INTERNSHIP REPORT

ON
REPORTING ANALYSIS OF FIRST SECURITY ISLAMI BANK LTD
(FSIBL)

Submitted To,
Md. Istiaque Hossain

Lecturer
Southern University Bangladesh

Submitted By,
Jhobayer Mahmud

ID: 111-61-14
Major: Accounting

Department of Business Administration

Southern University Bangladesh

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 SOUTHERN UNIVERSITY BANGLADESH

Letter of Submission

Date:

Md. Istiaque Hossain

Faculty of Business Administration

Southern University Bangladesh

Subject: Submission of report on Reporting Analysis FIRST SECURITY ISLAMI BANK

LTD (FSIBL)

Dear Sir,
With due respect and obedience I undertook my internship program under your
supervision and guidance I am very much delighted to submit my internship report
on “Reporting Analysis of FSIBL”. I am trying to cover all relevant topics,
representing whole financial performance analysis. I have collected as much
information as I could from FSIBL and other sources. This three months’ work in
first security Islami bank Ltd is a valuable experience for my entire career.

I believe that this internship program has enriched both my knowledge and my
experience. If you have any question or suggestion about the process, I would be
happy to oblige for any further clarification.

Yours obediently,

----------------------

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Jhobayer Mahmud
Id no: 111-61-14
Major: Accounting
Department of Business Administration
Southern University Bangladesh

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 Student’s Declaration

I do here by declarer that the internship report titled "Reporting

Practices of " first security Islami bank LTD (FSIBL)”, has been
submitted to Southern University Bangladesh in partial fulfillment for
the degree of Bachelor of Business Administration. It’s my original
work and not submitted for the Award of any degree, diploma to any
other Institute or University.

--------------------------------
Jhobayer Mahmud
ID: 111-61-14
Program: BBA, Major: Accounting
Department of Business Administration
Southern University Bangladesh

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Southern University Bangladesh

Supervisor’s Declaration
This is to certify that a research work titled "Reporting Practices of
“First Security Islami Bank Ltd”. The Internship Report has been
complete by jhobayer mahmud ID: 111-61- 14 student of BBA,
Southern University Bangladesh. This Internship Report work has been
original one. It was not published earlier and not submitted to any other
University. We believe that it would contribute to the Resolution of
operation & Accounting of completion on Bachelor of Business
Administration (BBA).
I therefore, recommended this Internship Report to be accepted for
completion of Bachelor of Business Administration (BBA).

May Allah bless him a lot and I wish his every success in life.

------------------------------------------
Md. Istiaque Hossain
Lecturer
Department of Business Administration
Southern University Bangladesh

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 Acknowledgement

During internship programmed, I have been fortunate to get support,

assistance and encouragement from a number of individuals. First, I
would like to express my grateful appreciation to the almighty Allah for
enabling me this report successfully.
I want to convey my heartfelt respect and cordial thanks to Lecturer Md.
Istiaque Hossain for his encouragement, guidance, advice and valuable
supervision. I am lucky for getting the opportunity to prepare this report
under his supervision and guidance. Without his instruction, it was
impossible for me to complete this report successfully.

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 Executive Summary

I have prepared this internship report based on three month internship program as it
required for the BBA program. Though this internship program I have worked in
Reporting Analysis of FSIBL.

FSIBL is one of the private commercial bank in banking industry. FSIBL play a
vital role in forecasting the economic and social condition of a country. FSIBL in
Bangladesh now constitutes the core of the country’s organized financial system.
Customer’s satisfaction is one of the most vital reflections of the progression
toward advancement and development for this bank institution. The achievement
of the customer’s satisfaction is the key feedback to improve service quality.

The report has organized in four chapters. First Chapter including introductory
part of the report, there I mention main objective of the report.

The Second chapter consist an overview of banking sector in Bangladesh, where I

discuss about the bank’s vision, mission, products and services etc.

The Third chapter consist an overall reporting practice of organization, where I

discuss about some important information of FSIBL such as IFRS system,
Accounting cycle and last five years performance.

The Fourth chapter deals with some findings, recommendations which are draw
by analysis of whole report. Then I concluded my report saying some
recommendation and justifications which may help FSIBL to improve its current
position.

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 Table of Content

Chapters Topics Pages

Chapter 1 Introduction
Chapter 2 Overview of
FSIBL
Chapter 3 Overall reporting
practice
Chapter 4 Findings,
recommendations
& conclusion

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 CHAPTER-1
FIRST SECURITY ISLAMI BANK LTD (FSIBL)

1.1: INTRODUCTION OF THE REPORT

Banks play an important role in the financial system and the economy. As a key
component of the financial system, banks allocate funds from savers to borrowers
in an efficient manner. These financial services help to make the overall economy
more efficient. First security Islami bank is one of the private-sector commercial in
BD with many years of experience. The bank can trace its origins to the former
First Security Islami Bank Limited is a public limited bank in Bangladesh which
was founded on 29 August 1999.It was a non-bank financial institution. In April
1999 its activities were suspended by Bangladesh Bank due to liquidity crises. To
protect the banking sector, the employees and customers of the firm it was changed
into a bank by Bangladesh Bank. First security Islami ltd was incorporated on 1
June 2001. Adaptation of modern technology both in terms of equipment and
banking practice ensures efficient service to clients. Through 178 branches of 52
districts in BD, is steadfast to fulfill its customer needs and become their first
choice in BD can be confirmed with a professional and motivated effort force.

1.2: OBJECTIVES OF THE REPORT

FSIBL offers affordable financing at reasonable rates. This bank offers credit limit
to finance current assets and working financing and long term loan to finance fixed
assets, capital machinery etc. Bank also finances Real Estate, Work Order and
Foreign Trade.

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The objective of the report may be viewed as:
1.Primary Objective.
2. Specific Objectives.

Primary Objective:

The Primary Objective of the study is to prepare and submit a report on the topic of
Reporting Practices on banking activities of First Security Islami Bank.

Specific Objectives:

Specific objectives of this report are:

a) To highlight the overview of First security Islami Bank.

b) To identify the international financial reporting standards and

Bangladesh financial reporting standards followed by first security
Islami Bank Ltd.

c) To explore the reporting practices of First Security Islami Bank Ltd.

d) To find out the problems involved in reporting practices of First

Security Islami Bank Ltd.

e) To suggest some policy recommendations to overcome the reporting

practices of First Security Bank Ltd

1.3: RATIONALE OF THE REPORT

Program is the systematic gathering, recording and analyzing of data about the
subject that a student goes to learn on the program. The aim of internship program
is to connect practical knowledge with theoretical knowledge. This report is part of

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my internship program. It is 3 months program related with BBA program. In our
BBA program courses are centered on theoretical things and the internship
program has helped me to understand and relate the organizational situations and
behavior as well in SOUTHERN UNIVERSITY BANGLADESH. At least 4
phases need to prepare the program:

To know the performance of the FSIBL.

To know the structural function of FSIBL
Completing the project work.
Report writing.
So the report will be very useful for all students those who meet the growing
challenges in job market.

1.4: SCOPE OF THE REPORT

Fast security Islami bank ltd has 178 branches in all over the country. I will do
intern at Jubilee Road Branch in Chittagong. There were many opportunities to
interact with the manager of the branch. That was a great opportunity for me.

1.5: METHODS AND TECHNIQUES

The analysis will be done based on secondary data information collected from
different sources, like different search engines. Different kinds of secondary data:

Different websites of FSIBL.

2017- 2021 Annual Report of FSIBL.
Many information from different search engines like Google, SnapTube,
YouTube etc.
Also collect information by phone call with bank manager.
External: Books, Articles, Newspapers, from known accountholder of
FSIBL etc.

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1.6: LIMITATIONS OF THE REPORT
Main problem faced in writing this report was the inadequacy and lack of
accessibility of needed information. Time wasn’t enough to form a full study on
such issues.

On the other hand, banking is a vast ocean that cannot be swim over in 3 months’
time. Some information that is given on the website doesn’t seem to be updated.
For primary data, non-response errors cannot be ruled out.

With all these limitations, I attempted my best to write this report as best as
possible. So readers are requested to think about these.

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 Chapter-2
Overview of first security Islami Bank Ltd

2.1: History of FSIB

First Security Islami Bank Limited was incorporated on 29 August 1999 as a
commercial bank. It started operations on 25 October 1999 with an authorized
capital of 1 billion taka. From 2009 the bank started sharia banking. Bangladesh
Sports Press Association (BSPA) in 2014 awarded the bank best sponsor.] The
Bank sponsored the National School Hockey Tournament. Also sponsored
Bangladesh under 21 Women's Hockey Team in Women's Junior AHF Cup
Tournament, Singapore.

In the history of lslami Sharia’h based banking system in our country with modern
and progressive guidelines; “First Security Islami Bank Limited (FSIBL)” is one of
the pioneers. It is a full- fledged sharia’h compliant bank which follows all the
Islami rules & regulations. First Security Islaml Bank Ltd. was inaugurated on 25th
October, 1999. By considering public demand and justification of the prudent
decision of the board & management of our bank, it was converted to a full-fledged
Islami bank on 1st January 2009.

“First Security Islami Bank Limited (FSIBL)” is relentlessly working for

developing long-term strategic plan to maintain dynamic growth by realizing the
changing habit of all types of clients and to become the symbol progressiveness of
banking arena of our country. It provides easy access to its broad base of customers
throughout the country via multi delivery channels which include branches, Sub-
branches, Agent Banking Outlets, ATM booths located nationwide, as well as app.
“FSIBL Cloud” based internet banking and Mobile financial Services.

With over two decades of glorious history in contributing to the financial

community in Bangladesh with its innovative and entrepreneurial business
spirit, “First Security Islami Bank Limited (FSIBL)”is committed to delivering the
best customer experience and creating long-term shareholders’ value.

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2.2: VISION and MISSION OF FSIBL
*Vision:
To be the premier financial institution in the country by providing high
quality products and services backed by latest technology and a team of
highly motivated personnel to deliver excellence in Banking.

*Mission:
1. To contribute to the socio-economic development of the country.
2. To attain the highest level of satisfaction through the extension of services
by dedicated and motivated professionals.
3. To maintain continuous growth of market share by ensuring quality.
4. To ensure ethics and transparency in all levels.
5. To ensure sustainable growth and establish full value of the honorable
shareholders and

above all, to contribute effectively to the national economy.

2.3: ORGANUGRAM OF FSIBL

There many positions in FSIBLN. Giving serially one by one according to their
positions-

Chairman,
Managing Director,
Head of IAD,
Head of IMRD,
Head of BCS and Head of IC&CD are the member of the committee and the
Head of HRD is the member secretary for the same.

Corporate Governance

 Executive committee
 Audit Committee
 Risk Management Committee

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 Senior, Executive Vice President
Executive Vice President,
Senior Vice President,
Vice President,
Senior Assistant Vice President,
Assistant Vice President,
First Assistant Vice President,
Senior Executive Officer,
Executive Officer,
First Executive Officer,
Officer,
Senior Assistant Officer,
Assistant Officer.

2.4: PRODUCTS AND SERVICES OF FSIBL

Al Wadiah Account

› Shomman

› Current Deposit

› Morjada

Mudaraba Savings Account

› Savings Deposit

› Onkur

› Projonmo

› Prapti

› Probin

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› Mehonoty

› SND

Mudaraba Term Account

› Mudarabah Term Deposit

› Mudarabah Monthly Profit Scheme

› FSIBL Murobbi

› Mahiyasi

› FSIBL Sanchay

› Double Benefit

› Triple Benefit

› Four Times Benefit

› Proyash

Mudaraba Scheme Account

› Alo

› Niramoy

› MMDS

› MMDS - Gold

› Agroshor

› Uddipon

› Aboshor

› Musafir

› Haj

› Unnoti

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Foreign Account

› FC

› RFCD

› NFCD

› ERQ

› NITA

› Other

Investment / Utilization of Funds:

> Bai-Murabaha Investment
 Bai-Murabaha (Hypo)
 Bai-Murabaha (General)
 Bai-Murabaha (Real Estate Material)
 Bai-Murabaha (Pledge/TR/ Local Purchase)
 Bai-Murabaha (Hypo) under SME
 Bai-Murabaha (EMI) under SME
 Bai-Murabaha (Agriculture)
 Bai-Murabaha (Hypo) against MTDR and other Deposit Schemes
> Hire Purchase under Sirkatul Milk (HPSM) Investment
 HPSM (House Building-Residential)
 HPSM (Real Estate/Commercial)
 HPSM (Transport-Bus, Truck, Launch, Cargo vessel etc.)
 HPSM (Auto-Car, CNG Three wheeler, Microbus etc.)
 HPSM (Machinery)
 HPSM (Industry)
 HPSM (Consumer Durables Scheme)
 HPSM (Lease/ Ijara Investment)
 HPSM-Car Lease (Staff)
 HPSM (House Building-Staff)

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 > Investment against Import
 Bai-Murabaha-Import Bill (Cash LC-MIB)
 Bai-Murabaha (MIB-EDF Fund)
 Bai-Murabaha-Post Import (TR)
 Bai-Murabaha-Post Import (Pledge)
> Investment against Export
 Bai- Istisna (Pre Shipment Investment)
 Bai-Salam
 Bai-Murabaha (Export)
 Wajira Bill Okalah against Cash Incentive
 Documentary Bill Purchase
 Foreign Documentary Bills Purchased (FDBP)
 Inland Documentary Bills Purchased (IDBP-FC)
> Other Investment

 Musharaka Investment
 Mudaraba Investment
 Bai-Muajjal Investment
> Quard

 Quard against MTDR

 Quard-E-Hasana
 Quard against Car (Staff)
 Quard against Provident Fund (Staff)
> Letter of Guarantee

 Tender Guarantee
 Performance Guarantee
 Guarantee for Sub-Contracts
 Shipping guarantee
 Advance Payment guarantee
 Guarantee in lieu of Security Deposits
 Guarantee for exemption of Customs Duties

Others
> Specialized Schemes

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  Consumer Investment Scheme
 SME Investment Scheme
 Women Entrepreneur Investment under SME Investment
 Agriculture Investment Scheme

2.5: CHARACTERISTICS OF FSIBL

First security Islami Bank Ltd offers affordable financing at reasonable rates.
FSIBL offers credit limit to finance current assets and working finance and long
term loan to finance fixed assets, capital machinery etc. Bank also finances Real
Estate, Work order, Foreign Trade etc.

2.6: OBJECTIVES OF INTERNSHIP FROM FSIBL

1. Assist the student's development of employer-valued skills such as

teamwork, communications and attention to detail.
2. Expose the student to the environment and expectations of
performance on the part of accountants in professional accounting
practice, private/public companies or government entities.
3. Enhance and/or expand the student's knowledge of a particular
area(s) of accounting.

4. Expose the student to professional role models or mentors who will

provide the student with support in the early stages of the internship
and provide an example of the behaviors expected in the intern's
workplace, Most of our interns have little or no substantial
accounting experience so objective. Above is very important but
not required. The accounting program is embedded in the
Department of Business which requires a minimum of 100 hours of
the internship experience.

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 CHAPTER-3
REPORTING PRACTICES OF FIRST SECURITY
ISLAMI BANK LTD ( FSIBL)
3.1 Accounting Standard followed by First Security
Islami Bank Ltd.

1.0 Legal Status and Nature of the Company

The First Security Islami Bank Limited was incorporated in Bangladesh as a Public
Limited Company as on the 29 August 1999 under Companies Act 1994 and
commenced commercial operation on the 16 September 1999. There are total 178
branches of First Security Islami Bank Limited situated in 52 districts in
Bangladesh.
The principal place of business is at the Registered Office at Rangs RD Center,
Block: SE (F), Plot:03, Gulshan Avenue, Gulshan-1, Dhaka:1212, Bangladesh,
Tel # +88 02 55045700
Fax # +88 02 55045709
E-mail # [email protected]
SWIFT # FSEBBDDHhe
principal activities carried out by the bank include all kinds of commercial
banking activities/services to its customers through its branches.

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Consolidated and Separate Financial Statements
The separate financial statements of the Bank for the year ended 31 December
2021 main operation referred to as "the Bank." The consolidated financial
statements comprise those of the Bank (parent) and its subsidiary (note 1.1),
together referred to as "the Group" or individually referred to as "Group
Entities/Subsidiaries" as the case may be. There were no significant changes in the
operations of the Bank/Group Entities. A summary of accounting principle and
policies which have been applied consistently (unless otherwise stated) are set out
below:

Statement of compliance and basis of preparation

'The Financial Reporting Act, 2015 (FRA) was enacted in 2015. The Financial
Reporting Council (FRQ under the FRA has been formed in 2017 but the Financial
Reporting Standards (FRS) under this council is yet to be issued for public interest
entities such as banks. The Bank Company Act, 1991 was amended to require
banks to prepare their financial statements under such financial reporting
standards.
As the FRS is yet to be issued by FRC hence as per the provisions of the FRA
(section-69), the consolidated and separate financial statements of the Group and
the Bank respectively have been prepared in accordance with International
Financial Reporting Standards (IFRSs) as adopted by The Institute of Chartered
Accountants of Bangladesh (ICAB) and in addition to this the Bank complied with
the requirements of following laws and regulations from various Government
bodies:"

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i) The Bank Company Act, 1991 and amendment thereon;

ii) The Companies Act, 1994;

iii) Circulars, Rules and Regulations Issued by Bangladesh Bank (BB) time to
time;
iv) The Value Added Tax Act, 1991 and amendment thereon;
v) Financial Reporting Act 2015;
vi) Parliamentary Act No.12,1997;
In case any requirement of the Bank Company Act 1991 and provisions and
circulars issued by Bangladesh Bank (BB) differ with those of IFRSs, the
requirements of the Bank Company Act 1991 and provisions and circulars issued
by BB shall prevail. Material departures from the requirements of IFRS are as
follows:

I ) Investment in equity instruments

FRS: As per requirements of IFRS 9: Classification and measurement of
investment in equity instruments will depend on how these are managed (the
entity's business model) and their contractual cash flow characteristics. Based on
these factors it would generally fall either under "at fair value through profit and
loss account" or under "at fair value through other comprehensive income" where
any change in the fair value (as measured in accordance with IFRS 13) at the year-
end is taken to profit and loss account or other comprehensive income respectively.
"Bangladesh Bank: As per Banking Regulation and Policy Department (BRPD)
circular no. 14 dated 25 June 2003 investments in quoted shares and unquoted

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shares are revalued at the year end at market price and as per book value of last
audited balance sheet respectively. Provision should be made for any loss arising

from diminution in value of investment; otherwise investments are recognized at

cost."

ii) Subsequent measurement of Government securities

"IFRS: Government securities refer primarily various debt instruments which
include both bonds and bills. As per requirements of IFRS 9 Financial
Instruments, bonds can be categorized as "Amortized Cost (AC)"" or ""Fair Value
Through Profit or Loss (FVTPL)"" or ""Fair Value through Other Comprehensive
Income (FVOCI)"". Bonds designated as Amortized Cost are measured at
amortized cost method and interest income is recognized through profit and loss
account. Any changes in fair value of bonds designated as FVTPL is recognized in
profit and loss account. Any changes in fair value of bonds designated as FVOCI is
recognized in other reserve as a part of equity.
As per requirements of IFRS 9, bills can be categorized either as "Fair Value
Through Profit or Loss (FVTPL)" or "Fair Value through Other Comprehensive
Income (FVOCI)". Any change in fair value of bills is recognized in profit and loss
or other reserve as a part of equity respectively."
Bangladesh Bank: As per DOS Circular no. 05 dated 26 May 2008 and subsequent
clarification in DOS Circular no. 05 dated 28 January 2009, Government
securities/bills are classified into Held for Trading (HFT) and Held to Maturity

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(HTM). HFT securities are revalued on the basis of mark to market and at year end
any gains on revaluation of securities which have not matured as at the balance
sheet date are recognized in other reserves as a part of equity. Any losses on
revaluation of securities which have not matured as at the balance sheet date are

charged in the profit and loss account. Interest on HFT securities including
amortization of discount are recognized in the profit and loss account HTM
securities which have not matured as at the balance sheet date are amortized at year
end and gains or losses on amortization are recognized in other reserve as part of
equity.

Hi) Provision on loans and advances

IFRS: As per IFRS 9 Financial Instruments an entity shall recognize an
impairment allowance on loans and advances based on expected credit losses. At
each reporting date, an entity shall measure the impairment allowance for loans
and advances at an amount equal to the lifetime expected credit losses if the credit
risk on these loans and advances has increased significantly since initial
recognition, whether assessed on an individual or collective basis, considering all
reasonable information (including that which is forward-looking). For those loans
and advances for which the credit risk has not increased significantly since initial
recognition, at each reporting date, an entity shall measure the impairment
allowance at an amount equal to 12 month expected credit losses that may result
from default events on such loans and advances that are possible within 12 months
after reporting date.

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Bangladesh Bank: As per BRPD Circular no. 07 dated 21 June 2018, BRPD
Circular no 13 dated 18 October 2018, BRPD circular No.15 dated 27 September
2017, BRPD circular no.16 dated 18 November 2014, BRPD circular no.14 dated
23 September 2012, BRPD circular no. 19 dated 27 December 2012, BRPD
circular no. 05 dated 29 May 2013 and BRPD circular no.1 dated 20 February

2018,BRPD Circular No. 03 dated 21.04.2019 a general provision at 0.25% to 5%

under different categories of unclassified loans (good/standard and SMA loans) has
to be maintained regardless of objective evidence of impairment. Also provision
for different categories of classified loans (sub-standard, doubtful & bad and loss
loans) has to be provided at 20%, 50% and 100% respectively for loans and
advances depending on time past due. Again as per BRPD circular no. 14 dated 23
September 2012 and BRPD circular no. 07 dated 21 June 2018, a general provision
at 1% is required to be provided for all off-balance sheet exposures except on 'bills
for collection' and 'guarantees' where the counter guarantees have been issued by
Multilateral Development Bank (MDB)/International Bank having BB rating grade
'I1 equivalent outlined in the Guidelines on Risk Based Capital Adequacy (Revised
Regulatory Capital Framework for banks in line with Basel III). Such provision
policies are not specifically in line with those prescribed by IFRS 9.

Iv ) Other comprehensive income

IFRS: As per IAS 1 Presentation of Financial Statements, other comprehensive
income is a component of financial statements or the elements of other

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comprehensive income are to be included in single comprehensive income
statements.
Bangladesh Bank: Bangladesh Bank has issued templates for financial statements
which will strictly be followed by all banks. The templates of financial statements
issued by Bangladesh Bank do not include Other Comprehensive Income nor are
the elements of Other Comprehensive Income allowed to be included in a single
Other Comprehensive Income (OCI) Statement. As such the Bank does not prepare

the Other Comprehensive Income statement. However, elements of OCI, if any, are
shown in the statement of changes in equity.

v) Financial Instruments - presentations and disclosure

In several cases Bangladesh Bank guidelines categories, recognize, measure and
present financial instruments differently from those prescribed in IFRS 9 Financial
Instruments. Hence some disclosure and presentation requirements of IFRS 7
Financial Instruments: Disclosures and IAS 32 Financial Instruments: Presentation,
cannot be made in this financial statements

Vi ) Repo and reverse repo transactions

IFRS: As per IFRS 9 when an entity sells a financial asset and simultaneously
enters into an agreement to repurchase the asset (or a similar asset) at a fixed price
on a future date (repo), the arrangement is treated as a loan and the underlying
asset continues to be recognized at amortized cost in the entity's financial
statements. The difference between selling price and repurchase price will be

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treated as interest expense. The same rule applies to the opposite side of the
transaction (reverse repo).

Bangladesh Bank: As per DOS Circular letter no. 6 dated 15 July 2010
and subsequent clarification in
DOS Circular no 03 dated 30 January 2012 and DOS circular no. 2 dated 23
January 2013, when a bank sells a financial asset and simultaneously enters into an
agreement to repurchase the asset (or a similar asset) at a fixed price on a future
date (repo or stock lending), the arrangement is accounted for as a normal sales

transactions and the financial assets are derecognized in the seller's book and
recognized in the buyer's book.
However, as per DMD circular letter no. 7 dated 29 July 2012, non primary dealer
banks are eligible to participate in the Assured Liquidity Support (ALS) program,
whereby such banks may enter collateralized repo arrangements with Bangladesh
Bank. Here the selling bank accounts for the arrangement as a loan, thereby
continuing to recognize the asset.

vii) Financial guarantees

IFRS: As per IFRS 9 Financial Instruments, financial guarantees are contracts that
require an entity to make specified payments to reimburse the holder for a loss it
incurs because a specified debtor fails to make payment when due in accordance
with the term of debt instruments. Financial guarantee liabilities are recognized
initially at their fair value, and the initial fair value amortized over the life of the
financial guarantee. The financial guarantee liability is subsequently carried at the

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higher of this amortized amount and the loss allowance determined as expected
credit loss under IFRS 9. Financial guarantees are prescribed to be included within
other liabilities.
Bangladesh Bank: As per BRPD circular no. 14, dated 25 June 2003, financial
guarantees such as Letter of Credit, Letter of Guarantee should be treated as off
balance items. No liability is recognized for the guarantee except the cash margin.

viii) Cash and cash equivalents •

IFRS: Cash and cash equivalents items should be reported as cash item as per IAS
7 Statement of Cash Flows.

Bangladesh Bank: Some cash and cash equivalent items such as money at call and
on short notice, treasury bills, Bangladesh Bank bills and prize bond are not shown
as cash and cash equivalents. Money at call and on short notice is shown separately
in the balance sheet. Treasury bills, Bangladesh Bank bills and prize bond are
shown under investment in the balance sheet. However, in the cash flow statement,
money at call and short notice and prize bonds are shown as cash and cash
equivalents beside cash in hand, balance with Bangladesh Bank and other banks.

ix) Non banking assets

IFRS: There is no particular/specific guideline about non banking assets in IFRSs.
Bangladesh Bank: As per BRPD circular no. 14, dated 25 June 2003, there is a
separate balance sheet item titled as non-banking asset exists in the standard
format.

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x) Cash flow statement
IFRS: As per IAS 7 Statement of Cash Flows, Cash Flow Statement can be
prepared either in direct method or in indirect method. The presentation is selected
to present these cash flows in a manner that is most appropriate for the business or
industry. The method selected is applied consistently.
Bangladesh Bank: As per BRPD circular no. 14, dated 25 June 2003, the cash
flow statement is a mixture of both the direct and the indirect methods.

xi) Balance with Bangladesh Bank

IFRS: Balance with Bangladesh Bank should be treated as other asset as it is not
available for use in day to day operations as per IAS 7 Statement of Cash Flows.

Bangladesh Bank: Balance with Bangladesh Bank is treated as cash and cash
equivalents.

xii) Presentation of intangible asset

IFRS: Intangible asset must be identified and recognized, and the disclosure must
be given as per IAS 38 Intangible Assets.
Bangladesh Bank: Intangible assets are shown in fixed assets including premises,
furniture and fixtures as there is no specific regulation for intangible assets in
BRPD circular no. 14 dated 25 June 2003.

xiii) Off balance sheet items

IFRS: As per IFRS, there is no requirement for disclosure of off-balance sheet
items on the face of the balance sheet.

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Bangladesh Bank: As per BRPD circular no. 14 dated 25 June 2003, off balance
sheet items e.g. Letter of Credit, Letter of Guarantee, Acceptance must be
disclosed separately on the face of balance sheet.

xiv) Disclosure of appropriation of profit

IFRS: There is no requirement to show appropriation of profit on the face of
statement of comprehensive income.
Bangladesh Bank: As per BRPD circular no. 14 dated 25 June 2003, an
appropriation of profit should be disclosed on the face of profit and Loss Account.
IFRS: As per IFRS 9, loans and advances/Investments should be presented net of
provision.

Bangladesh Bank: As per BRPD circular no.14 dated 25 June 2003, provision on
loans and advances/investments are presented separately as liability and cannot be
netted off against loans and advances.
xvi) Recognition of interest in suspense
IFRS: Loans and advances to customers are generally classified at amortized cost
as per IFRS 9 and interest income is recognized in profit and loss account by using
the effective interest rate method to the gross carrying amount over the term of the
loan. Once a loan subsequently become credit-impaired, the entity shall apply the
effective interest rate to the amortized cost of these loans and advances.

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Bangladesh Bank: As per BRPD circular no. 14 dated 23 September 2012, once a
loan is classified as impaired, interest on such loans are not allowed to be
recognized as income, rather the corresponding amount needs to be credited to an
interest in suspense account, which is presented as liability in the balance sheet.

xvii) Provision on undrawn loan commitments

IFRS: As per IFRS 9 bank shall recognize credit losses on undrawn loan
commitments such as Letter of Credit (L/C), Letter of Guarantee (L/G) etc. as the
present value of the difference between the contractual cash flow that are due by
the customer if the commitment is drawn down and the cash flows that bank
expects to receive.
Bangladesh Bank: As per BRPD Circular no. 07 dated 21 June 2018 and BRPD
Circular no.14 dated 23 September 2012 and BRPD Circular No. 03 dated
21.04.2019, the Bank is required to maintain provision at 1% rate against off-
balance sheet exposures (which includes all types of undrawn loan commitments).

[Also refer to (note 2.15) Compliance of International Financial Reporting

Standards (IFRSs)]

IFRS & IAS:

IFRS: International Financial Reporting Standards (IFRS) set common rules so
that financial statements can be consistent, transparent, and comparable around the
world. ... They specify how companies must maintain and report their accounts,
defining types of transactions, and other events with financial impact.

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IAS: International Accounting Standards (IAS) are older accounting standards
issued by the International Accounting Standards Board (IASB), an independent
international standard-setting body based in London. The IAS were replaced in
2001 by International Financial Reporting Standards (IFRS).

3.2: International Financial Reporting Standards (IFRS):

Issued by the International Accounting Standards Board (IASB)

Title Date issued Effective

Date

IFRS 1 — First-time Adoption of International 24 Nov 01 Jul 2009

Financial Reporting Standards 2008

(IFRS 2 — Share-based Payment 19 Feb 01 Jan 2005

2004

(IFRS 3 — Business Combinations 10 Jan 2008 01 Jul 2009

(IFRS 4 — Insurance Contracts 31 Mar 01 Jan 2005

2004

((IFRS 5 — Non-current Assets Held for Sale and 31 Mar 01 Jan 2005
Discontinued Operations 2004

TIFRS 6 — Exploration for and Evaluation of

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 Mineral Resources 09 Dec 01 Jan 2006
2004

IFRS 7 — Financial Instruments: Reportings 18 Aug 01 Jan 2007

2005

(IFRS 8 — Operating Segments 30 Nov 01 Jan 2009

2006

IFRS 9 — Financial Instruments 24 Jul 2014 01 Jan 2018

IFRS 10 — Consolidated Financial Statements 12 May 01 Jan 2013

2011

(IFRS 11 — Joint Arrangements 12 May 01 Jan 2013

2011

IFRS 12 — Reporting of Interests in Other Entities 12 May 01 Jan 2013

2011

IFRS 13 — Fair Value Measurement 12 May 01 Jan 2013

2011

IFRS 14 — Regulatory Deferral Accounts 30 Jan 2014 01 Jan 2016

IFRS 15 — Revenue from Contracts with 28 May 01 Jan 2018

Customers 2014

IFRS 16 — Leases 13 Jan 2016 01 Jan 2019

3.2.1: IFRS Practices by FSIBL

IFRS-13 Fair Value Measurement Complied

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 IFRS-14 Regulatory Deferral Accounts Not applicable
IFRS-15 Revenue from Contracts with Customers Complied

IFRS-16 Leases Not Complied

IAS-1 Presentation of Financial Statements Complied

IAS-2 Inventories Not applicable

IAS-7 Statement of Cash Flows Complied
IAS-8 Accounting Policies, Changes in Paritally Complied**
Accounting Estimates and Errors
IAS-10 Events after the Reporting Period Complied

I AS- 12 Income taxes Complied

I AS- 16 Property, Plant and Equipment Complied
IAS-19 Employee Benefits Complied
IAS-20 Accounting for Government Grants and Not applicable
Disclosure of Government Assistance
IAS-21 The Effect of Changes in Foreign Complied
Exchanges Rates
IAS-23 Borrowing Cost Complied
IAS-24 Related Party Disclosures Complied
IAS-26 Accounting and Reporting by Retirement Not applicable
Benefit Plans
IAS-27 Separate Financial Statements Complied
IAS-28 Investment in Associates Complied
IAS-29 Financial Reporting in Hyperinflationary Not applicable
Economies
IAS-32 Financial Installments: Presentation Com piled *

IAS-33 Earnings Per Share Complied

IAS-34 Interim Financial Reporting ** Complied
IAS-36 Impairment of Assets Complied
IAS-37 Provisions, Contingent Liabilities and Complied
Contingent Assets
IAS-38 Intangible Assets Complied
IAS-39 Financial Instruments: Recognition and Complied *
Measurement
IAS-40 Investment Property Not applicable
IAS-41 Agriculture Not applicable
.

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IFRS-13: IFRS 13 defines fair value, sets out a framework for measuring fair
value, and requires disclosures about fair value measurements.

It applies when another Standard requires or permits fair value measurements or

disclosures about fair value measurements, except in specified circumstances in
which other Standards govern.

IFRS-14: IFRS 14 prescribes special accounting for the effects of rate regulation.
Rate regulation is a legal framework for establishing the prices that a public utility
or similar entity can charge to customers for regulated goods or services.

IFRS-15: IFRS 15 establishes the principles that an entity applies when reporting
information about the nature, amount, timing and uncertainty of revenue and cash
flows from a contract with a customer. Applying IFRS 15, an entity recognizes
revenue to depict the transfer of promised goods or services to the customer in an
amount that reflects the consideration to which the entity expects to be entitled in
exchange for those goods or services.

IFRS-16: IFRS 16 is to report information that (a) faithfully represents lease

transactions and (b) provides a basis for users of financial statements to assess the
amount, timing and uncertainty of cash flows arising from leases. To meet that
objective, a lessee should recognize assets and liabilities arising from a lease .

IAS-1: IAS 1 Presentation of Financial Statements sets out the overall

requirements for financial statements, including how they should be structured, the
minimum requirements for their content and overriding concepts such as going
concern, the accrual basis of accounting and the current/non-current distinction.
The standard requires a complete set of financial statements to comprise a
statement of financial position, a statement of profit or loss and other
comprehensive income, a statement of changes in equity and a statement of cash
flows

IAS-2: IAS 2 Inventories contains the requirements on how to account for most
types of inventory. The standard requires inventories to be measured at the lower
of cost and net realizable value (NRV) and outlines acceptable methods of
determining cost, including specific identification, first-in first-out (FIFO) and
weighted average cost.

IAS-7: IAS 7 Statement of Cash Flows requires an entity to present a statement of

cash flows as an integral part of its primary financial statements. Cash flows are

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classified and presented into operating activities, investing activities or financing
activities, with the latter two categories generally presented on a gross basis.

IAS-8: IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors is

applied in selecting and applying accounting policies, accounting for changes in
estimates and reflecting corrections of prior period errors.

IAS-10: IAS 10 Events after the Reporting Period contains requirements for when
events after the end of the reporting period should be adjusted in the financial
statements. Adjusting events are those providing evidence of conditions existing
at the end of the reporting period, whereas non-adjusting events are indicative of
conditions arising after the reporting period. IAS 10 was reissued in December
2003 and applies to annual periods beginning on or after 1 January 2005.

IAS-12: IAS 12 Income Taxes implements a so-called 'comprehensive balance

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

IAS-16: IAS 16 Property, Plant and Equipment outlines the accounting treatment
for most types of property, plant and equipment. Property, plant and equipment is
initially measured at its cost, subsequently measured either using a cost or
revaluation model, or depreciated so that its depreciable amount is allocated on a
systematic basis over its useful life.

IAS-19: IAS 19 Employee Benefits (amended 2011) outlines the accounting

requirements for employee benefits, including short-term benefits (wages and
salaries, annual leave), post-employment benefits such as retirement benefits, other
long-term benefits (e.g. long service leave) and termination benefits.

IAS-20: IAS 20 Accounting for Government Grants and Disclosure of

Government Assistance outlines how to account for government grants and other
assistance. Government grants are recognized in profit or loss on a systematic basis
over the periods in which the entity recognizes expenses for the related costs for
which the grants are intended to compensate, which in the case of grants related to
assets requires setting up the grant as deferred income or deducting it from the
carrying amount of the asset.

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 IAS 20 was issued in April 1983 and is applicable to annual periods beginning on
or after 1 January 1984.

IAS-21: IAS 21 The Effects of Changes in Foreign Exchange Rates outlines how
to account for foreign currency transactions and operations in financial statements,
and also how to translate financial statements into a presentation currency.

IAS 21 was reissued in December 2003 and applies to annual periods beginning
on or after 1 January 2005.

IAS-23: IAS 23 Borrowing Costs requires that borrowing costs directly

attributable to the acquisition, construction or production of a 'qualifying asset' are
included in the cost of the asset. Other borrowing costs are recognized as an
expense.

IAS 23 was reissued in March 2007 and applies to annual periods beginning on
or after 1 January 2009.

IAS-24: IAS 24 Related Party Disclosures requires disclosures about transactions

and outstanding balances with an entity's related parties. The standard defines
various classes of entities and people as related parties and sets out the disclosures
required in respect of those parties, including the compensation of key
management personnel.

IAS 24 was reissued in November 2009 and applies to annual periods beginning
on or after 1 January 2011.

IAS-26: IAS 26 Accounting and Reporting by Retirement Benefit Plans outlines

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

IAS 26 was issued in January 1987 and applies to annual periods beginning on or
after 1 January 1988.

IAS-27: IAS 27 Consolidated and Separate Financial Statements outlines when an

entity must consolidate another entity, how to account for a change in ownership
interest, how to prepare separate financial statements, and related disclosures.
Consolidation is based on the concept of 'control' and changes in ownership

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interests while control is maintained are accounted for as transactions between
owners as owners in equity.

IAS-28: IAS 28 Investments in Associates outlines the accounting for investments

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

IAS-29: IAS 29 Financial Reporting in Hyperinflationary Economies applies

where an entity's functional currency is that of a hyperinflationary economy. The
standard does not prescribe when hyperinflation arises but requires the financial
statements of an entity with a functional currency that is hyperinflationary to be
restated for the changes in the general pricing power of the functional currency.

IAS-32: IAS 32 Financial Instruments: Presentation outlines the accounting

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

IAS-33: IAS 33 Earnings Per Share sets out how to calculate both basic earnings
per share (EPS) and diluted EPS. The calculation of Basic EPS is based on the
weighted average number of ordinary shares outstanding during the period,
whereas diluted EPS also includes dilutive potential ordinary shares if they meet
certain criteria.

IAS-34: IAS 34 Interim Financial Reporting applies when an entity prepares an

interim financial report, without mandating when an entity should prepare such a
report. Permitting less information to be reported than in annual financial
statements (on the basis of providing an update to those financial statements), the
standard outlines the recognition, measurement and disclosure requirements for
interim reports.

IAS-36: IAS 36 Impairment of Assets seeks to ensure that an entity's assets are not
carried at more than their recoverable amount. With the exception of goodwill and
certain intangible assets for which an annual impairment test is required, entities
are required to conduct impairment tests where there is an indication of impairment
of an asset, and the test may be conducted for a 'cash-generating unit' where an

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asset does not generate cash inflows that are largely independent of those from
other assets.

IAS-37: IAS 37 Provisions, Contingent Liabilities and Contingent Assets outlines

the accounting for provisions, together with contingent assets (possible assets) and
contingent liabilities. Provisions are measured at the best estimate of the
expenditure required to settle the present obligation, and reflects the present value
of expenditures required to settle the obligation where the time value of money is
material.

IAS-38: IAS 38 Intangible Assets outlines the accounting requirements for

intangible assets, which are non-monetary assets which are without physical
substance and identifiable. Intangible assets meeting the relevant recognition
criteria are initially measured at cost, subsequently measured at cost or using the
revaluation model, and amortized on a systematic basis over their useful lives.

IAS-39: IAS 39 Financial Instruments: Recognition and Measurement outlines the

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

IAS-40: IAS 40 Investment Property applies to the accounting for property held to
earn rentals or for capital appreciation (or both). Investment properties are initially
measured at cost and, with some exceptions. May be subsequently measured using
a cost model or fair value model, with changes in the fair value under the fair value
model being recognized in profit or loss.

IAS-41: IAS 41 Agriculture sets out the accounting for agricultural activity – the
transformation of biological assets into agricultural produce. The standard
generally requires biological assets to be measured at fair value less costs to sell.

IAS 41 was originally issued in December 2000 and first applied to annual
periods beginning on or after 1 January 2003.

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3.3: Management

Risk Management
Risk is an inherent part of the business activities and risk management is pivotal
for the sustainability of business. This era of globalization enables hefty expansion
of business activities that ultimately increases competition level for organizations
drastically. Financial crisis and volatility in economic growth in some developed
countries set the example of imperativeness towards comprehensive risk
management. Types of risk, however, vary from business to business but preparing
a risk management plan involves a conjoint process. A comprehensive risk
management plan must enumerate strategies for dealing with risks specific to any
business but should not be limited to those.
When it comes to banking business, risk management is in the heart of this
business. Banks are to strive for a prudent risk management discipline to combat
unpredictable situation. These days, it is transparent that banking organizations are
in need of setting up systematic and vigilant way to monitor the activities that are
major influences of this particular business.
The standards of Risk Management as guided by the Bank for International
Settlements (BIS) and particularly Basel Committee on Banking Supervision
(BCBS) have been applied by bank regulators across the world. The Central Bank
of Bangladesh i.e. Bangladesh Bank also issued revised risk management
guidelines in September 2020, which forms the basis of risk management of all
scheduled banks in Bangladesh. The guidelines require that the banks adopt
enhanced policies and procedures of risk management. The risk management of
banks broadly cover 4 (four) core risk areas of banking i.e. a. Credit Risk b.
Operational Risk, c. Liquidity Risk & d. Market Risk. Bangladesh Bank also

40 | P a g e
prescribes that there should be separate desk for each of these risk type under risk
management division.
FSIBL’s risk management strategy is based on a clear understanding of various
risks, disciplined risk assessment & measurement procedures and continuous
monitoring. FSIBL continues to focus on improving its risk management systems
not only to ensure compliance with regulatory requirements but also to ensure
better risk-adjusted return and optimal capital utilization keeping in mind the
business objectives. For sound risk management, FSIBL manages risk in strategic
layer, managerial layer and operational layer. The assets and liabilities of FSIBL is
managed so as to minimize (to the degree prudently possible) the Bank's exposure
to risk, while at the same time attempting to provide a stable and steadily
increasing flow of net interest income, an attractive rate of return on an appropriate
level of capital and a level of liquidity adequate to respond to the needs of
depositors and borrowers and earnings enhancement opportunities. These
objectives are accomplished by setting clear plan with control and reporting
process, the key objective of which is the coordinated management of the Bank's
assets and liabilities, current banking laws and regulations, as well as prudent and
generally acceptable banking practices.

Credit Risk Management

Credit risk is most simply defined as the potential that a bank borrower or
counterparty will fail to meet its obligations in accordance with agreed terms and
conditions. The goal of credit risk management is to maximize a bank's risk-
adjusted rate of return by maintaining credit risk exposure within acceptable
parameters.

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Considering key elements of Credit Risk, the Bank has segregated duties of the
officers/ executives involved in credit related activities. Separate Division for
Corporate, SME, Retail and Credit Cards are entrusted with the duties of
maintaining effective relationship with customers, marketing credit products,
exploring new business opportunities, etc. For transparency in operations during
the entire credit process, teams for i. Credit Approval, ii. Asset Operations, iii.
Recovery Unit and Special Asset Management have been set up.
The entire process involves relationship teams of respective Asset Portfolio (Retail,
SME and Corporate) booking the clients, the underwriting team conducting
thorough assessment before placing the facility for approval from the authority.
Risk assessment includes borrower risk analysis. Industry risk analysis, financial
risk analysis, security risk analysis, account performance risk analysis
&environmental & social risk analysis of the Customer. Post-approval, the Credit
Administration Department ensures compliance of all legal formalities, completion
of documentation including security of proposed facility and finally disburses the
amount. The above arrangement has not only ensured segregation of duties and
accountability but also helped in minimizing the risk of compromise with quality
of the credit portfolio.

Foreign Exchange Risk Management

Foreign Exchange risk arises from fluctuation in currency prices influenced by
various macro and micro economic factors. Today's financial institutions engage in
activities starting from basic currency buy, sell, imports, exports and remittances to
complex structured products. Within the Bank, the Treasury department is vested
with the responsibility to measure and minimize the risk associated with bank's
foreign currency position.

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AH treasury functions are dearly demarcated between treasury front office, mid
office and back office. The front office is involved only in dealing activities, mid
office is involved in monitoring of rate, limit etc. and the back office is responsible
for all related processing functions. Treasury front and back office: personnel are
guided as per Bangladesh Bank core risk management guideline and their
respective job description. They are barred from performing each other's job.
Treasury Front Office, Mid office and Treasury Back Office has separate and
independent reporting lines to ensure segregation of duties and accountability but
also helps minimize the risk of compromise. The full function is operated under the
foreign exchange risk management policy of the bank updated based on the latest
Foreign Exchange Guideline of central bank. ': - v\ - :
Dealing room is well equipped with Reuter's dealing system, Eikon, Bloomberg, a
number of FX trading platforms, voice logger etc. State of the art treasury system
is in place to ensure Straight through Processing (STP) of all deals, which also
facilitates Mid office in effective monitoring and Back office with different reports
along with easy processing of transactions. Counter party limit is set by the Credit
Committee and monitored by mid office. Well-articulated dealers trading limit,
stop-loss limit and currency wise open position limits are in place which are being
monitored by Mid-office. Trigger levels are set for the dealers. Chief Dealer and
Head of Treasury. The entire transactions are carried on by a number of well
trained, young and dynamic dealers ensuring all local and global regulatory
compliances.

Asset Liability Management

Changes in market liquidity and or interest rate exposes Bank's business to the risk
of loss, which may, in extreme cases, threaten the survival of the institution. Thus
it is essential that the level of balance sheet risks are effectively managed,

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appropriate policies and procedures are established to control and limit these risks
and proper resources are available for evaluating and controlling these risks. The
Asset Liability Committee (ALCO) of the bank monitors Balance Sheet risk and
liquidity risks of the Bank.
Asset liability Committee (ALCO) reviews the country's overall economic
position, Bank's Liquidity position, ALM Ratios, Interest Rate Risk, Capital
Adequacy, Deposit Advanced Growth, Cost of Deposit and yield on Advance,
Foreign Exchange GAP, Market Interest Rate, Loan loss provision adequacy and
deposit and lending pricing strategy.

Prevention of Money Laundering

In recognition of the fact that financial institutions are particularly vulnerable to be
used by money launderers. FSIBL has established a Anti Money Laundering
Policy. The purpose of the Anti-Money Laundering Policy is to provide a guideline
within which to comply with the laws and regulations regarding money laundering
both at country and international levels and thereby to safeguard the Bank from
potential compliance, financial and reputational risks. Know Your Customer
(KYC) procedures have been set up with address verification. As a part of
monitoring account transaction, the estimated transaction profile and high value
transactions are being reviewed electronically. Training has been taken as a
continuous process for creating/developing awareness among the officers.

Internal Control and Compliance

Internal Control is the mechanism to provide reasonable assurance to Bank on an
ongoing basis regarding the achievement of objectives in the effectiveness and
efficiency of operations, the reliability of financial reporting and compliance with

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applicable laws, regulations and internal policies. The primary objective of Internal
Control and Compliance is to help the Bank perform better and add value through
use of its resources. Through internal control system, Bank identifies its
weaknesses associated with the process and adopts appropriate measures to
overcome that.
The main objectives of internal control are as follows:
The Bank has established an effective internal control system whose primary aim
is to ensure the overall management of risks and provide reasonable assurance that
the objectives set by the Bank will be met. It has been designed to develop a high
level risk culture among the personnel of the Bank, establish efficient and effective
operating model of the Bank, ensure reliability of internal and external information
including accounting and financial information, secure the Bank's operations and
assets, and comply with laws, regulatory requirements and internal policies.
'The key functionalities that have been established in reviewing adequacy and
integrity of the system of internal controls are as follows:
a) Various committees are established by the Board to assist the Board in ensuring
the effectiveness of Bank's daily operations and that the Bank's operations are in
accordance with the corporate objectives, strategies and the annual budget as well
as the policies and business directions that have been approved.
b) The internal audit department of the Bank checks for compliance with policies
and procedures and the effectiveness of the internal control systems on an ongoing
basis using samples and rotational procedures and highlight significant findings in
respect of any non-compliance.
c) Audits are carried out on various departments/units, all branches in accordance
with the annual audit plan approved by the Audit Committee of the Board. The
frequency of audits of branches is determined by the level of risk assessed, to
provide an independent and objective report. Findings of the internal audit are

45 | P a g e
submitted to the Audit Committee of the Board for review at their periodic
meetings.
d) The Audit Committee of the Board of the Bank reviews internal control issues
identified by the Internal Audit Department, Bangladesh Bank, External Auditors
and management and evaluates the adequacy and effectiveness of the risk
management and internal control systems. They also review the internal audit
functions with particular emphasis on the scope of audits and quality of internal
audits. The minutes of the Audit Committee meetings of the Board are tabled at the
meetings of the Board of Directors of the Bank on a periodic basis."
"e) Self-Assessment of Anti-Fraud Internal Controls is carried out on semi-annual
basis and is sent to Bangladesh Bank as per requirement of DOS Circular Letter
No. 10, dated 09 May 2017 issued by Bangladesh Bank,
f) In assessing the internal control system, identified officers of the Bank continued
to review and update all procedures and controls that are connected with
significant accounts and disclosures of the Financial Statements of the Bank. The
Internal Audit Department of the Bank continued to verify the suitability of design
and effectiveness of these procedures and controls on an ongoing basis. ICCD of
BBL comprises mainly of four units/departments- Internal Audit, Compliance
Unit, Monitoring Unit and Concurrent Audit."

Internal Audit
Internal Auditing is an independent, objective assurance and consulting activity
designed to add value and improve an organization's operations. Audit staff of
FSIBL has combination of business. Professional and IT knowledge based
personnel. Audit Department is committed to meet the standards of best
professional practices. FSIBL Audit is applying risk based internal audit
methodology for doing their audit functions. Risk based internal audit includes, in

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addition to selective transaction testing, an evaluation of the risk management
systems and control procedures prevailing in various areas of the Bank's
operations.
FSIBL has a strong internal audit team comprised of three units to carry out the
audit activities, namely Head Office Audit, Distribution Audit (which carryout
audit on all Branches. FSIBL also introduced Risk Based Audit system and audit
team conducts comprehensive, spot, surprise audits in various Branches, various
Departments & Division. Internal Audit helps the organization to accomplish its
objectives by bringing a systematic, disciplined approach to evaluate and improve
the effectiveness of risk management, control and governance processes.

Monitoring
FSIBL has separate monitoring department under Internal Control & Compliance
Division which is dedicated to verify the internal control system & operational
activities of the Bank on an ongoing basis. Monitoring department ensures
maintenance of DCFCL at Branches and Departments as a regulatory requirement
and also submits Self-Assessment of Anti-Fraud Internal Controls report and
Bank's Hearth report to Bangladesh Bank.

3.4: Accounting cycle Practices in FSIBL

The accounting cycle is the holistic process of recording and processing all
financial transactions of a company, from when the transaction occurs, to its
representation on the financial statements, to closing the accounts. One of the main
duties of a bookkeeper is to keep track of the full accounting cycle from start to
finish. The cycle repeats itself every fiscal year as long as a company remains in
business.

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The accounting cycle incorporates all the accounts, journal entries, T accounts,
debits, and credits, adjusting entries over a full cycle.

Steps in the accounting cycle

#1 Identify and Analyze Transactions

Transactions: Financial transactions start the process. If there were no financial
transactions, there would be nothing to keep track of. Transactions may include a
debt payoff, any purchases or acquisition of assets, sales revenue, or any expenses
incurred.

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#2 Record Journal Entries
Journal Entries: With the transactions set in place, the next step is to record these
entries in the company’s journal in chronological order. In debiting one or more
accounts and crediting one or more accounts, the debits and credits must always
balance.

#3 Post To General ledger

The journal entries are then posted to the general ledger where a summary of all
transactions to individual accounts can be seen.

#4 Trial Balance
At the end of the accounting period (which may be quarterly, monthly, or yearly,
depending on the company), a total balance is calculated for the accounts.

#5 Worksheet
When the debits and credits on the trial balance don’t match, the bookkeeper must
look for errors and make corrective adjustments that are tracked on a worksheet.

#6 Adjusted Trail Balance

Adjusting Entries: At the end of the company’s accounting period, adjusting
entries must be posted to accounts for accruals and deferrals.

#7 Financial Statements
Financial Statements: The balance sheet, income statement, and cash flow
statement can be prepared using the correct balances.

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#8 Closing
Closing: The revenue and expense accounts are closed and zeroed out for the next
accounting cycle. This is because revenue and expense accounts are income
statement accounts, which show performance for a specific period. Balance sheet
accounts are not closed because they show the company’s financial position at a
certain point in time.

3.5: Mandatory Reporting

1) Cash Flow Statement: A statement of cash flows summarizes information

about the cash inflows (receipts) and outflows (payments) for a specified period of
time. Cash flow statement is to be prepared as it provides information about cash
flows of the enterprise which is useful in providing users of financial statements
with a basis to assess the ability of the enterprise to generate cash and cash
equivalents and the needs of the enterprise to utilize those cash flows. The primary
purpose of a statement of cash flows is to provide relevant information about the
cash receipts and cash payments of an enterprise during a period. To achieve this
purpose, the statement of cash flows report.

2) Income statement: An income statement is one of the three (along with balance
sheet and statement of cash flows) major financial statements that reports a
company's financial performance over a specific accounting period. Net Income =
(Total Revenue + Gains) – (Total Expenses + Losses)

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3) Balance Sheet: A balance sheet reports the assets, liabilities and owners’ equity
at a specified date. The balance sheet is the statement that reflects the economic
and financial status of a bank at a given date, that shows the assets, liabilities and
own funds under the form of asset and liability items in a truthful and correct
manner. The asset part of the balance sheet is arranged according to liquidity, and
the liabilities part according to solvability. The balance sheet is prepared according
to the principle of net value.

4) Owner’s equity statement: The fixed assets are Property, Plant and Equipment.
All property and equipment are classified and grouped on the basis of their nature
as required in as per provision of Property, Plant and Equipment. The major
categories of property and equipment held by the bank are furniture and fixtures,
office equipment’s, motor vehicles and books.

1. Last five year cash flow statement of FSIBL

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55 | P a g e