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Financial Accounting / IFRS 15
« on: February 27, 2020, 05:31:29 PM »
Summary of IFRS 15
The objective of IFRS 15 is to establish the principles that an entity shall apply to report useful information to users of financial statements about the nature, amount, timing, and uncertainty of revenue and cash flows arising from a contract with a customer. [IFRS 15:1] Application of the standard is mandatory for annual reporting periods starting from 1 January 2018 onwards. Earlier application is permitted.


IFRS 15 Revenue from Contracts with Customers applies to all contracts with customers except for: leases within the scope of IAS 17 Leases; financial instruments and other contractual rights or obligations within the scope of IFRS 9 Financial Instruments, IFRS 10 Consolidated Financial Statements, IFRS 11 Joint Arrangements, IAS 27 Separate Financial Statements and IAS 28 Investments in Associates and Joint Ventures; insurance contracts within the scope of IFRS 4 Insurance Contracts; and non-monetary exchanges between entities in the same line of business to facilitate sales to customers or potential customers. [IFRS 15:5]

A contract with a customer may be partially within the scope of IFRS 15 and partially within the scope of another standard.  In that scenario: [IFRS 15:7]

if other standards specify how to separate and/or initially measure one or more parts of the contract, then those separation and measurement requirements are applied first. The transaction price is then reduced by the amounts that are initially measured under other standards; if no other standard provides guidance on how to separate and/or initially measure one or more parts of the contract, then IFRS 15 will be applied.

Key definitions
[IFRS 15: Appendix A]

An agreement between two or more parties that creates enforceable rights and obligations.
A party that has contracted with an entity to obtain goods or services that are an output of the entity’s ordinary activities in exchange for consideration.
Increases in economic benefits during the accounting period in the form of inflows or enhancements of assets or decreases of liabilities that result in an increase in equity, other than those relating to contributions from equity participants.
A promise in a contract with a customer to transfer to the customer either:
a good or service (or a bundle of goods or services) that is distinct; or a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.
Income arising in the course of an entity’s ordinary activities.
The amount of consideration to which an entity expects to be entitled in exchange for transferring promised goods or services to a customer, excluding amounts collected on behalf of third parties.

Accounting requirements for revenue
The five-step model framework

The core principle of IFRS 15 is that an entity will recognise revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services.  This core principle is delivered in a five-step model framework: [IFRS 15:IN7]

Identify the contract(s) with a customer Identify the performance obligations in the contract Determine the transaction price Allocate the transaction price to the performance obligations in the contract Recognise revenue when (or as) the entity satisfies a performance obligation.
Application of this guidance will depend on the facts and circumstances present in a contract with a customer and will require the exercise of judgment.

Step 1: Identify the contract with the customer

A contract with a customer will be within the scope of IFRS 15 if all the following conditions are met: [IFRS 15:9]

the contract has been approved by the parties to the contract; each party’s rights in relation to the goods or services to be transferred can be identified; the payment terms for the goods or services to be transferred can be identified; the contract has commercial substance; and it is probable that the consideration to which the entity is entitled to in exchange for the goods or services will be collected.
If a contract with a customer does not yet meet all of the above criteria, the entity will continue to re-assess the contract going forward to determine whether it subsequently meets the above criteria. From that point, the entity will apply IFRS 15 to the contract. [IFRS 15:14]

The standard provides detailed guidance on how to account for approved contract modifications. If certain conditions are met, a contract modification will be accounted for as a separate contract with the customer. If not, it will be accounted for by modifying the accounting for the current contract with the customer. Whether the latter type of modification is accounted for prospectively or retrospectively depends on whether the remaining goods or services to be delivered after the modification are distinct from those delivered prior to the modification. Further details on accounting for contract modifications can be found in the Standard. [IFRS 15:18-21].

Step 2: Identify the performance obligations in the contract

At the inception of the contract, the entity should assess the goods or services that have been promised to the customer, and identify as a performance obligation: [IFRS 15.22]

a good or service (or bundle of goods or services) that is distinct; or a series of distinct goods or services that are substantially the same and that have the same pattern of transfer to the customer.
A series of distinct goods or services is transferred to the customer in the same pattern if both of the following criteria are met: [IFRS 15:23] 

each distinct good or service in the series that the entity promises to transfer consecutively to the customer would be a performance obligation that is satisfied over time (see below); and a single method of measuring progress would be used to measure the entity’s progress towards complete satisfaction of the performance obligation to transfer each distinct good or service in the series to the customer.
A good or service is distinct if both of the following criteria are met: [IFRS 15:27]

the customer can benefit from the good or services on its own or in conjunction with other readily available resources; and the entity’s promise to transfer the good or service to the customer is separately idenitifable from other promises in the contract.
Factors for consideration as to whether a promise to transfer goods or services to the customer is not separately identifiable include, but are not limited to: [IFRS 15:29]

the entity does provide a significant service of integrating the goods or services with other goods or services promised in the contract; the goods or services significantly modify or customise other goods or services promised in the contract; the goods or services are highly interrelated or highly interdependent.
Step 3: Determine the transaction price

The transaction price is the amount to which an entity expects to be entitled in exchange for the transfer of goods and services. When making this determination, an entity will consider past customary business practices. [IFRS 15:47]

Where a contract contains elements of variable consideration, the entity will estimate the amount of variable consideration to which it will be entitled under the contract. [IFRS 15:50] Variable consideration can arise, for example, as a result of discounts, rebates, refunds, credits, price concessions, incentives, performance bonuses, penalties or other similar items. Variable consideration is also present if an entity’s right to consideration is contingent on the occurrence of a future event.  [IFRS 15:51]

The standard deals with the uncertainty relating to variable consideration by limiting the amount of variable consideration that can be recognised. Specifically, variable consideration is only included in the transaction price if, and to the extent that, it is highly probable that its inclusion will not result in a significant revenue reversal in the future when the uncertainty has been subsequently resolved. [IFRS 15:56]

However, a different, more restrictive approach is applied in respect of sales or usage-based royalty revenue arising from licences of intellectual property. Such revenue is recognised only when the underlying sales or usage occur. [IFRS 15:B63]

Step 4: Allocate the transaction price to the performance obligations in the contracts

Where a contract has multiple performance obligations, an entity will allocate the transaction price to the performance obligations in the contract by reference to their relative standalone selling prices. [IFRS 15:74] If a standalone selling price is not directly observable, the entity will need to estimate it. IFRS 15 suggests various methods that might be used, including: [IFRS 15:79]

Adjusted market assessment approach Expected cost plus a margin approach Residual approach (only permissible in limited circumstances).
Any overall discount compared to the aggregate of standalone selling prices is allocated between performance obligations on a relative standalone selling price basis. In certain circumstances, it may be appropriate to allocate such a discount to some but not all of the performance obligations. [IFRS 15:81]

Where consideration is paid in advance or in arrears, the entity will need to consider whether the contract includes a significant financing arrangement and, if so, adjust for the time value of money. [IFRS 15:60] A practical expedient is available where the interval between transfer of the promised goods or services and payment by the customer is expected to be less than 12 months. [IFRS 15:63]

Step 5: Recognise revenue when (or as) the entity satisfies a performance obligation

Revenue is recognised as control is passed, either over time or at a point in time. [IFRS 15:32]

Control of an asset is defined as the ability to direct the use of and obtain substantially all of the remaining benefits from the asset. This includes the ability to prevent others from directing the use of and obtaining the benefits from the asset. The benefits related to the asset are the potential cash flows that may be obtained directly or indirectly. These include, but are not limited to: [IFRS 15:31-33]

using the asset to produce goods or provide services; using the asset to enhance the value of other assets; using the asset to settle liabilities or to reduce expenses; selling or exchanging the asset; pledging the asset to secure a loan; and holding the asset.
An entity recognises revenue over time if one of the following criteria is met: [IFRS 15:35]

the customer simultaneously receives and consumes all of the benefits provided by the entity as the entity performs; the entity’s performance creates or enhances an asset that the customer controls as the asset is created; or the entity’s performance does not create an asset with an alternative use to the entity and the entity has an enforceable right to payment for performance completed to date.
If an entity does not satisfy its performance obligation over time, it satisfies it at a point in time. Revenue will therefore be recognised when control is passed at a certain point in time. Factors that may indicate the point in time at which control passes include, but are not limited to: [IFRS 15:38]

the entity has a present right to payment for the asset; the customer has legal title to the asset; the entity has transferred physical possession of the asset; the customer has the significant risks and rewards related to the ownership of the asset; and the customer has accepted the asset.
Contract costs

The incremental costs of obtaining a contract must be recognised as an asset if the entity expects to recover those costs. However, those incremental costs are limited to the costs that the entity would not have incurred if the contract had not been successfully obtained (e.g. ‘success fees’ paid to agents). A practical expedient is available, allowing the incremental costs of obtaining a contract to be expensed if the associated amortisation period would be 12 months or less. [IFRS 15:91-94]

Costs incurred to fulfil a contract are recognised as an asset if and only if all of the following criteria are met: [IFRS 15:95]

the costs relate directly to a contract (or a specific anticipated contract); the costs generate  or enhance resources of the entity that will be used in satisfying performance obligations in the future; and the costs are expected to be recovered.
These include costs such as direct labour, direct materials, and the allocation of overheads that relate directly to the contract. [IFRS 15:97]

The asset recognised in respect of the costs to obtain or fulfil a contract is amortised on a systematic basis that is consistent with the pattern of transfer of the goods or services to which the asset relates. [IFRS 15:99]

Further useful implementation guidance in relation to applying IFRS 15

These topics include:

Performance obligations satisfied over time Methods for measuring progress towards complete satisfaction of a performance obligation Sale with a right of return Warranties Principal versus agent considerations Customer options for additional goods or services Customers’ unexercised rights Non-refundable upfront fees Licensing Repurchase arrangements Consignment arrangements Bill-and-hold arrangements Customer acceptance Disclosures of disaggregation of revenue
These topics should be considered carefully when applying IFRS 15.

The depositors’ money in the banks and financial institutions will be more secure under the proposed ‘Deposit Protection Act, 2020’ as depositors will get Taka 1,00,000 within 90 days if any bank becomes bankrupt and rest of the money will be returned from the assets of the bank concerned.

“The ‘Bank Company Act’ and the ‘Deposit Insurance Act’ ensure the security of depositors. If the new law is made effective, the depositors of the financial institutions and the scheduled banks will be more secure,” said Bangladesh Bank (BB) Chief Spokesperson M Serajul Islam at a press conference at the Bangladesh Bank (BB) headquarters, BSS reports.

He urged all not to be anxious or frightened by the reports published in the different media recently.

Under the existing law, he informed, if the central bank declare bankrupt to any bank, the depositors money will be paid from the ‘Deposit Insurance Trust Fund’ within a hundred and eighty days.

As per the deposited money in the current insurance fund, Serajul Islam said, 92 percent depositors’ accounts are fully insured.

Moreover, he said, in the bank company act, there is a clear provision for repayment of all deposits from the assets of the bank in case a scheduled bank falls.

As per the proposed ‘Deposit Protection Act, he said, the government is likely to double the amount of insurance coverage. If the new provision will come to effect, about 96 percent of the depositors will be fully insured, he added.

The BB chief spokesperson expected that 100 percent deposit will be insured in future as the ‘Deposit Protection Trust fund’ invests in the public Treasury bond sector and the profit from the investment and the premium paid by the scheduled banks increases day by day.

BBA Discussion Forum / IMF calls DR Congo to halt central bank loans
« on: February 27, 2020, 05:24:29 PM »

IMF calls DR Congo to halt central bank loans
Published : Thursday, 27 February, 2020 at 4:37 PM  Count : 40
Observer Online Desk

IMF calls DR Congo to halt central bank loans
IMF calls DR Congo to halt central bank loans

The International Monetary Fund (IMF) expressed concern over the Democratic Republic of Congo’s 2020 budget and urged its central bank to stop drawing down foreign currency reserves and advancing money to the government.

In late December, the IMF paid $ 368 million to the Commonwealth Democratic Republic to tackle the issue of emergency balance.

That same month, the country’s 2020 budget draft was estimated at $ 10.59 billion, equivalent to about 1 million countries, of which two-thirds live on less than $ 2 a day.

On Wednesday, IMF staff, after a fact-finding mission, issued a statement concerned with spending pressure and concerns arising from unnecessary revenue, which caused the central bank to renew its government and erode its foreign reserves.

The fund welcomed a treasury plan published by the finance ministry, considering it was "consistent with realistic revenue estimates.

A ministry-issued plan on February 1 has allocated $ 1.8 billion to spend for 2020 - more than half of the original budget plan.-Internet

BBA Discussion Forum / Concern over ailing banking sector pulls down stocks
« on: February 27, 2020, 05:21:50 PM »

Key index falls for five straight days

DSEX, the key index of Dhaka Stock Exchange (DSE), fell on Wednesday for the five straight sessions amid concerns over the ailing banking sector due to the implementation of the single-digit lending rate.

The DSEX settled at 4,549 after losing 72.09 points or 1.56% on Wednesday's session. Total turnover took a negative turn and ended at Tk627 crore, which is 0.4% less than that of the last session.

Market insiders said that the implementation of the single-digit lending rate would slow down credit flow to the private sector. They also think that the economy and capital market will slow down too.

The banking sector is already being affected by this impending policy change — in the past two trading sessions it lost 4.4% in value.

Telecommunication, bank, NBFI and food and allied sectors observed the highest sell pressure from the investors, they also said.

Two other indices also ended lower. The DS30 index, comprising blue chips, fell sharply by 33.26 points to close at 1,517 and the DSES index lost 9.61points to settle at 1,060.

Losers took a strong lead over the gainers, as out of 356 issues traded, 226 closed lower, 84 ended higher and 46 remained unchanged on the DSE trading floor.

EBL Securities Limited in its daily market commentary said that the market started to take a hit from the early session and registered a stiff fall at the end as investors grieved on the probable impact of 9% lending rate on the economy, added to that reluctance in the formation of special fund even after two weeks of BB’s declaration seemed to lay investors in a doubt about a soon-to-be market recovery.

Among large-cap companies, Brac Bank (-9.5%), BATBC (-1.8%) and Grameenphone (-1.5%) were hit the most.

Grameenphone topped the turnover chart with shares worth Tk16 crore changing hands, closely followed by Indo-Bangla Pharma, VFS Thread Dyeing, Brac Bank and National Polymer.

Central Pharma was also the day’s best performer, posting a gain of 9.56% while Brac Bank was the worst loser, losing 9.5%.

Market insiders said that the Grameenphone, the large-cap stock, got a beating on court’s order to pay remaining Tk1,000 crore in 90 days over its disputed audit claim that led the market fall while many nervy investors continued to sell shares to opt for safer and more profitable securities.

The port city’s bourse, Chittagong Stock Exchange also registered loss at the end of the session. The selected index, CSCX and all Share Price Index, CASPI declined by 128.4 and 207.8 points respectively.

MBA Discussion Forum / Savings tools sale set to be double the target
« on: February 26, 2020, 09:23:52 AM »
The sale of the instrument is set to cross even the revised target of Tk45,000 crore set for the outgoing financial year

Net sale of National Savings Certificates (NSC) is likely to be more than double its original target of Tk26,197 crore this fiscal year ending June 30, as per sources at Internal Resources Division (IRD).

The sale of the instrument is set to cross even the revised target of Tk45,000 crore set for the outgoing financial year , as the government in the first 10 months of the 2019-20 fiscal year already borrowed Tk43,474.42crore from the savings tools.

Officials at the Directorate of National Savings Certificates have said that the mad rush for the lucrative instruments further intensified soon after the proposed 10% tax at source was announced in the draft budget.

“It seems the sale (of savings certificates) will even overshoot the revised target by Tk6,000 crore to Tk7,000 crore, and be more than double the original estimate,” a senior official at the IRD under the finance ministry has told Dhaka Tribune.

He finds borrowing target of Tk27,000 crore set in the revised budget from the savings tools unrealistic as the instruments are becoming increasingly an attractive area to invest.

In July-April of 2017-18 fiscal year, government’s borrowing from the savings certificates stood at Tk40,063.19crore.

“New rules and regulation will be implemented to sell the savings certificates in the next (2019-2020) fiscal year. As a result, public fear resulted in increased investment in the savings certificates ,” Agrani Bank Chairman Dr Zaid Bakht points out.

Zaid,  also research director of Bangladesh Institute of Development Studies, says: “High interest rates on national savings tools than banks’ deposit rates is another reason for the high demand for the tools.”

For 2018-2019 fiscal year, the government targeted that Tk26,197crore would be collected from national savings scheme sales. However, the government increased the targets to Tk45,000crore in the revised budget due to its growing demand.

High yields on national savings instruments is encouraging a large number of small investors and pushing up the government's debt burden.

Officials at the Directorate of National Savings Certificates cite the “striking difference” in the interest rates on offer has been encouraging people to move their money from banks to savings certificates.

While banks are typically offering 6-7% interest on deposits, savings schemes offer between 11.04% and 11.76%.

Government moved to introduce National Savings Scheme Online Management System from July this year to check abuses in investments in the government savings tools.

As part of the move, the finance ministry launched the system on February 3 this year on a trial basis and instructed all the entities to install the system by June this year.

There are allegations that many high net worth individuals invest huge amount of money to get high interest, prompting the government to install the system, officials concerned said.

For FY2019-20 fiscal year, the overall budget deficit (excluding grants) is expected to be Tk1,45,000 crore, about 5% of the national GDP, while Tk27,000 crore will come from National Savings Schemes.

MBA Discussion Forum / Exporters to bear brunt of new gas price hike
« on: February 26, 2020, 09:23:29 AM »
For industrial use, gas price has been increased by 37.88% from Tk7.76 to Tk10.70 per cubic metre, while for captive power it has been increased by 43.97% from Tk9.62 to Tk13.85

Bangladeshi exporters, especially those in apparel and leather sectors, will lose competitive edge in global markets as they fear that the latest spell of hike in gas prices will push up production cost.

The Bangladesh Energy Regulatory Commission (BERC) on Sunday issued a circular increasing gas prices at different rates effective from Monday.

For industrial use, gas price has been increased by 37.88% from Tk7.76 to Tk10.70 per cubic metre, while for captive power it has been increased by 43.97% from Tk9.62 to Tk13.85.

Gas price for the power sector has been increased from Tk3.16 to Tk4.45  per cubic metre with a 40.82% rise. 

In immediate reactions, industrialists and trade body leaders expressed deep concerns over the losing competitiveness in global export destinations.

“On the basis of the information I have, gas bill will take up around 1.5% of the manufacturing cost. So 38% increase in gas price means almost 1% increase in production cost. This may not sound much in terms of percentage, but for an industry struggling for every penny this will be another blow,” Bangladesh Garment Manufacturers and Exporters Association (BGMEA) President Rubana Huq has told Dhaka Tribune.

"Now, given the fact that the supply situation of gas did not improve and factories are suffering from pressure fluctuations, we are in tipping point with regard to pricing," Huq mentions.

Entrepreneurs are not feeling encouraged to invest due to numerous challenges and this sudden increase in gas price cripples their financial plan, such as increase in gas price will only add up to production cost making the business difficult for the SMEs whose break even is on a thin ice now, the trade leader finds.

Meanwhile, primary textile sector people have urged the government to increase prices of gas in phases, which they think will mitigate the pressure.

“From the current fiscal year, the government is implementing VAT. In this context, a sharp rise in gas prices will be a huge burden for the textile and apparel sector,” Bangladesh Textile Mills Association President Mohammad Ali Khokon tells Dhaka Tribune.

Moreover, he says, in the apparel sector compliance has cost huge but the prices of finished goods did not increase.

"So the rise in gas prices will leave the textile sector highly dependent on captive power, in tougher competition," Khokon fears.

He thinks the government should increase the prices of gas in phases so as not to put extra pressures on the manufacturers.   

Meanwhile, former Dhaka Chamber of Commerce and Industry (DCCI) President Abul Kasem Khan warns that the rise in gas prices will put an extra pressures on production cost.

The government should have done it taking more time so that investment will be encouraged and businesspeople will get breathing space, he notes.

Besides, the leather sector, the second largest export earner after the apparel industry, will also face competition as the price of raw materials will go up.

“Though there is no direct use of gas in finished leather goods, the gas price hike will hit the sector as gas is used in tanneries, which supply raw materials for the sector,” Md Saiful Islam, managing director of Picard Bangladesh Limited, a leather goods exporter, tells Dhaka Tribune.

On top of that, businesspeople also call for a long-term policy on gas and electricity so that people can make investment decisions with a sustained and futuristic aim.

According to Petro Bangla data, in the fiscal year 2017-18, Bangladesh produced 966684.63 mmcm gas.

Of the total production, 40.60% was used in the power sector, the highest, while 16.96% was used in industry, followed by captive power 16.35%, domestic 16.06%, fertilizer 4.38%, compressed natural gas (CNG) 4.70%, commercial 0.83%, and tea estates 0.10%.

MBA Discussion Forum / New VAT regime
« on: February 26, 2020, 09:23:05 AM »
Rate for e-commerce and ride sharing service cut to 5%

New value added tax (VAT) regime will start on Monday with a few changes brought in the final budget for 2019-20 fiscal year, as the government is committed to implementing the much talked-about VAT and Supplementary Duty Act, 2012 from the first day of new financial year.

Instead of previous seven slabs, the businesspeople now have to pay VAT at 15 %, 10%, 7.5% and 5% rates.

The 15% rate will be applicable only for the imported and luxury items, while wholesalers and retail sellers have to pay at the rate of 5%. Other businesses will pay VAT at 7.5% and 10% rates.

Besides, there will be special rates for a few sectors including pharmaceuticals, petroleum, rod and iron and yarns.

Officials at the National Board of Revenue (NBR) have said they have set the four-tier VAT rates for different sectors. But only those who will pay VAT at 15% rate will enjoy rebate or refund facility.

The traders will get VAT rebate once they pay surplus amount of VAT or double VAT, they add.

“If anyone thinks his estimated VAT is higher than his payable amount, he can switch to 15% VAT rate and take rebate,” NBR Second Secretary Md Tariq Hassan clarifies.

He informs that the government has cut down VAT on ride sharing and e-commerce services from the proposed 7.5% to 5% in the Finance Bill 2019.

The sectors had been out of VAT purview from the beginning.

The government enacted the VAT and Supplementary Duty Act, 2012 seven years ago but could not implement it amid protests from business community.

But, this year both the parties came to a settlement, said AHM Mustafa Kamal in his budget speech.

“To ensure effective implementation of this Act, we will provide all types of logistical support including necessary manpower,” he added.

Kamal informed that a joint working group, comprising officials from the government and private sectors, would oversee the implementation of the new VAT law.

Meanwhile, businesspeople have welcomed the new VAT law in a post-budget reaction in the capital, saying they do not have any objection to it, as the government has kept multiple rates as demanded.

President of the Federation of Bangladesh Chambers of Commerce and Industries (FBCCI) Sheikh Fazle Fahim, however, has urged the authorities concerned not to harass businesspeople while implementing the new VAT act, saying that they have no discord with the NBR.

The new VAT act excluded traders having annual turnover up to Tk50 lakh from the VAT net, while it imposed a 4% turnover tax for the small traders having turnover up to Tk3 crore.

The VAT registration threshold has been set at Tk3 crore, which was Tk80 lakh earlier.

Besides, a total of 98 products and 42 services will enjoy VAT exemption facility in the new fiscal year, according to the Finance Bill, 2019.

Previously exempted heavy industries like automobiles, refrigerators, freezers, air conditioners, motorcycles, mobile industries and government mega projects will also enjoy the facility.

However, products, which had been out of Vat net, such as plastic and aluminum items, soybean oil, palm oil, sunflower oil, mustard oil will be brought under the VAT purview.

Besides, astrologists, marriage media services and program producers of entertainment industry have been brought under the VAT net from today.

Mandatory EFD for 24 business categories

The NBR made electronic fiscal device (EFD) mandatory for 24 types of businesses in city corporations and district headquarters from the new fiscal year.

The businesses are hotel, restaurant and fast-food shop, decorator and catering service, motor workshop, advertising agency, printing press, community centre, sweetmeat, jeweler, furniture, courier service, beauty parlour, fitness centre, coaching centre, social and athletic club, apparel outlet, electronics sales centre, outlets at shopping centre, department store, super-shop, wholesale outlet, laundry, cinema hall and security service.   

Besides, the NBR or vat commissioners can make mandatory EFD for any service or business, if they feel necessary.

An EFD is a device which produces the digital record of every sale and transaction which will instantly send the data to a central server automatically.

MBA Discussion Forum / E-wallet transaction limit doubles
« on: February 26, 2020, 09:22:13 AM »

For personal E-wallet account, the maximum balance has been set at Tk400,000

Bangladesh Bank on Tuesday raised the transaction limit for E-wallet account from Tk50,000 to Tk100,000 a day to encourage cashless transaction in the economy.

The facility, however, will not be applicable for mobile financial services (MFSs), according to a central bank circular.

For personal E-wallet account, the maximum balance has been set at Tk400,000.

Any individual could transact a maximum amount of Tk100,000 a day through the system, while the monthly transaction limit has been fixed at Tk400,000, the circular adds.

The new limits of transaction through E-wallet will be effective immediately, the circular says.

However, the maximum transaction ceiling will not be applicable for the other transactions like person to business, business to person or business to business, it elaborates.

Experts say E-wallet account is an account to account payment system, having no cash out facility in this digital payment system. The E-wallet account must be linked with one's bank account.

“Now people buy plane tickets, pay credit card bills, gas and electricity bills and buy goods from e-commerce companies through E-wallet accounts. To facilitate transaction under the E-wallet method, the ceiling has been increased,” Md Mezabul Haque, general manager, Payment System Department of Bangladesh Bank, told Dhaka Tribune.

MBA Discussion Forum / NBR to engage more IT firms to develop VAT software
« on: February 26, 2020, 09:21:21 AM »
Currently, there have been only 11 firms, which are eligible for developing the software and approved by the NBR

The National Board of Revenue (NBR) is going to engage more IT firms in developing software for businesses to help them maintain accounts and keep records of value-added tax (VAT).

Currently, there have been only 11 firms, which are eligible for developing the software and approved by the NBR.

The revenue regulator took the initiative in a bid to expedite implementation new the Value Added Tax and Supplementary Duty Act, 2012

Speaking as chief guest at a workshop titled “Awareness Raising on Value Added Tax and Supplementary Duty Act-2012” NBR Chairman Mosharraf Hossain Bhuiyan came up with the announcement in the capital yesterday.     

“It is quite impossible to provide services for the huge number of businesses under VAT coverage with only 11 listed software developing companies,” Mosharraf Hossain Bhuiyan said.

Considering the number of businesses, the NBR decided to increase the number of companies to ensure quicker implementation of new VAT law, said the NBR chair.

The NBR would issue a circular within two or three days to add more companies to existing lists, he added.

As per the direction of the NBR, these companies will be allowed to develop software for businesses to help maintain accounts and keep digital records of VAT. The software will also connect the business firms with the NBR automatically.

Mosharraf urged the country’s eligible software companies to apply to be listed with the NBR for the job.

Earlier on February, the NBR authorized 11 companies —UY Systems, Ennova Technologies, Dhrupadi Techno Consortium, Symphony Softtech, UniSoft Systems, Mediasoft Data Systems, Best Business Bond, CSL Software Resources, Allied Information Technology, Jubosoft Information Systems and Divine IT — as eligible for the software development.

Businesses like medium firms or manufacturing companies with more than Tk5crore annual turnover were asked to use the software, said an NBR circular published last year.

However, the directive was not implemented then as the NBR delayed for authorizing the companies.

Meanwhile, as part of the ‘VAT and supplementary duty act 2012’ implementation, the revenue board on June 13 this year issued an order and mentioned the details about the software and the eligibility of the software producing companies.

Who can apply?

The recent order of the NBR mentioned four eligibilities for the aspirants who want to produce such software.

The aspirant company must have registration from Register of Joint Stock Companies and Firms Office as public or private limited company.

The company must have five-year experience of running the business uninterruptedly and must have experience of post-sale services.

Besides, the aspirant needs to have experience in accounting or similar software making, which has been successfully set up in at least three medium or large business firms.

Also, the company has to manage all for examining the software by the revenue board.

How will authorization be carried out?

Aspirant will apply to VAT Commissioner concerned. Then, he will initially check the software and send it to a NBR member, who is responsible for VAT implementation and IT. The member, after his observation, will send it to authorizing committee comprised of five members and headed by the convener, commissioner (VAT) of the large taxpayer unit. The committee will provide the final approval.

Earlier, in a meeting at the Post and Telecommunication Division, it was decided that the BTRC’s VAT registration should be completed immediately

The value added tax (VAT) registration of the telecom regulator to collect taxes from mobile phone companies faced yet another hurdle as the revenue authority is not cooperating in this regard, allege BTRC officials.

Bangladesh Telecommunication Regulatory Commission (BRTC) officials say the commission recently put forward an application to the Large Taxpayers’ Unit (LTU) of the National Board of Revenue (NBR) seeking vat registration.

However, it was not accepted by the LTU.

Earlier, in a meeting at the Post and Telecommunication Division, presided over by prime minister’s ICT advisor Sajeeb Wazed Joy, it was decided that the BTRC’s VAT registration should be completed immediately.

Meeting sources say the revenue collection from the operators is facing problem as BTRC is not VAT registered.

‘After the meeting with Sajeeb Wazed Joy, we applied to the Large Taxpayers’ Unit (LTU) of the NBR, but they did not accept our application. We were then asked to come through zonal office. Then we put forward the application to the Dhaka South zone but yet to receive any response so far,’ a senior BTRC official told Dhaka Tribune.

He said although the matter was supposed to be done urgently, but the NBR still seems reluctant.

‘It seems the NBR does not want to give any rebate to the mobile operators as BTRC’s  VAT registration will make the operators eligible for rebate,” he said.

He also says around Tk 150 crore in VAT lies uncollected to all mobile operators from the last quarter.

According to the Value-Added Tax and Supplementary Duty Act 2012, all service suppliers must have VAT registration, which includes the BTRC. The VAT rate is 15%.

The Association of Mobile Telecom Operators of Bangladesh (Amtob), in a statement on last week, said as the BTRC did not have any VAT registration, the operators were not allowed to pay the VAT amount to the telecom regulator.

In 2017-18 fiscal year, the BTRC collected Tk2,501.5 crore from the mobile phone operators in revenue sharing, spectrum charges and licence fees, and Tk2,648.9 crore in the previous fiscal year.

BBA Discussion Forum / One-third of NBFIs in dire straits
« on: February 26, 2020, 09:20:03 AM »

Imprudent lending, regulatory lapses blamed

Financial health of at least one-third of Non-Bank Financial Institutions (NBFIs) is alarming, thanks largely to Bangladesh Bank’s oversight failure, lack of management accountability and regulatory actions.

The regulatory lapses paved the way for imprudent lending by the NBFIs, which are now shouldering a huge accumulation of bad loan coupled with a tendency of becoming defaulters against bank credits and fall in deposit mobilization, it is learnt.

The Bangladesh Bank has appointed 'Observers' at three of the ailing NBFIs — BIFC, First Finance and PLFS — so that their business can turn around while others went scot-free. Either observers were withdrawn from the NBFIs in question, or not reappointed.

The weak financial status of the NBFIs came to forefront following the liquidation move of Peoples' Leasing and Financial Services Limited (PLFS) on July 14. 

PLFS loans and advances stood at Tk1,131crore as of December 31 last year, which was 56 percent of total deposit of Tk2,044.24 crore, according to a recent report of the finance ministry.

The BB found Tk748crore or 66.14% of the loans and advances of PLFS as bad.

Talking to Dhaka Tribune, general manager of Department of Financial Institutions and Market (DFIM) of Bangladesh Bank Md Shahidul Islam rejected the allegation and said, "The central bank has always been watchful on NBFIs."   

He, however, admitted that three NBFIs, which had 'Observers', had none now. 

"Observer at Bangladesh Industrial Finance Company Limited (BIFC) was not reappointed after promotion of the then BB official a couple of years ago. Observer at the First Finance Limited stopped discharging duty because of illness. No one replaced him till date. On the other hand, the function of the observer at PLFS is no longer relevant as Liquidator has been appointed there," Shahidul Islam said.

Ibrahim Khaled, a former deputy governor of BB, thinks the central bank should have been more proactive in protecting the NBFIs.

“The central bank has a scoring mechanism to measure the financial health of the NBFIs like banks. Precautionary measures could have been effective to protect them from becoming sick," he mentions.

NBFIs largely depend on banks for sourcing finance for lending while a small portion of investable funds come from individual depositors. Therefore, imprudent investment involves extensive risks, sources say.

Among the ailing NBFIs are Bangladesh Industrial Finance Company Limited (BIFC) topped the list followed by Peoples' Leasing and Financial Services Limited, FAS Finance & Investment Limited, First Finance Limited, International Leasing and Financial Services Limited (ILFSL), Prime Finance and Investment Limited, Fareast Finance and Investment Limited, Bay Leasing and Investment Limited, Premier Leasing and Finance Limited, Reliance Finance Limited and Union Capital Limited, according to the annual  report of financial institutions (Banks and non-banks) of the Financial Institution Division of Finance.

The report was based on data available up to December 31 last year.

According to the report, BIFC disbursed loans and advances to the tune of Tk841.48 crore, which was 154.2 percent higher than deposits of Tk545.60 crore till 2018. All the loans turned bad.

First Finance's deposit stood at Tk800.06 crore while loans and advances were found 109 percent higher than deposit at Tk879.41 crore while its deposit fell by 4.3 percent, mentions the annual report.

According to the report, the deposit of FAS Finance stood Tk837.50 crore while loans and advances disbursed by the company almost doubled at Tk1535.35 crore. The company's classified loan stood at Tk233.53 crore at the end of 2018, which was 15.2 percent of total investment. FAS Finance obtained loans to the tune of Tk500 crore from banks and, of the amount, Tk77 crore was defaulted. The  company was listed at DSE in 2007. In 2018, its deposit fell by 4.6 percent from what it was the previous year.

The ILFSL's deposit stood Tk2855.77 crore while loans and advances reached Tk3689.67 crore, 129.2 percent higher than deposit during the period. The company was listed at DSE and CSE respectively in 2007. It experienced 1.5 percent fall in deposit over the previous year, 2017.

ILFSL borrowed Tk837 crore from different banks and financial institutions and turned defaulter of loans amounting Tk53 crore.

Deposit at Prime Finance and Investment Limited stood Tk688.50 crore while loans and advances was Tk847.05 crore in 2018; around 123 percent higher than deposit. The company was listed at DSE and CSE respectively in 2005. Its deposit fell in 2018 by 25 % over last year. Prime Finance and Investment Limited had Tk207 crore loans from banks, of which, Tk22 crore was defaulted in 2018.

Bay Leaning’s  deposit stood at Tk774.17 crore while loans and advances were found 131 percent higher at Tk1,016.75 crore. The company was listed at capital market in 2009.

Fareast Finance's deposit stood at Tk557.79 crore and the volume of loans and advances was Tk998.94 crore, which is 179 percent higher than deposit. This company was listed with the capital market in 2013. Its deposit fell in 2018 by 19.3 percent than previous year.

Premier Leasing's deposit stood at Tk893.45 crore and loans and advances was Tk1,282.69 crore, 183 percent higher than deposit. This company's deposit in 2018 fell by 11.8 percent.

In the PLFS's post-liquidation regime, a total of 33 NBFIs are now in operation in the country.

The total investment of the NBFIs together stood at Tk67,000 crore as of June, 2019, said Khalilur Rahman, chairman of Bangladesh Leasing and Finance Companies' Association.

NBFIs bank borrowing was around Tk25,000 crore during the period, he said.

Commenting on NBFIs financial status, Khalilur Rahman said that liquidation of one company would not create any instability in the industry.

Contradicting him, DFIM General Manager Md Shahidul Islam said the liquidation of PLFS created instability to a small extent in the industry.

"It may hurt the economy if any more company's liquidation takes place," he said in response to a question over whether BB had any plan of liquidation of weak BBFIs.

He said NBFIs having sound financial standings were asked to take care of sick ones.

"We will sit with our higher authorities including the Bangladesh Bank governor to find ways to address the ongoing crisis, generating following the PLFS's liquidation move," he added.

The circular said the banks must coordinate with the branches of the central bank outside Dhaka to set up the booths

The Bangladesh Bank on Wednesday asked scheduled banks to set up booths in the cattle markets ahead of Eid-ul-Azha to detect fake or forged notes considering the huge cash transaction.

In a circular, the Bangladesh Bank asked the commercial banks to assign dedicated officers in this regard by August 8.

The circular said the banks must coordinate with the branches of the central bank outside Dhaka to set up the booths.

In absence of any central bank branch, the banks were instructed to conduct the operation through Sonali Bank, the order said.

The central bank also said the banks would have to contact with the local authorities including city corporation, district offices, municipalities and the law enforcing agencies to ensure smooth transaction.

The bank booths must feature the identification marks of the fake notes of taka 100, taka 500, and taka 1000 denominations.

According to BB rules, if any fake notes are found, people circulating such notes should be handed over to police.

However, if the bank finds that the people in question were unaware about such misconduct and presented the note in a good faith, the bank would take detailed information about them and deposit the fake notes to the police, the circular added.

BBA Discussion Forum / Fake handsets not be barred from August 1
« on: February 26, 2020, 09:18:57 AM »
BTRC officials said mobile handset users were advised to buy new handset after checking the authenticity of the set from August 1

The Bangladesh Telecommunication Regulatory Commission on Wednesday backtracked on its earlier decision and said network disconnection of the fake handset would not start on August 1.

BTRC officials said mobile handset users were advised to buy new handset after checking the authenticity of the set from August 1.

‘Confusion was created among the users that we might start disconnecting fake handsets on August 1. But that is not the case. We would do so after the National Equipment Identity Register will come into operation,’ BTRC senior assistant director Zakir Hossain Khan said.

He said the commission would give necessary information to the mobile handset users in appropriate time.

Earlier on Monday, the telecom regulator in a notice said clone mobile phone handset would be barred from network connectivity from August 1.

In the notice the telecom regulator said if any mobile phone handset was found with clone or a wrong IMEI number, a unique number to mark a handset, it would be disconnected through National Equipment Identity Register.

‘Customers are advised to check the authenticity before buying handsets. In the message option of any phone, customers should type KYD<space>15-digit IMEI number and send it to 16002 to get the proper information about the handset.

Also, customers can know IMEI information by dialing *#06#,’ reads the notice.

BTRC officials said the installment of the NEIR under process and might come into operation during the end of the year.

Remittance upto $1,500 will not face questioning

Inward remittances upto $1,500 from same individual in a month would get 2% cash incentives without any questioning while the remitter would need to provide documents relating to source of any amount beyond the ceiling, said Finance Secretary Abdur Rouf Talukder on Monday.

The secretary said the decision came at a meeting held on the day at the finance ministry with Finance Minister AHM Mustafa Kamal in the chair.

"Remittance upto $1,500 will not face questioning. Any amount above the ceiling may require documents relating to its source. Bangladesh Bank (BB) will issue a circular to this effect within a couple of days," said the secretary while briefing reporters at the ministry after the meeting.

The Bangladesh Bank had proposed the ceiling to be set at $1,000 per month.

"We have raised the ceiling to $1,500 aiming to extend maximum facility to the remitters considering that it may bring larger amount of remittance into the country," the secretary said.

The government had announced cash incentives for inward remittance in the budget for FY20.

According to the University Grants Commission (UGC), in 2018 there were 2,190 international students in public and private universities in Bangladesh - 1,386 in private and 804 in public

A government plan to increase the number of foreign students enrolled at public universities may be poised to discouraging foreign enrolment instead.

On December 9, the Ministry of Education issued an order instructing all private and public universities to obtain ministry approval before admitting a student of foreign origin. The order was requested by the Ministry of Foreign Affairs.

Public universities have already had the rule in place. Private university authorities fear that the direct involvement of the state may induce bureaucratic complexities, effectively reduce admission requests from abroad. While the number of foreign students at universities has seen a noticeable uptick since 2012 save for a few hiccups, it still trails behind the private university numbers.

According to the University Grants Commission (UGC), in 2018 there were 2,190 international students in public and private universities in Bangladesh - 1,386 in private and 804 in public.

The government’s case

Currently, private universities recruit students directly through scholarship, Memorandum of Understanding between partner universities and direct applications from foreign students. After getting student visa, the university authority helps renew the student visa every year.

The new admission process will see foreign students submit their application to Bangladesh missions in their home countries. The applications will be forwarded by the Ministry of Foreign Affairs to the Ministry of Education, while the Ministry of Home Affairs carry out security checks.

A total of nine steps of verification by an equal number of agencies will be involved, according to sources familiar with the change.

However, private university authorities have privately expressed their concerns for lengthening the process, instead suggesting a one-stop service and a fixed timeframe for operation. The UGC is also in favour of an easier process, but it has already begun to implement the rule.

Abdullah Al Hasan Chowdhury, an additional secretary at the Ministry of Education said: “It should be clarified how private universities recruit students. The Ministry of Home Affairs has to be in the loop. Foreign applications should come through embassies. We have issued the instruction to homogenize the process for public and private universities alike.”

The UGC also wants an easy way to provide clearance from the ministry of education.

Dr Md Fakhrul Islam, a director (Private University Division) at the UGC, said that the majority of the students arrive in Bangladesh without proper student visa or proper channels.

He said: “There was a time when there were many foreign students at public universities. But that number has dwindled. But private universities have more international students. Our prime minister wants the number of international students in Bangladesh to reach 10,000 by 2020.

“It is difficult to start studying in Bangladesh because documents need to be verified by nine government agencies. Can a student meet all the requisites and begin the semester on time? Unlikely. We suggested a four-step verification, but this is what it is.”

The rebut

According to private university authorities, the approval process is complex and discouraging international students to consider Bangladesh. The new steps are expected to stretch the whole admission process, dampening the rising flow of foreign students, and having and adverse impact on foreign cash flow as well.

Sheikh Kabir Hossain, president of the Association of Private Universities of Bangladesh, said: “Whatever the government is doing is for the well-being of the country. The government should know what kind of people are enrolling in our universities. It will be better if the government consults us.”

Mohammad Imtiaj, director of Branding, Communication and Public Relations at Southeast University, said: “We welcome the move, but the requirement must be clear and the process has to have a fixed timeframe otherwise the students are going to miss their semesters.”

State of foreign students in Bangladeshi universities

Of the 50 public universities in Bangladesh, there are 23 where the 804 international students are enrolled. On the other hand, 37 private universities among 103 have 1,386 international students, according to the UGC.

Dhaka International University has the most, with 285 international students, followed by Daffodil International University with 167 students and North South University with 120.

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