jute (3), Leasing (5),
Leather (6), Misc (13), Paper & Pack (7), Pharma &
Chem (26), Service & Real Estate (4), Textile (42)
Account 40 Bank (7), Engineering (3), Food & Allied (3), Insurance (25)
Format (2) (16%) Insurance (25), Paper & Pack (1), Pharma & Chem (1)
Total 243
Source: This study result

Table 9: Balance Sheet Presentation Styles with Presentation Formats

Balance Presentation Frequency of Sector Modal Sector
Sheet Formats Combination
Presentation [(1) Report
Styles Format, (2)
Account
Format]
1 23 Ceramics (1), Engineering (2), Food Textile (10)
& Allied (4), ICT (1), Leather (1),
2 Pharma & Chem (3), Service & Real
Estate (1), Textile (10)
2 2 Engineering (1), Paper & Pack (1)
3 1 3 Finance & Investment (1), Food &
Allied (1), Service & Real Estate (1)
2 5 Engineering (2), Food & Allied (2),
Pharma & Chem (1)
4 1 8 Engineering (1), Food & Allied (1), Textile (3)
Misc (1), Pharma & Chem (2),
Textile (3)
5 1 45 Cement (1), Ceramics (1), Engineering (9)
Engineering (9), Finance &
Investment (2), Food & Allied (6),
Fuel & Power (2), Leather (3), Misc
(2), Paper & Pack (4), Pharma &
Chem (8), Service & Real Estate (1),
Textile (6)
1 82 Cement (7), Ceramics (1), Textile (21)
Engineering (6), Food & Allied (17),
6 ICT (4), Jute (3), Leather (2), Misc
(8), Paper & Pack (2), Pharma &
Chem (10), Service & Real Estate
(1), Textile (21)
2 1 Food & Allied (1)

12
 7 1 1 Paper & Pack (1)
8 1 15 Ceramics (1), Engineering (1), Food Food & Allied (6)
& Allied (6), Fuel & Power (1), Misc
(2), Pharma & Chem (2), Textile (2)
9 1 1 Pharma & Chem (1)
10 1 18 Bank (18)
2 7 Bank (7)
11 1 1 Insurance (1)
2 25 Insurance (25)
12 1 6 Finance & Investment (1), Leasing Leasing (5)
(5)
Source: This study result

CONCLUSIONS
This study found that 31st December (52%) is the most used balance sheet reporting date. English
language is the main language (93%) to report the balance sheet, which greatly removes the chance of
information asymmetry due to language. Another common feature is the balance sheet format. Most of
the companies (84%) follow report format of balance sheet. Regarding the balance sheet presentation
style, the average practice is Style 6 (34%), which focuses on working capital, and long-term financing
keeping long-term investing at top. The wide free choice of balance sheet styles by different sectors make
the information cost higher. Due to the strict regulation, financial sectors in Bangladesh follow uniform
balance sheet styles. Regarding the marshalling of assets, most of the companies (76%) follow fixed
assets first with least liquid first and more liquid last, then current assets second with less liquid first and
most liquid last.

The findings certainly disclose one issue that the wide variety of choices adopted by the companies
hampers the comparability characteristic of financial reporting. For example, reporting date of December
31, and June 30 by the textile sector companies surely create problem for textile sector analysts. This
kind of wide variety of presentation choice may create information risk for the economic decision
makers, and may lead to agency problem. It can be a great concern to implement or improve corporate
governance quality. It is essential to increase investor confidence as the private sector moves from family
firms to more broadly owned companies that mobilize funds from the public. Further uniformity will
ensure information asymmetry for the investors and the capital market will be more efficient. Corporate
governance would be much improved with uniform balance sheet reporting. Un-uniform balance sheet
reporting creates cost to the investors to make it asymmetric. The findings of this paper may help the
policy makers of the trade association also to set a common reporting outline for better comparability. It
can be used in broader perspective like in discussion of regional or international harmonization. This
paper focused on recent balance sheet reporting practices in Bangladesh. Future research can be on
convergence of financial reporting within the industry over several time periods.

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15
Appendix A: Balance Sheet Pro forma as per BAS 1
Assets
Non-Current Assets 1
Property, Plant and Equipment
Goodwill
Manufacturing licences
Investment in associates
Other financial assets

Current Assets: 2
Inventories
Trade and other receivables
Prepayments
Cash and cash equivalents
Total assets/Total Application of Funds 3= (1)+(2)

Equity and Liabilities

Capital and Reserves 4
Issued capital
Reserves
Accumulated profits/ (losses)

Minority interest

Non-Current Liabilities 5
Interest bearing borrowings
Deferred tax
Retirement benefit obligation

Current Liabilities 6
Trade and other payables
Short term borrowings
Current portion of interest bearing borrowing
Warranty provisions

Total Equity and Liabilities 7=4+5+6

16
Appendix B: Different Balance Sheet Styles Being Practiced in Bangladesh

Appendix B: Style 1 Appendix B: Style 2

Assets Assets/Application of Funds

Current Assets: 1 Non-Current Assets/Fixed Assets: 1
Inventories Property, Plant and Equipment
Accounts receivable Investment - Long term (at cost)
Advances, deposits, and prepayments Current Assets: 2
Investment in marketable securities Inventories
Short term loans Accounts receivable
Cash and bank balances Advances, deposits, and prepayments
Non-Current Assets: 2 Investment in marketable securities
Property, Plant and Equipment Short term loans
Investment - Long term (at cost) Cash and bank balances
Total assets 3= (1)+(2) Total assets/Total Application of Funds 3= (1)+(2)
Equity and Liabilities Equity and Liabilities/Sources of Funds
Current Liabilities 4 Capital and Reserves/Shareholders Fund: 4
Short term bank loans Issued capital
Long term loan - Current portion Retained earnings
Trade creditors Non-Current Liabilities/Long-Term Liabilities: 5
Liabilities for expense Long term loan –Secured
Liabilities for other finance Current Liabilities 6
Non-Current Liabilities: 5 Short term bank loans
Long term loan –Secured Long term loan - Current portion
Capital and Reserves: 6 Trade creditors
Issued capital Liabilities for expense
Retained earnings Liabilities for other finance
Total Liabilities and Shareholders' Equity 7=4+5+6 Total Liabilities and Shareholders' Equity/Total Sources of
Funds 7=4+5+6

17
Appendix B: Different Balance Sheet Styles (Continued)

Appendix B: Style 3 Appendix B: Style 4

Equity and Liabilities/Sources of Funds Net Assets:

Capital and Reserves/Shareholders Fund: 1 Fixed assets - At cost less depreciation 1
Issued capital Capital work-in-progress 2
Retained earnings Investment - Long term (at cost) 3
Non-Current Liabilities/Long-Term Liabilities: 2 Current Assets: 4
Long term loan –Secured Stocks
Current Liabilities 3 Trade debtors
Short term bank loans Advances, deposits, and prepayments
Long term loan - Current portion Investment in marketable securities
Trade creditors Short term loans
Liabilities for expense Cash and bank balances
Liabilities for other finance Less: Current liabilities 5
Total Liabilities and Shareholders' Equity/Total Short term bank loans
Sources of Funds 4=1+2+3 Long term loan - Current portion
Assets/Application of Funds Trade creditors
Non-Current Assets/Fixed Assets: 5 Liabilities for expense
Property, Plant and Equipment Liabilities for other finance
Investment - Long term (at cost) Net current assets 6 =(4) - (5)
Current Assets: 6 7=1+2+3+6
Inventories Financed by:
Accounts receivable Long term loan -Secured 8
Advances, deposits, and prepayments Shareholders equity: 9
Investment in marketable securities Share capital
Short term loans Share premium
Cash and bank balances General reserve
Total assets/Total Application of Funds 7= (5)+(6) Retained earnings
10 = (8)+(9)

18
Appendix B: Different Balance Sheet Styles (Continued)

Appendix B: Style 5 Appendix B: Style 6

SOURCES OF FUNDS APPLICATION OF FUNDS

Shareholders' Funds 1 Fixed Assets 1
Share capital Fixed assets - At cost less depreciation
Share premium Capital work-in-progress
General reserve Investment - Long term (at cost)
Retained earnings Current Assets: 2
Long Term Liabilities Stocks
Long term loan -Secured 2 Trade debtors
Total 3 = (1) + (2) Advances, deposits, and prepayments
Investment in marketable securities
APPLICATION OF FUNDS Short term loans
Fixed Assets 4 Cash and bank balances
Fixed assets - At cost less depreciation Less: Current liabilities 3
Capital work-in-progress Short term bank loans
Investment - Long term (at cost) Long term loan - Current portion
Current Assets: 5 Trade creditors
Stocks Liabilities for expense
Trade debtors Liabilities for other finance
Advances, deposits, and prepayments Net current assets/Net Working Capital 4 =(2) - (3)
Investment in marketable securities Net Assets/ Capital Employed 5 = (1)+(4)
Short term loans SOURCES OF FUNDS/ FINANCED BY
Cash and bank balances Shareholders' Funds 6
Less: Current liabilities 6 Share capital
Short term bank loans Share premium
Long term loan - Current portion General reserve
Trade creditors Retained earnings
Liabilities for expense Long Term Liabilities
Liabilities for other finance Long term loan -Secured 7
Net current assets 7 =(5) - (6) Total sources of funds 8 = (6)+(7)
Preliminary expenses 8
10 = (4)+(7)+(8)

19
Appendix B: Different Balance Sheet Styles (Continued)

Appendix B: Style 7 Appendix B: Style 8

Current Assets: 1 Net Assets:

Stocks Fixed assets - At cost less depreciation 1
Trade debtors Capital work-in-progress 2
Advances, deposits, and prepayments Investment - Long term (at cost) 3
Investment in marketable securities Current Assets: 4
Short term loans Stocks
Cash and bank balances Trade debtors
Less: Current liabilities 2 Advances, deposits, and prepayments
Short term bank loans Investment in marketable securities
Long term loan - Current portion Short term loans
Trade creditors Cash and bank balances
Liabilities for expense Less: Current liabilities 5
Liabilities for other finance Short term bank loans
Net current assets/Net Working Capital 3 = (1) - (2) Long term loan - Current portion
Fixed Assets 4 Trade creditors
Fixed assets - At cost less depreciation Liabilities for expense
Capital work-in-progress Liabilities for other finance
Investment - Long term (at cost) Net current assets 6 =(4) - (5)
Net Assets 5 = (3)+(4) Long term loan - Secured 7
Net Assets 8=1+2+ 3+ 6- 7
SOURCES OF FUNDS Financed by:
Shareholders' Funds 6 Shareholders equity: 9
Share capital Share capital
Share premium Share premium
General reserve General reserve
Retained earnings Retained earnings
Long Term Liabilities 10 = (9) = 8
Long term loan -Secured 7
Total sources of funds 8 = (6)+(7)

20
Appendix B: Different Balance Sheet Styles (Continued)

Appendix B: Style 9 Appendix B: Style 10

SOURCES OF FUNDS Properties and Assets 1

Shareholders' Funds 1 Cash
Share capital Balance with other banks & financial institutions
Share premium Money at call and short notice
General reserve Investments (shares and bonds)
Retained earnings Investments (general)
Total 2 = (1) Fixed assets
Other assets
APPLICATION OF FUNDS Non-banking assets
Fixed Assets 3 Total assets (2) = 1
Fixed assets - At cost less depreciation Liabilities and Capital
Capital work-in-progress Liabilities 3
Investment - Long term (at cost) Borrowing from other banks
Investment 4 Deposits and other accounts
Current Assets: 5 Other liabilities
Stocks Capital/ Shareholders' equity 4
Trade debtors Paid up capital
Advances, deposits, and prepayments Share premium
Investment in marketable securities Statutory reserve
Short term loans Retained earnings
Cash and bank balances Total Liabilities and Shareholders' Equity (5) = 3+4
Less: Current liabilities 6
Short term bank loans Off Balance Sheet Items
Long term loan - Current portion Contingent Liabilities 6
Trade creditors Acceptance and endorsements:
Liabilities for expense Letter of guarantee
Liabilities for other finance Irrevocable letter of credit
Net current assets 7 =(5) - (6) Bills for collection
Preliminary expenses 8 Other Commitments 7
Less: Long term liabilities 9 Total off balance sheet items (8) = 6+7
10 = (3)+ (4)+(7)+(8) -(9)

21
Appendix B: Different Balance Sheet Styles (Continued)

Appendix B: Style 11 Appendix B: Style 12

Capital and Liabilities 1 SOURCES OF FUNDS

Share capital Shareholders' Funds 1
Share premium Share capital
Reserve and contingency account: 2 Share premium
Reserve for exceptional losses General reserve
Profit & loss appropriation Retained earnings
Total shareholders' equity (3) = 1+2 Long Term Liabilities
Long term loan - Secured 2
Balance of funds & accounts 4 Total 3 = (1) + (2)
Fire insurance business
Marine insurance business APPLICATION OF FUNDS
Misc. insurance business Leased Assets 4
Premium deposit 5 Investment and Advances 5
Liabilities & provision 6 Net investment in lease finance
Sundry creditors 7 Investment in shares
(8)= 3+4+5+6+7 Provision for future losses on lease accounts
Provision for future losses on loan accounts
Property and Assets 9 Fixed Assets 6
Investment Intangible Assets 7
Agents balances Current Assets: 8
Outstanding premium Cash and bank balances
Sundry debtors Trade debtors
Cash and bank balances Advances, deposits, and prepayments
Other accounts: 10 Net Investment in lease finance - current maturity
Fixed assets Short term loans
Stock of stationery and stamps Less: Current liabilities 9
Preliminary expenses Payables & accrued expenses
Share issue expenses Short term loans
(11)= 9+10 Lease advance - current maturity
Term loan - current maturity
Provision for tax
Net current assets 10 =(8) - (9)
11 = (4)+(5)+(6)+(7)+(10)

22
Appendix C: Marshalling of Assets
Type 1 Type 4
Fixed asset first Current asset first
Less liquid first More liquid first
More liquid last Less liquid last
Current asset second Fixed asset second
Less liquid first
More liquid last

Type 2 Type 5
Fixed asset first Non-current asset first
More liquid first Current asset second
Less liquid last Non-current asset third
Current asset second
More liquid first
Less liquid last

Type 3
Current asset first
Less liquid first
More liquid last
Fixed asset second
Type 6
Fixed Asset First
Less liquid first
More liquid last
Current Asset Second
More liquid first
Less liquid last

23