If you work in accounting, finance, or business in Bangladesh, you have probably heard people talk about IFRS. Students preparing for ACCA or BBA programs also come across it early in their studies. Still, many beginners find the topic confusing. Let’s break it down in a simple and friendly way so you understand what IFRS in Bangladesh really means and why it matters.
What is IFRS in Simple Words
International Financial Reporting Standards, or IFRS, are a set of globally accepted accounting rules. These rules guide companies on how to prepare and present their financial statements. You can think of IFRS as a universal language of business. When companies follow the same rules, their financial reports become easier for investors, lenders, regulators, and even students to understand.
Bangladesh uses IFRS through locally adapted versions known as Bangladesh Financial Reporting Standards (BFRS) and Bangladesh Accounting Standards (BAS). These are mostly aligned with IFRS so that our financial system stays connected with global practices.
Why IFRS Matters for Companies and Professionals in Bangladesh
IFRS is not just an accounting formality. It has a big impact on how businesses work and how investors trust them. Here are a few reasons why IFRS in Bangladesh plays such an important role.
It builds investor confidence
When companies follow international rules, investors feel more comfortable reading their reports. This is helpful for Bangladeshi firms seeking foreign investment or partnerships. It shows that the business follows transparent and reliable reporting practices.
It supports global trade
Bangladesh exports goods worldwide. Many foreign buyers want financial clarity before working with a Bangladeshi supplier. IFRS-based reporting helps companies demonstrate credibility.
It helps professionals compete globally
Students and professionals trained in IFRS have better opportunities abroad. Many countries recognise IFRS, so learning it gives accountants a strong career advantage.
Key IFRS Standards and Their Role in Bangladesh Financial Reporting
There are many standards under IFRS, but some are especially relevant in Bangladesh. They shape the structure and content of Bangladesh’s financial reporting.
A few important ones include:
IFRS 9 Financial Instruments
This standard guides how companies classify and measure financial assets and liabilities. It helps banks and large corporations show a clear picture of their financial health.
IFRS 15 Revenue from Contracts with Customers
This explains how a business should recognise revenue. Many sectors in Bangladesh, such as telecom, garments, and service industries, rely heavily on this standard because it influences profit reporting.
IFRS 16 Leases
This standard requires companies to bring most leases onto their balance sheets. It changes how asset-heavy businesses like manufacturing or transport present their finances.
IAS 1 Presentation of Financial Statements
This sets the structure of financial statements. It explains what should be included in the statement of financial position, profit or loss, changes in equity, and cash flows.
These standards help maintain uniformity and accuracy across Bangladesh’s financial reporting.
Understanding IFRS Requirements in Bangladesh
When we talk about IFRS requirements in Bangladesh, we refer to the rules and responsibilities that companies must follow. These include:
Using BFRS and BAS
Companies must prepare their accounts according to the Bangladesh versions of IFRS. These standards are issued by the Institute of Chartered Accountants of Bangladesh (ICAB).
Mandatory compliance for listed companies
Firms listed on the Dhaka Stock Exchange and Chittagong Stock Exchange must strictly follow these standards.
Ensuring reliable measurement
Companies must follow the specific measurement rules in the standards such as fair value measurement, accrual accounting, impairment rules, and revenue recognition criteria.
Proper disclosures
Disclosures are a big part of IFRS. Firms must explain accounting policies, assumptions, risks, and uncertainties in detail so the financial statements are transparent.
These IFRS requirements in Bangladesh ensure consistency across the corporate sector and give users of financial statements the clarity they need.
How IFRS Improves Transparency and Investor Confidence
One of the strongest benefits of IFRS is the level of transparency it brings. Investors want to know how a company earns money, spends money, and manages risks. IFRS supports this by:
Making reports more comparable
If companies in Bangladesh and companies abroad follow the same standards, investors can easily compare performance across markets.
Reducing manipulation
IFRS demands detailed disclosures, which reduces the chance of hiding poor performance or risky decisions.
Improving audit quality
When companies follow clear rules, auditors can perform better quality audits. This strengthens the overall financial reporting environment.
These advantages help foreign and local investors trust Bangladeshi companies more.
How Companies Prepare IFRS Financial Statements
Preparing IFRS financial statements requires careful planning. Here is a simplified view of the process:
Step 1: Identify applicable standards
Different industries use different IFRS standards. Companies must determine which standards apply to their activities.
Step 2: Collect accurate financial data
Good bookkeeping is the foundation. Without proper records, preparing IFRS-compliant statements becomes difficult.
Step 3: Apply measurement and recognition rules
For example, revenue must be recognised based on IFRS 15, leases must follow IFRS 16, and financial assets follow IFRS 9.
Step 4: Prepare the four main financial statements
These include the statement of financial position, statement of profit or loss, statement of cash flows, and statement of changes in equity.
Step 5: Add disclosures
This is a major part of IFRS. Companies must explain judgments, risks, assumptions, and policies clearly.
Preparing IFRS reports can be time-consuming, but it results in high-quality financial statements that meet global standards.
Challenges in Following IFRS Guidelines in Bangladesh
Even though IFRS is beneficial, many businesses face difficulties when applying IFRS guidelines in Bangladesh. A few common challenges include:
Limited technical expertise
Many small and medium enterprises do not have staff trained in IFRS. This leads to the incorrect application of complex standards.
Changing standards
IFRS updates regularly. Keeping up with new rules requires training and investment.
Cost of compliance
Preparing IFRS-based statements can be expensive because companies often need skilled accountants, auditors, and new software.
Lack of awareness
Many small businesses are not fully aware of what the standards require. This makes compliance difficult.
Overcoming these challenges takes time, training, and support from regulators and professional bodies.
Main IFRS Reporting Obligations for Companies
Companies in Bangladesh must meet several important IFRS reporting obligations. These include:
Preparing complete financial statements following BFRS and BAS
This is mandatory for listed companies and highly recommended for large private businesses.
Submitting audited financial statements
Auditors must review the statements to ensure compliance with standards.
Providing detailed disclosures
This includes information on accounting policies, risks, assumptions, contingencies, and related party transactions.
Following deadlines
Companies must issue timely reports to regulators, shareholders, and stock exchanges.
These obligations create a disciplined reporting environment across the country.
Conclusion
By knowing all the requirements of the IFRS standards, companies in Bangladesh can move more smoothly with their business. IFRS helps in moving business at the international level and makes business beneficial for most people.
Frequently asked questions
1. What is the purpose of IFRS in Bangladesh
The purpose of IFRS in Bangladesh is to bring consistency, transparency, and global comparability to financial reporting. It helps companies build trust with investors and international partners.
2. Are all companies required to follow IFRS requirements in Bangladesh
No, not all companies are required to follow the standards. However, listed companies and many large firms must comply with IFRS requirements in Bangladesh. Smaller companies often follow simplified standards.
3. What are IFRS financial statements
These are financial statements prepared according to IFRS rules. They include the statement of financial position, profit or loss, cash flows, and changes in equity.
4. What happens if a company does not follow IFRS reporting obligations
Failure to follow IFRS reporting obligations can lead to penalties, inaccurate reporting, and loss of investor confidence. Listed companies may also face regulatory action.
