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BBA Discussion Forum / BB increases loan limit of export development fund
« on: February 26, 2020, 06:08:18 PM »
The Bangladesh Bank has increased the loan limit of its Export Development Fund (EDF) to $20 million from $15 million.

“It has now been decided to enhance the limit of $15.00 million to $20.00 million for member mills of the Bangladesh Knitwear Manufacturers and Exporters Association (BKMEA),” said the central bank through circular recently, reports BSS.

Other instructions contained in the circular shall remain unchanged, the circular added.

BBA Discussion Forum / Another new bank gets licence
« on: February 26, 2020, 06:06:37 PM »
The number of scheduled banks reached 60 as the central bank issued licence to Bengal Commercial Bank Ltd on Sunday.

"We've issued licence to Bengal Commercial Bank in line with the decision taken by our board of directors," a senior official of the Bangladesh Bank (BB) told the FE.

Earlier on February 09, the BB board of directors gave its final approval to the proposed Bengal Commercial Bank, asking the lender to increase its paid-up capital to Tk 5.0 billion within two years.

The new private commercial bank (PCB) has now been empowered to take preparations to start their business, according to the central banker.

"The PCB will have to take another licence for establishing its branches," he said while replying to a query.

The central bank issued a notification in this regard on Sunday with inclusion of the name of Bengal Commercial Bank Ltd as a scheduled bank.

The sponsors are now trying to start operations of the PCB as early as possible, banking sector insiders said.

"We expect that our bank will start operations formally by June, 2020," Jasim Uddin, chairman of Bengal Commercial Bank, told the FE.

Mr. Jasim, also vice chairman of Bengal Group of Industries, said appointment of top executives including managing director will be discussed in the first board of directors meeting scheduled to be held by the end of this month.

After Awami League formed the government in 2009, nine banks were given the green light on 'political consideration' despite opposition from different quarters.

Shimanto Bank Limited, owned by BGB Welfare Trust, was offered the licence in 2016.

Two years later, the BB board gave the final approval to Community Bank Bangladesh Limited.

Currently, there are 60 banks in Bangladesh, of which 42 are local private banks, nine are foreign, and nine are state-owned lenders.

BBA Discussion Forum / BB sets 9.0 pc interest rate on all loans
« on: February 26, 2020, 06:05:04 PM »
The central bank has instructed banks to fix a maximum 9.0 per cent interest rate on all loans except credit cards as part of the government initiative to bring down the lending rate to a single digit.

The new instruction will come into effect from April 01, 2020, according to a notification, issued by the Bangladesh Bank (BB) on Sunday night.

Borrowers will have to pay an additional 2.0 per cent as panel interest along with the new rate if they become defaulters despite getting the facility, it added.

The BB, however, kept unchanged the interest rate at 7.0 per cent for exporters.

From the current year, banks will not be allowed to disburse loans to the industrial sectors less than their average outstanding credit in the last three years.

The circular said the present high bank interest rates are impeding the growth of the country’s small, medium and large business, and services sector.

Such high lending rates are not only pushing their cost of production, but also affecting the country’s competitive advantage in the global market, it added.

As a result, the businesses, sometimes, are unable to repay their bank loan on time, which affects the discipline of the bank loans and hampers the country’s overall economic development, the BB added.

On December 30 last year, finance minister AHM Mustafa Kamal told reporters that the single digit interest rate on all loans, excepting credit cards, will take effect from April 01.

Earlier on the day, he sat with chairmen and managing directors of private commercial banks to discuss the matter.

Besides, the seven-member committee, led by the BB Deputy Governor S M Moniruzzaman, was formed on December 01 to find ways to cut down ending rates to single-digit from the existing level to facilitate achieving higher economic growth.


Financial inclusivity and the banking sector
From progress to regress

Zahid Hussain
Financial reforms have been on a reverse gear in Bangladesh. The latest being the announcement to return to a regime of interest rate repression. Following the easing of loan classification and write-off standards and announcing generous rescheduling facility to the defaulters last year, this is yet another attempt to return to a financial regulation regime that we successfully got out of several decades ago.

A story of reforms

The financial sector turned around following a series of reform programmes in the 1990s. Legal, policy, and institutional reforms improved the regulatory and governance environment and enhanced the ability of bank owners, management and regulators, and the markets themselves to provide for better governance and regulation. The domination of the banking system by the State-owned Commercial Banks (SCB) declined while Private Commercial Banks (PCB) and Foreign Commercial Banks (FCB) gained market share, increasing competition in the banking industry. The private sector banks have consistently outperformed specialised banks and SCBs in terms of growth in deposits, bank advances and other banking services.

Banks were heavily burdened by high levels of nonperforming loans (NPLs) accumulated over many years due to weak management of the SCBs. Priority lending to loss-making state-owned enterprises, a deficient legal and debt recovery framework, weaknesses in loan screening and supervision, lack of accountability of bank officials, and a weak credit culture undermined good management. The share of NPLs rose steadily from 1972 onwards with the gross NPL ratio to total loans in the banking system peaking at 41.1 percent in 1999. The SCBs and Development Financial Institutions (DFI) recorded the highest NPL ratios. Directed lending programmes led to a massive build-up of poor-quality loans in the 70s and the 80s. Banks were reluctant to write off the long-lasting bad loans mainly due to sub-standard underlying collateral and fear of probable legal complications.

The government adopted several measures, dating back to the 1980s, to ensure better policy framework for managing NPLs. Administrative and judicial measures for solving problem loans of SCBs and DFIs suggested by the National Commission on Money Exchange and Credit, formed in 1986, were heeded to. The Financial Sector Reform Project in 1990 supported enactment of different laws and regulations to expedite settlement processes. A concrete loan recovery policy for SCBs was put in place based on recommendations from the Banking Reform Commission in 1996. The Structural Adjustment Performance Review Initiative in 2000 concentrated on better loan screening and monitoring standards of individual banks while the Credit Risk Grading Manual in 2005 made the Credit Risk Grading system mandatory for analysing credit risk. SCBs were corporatised in 2007 and the minimum capital adequacy ratio was increased from 9 to 10.  Measures were adopted for tightening loan classification and establishing provisions more in line with international practices. Key provisions in the Bank Companies Act were amended in 2013 to provide the BB full regulatory and supervisory control over the SCBs. The financial reporting of bank branches was automated in 2014. Banks implemented Risk Based Capital Adequacy guideline formulated in line with Basel-II and started adopting Basel-III.

NPL reduction was achieved through provisioning and write-offs and by a sharp reduction in new NPLs. Enhanced legal powers of the banks to collect problem loans and better screening of new loans improved the NPL ratio. NPL recoveries improved significantly after 1999, leading to steady decrease in the NPL ratio to 6.1 percent in 2011. Greater legal powers of the banks to recover problem loans through the money loan courts and better screening of new loans by the Credit Information Bureau contributed.

The slide back

Bangladesh's financial system deepened notably in the past decade, with private sector credit increased from 30.9 percent of GDP in 2009 to 39.8 percent of GDP in 2019. The improvements came mainly from banks, driven by better access and improved operating efficiency. Good access reflects a relatively wide network of ATMs and bank branches per 100,000 adults. Bangladesh's strong economic performance has been historically supported by rapid private sector credit growth. However, the correlation between the change in the private credit to GDP ratio and real activity is diminishing. The degree of co-movement of financial and real variables has weakened while the credit intensity of growth is on the rise. NPLs rebounded to 10 percent in 2012 and further to 12 percent in September 2019. This indicates growing resource misallocation. The deterioration of credit quality, with NPLs significantly increasing in recent years in the context of weakly capitalised banks, raises concerns about the capacity of the financial sector to continue supporting economic growth.

Increased regulatory forbearance of the kind seen recently in Bangladesh compounded the problem of NPLs. The fundamental causes of resurgence of NPLs include weak corporate governance practices, risk management systems and regulatory failures. Country experiences have shown that moral hazard thrive where the owners of undercapitalised banks have little shareholder capital to lose from risky investments. Weakening asset quality has undermined the intermediary role of banks. So far, the regulator's strategy for resolving the NPLs problem has been to allow the defaulters an exit route by relaxing the application of regulatory codes and repeated rounds of re-capitalisation of public sector banks. Neither strategy has paid any dividend yet. Almost all of the loans rescheduled in 2015 defaulted one year after they were rescheduled. Similarly, indiscriminate re-capitalisation of public sector banks without a credible commitment to improve governance and disinvest over time, created a vicious cycle of moral hazard and weak micro-prudential regulation. Although re-capitalisation plans have been linked to performance targets of the state-owned banks in theory, the links have not been enforced due to various intervening forces.

Two amendments of a dubious nature were made to the Banking Company Act in 2018 undermining the cause of good governance. The tenure of banks' board of directors increased from six years to nine years, while up to four family members were allowed to be on the board, instead of two. Repeated violations of bank policies have led to their current dilapidated state.

In the context of a remarkable history of reform success, how do we make sense of the reform reversals seen in recent years? These reversals demonstrated the key vulnerabilities of the financial sector and the regulatory architecture governing it with the government invoking both formal and informal mechanisms to issue directions to the BB. We know that elites have a disproportionate influence on any reform process and associated outcomes. The elites are also not a homogenous group. The functioning of the financial sector affects different elites differently. Some benefit directly from blocking financial sector inclusion. However, the elites controlling financial institutions have a direct interest in expanding their activities.

Similarly, large manufacturing firms need significant external finance and thus a developed financial sector. When the banking system is in part controlled by the State, elites can use it as a powerful economic lever in their political competition. The bureaucracy plays their part in determining who gives and receives credit, and at what price, offering various rationales for maintaining such a system. What is in the interest of one class of elites is not necessarily in the interest of others.

What determines which group wins the battle of the elites? Raghuram G Rajan and Luigi Zingales (2005) observe from their extensive research that in intermediate regimes of partial democracy, the balance of power tilts towards some economic elites who are able to "capture" the government with greater ease and adopt policies that simply maximise the interests of the same elites. Acemoglu and Robinson (2008) defined these regimes as "captured democracy". Such privileged elites may block reforms in specific areas, while reforms can still proceed in areas where they have no strong vested interests or where they in fact gain from reforms.

What makes elite control a problem?

If accountability of institutions is weak, elite capture can happen even under limited government where the authority of public officials is constrained. Such institutions can be subject to elite capture and favour connected interests. Connected individuals inevitably use it to obtain preferential access to capital, in particular from, but not limited to, the state-owned banks. The consequent weak financial regulation and enforcement limit access to finance for less established competitors.

The financial sector contains a number of very large institutions organised into powerful banking associations. They can afford lobbying through well-prepared participation in public debate on regulatory measures. Finance is necessarily characterised by asymmetric information between banks and their clients, and by systemic effects. Risk is an inherent feature of the industry. Confidence effects among banks and between banks and their creditors create various forms of externality. Other externalities arise because of competition. The competitive behaviour of banks varies depending upon their financial condition. Sound banks have lower funding costs and weak banks compete more aggressively. The regulations favoured by the key players may promote financial stability and largely coincide with what would promote overall efficiency if they perceive such regulation is in their self-interest. Often, they are not so perceived.

Politicisation of entry and excessive forbearance of risky lending lead to inefficiency and stability risks. Political influence led to allowing new banks without extensive scrutiny in recent years. Several of these fourth-generation banks suffered a severe liquidity and capital adequacy crisis. These had to be bailed out by the government. The costs are borne largely by a subset of institutions whose interests diverge from the users of financial services and those seeking financing who have less ability to exercise influence over regulators. The ability of just a few business interests to capture the regulator may be enough to undermine the public's confidence in the competence of the banking regulator.

When people lose trust in formal financial systems, they keep their savings in un-regulated or under-regulated investment avenues, making them more vulnerable to fraud. Anecdotal evidence suggests a number of weak PCBs are plagued by insider lending and other owner abuses.

The political capture of the regulatory entity prevents proper resolution of failing banks. While there is an explicit deposit insurance scheme, it has never been used. BB has de facto extended an implicit guarantee to all banks. Over the past years, no domestic bank has been allowed to fail. Weak banks are referred to the Problem Bank Monitoring Department within BB where they are subject to special supervisory oversight, certain regulatory restrictions and regulatory forbearance. These produce systemic inefficiencies. Larger loan loss provisions of weak banks drive up the spread between lending and deposit rates, allowing other healthy banks to enjoy rents in the form of higher profits.

The drift towards extractive institutions

In their "Why Nations Fail: The Origins of Power, Prosperity and Poverty", Daron Acemoglu and James Robinson, suggest that countries can be bedevilled by economic institutions "structured to extract resources from the many by the few and that fail to protect property rights or provide incentives for economic activity." The banking sector has historically been a target for extractive elites in many economies. The wealth of the financial industry gives them enormous lobbying power, including as contributors to political campaigns or to ruling parties. A narrow elite seizes control of bank regulation to prevent broad based financial inclusion.

Sustained economic reform requires a framework of long-term policy to which the government can credibly commit itself. But the backsliding in the reform process is eroding most of the structures of institutional insulation of long-run economic management decisions against the wheeling-dealing of day-to-day politics. There are very few assurances that commitments made by the government will be kept even by itself under pressure. The pressure comes from insiders who have a strong incentive to block or reverse financial reform as financial development improves the conditions for entry of new players, thus challenging rents of the insiders through increased competition.

Can we still hope?

Bangladesh's financial sector development lags those of peer economies. Dealing with symptoms of a financial crisis before the crisis becomes full blown requires swift action to maintain stability and confidence in the banking system. Within Bangladesh's political elites, the leadership at the top plays a decisive role in shaping the policy. A leadership committed to reforms faces resistance from three quarters: opponents within and among the supporters of the government, those in the opposition, and the vested interests that expect to lose from the policy change. A determined leadership can often overcome resistance from all three sources.

The focus on regulation and corporate governance of banks is important given the prevailing dominant role of banking institutions as a source of finance for the corporate sector and the SMEs. Improved board structures, administrative procedures and disclosure requirements could result in better governed banks, which are more likely to allocate capital efficiently. The evolving discourse on financial regulatory reforms recognises that the motivation for state intervention in finance must be guided by an understanding of the sources of market and regulatory failures. The government has been taking on a very active role in the financial system to enhance savings mobilisation, direct credit to priority sectors, and make financial services affordable to larger parts of the population. Through interest rate controls the government is hoping to reduce lending costs for borrowers, while credit quotas are reportedly under consideration to guarantee that financial resources flow to priority and underserved sectors.

Government solutions to overcome market failures have not worked. Bureaucrats have limited expertise to run financial institutions and they are subject to political and regulatory capture. Bureaucrats as bankers have failed almost everywhere, but especially in developing countries. Being owner, borrower and regulator of an institution at the same time, the Financial Institutions Division under the Ministry of Finance face obvious conflicts of interest.

Experience in Bangladesh has shown once again that government-owned banks are often used by politicians to finance commercially unviable government projects or state-owned enterprises. Present approach to financial regulatory reform has been limited to addressing the symptoms. This approach relies on the government to enable and develop markets.

The role of government has to be redefined to make Bangladesh's financial system more efficient and investment friendly. Beyond ensuring macroeconomic stability and providing an effective and reliable contractual and informational framework, the government should move from the role of an operator and arbiter in the financial system to the role of enabling and creating markets.

Yes, the financial sector suffers from the general governance problems in the economy and the society at large. This actually strengthens the case for putting financial sector reform at the centre of governance reform, since it is here that the money and thus the temptation is. The depoliticisation of financial sector regulation and supervision can send an important signal to the rest of the economy and society and be an important catalyst for governance reforms in other areas.

Source:Daily Star

BBA Discussion Forum / Beyond wage digitization in RMG sector
« on: February 20, 2020, 05:48:37 PM »
Nearly a billion women around the world are economically excluded. They lack access to formal financial services, like bank accounts. They are unlikely to have their own formal identification, meaning they cannot own property or land, or a mobile phone.  They struggle to own businesses, or secure the credit and insurance they need to run them. They are more likely than men to be poor and have no job, and are often one economic shock, and not always a big one, away from economic disaster.

Research suggests that global growth rates are 1.1 per cent slower because women are not economically empowered. This is in part because women are great consumers – they purchase household items, education and healthcare products for their children and wider families. McKinsey suggests that $28 trillion in GDP growth is being left on the table worldwide because women are not reaching their full potential.

This is why the work being done by the government of Bangladesh in wage digitization is so important for women. The government's goal is to digitize wage distributions to around 90 per cent of the population by 2021 as part of a push towards a cashless society. A large and significant group that will benefit from this are garment sector workers, most of whom are women.

However, there are challenges. Despite 50 per cent growth of financial inclusion in Bangladesh, the gender gap has widened – the gap in financial account ownership between men and women has grown by nearly 4 per cent, meaning that while more people overall are being financial included in Bangladesh, the benefit is being felt by men, not women. All tides are not lifting all boats equally.

This is because men and women have different financial lives and therefore different financial needs. Additionally, women have a steeper technology adoption curve then men, and digital wallets can be difficult to navigate, and rely on sometimes sporadic data or network availability – it is not a good moment when you send money on your mobile and the internet crashes.

Wage digitisation can help with financial inclusion as it provides women with greater security and control.

However, giving women access to digital financial services is only half the issue. Once customers have a wallet or an account, it is important to ensure that they use it, which is why Women's World Banking worked with Dutch-Bangla Bank on an extensive pilot to test how to best serve women garment workers with digital financial services. We delivered the results in a round table in Dhaka in early January this year to see how wage digitization can be delivered in the most effective way for women workers.

Challenges of wage digitization and solutions

We discovered that, while wage digitization was an important step towards financial inclusion, we need to look beyond that and focus on usage if we are to achieve real results in financial inclusion for women garment workers. Although workers' wages were paid into their digital wallets every month, they were often unaware of the functionality on offer, and resorted to cashing out as quickly as possible so that they had physical cash to use, however, they needed. They were not aware, for example, that they could use their mobile device to send money home immediately and more cheaply than over the counter options. They also have usability concerns since the phone menus were in English.

All of this is solvable. Education and training play a large role. We found that peer learning was the most effective approach to this and interestingly, it worked for both men and women. Furthermore, we found that women were effective teachers, both for other women, but also for men. We also found signs that, as women became more confident using basic services, they were more open to trying additional services, which becomes an opportunity for financial service providers to up sell.

At a policy level, inseparability requirements, supported with central bank mandates, help to ensure that no wallet corners the market and consumers have choice.

There is huge potential in wage digitization, but we must look beyond that to realise the benefits for women in Bangladesh. There are opportunities for all ecosystem players if we invest a bit more effort in not only connecting women with financial products, but making sure they have the confidence to use them. Our experiences with our pilot showed us that increasing both the financial and digital capabilities of women in the garment sector together has real benefits and can become a solid platform for further acquisition of financial services over a mobile platform. And everyone benefits from that.


The writer is the global head of advocacy of the Women's World Banking.

Business Administration / What is 'Backflush Costing'
« on: April 30, 2018, 02:17:47 PM »
What is 'Backflush Costing'

Backflush costing is a product costing system generally used in a just-in-time inventory environment. Backflush costing delays the costing process until the production of goods is completed. Costs are then "flushed" back at the end of the production run and assigned to the goods. This eliminates the detailed tracking of costs throughout the production process, which is a feature of traditional costing systems.

Shahana kabir
Assistant Professor

Business Administration / amortization schedule definition
« on: April 30, 2018, 02:11:18 PM »
amortization schedule definition

A multi-column listing of the amounts needed to eliminate a balance in a systematic manner over the life of the item. For example, an amortization schedule for a 15-year mortgage loan would show the 180 payments. The first column might be the payment number. The second column would show the amount of the payment. Column 3 would show the amount of interest being paid. Column 4 would show the principal amount being paid (total payment minus the interest payment). Column 5 would show the principal balance remaining after the payment (previous principal balance minus the current principal payment).

An amortization schedule for bond discount would show the amounts needed to be journalized over the life of the bonds in order to systematically move the amount from the balance sheet to interest expense on the income statement.

Shahana Kabir
Assistant professor

Business Administration / activity-based costing (ABC) definition
« on: April 30, 2018, 02:04:40 PM »
activity-based costing (ABC) definition

A technique for allocating costs to a product, service, customer, etc. The premise is that activities cause an organization to incur costs. Once the costs of the activities have been identified and each activity's cost has been determined, the cost of the activities is then allocated to the product, service, customer, etc. that required the activity. This technique is more logical for allocating overhead than simply allocating costs based on machine hours or direct labor hours.

Business Administration / Benapole land port needs more warehouses
« on: April 30, 2018, 02:01:10 PM »
Benapole land port needs more warehouses
Businesses tell seminar on Indo-Bangla trade
Star Business Report

Businesses that trade with India yesterday demanded more warehouses at the Benapole land port by private sector players like in the Chittagong port for proper storage of imported and export consignments.

“It's absolutely a necessity,” said Motiar Rahman, a clearing and forwarding agent, adding that 19 private warehouses were built around the Chittagong port in the last ten years for safer storage of imported and export goods.

The existing 60,000 square feet government-owned warehouse is simply not adequate for the expanded trading relationship between the two neighbouring countries, businesses said at a seminar styled “addressing land port issues for better Indo-Bangla trade”.

The seminar was organised by the India-Bangladesh Chamber of Commerce and Industry (IBCCI) and the High Commission of India in Bangladesh at the capital's Pan Pacific Sonargaon hotel.

Due to congestion on either side of the border, importers and exporters have to wait for as many as 25 days and in that time goods deteriorate in quality or go missing in the absence of adequate storage facilities.

For instance, in the past 15 days, more than 4,000 trucks have been unable to enter Bangladesh from Indian Bangaon-Chakdaha side due to lack of space in Benapole, said Rahman, who is also the chairman of the import-export sub-committee of the IBCCI.

Abdul Matlub Ahmad, the IBCCI president, echoed the same. “It is very difficult for businessmen to wait for up to 25 days for unloading goods.”

“Unless we have enough warehouses, we cannot do business. The private sector is ready to help to build the warehouses at the port and we are ready to help the government.”

Ahmad, who is also the immediate past president of the Federation of Bangladesh Chambers of Commerce and Industry, recommended making all 22 land ports along the India-Bangladesh bordering areas fully operational to further bilateral trade.

Currently, Bangladesh has 23 land ports, 22 of which are located along the Indian border. Only the Teknaf land port is with Myanmar.

Last fiscal year, Bangladesh imported goods worth $6.5 billion from India -- 90 percent of which were brought in through the land ports.

Goods worth $650 million were shipped to India in 2016-17, according to data from the Export Promotion Bureau.

If better land port facilities can be created, Bangladesh can easily grab a good portion of the $30 billion Indian apparel market, Ahmad said.

He also called for an office of the Bangladesh Standards and Testing Institution at the Benapole land port for quick release of certification.

In 2016-17, the Petrapole-Benapole land port alone accounted for 37 percent of the total trade between the two countries, said Adarsh Swaika, deputy high commissioner of India in Bangladesh.

Recognising the importance of the land port, the Indian government will convert Petrapole and Agartala into integrated check posts to facilitate the movement of cargo.

The idea behind the construction of integrated check posts is to bring different agencies and services such as customs, immigration and border security under one integrated complex and facilitate seamless movement of goods and people.

Swaika, currently the acting Indian High Commissioner, said seven more land customs stations on the India-Bangladesh border will be upgraded to integrated check posts.

For instance, work on upgrading the Dawki land customs station on the Meghalaya-Bangladesh border is already underway, he added.

In 2016-17, a total of 155.19 lakh tonnes of goods were imported and exported through the land ports, according to Shipping Minister Shajahan Khan. In 2008-09, it was 34.26 lakh tonnes.

Bangladesh earned Tk 111.47 crore from the land port last fiscal year in contrast to Tk 26.74 crore in 2008-09, he added.

“Twelve more land ports are on way now,” said Tapan Kumar Chakravorty, chairman of the Bangladesh Land Port Authority, which manages six of the land ports.

The trade imbalance with India is a reality for Bangladesh as the country imports a lot of basic goods from its largest neighbouring country, said Tariq Karim, a former Bangladesh ambassador to India.

He suggested speeding up the e-commerce facility at the land port to boost bilateral trade.

Non-tariff, procedural and regulatory barriers are standing in the way of higher bilateral trade between the two countries, said Bipul Chatterjee, executive director of CUTS International, an Indian research body.

Shahana Kabir
Assistant professor

What are the Difference Between Amortization ,Depreciation and depletion?

The cost of business assets can be expensed each year over the life of the asset. The expense amounts are subsequently used as a tax deduction reducing the tax liability for the business.

Because very few assets last forever, a finite number of years is calculated which is called the asset's useful life. In this discussion, we'll review three common methods used by business to spread out the cost of an asset. The key difference between all three methods involves the type of asset being expensed.

Depreciation is the expensing of fixed assets over its useful life. Fixed assets are tangible assets meaning they are physical assets and can be touched. Some examples of fixed or tangible assets that are commonly depreciated include:

Office furniture,
Since tangible assets might have some value at the end of their life, depreciation is calculated by subtracting the asset's salvage value or resale value from its original cost. The difference is depreciated evenly over the years of the expected life of the asset. In other words, the depreciated amount expensed in each year is a tax deduction for the company until the useful life of the asset has expired.

For example, an office building can be used for many years before it becomes run down and is sold. The cost of the building is spread out over the predicted life of the building, with a portion of the cost being expensed in each accounting year.

Depreciation of some fixed assets can be done on an accelerated basis, meaning that a larger portion of the asset's value is expensed in the early years of the assets' life. For example, vehicles are typically depreciated on an accelerated basis.

Amortization is the practice of spreading an intangible asset's cost over that asset's useful life. Intangible assets are not physical assets per se. Examples of intangible assets that are expensed through amortization might include:

Patents and trademarks
Franchise agreements
Proprietary processes like copyrights
Cost of issuing bonds to raise capital
Organizational costs
Unlike depreciation, amortization is typically expensed on a straight-line basis, meaning the same amount is expensed in each period over the asset's useful life. Also, assets that are expensed using the amortization method typically don't have any resale or salvage value, unlike with depreciation.

It's important to note the context when using the term amortization since it carries another meaning. An amortization schedule is often used to calculate a series of loan payments consisting of both principal and interest in each payment as in the case of a mortgage. The term amortization is used in both accounting and in lending with completely different definitions and uses.

Depletion refers to the allocation of the cost of natural resources over time. For example, an oil well has a finite life before all of the oil is pumped out. Therefore, the oil well's setup costs are spread out over the predicted life of the well.

With depreciation, amortization, and depletion all three methods are noncash expenses with no cash spent in the years they are expensed. Also, it's important to note that in some countries, such as Canada, the terms amortization and depreciation are often used interchangeably to refer to both tangible and intangible assets.

Shahana Kabir
Assistant Professor

Business Administration / Accelerated Depreciation
« on: April 30, 2018, 01:49:54 PM »
What is 'Accelerated Depreciation'

Accelerated depreciation is any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset. While the straight-line depreciation method spreads the cost evenly over the life of an asset, an accelerated depreciation method allows the deduction of higher expenses in the first years after purchase and lower expenses as the depreciated item ages.

Shahana Kabir
Assistant Professor

BBA Discussion Forum / Accelerated depreciation
« on: April 30, 2018, 01:47:56 PM »
What is 'Accelerated Depreciation'

Accelerated depreciation is any method of depreciation used for accounting or income tax purposes that allows greater deductions in the earlier years of the life of an asset. While the straight-line depreciation method spreads the cost evenly over the life of an asset, an accelerated depreciation method allows the deduction of higher expenses in the first years after purchase and lower expenses as the depreciated item ages.

BBA Discussion Forum / Seafood: Benefits and cooking essentials
« on: January 08, 2015, 04:31:48 PM »
Seafood: Benefits and cooking essentials

With the rise in the consumption of seafood, it is good to know some basics of cooking fish to ensure the best taste. Not only is seafood a tasty treat but due to high levels of Omega-3 and low levels of saturated fat, it also protects the heart from disease. It also lowers the amount of cholesterol in the blood.
Renowned Sydney chef Giovanni Pilu advises to wait for the fish to come to room temperature before cooking. In this way the fish is cooked evenly. For those who love clams, removing the sand from the shells can be easy. Just add some flour to the water and the clams will spit sand out more quickly.
Seafood contains many essential nutrients including iodine, selenium, zinc and potassium. Iodine is important for the thyroid gland, and selenium makes enzymes, which can help to protect us from cancer. Fish is also an excellent source of many vitamins, including vitamins A and D.

We all know seasoning can make or break a dish, so to ensure the proper flavour is achieved continually taste the dish while cooking it. Overcooking or undercooking can ruin an otherwise perfect dish. Pierce the fish in the middle with a small metal skewer. Take the skewer out and check the temperature by gently tapping it against the lower lip. The dish is done if the metal is hot.
Eating oil-rich fish regularly can help to keep the eyes bright and healthy and can help to protect the eyesight of those suffering from age-related macular degeneration. The retinol in fish and shellfish, a form of vitamin A boosts night vision.
Eating fish should be a regular part of a balanced diet. The symptoms of rheumatoid arthritis, a condition, which causes the joins to swell up, are eased due to this.
Recent research has also found a link between Omega-3 fats and osteoarthritis, suggesting that eating more seafood could help to prevent the disease.

BBA Discussion Forum / Forex reserves hit new high
« on: January 08, 2015, 03:16:23 PM »

Forex reserves hit new high

Foreign currency reserves reached a new high yesterday, hitting $22.46 billion on the back of resurgence in exports in the past couple of months.

Last month, exports raked in $2.84 billion, up 4.41 percent year-on-year, according to an official from the commerce ministry, whose sub-division Export Promotion Bureau logs in export data. Exports raked in $2.42 billion in November last year.

December's figure takes the total export earnings in the first half of fiscal 2014-15 to $14.91 billion, a slight improvement of 1.56 percent over the previous year, the official added.

Meanwhile, the surging reserves will take a hit today: some $900 million will be paid to Asian Clearing Union as import liabilities, as per a Bangladesh Bank official.

There was a rush of imports last month, particularly for Padma bridge construction, he said.

“Even then, the reserves were at satisfactory level. The forex market is very liquid now. There is no supply side problem,” the official said, quashing fears of a greenback shortage. On December 30, reserves hit $22.30 billion, a record until now.

If the trend continues, seeing the steady inflow of remittance, BB might soon have to resume its purchase of greenbacks in the interbank market, he added.

Inward remittance grew at double-digit rates in the first half of fiscal year to $7.47 billion. Some $1.26 billion was sent in last month by migrant workers, according to BB's latest data.

Source:Daily Star

BBA Discussion Forum / Robi postpones IPO plan
« on: January 08, 2015, 03:11:34 PM »

Robi postpones IPO plan
Sarwar A Chowdhury

Mobile operator Robi Axiata said it might not go for an initial public offering before July next year, as business circumstances are not favourable.

Robi has backtracked on the IPO for uncertainty over acquiring spectrum this year, an unsettled issue of SIM replacement tax and insufficient incentive for listing, according to a recent letter sent to Bangladesh Securities and Exchange Commission. “It appears that the conditions are not conducive to public offering at this point in time,” Robi said in the letter, signed by its Chief Financial Officer Yap Wai Yip.

Of the six mobile phone operators in Bangladesh, only Grameenphone is listed on the stockmarket.

Robi said it is doubtful that the factors and fundamental parameters will remain favourable for it to acquire further spectrum in 2015, as Bangladesh Telecommunication Regulatory Commission is in the process to call an auction for selling spectrum this year.

Robi, majority owned by Malaysia-based Axiata Group, rolled out its 3G services last year.

“Further uncertainties are intertwined due to the fact that SIM replacement claim by the National Board of Revenue is yet to be settled, which may affect the business as a whole and consequently our own business plans,” it said.

“Even if business circumstances become favourable, our shareholders are of the view that there is insufficient incentive to proceed for IPO, in light of the existing corporate income tax regime,” it said, in response to a regulatory letter that was sent to the operator in August last year.


Referring to the 45 percent corporate tax, Robi said the mobile phone operators are currently facing the highest rate of corporate tax in Bangladesh, which is a deterrent to business.

The same tax rate is also applicable to the tobacco industry, which produces cigarettes and other tobacco products detrimental to public health and general wellbeing. But the mobile telecom industry is continuously contributing to the development of the nation, the letter added.

“In this respect, we have written to the finance ministry, decision of which would be paramount to our shareholder's decision to offer shares to public,” Robi said in the letter.

Arif Khan, a commissioner of the stockmarket regulator, said listing is mandatory for a company that has a paid-up capital of more than Tk 50 crore. “And listing of such companies always brings good results for both the market and investors.”

Robi has a subscriber base of 2.5 crore as of September last year, with a 21 percent market share. Revenue in the January-September period of 2014 was Tk 3,601 crore, 5.8 percent lower than that in the same period of the previous year.

Source: Daily Star

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