Depreciation Practice in Bangladesh

Introduction

Depreciation is a process to allocate fixed assets over their useful life. It will not show the
value of assets rather it shows the net book value of the assets over their useful life.
“Depreciation Expense” is recorded as an expense in the income statement account, but
this is a non-cash expense for which no cash transaction is needed. Therefore, it needs to
be added back in the cash flow statement. A contra asset account- Accumulated
Depreciation is used to allocate the use of the asset for a specific period of time.
Accumulated depreciation is subtracted from the net book value of the asset to get the
new net book value after period ends.

Depreciation is a tool to determine the usage of a particular asset for a period; different
ways can be used to calculate this amount of depreciation. All of the methods although
provide same final result. Different approaches are used so that different purposes of
different organizations can be served. Another reason for such choice is that, different
asset may have different sort of usage for which one method may not result in a perfect
way but other method may serve best.

Organizations which try to show more depreciation expense may use double declining
balance method, by using this approach organization can show less net income and
therefore they has to pay a less income tax for the period. Some organizations try to
simplify the calculation, therefore they uses straight-line method. Some organizations
have to deal with machineries to produce, they may use unit of output method.

Literature Review

Depreciation: In accounting jargon, the term Depreciation is meant to refer to the

allocation of an asset's cost to the accounting periods benefited -- not an attempt to value
the asset. Thus, it is often said that depreciation is a process of "allocation" not
"valuation."

Determining the service life of an asset is an essential first step in calculating the amount
of depreciation attributable to a specific period. Several factors must be considered:

Physical deterioration -- "Wear and tear" will eventually cause most assets to simply
wear out and become useless. Thus, physical deterioration serves to establish an outer
limit on the service life of an asset.

Obsolescence -- The shortening of service life due to technological advances that cause
an asset to become out of date and less desirable.
Inadequacy -- An economic determinant of service life which is relevant when an asset
is no longer fast enough or large enough to fill the competitive and productive needs of a
company.

Factors such as the above must be considered in determining the service life of a
particular asset. In some cases, all three factors must be considered. In other cases, one
factor alone may control the determination of service life. Importantly, one should
observe that service life can be completely different from physical life.

Recognize that some assets have an indefinite (or permanent) life. One prominent
example is land. Accordingly, it is not considered to be a depreciable asset.

Different Depreciation Methodologies

After the cost and service life of an asset are determined, it is time to move on to the
choice of depreciation method. The depreciation method is simply the pattern by which
the cost is allocated to each of the periods involved in the service life. There are many
methods from which to choose. Four popular methods are:

i. straight-line method,
ii. units-of-output method,
iii. double-declining-balance method, and
iv. Sum-of-the-years'-digits method.

In any given scenario, ample professional judgment must be applied in selecting the
specific depreciation method to apply. It must be noted that the choice of depreciation
method can become highly subjective. Some research suggests that such choices are
unavoidably "arbitrary," despite the best of intentions. Having set the stage for
consideration of multiple depreciation methods, it is now time to dig into the mechanics
of each approach.

Most companies elect to stay with one of the fairly basic techniques -- as they all produce
the same "final outcome" over the life of an asset, and that outcome is allocating the
depreciable cost of the asset to the asset's service life.

Some Important Terminology:

Cost: The dollar amount assigned to a particular asset; usually the ordinary and necessary
amount expended to get an asset in place and in condition for its intended use.
Service life: The useful life of an asset to an enterprise, usually relating to the anticipated
period of productive use of the item.
Salvage value: Also called residual value; is the amount expected to be realized at the
end of an asset's service life. The anticipated sales amount at the end of the service life is
the salvage or residual value.
Depreciable base: The cost minus the salvage value. Depreciable base is the amount of
cost that will be allocated to the service life.
 Book value: Also called net book value; refers to the balance sheet amount at a point in
time that reveals the cost minus the amount of accumulated depreciation.

The Straight-Line Method: Under this simple and popular approach, the annual
depreciation is calculated by dividing the depreciable base by the service life. The
applicable depreciation expense would be included in each year's income statement and
the appropriate balance sheet presentation would appear also.

The Units-of-Output Method: This technique involves calculations that are quite
similar to the straight-line method, but it allocates the depreciable base over the units of
output (e.g., machine hours) rather than years of use. It is logical to use this approach in
those situations where the life is best measured by identifiable units of machine
"consumption"

The Double-Declining-Balance Method (DDB): As one of several "accelerated

depreciation" methods, DDB results in relatively large amounts of depreciation in early
years of asset life and smaller amounts in later years. This method can be justified if the
quality of service produced by an asset declines over time, or if repair and maintenance
costs will rise over time to offset the declining depreciation amount. With this method, a
fixed percentage of the straight-line rate (i.e., 200% or "double") is multiplied times the
remaining book value of an asset to determine depreciation for a particular year. As time
passes, book value and annual depreciation decrease.

The Sum-of-The-Years'-Digits Method: Under this technique, depreciation for any

given year is determined by multiplying the depreciable base by a fraction; the numerator
is a digit relating to the year of use.

(Walther, L. M. & Skousen, C. J. (2009) Long-Term Assets, Ventus Publishing ApS,

Denmark)

Analysis and findings

Depreciation methods used by companies enlisted under different Industries of

Bangladesh and are shown in the table below:

Company Name Industry Depreciation Method Used

GQ Ball Pen Miscellaneous Diminishing balance
Berger Paints Miscellaneous Straight Line
Al-Arafah Islami Bank Bank Reducing balance method
Exim Bank Bank Straight line
Uttara Bank Bank Reducing balance method
United Commercial Bank Bank Reducing balance method
Southeast Bank Bank Straight line
AB Bank Limited Bank Reducing balance method
Eastern Bank Bank straight line & reducing balance
Prime Bank Bank Reducing balance method
Rupali Bank Bank Diminishing balance
Social Islami Bank Bank Reducing balance method
Trust Bank Limited Bank Straight line
Standard Bank Limited Bank Reducing balance method
Dutch-Bangla Bank Bank Straight line
The City Bank Bank Straight line
Niloy Cement Cement Diminishing balance
Aramit Cement Cement Straight line
Lafarge Cement Cement Straight line
Meghna Cement Cement Reducing Balance
Confidence Cement Cement Straight line
Standard Ceramic Ceramics Sector Reducing Balance
Fu-Wang Ceramic Ceramics Sector Diminishing balance
National Tubes Engineering Reducing Balance
BD Lamps Engineering Straight line
Aziz Pipe Engineering Diminishing balance
BD Auto Engineering Reducing Balance
BOC Engineering Straight line
Aftab Automobiles Engineering Diminishing balance
Singer Bangladesh Engineering Reducing Balance
Eastern Cables Engineering Straight line
Atlas Bangladesh Engineering Reducing Balance
Navana CNG Engineering Diminishing balance
IDLC Finance Ltd Financial Institutions Straight line
Premier Leasing Financial Institutions Straight line
Uttara Finance Financial Institutions Straight line
United Leasing Financial Institutions Straight line
Peoples Leasing Financial Institutions Diminishing balance
Bionic Sea Food Food & Allied Reducing Balance
Dhaka Fisheries Food & Allied Reducing Balance
Beximco Fisheries Food & Allied Straight line
BAT BC Food & Allied Straight line
Rahima Food Food & Allied Reducing Balance
Fu-Wang Food Food & Allied Diminishing balance
Gemini Sea Food Food & Allied Diminishing balance
Bangas Food & Allied Written down value
AMCL (Pran) Food & Allied Reducing balance method
Summit Power Fuel & power Straight line
Padma Oil Fuel & power Straight line
DESCO Fuel & power Reducing balance method
Titas Gas Fuel & power Diminishing balance
BGIC Insurance Reducing balance method
Karnaphuli Insurance Insurance Diminishing balance
Phoenix Insurance Insurance Reducing balance method
National Life Insurance Insurance Reducing balance method
Pragati Insurance Insurance Straight line
Prime Insurance Insurance Straight line
Sonar Bangla Insurance Insurance Reducing balance method
Green Delta Insurance Insurance Straight line
Rupali Insurance Insurance Reducing balance method
Rupali Life Insurance Insurance Reducing balance method
Agrani Insurance Insurance Straight line
Central Insurance Insurance Diminishing balance
Dhaka Insurance Limited Insurance Diminishing balance
Nitol Insurance Insurance Reducing balance method
BDCOM Online Ltd IT Diminishing balance
BOL IT Straight line
Beximco Pharma Pharmaceuticals & Chemicals Reducing Balance
Reckitt Benckiser Pharmaceuticals & Chemicals straight line
Square Pharma Pharmaceuticals & Chemicals Reducing Balance
Libra Infusion Pharmaceuticals & Chemicals Reducing Balance
Ambee Pharma Pharmaceuticals & Chemicals Reducing Balance
Renata Ltd. Pharmaceuticals & Chemicals Straight line
Orion Infusion Pharmaceuticals & Chemicals Straight line
Glaxo SmithKline Pharmaceuticals & Chemicals Straight line
The Ibn Sina Pharmaceuticals & Chemicals Reducing Balance
ACI Limited Pharmaceuticals & Chemicals Straight line
Kohinoor Chemical Pharmaceuticals & Chemicals Reducing Balance
Eastern Housing Services & Real Estate Diminishing balance
OCL Services & Real Estate Reducing balance method
Summit Alliance Services & Real Estate Reducing balance method
Bata Shoe Tannery Industries Reducing balance and Straight line
Samata Leather Tannery Industries Reducing Balance
Apex Footwear Ltd Tannery Industries Reducing Balance
Apex Tannery Tannery Industries Reducing Balance
Saiham Textile Textile Reducing Balance
Apex Spining Textile Reducing Balance
Mithun Knitting Textile Reducing Balance
Prime textile Textile Diminishing balance
Bangladesh Dyeing Textile Reducing Balance
Desh Garmants Textile Diminishing balance
Monno Fabrics Textile Reducing Balance
Beximco Denims Textile Straight line
H.R.Textile Textile Straight line
Beximco Knitting Textile Straight line
Square Textile Textile Straight line
Tallu Spinning Textile Straight line
Rahim Textile Textile Reducing Balance
Al-Haj Textile Textile Diminishing balance
Quasem Silk Textile Reducing Balance

D ep r eci ati on M eth od U sed by C om p an ys

fr om D i ffer en t I n du str i es of B an gl adesh

D im in ish in g b a la n c e
0.99% 19%
Stra ig h t Lin e
44%
R e d u c in g b a la n c e
m e th o d
37% W ritte n d o w n v a lu e

In our survey of 101 companies of 14 industries, we found that about 44% of the
companies using Reducing balance method to calculate depreciation and it is the
majority. Among these companies, nearly 37% uses Straight line method to find out
depreciation. While some of the companies’ uses combination of these two methods to
determine depreciation. Pie chart shown above is presenting the depreciation method and
their respective proportions in all industries.

Notably, none of the companies neither uses units-of-output method nor the sum-of-the-
years'-digits method. Conversely, Bangas Foods from Food & Allied industry uses
written down value method to calculate its depreciation, which is a unique finding in our
analysis.
Another important think we observed is that the majority of the companies of a particular
industry follow the same method used by other companies of the same industry. That is,
the companies have a tendency to go with the same method used by other companies of
that respective industry, although it is not true in every case.

While going through the annual reports of different companies, we found that all of the
companies stated which method they are using to determine depreciation. Depreciation
techniques used by these companies are mentioned in their Annual Report under the Note
to The Financial Statement part.

* Separate pie chart showing depreciation method used by different industries are
provided in the appendix.

Recommendation

As we know that different methods of determining depreciation has the same final result.
So, company should use methods that best serve the company’s purpose. Another
tendency that we observed during our survey which we mentioned earlier that all the
companies of same industry follow identical method but this is not essential to follow
same approach. Companies should not bother choosing approaches which most of the
companies following but they should consider their function and based on this they
should decide which method they should apply.

Conclusion

Depreciation is vital for an organization as it helps to realize the net book value of the
asset and it is a significant source of expenditure. So, companies should be very careful
of selecting methods to determine depreciation. They should regularly check which
approach is suitable to them and change estimates or method of depreciation if required.
Those companies which are engaged in different nature of business should not follow
uniform depreciation method; they should use different methods to allocate depreciation
for different assets.
 Inventory Valuation/Costing Practice in Bangladesh
Introduction

Inventory means the goods and services that businesses hold in stock. Their can be
different types of inventories: finished goods, work-in-process or raw materials. These
inventories are recorded as an asset of the organization in the balance sheet and they are
expensed in the income statement as cost of goods sold and ending inventory. There are
three major techniques to determine the cost of inventory. They are First in first out
(FIFO), Last in Last out (LIFO), and weighted average cost. Companies can use one of
these methods because all of these are approved by GAAP. Each method serves different
purposes of an organization. Though, the cost of inventory remains same, companies can
allocate this cost with different costing approaches based on their function. Most of the
companies use different methods for different type of inventories. Therefore, two or more
inventory costing method may found within one single organization.

Literature Review

Inventory include all costs that are "ordinary and necessary" to put the goods "in place"
and "in condition" for their resale.
This means that inventory cost would include the invoice price, freight-in, and similar
items relating to the general rule. Conversely, "carrying costs" like interest charges (if
money was borrowed to buy the inventory), storage costs, and insurance on goods held
awaiting sale would not be included in inventory accounts; instead those costs would be
expensed as incurred. Likewise, freight-out and sales commissions would be expensed as
a selling cost rather than being included with inventory.

Costing Methods: Once the unit cost of inventory is determined via the preceding rules of
logic, specific costing methods must be adopted. In other words, each unit of inventory
will not have the exact same cost, and an assumption must be implemented to maintain a
systematic approach to assigning costs to units on hand (and to units sold).

The methods from which to choose are varied, generally consisting of one of the
following:

i. First-in, first-out (FIFO)

ii. Last-in, first-out (LIFO)
iii. Weighted-average

Each of these methods entails certain cost-flow assumptions. Importantly, the

assumptions bear no relation to the physical flow of goods; they are merely used to assign
costs to inventory units. Another method that is the specific identification method; as its
name suggests, it does not depend on a cost flow assumption.
First-in, First-out: With first-in, first-out, the oldest cost (i.e., the first in) is matched
against revenue and assigned to cost of goods sold. Conversely, the most recent
purchases are assigned to units in ending inventory.
Last-in, First-out: Last-in, first-out is just the reverse of FIFO; recent costs are assigned
to goods sold while the oldest costs remain in inventory.
Weighted-Average: The weighted-average method relies on average unit cost to
calculate cost of units sold and ending inventory. Average cost is determined by dividing
total cost of goods available for sale by total units available for sale.

Accountants usually adopt one of these cost flow assumptions to track inventory costs
within the accounting system. The actual physical flow of the inventory may or may not
bear a resemblance to the adopted cost flow assumption.

The results above are consistent with the general rule that LIFO results in the lowest
income (assuming rising prices), FIFO the highest, and weighted average an amount in
between. Because LIFO tends to depress profits, so why a company would select this
option; the answer is sometimes driven by income tax considerations. Lower income
produces a lower tax bill, thus companies will tend to prefer the LIFO choice. Usually,
financial accounting methods do not have to conform to methods chosen for tax purposes.

Accounting theorists may argue that financial statement presentations are enhanced by
LIFO because it matches recently incurred costs with the recently generated revenues.
Others maintain that FIFO is better because recent costs are reported in inventory on the
balance sheet. Whichever side of this debate, it is important to note that the inventory
method in use must be clearly communicated in the financial statements and related
notes. Companies that use LIFO will frequently augment their reports with supplement
data about what inventory would be if FIFO were instead used. No matter which method
is selected, consistency in method of application should be maintained. This does not
mean that changes cannot occur; however, changes should only be made if financial
accounting is improved.

Specific Identification: As was noted earlier, another inventory method is specific

identification. This method requires a business to identify each unit of merchandise with
the unit's cost and retain that identification until the inventory is sold. Once a specific
inventory item is sold, the cost of the unit is assigned to cost of goods sold. Specific
identification requires tedious record keeping and is typically only used for inventories of
uniquely identifiable goods that have a fairly high per-unit cost (e.g., automobiles, fine
jewelry, and so forth).

Measuring Market Value: Market values are very subjective. In the case of inventory,
applicable accounting rules define "market" as the replacement cost (not sales price!) of
the goods. In other words, what would it cost for the company to acquire or reproduce
the inventory?

However, the lower-of-cost-or-market rule can become slightly more complex because
the accounting rules further specify that market not exceed a ceiling amount known as
"net realizable value" (NRV = selling price minus completion and disposal costs). The
reason is this: occasionally "replacement cost" for an inventory item could be very high
(e.g., a supply of slide rules at an office supply store) even though there is virtually no
market for the item and it is unlikely to produce much net value when it is sold.
Therefore, "market" for purposes of the lower of cost or market test should not exceed the
net realizable value. Additionally, the rules stipulate that "market" should not be less
than a floor amount, which is the net realizable value less a normal profit margin.

(Walther, L. (2009) Chapter 8- Inventory [Internet]. Available from:

http://www.principlesofaccounting.com/chapter%208.htm [Accessed July 17, 2010])

Analysis and findings

The table shown below is the survey of the basis of inventory valuation techniques used
by various companies of different industries in Bangladesh:
Company Name Industry Inventory Costing Methods Used
Al-Arafah Islami Bank Bank
Exim Bank Bank
Uttara Bank Bank
United Commercial Bank Bank
Southeast Bank Bank
AB Bank Limited Bank
Eastern Bank Bank
Prime Bank Bank
Rupali Bank Bank
Social Islami Bank Bank
Trust Bank Limited Bank
Standard Bank Limited Bank
Dutch-Bangla Bank Bank
The City Bank Bank
Niloy Cement Cement Lower of cost and net realizable value
Aramit Cement Cement Lower of cost and net realizable value
Lafarge Cement Cement Lower of cost and net realizable value
Meghna Cement Cement Weighted Average Cost
Confidence Cement Cement Lower of cost and net realizable value
Standard Ceramic Ceramics Sector Lower of cost and net realizable value
Fu-Wang Ceramic Ceramics Sector Lower of cost and net realizable value
National Tubes Engineering Weighted Average Cost
BD Lamps Engineering FIFO
Aziz Pipe Engineering Weighted Average Cost
BD Auto Engineering Weighted Average cost
BOC Engineering Lower of cost and net realizable value
Aftab Automobiles Engineering Lower of cost and net realizable value
Singer Bangladesh Engineering Weighted Average Cost
Eastern Cables Engineering Weighted Average Cost
Atlas Bangladesh Engineering Lower of cost and net realizable value
Navana CNG Engineering Weighted Average Cost
IDLC Finance Ltd Financial Institutions
Premier Leasing Financial Institutions
Uttara Finance Financial Institutions
United Leasing Financial Institutions
Peoples Leasing Financial Institutions
Bionic Sea Food Food & Allied Lower of cost and net realizable value
Dhaka Fisheries Food & Allied Net Realizable Value
Beximco Fisheries Food & Allied Lower of cost and net realizable value
BAT BC Food & Allied Lower of cost and net weighted average cost
Rahima Food Food & Allied FIFO
Fu-Wang Food Food & Allied Lower of cost and net realizable value
Gemini Sea Food Food & Allied Lower of cost and net realizable value
Bangas Food & Allied lower of cost and Weighted Average Cost
AMCL (Pran) Food & Allied lower of cost and Weighted Average Cost
Summit Power Fuel & power FIFO
Padma Oil Fuel & power Lower of cost and net realizable value
Lower of cost and net realizable value, weighted
DESCO Fuel & power average method.
Titas Gas Fuel & power Weighted Average Cost
BGIC Insurance
Karnaphuli Insurance Insurance
Phoenix Insurance Insurance At Cost
National Life Insurance Insurance
Pragati Insurance Insurance
Prime Insurance Insurance
Sonar Bangla Insurance Insurance At Cost
 I n ven tor y C osti n g M eth od U sed b y
C om p an i es fr om D i ffer en t I n d u str i es of
B an gl ad esh

Lo w er o f c o st a nd ne t
re a liza b le v a lue
W e ig hte d A v e ra g e C o st
1.43%
1.43% FIFO
4.29%
N e t Re a liza b le V a lue
7.14%
1.43% Lo w er o f c o st a nd ne t
w e ig hte d a v e ra g e c o st
11.43%
A t C o st
50%
21.43% A t Sta nd a rd C o st

A v era g e c o st

From our analysis on Inventory valuation method used by companies in Bangladesh, we

can state that the majority of the companies (about 50%) in Bangladesh use lower of cost
and net realizable value method. 21.43% of the companies uses weighted average cost
method to measure inventory cost. FIFO method was used by almost 11% companies.
Rest of the companies uses Net Realizable Value, Lower of cost and net weighted
average cost, At Cost, At Standard Cost, Average cost method with smaller percentages.

In this analysis, we found that Bank, Financial Institutions, and Insurance industries do
not included inventory costing technique they used in their annual report as these are the
service industries which do not deals with inventory for further production. However, two
(2) of the insurance companies mentioned about their inventory costing method.

Interestingly, Last-in-first-out (LIFO), one of the popular methods was not used by a
single company of our interest.

Next, some of the companies use two or more methods for different inventory accounts.
They do so because inventories are usually unusual in nature and within a company there
can be various types of inventories that are required.

Lastly, it was found from our observations that the majority of the companies of an
industry follow same methods for inventory costing.

* Separate pie chart showing Inventory Valuation method used by different industries are
provided in the appendix.

Recommendation

As all of these three methods are accepted by GAAP, therefore companies can use one or
multiple techniques. But they should be careful while choosing the most suitable method
for a particular inventory. Different methods may also be useful for the company as a
whole. For ex- when input prices are rising, LIFO shows the lowest profit and FIFO the
highest. So, company may use FIFO when price is increasing to show higher profit.
Similarly, when prices are rising, FIFO gives the best measure of the cost of the ending
inventory at current prices. However if a company try to reduce its tax payment in this
situation, it should follow LIFO because LIFO results in the lowest income taxes.
Companies should not bother to stick with one method of inventory calculation, they
should regularly check whether the selected approach is working best or not, if necessary
then they should carefully change the valuation technique.

Conclusion

Inventory valuation is important tool to determine the cost of inventory. As different

methods produces different results so companies use these methods interchangeably.
Although they are conscious while choosing suitable method for their inventory but they
also try to follow other companies of a same industry. Different methodology can be
applicable for different purposes so companies should dedicate its effort to choose the
best alternative.
 Recent News Analysis

“Price Sensitive Information”

An article published in The Financial Express on Monday, April 12, 2010 about the 37th
Annual General Meeting (AGM) of Berger Paints Bangladesh Ltd. This article was
published to announce the date, time, and venue of the 37th AGM.

The report states on the company’s declaration of dividends. The company declared
150% cash dividend for the year ended 31st December, 2009.

According to the report, the Director and the secretary of the company Abdul Khalek,
FCA announces the 37th AGM and dividend on behalf of Board of Directors in its 129th
meeting.

Furthermore, this article also states net asset value, net asset value per share, earning per
share and net operating cash flow per share (NOCFPS).

This report shows that the company recently declared the 150 percent cash dividends for
the recent past fiscal year and the shareholders who are entitled to receive the dividend
are invited in AGM.
Part A – Background

Question 1 – Where is the company incorporated? Where are its primary locations?
Answer:

The Company was incorporated on 6 June 1973 as a ‘Private' Company limited by Shares
registered under the Companies Act. Subsequently the Company converted to ‘Public’
Company limited by shares vide extra ordinary general meeting held on 21 June 2005 and
is listed both in Dhaka and Chittagong Stock Exchanges of Bangladesh. In December
2005, the company issued 5% shares to the public and listed with Dhaka Stock Exchange
(DSE) and Chittagong Stock Exchange (CSE).

The registered office of the Company is located at 43/3 Chatteswari Road, Chittagong.
The Corporate office was shifted to Berger House, Plot No-8, Road No-2, Sector-3,
Uttara, Dhaka on 1 January 2003.

Berger Paints Bangladesh has two factories and two plants in Bangladesh. Dhaka factory
is located at Mouja – Taksur, Nabinagar, Savar, Dhaka. The state-of-the-art Dhaka
factory is an addition to Berger's capacity, making it the paint giant in Bangladesh.
Chittagong Factory is situated at 27-D, FIDC Road, Kalurghat Heavy Industrial Area,
Chittagong-4212. Powder Coating Plant and Emulsion Plant aboth are located at Mouja –
Taksur, Nabinagar, Savar, Dhaka.

The nationwide dealer network, supported by seven (7) sales depots strategically located
at Dhaka, Chittagong, Rajshahi, Khulna, Bogra, Sylhet and Comilla has enabled them to
strategically cater to all parts of the country.

Question 2 – Describe the nature of its business, primary products etc.

Answer:

The principal activities of the Company throughout the year continued to be

manufacturing and marketing of liquid and non-liquid paints & varnishes, emulsion and
coating. Berger Paints Bangladesh Ltd. owns 100% shares of Jenson & Nicholson
(Bangladesh) Limited – J & N (B) L. The principal activities of the Company until 12
August 1995 were trading & indenting. It has started production and marketing of tin
containers and printing of tin sheets from 12 August 1995 and 1 September 1997
respectively in its factory at 70 East Nasirabad Industrial Area, Chittagong.

The product range includes specialized outdoor paints to protect against adverse weather
conditions. Color Bank, superior Marine Paints, Textured Coatings, Heat Resistant
Paints, Roofing Compounds, Epoxies and Powder Coatings. In each of these product
categories, Berger has been the pioneer. Berger also provides customer support
connecting consumers to technology through specialized Home Decor service giving free
technical advice on surface preparation, colour consultancy, special colour schemes etc.
To bolster customer satisfaction, Berger launched Illusion-the first designer paint
solution. The Company also launched Innova wood Coating and PowerBond adhesive to
cater the needs of the customers.

Question 3 – What is the primary focus of the company’s management letter in the
current year?
Answer:

Primary focus of the company’s management letter in the current year was the successful
performance over last year and affirming the target for future growth. The letter states
that the company diversified to a number of new frontiers in the last financial year.
Berger introduces vehicle re-finish brands like NEXA auto color, Bilux, and V-fleet.

In the decorative paint segment, Radiance interior Emulsion was launched.

To cater the growing demand in textile industry, in November 2009 Berger launched
TexBond PB and TexBond FA as the import substitute printing binder (PB) and finishing
agent (FA).

The letter entail, all the new products had been able to position themselves in the desired
market segment and were gradually increasing their market shares.

The letter also ensures that Berger will remain focused on core business and organic
growth, constant search for new products and business diversification will be there.