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Finalised

Disclosure Level and Compliance with IASs of


Non-financial Companies in an Emerging
Economy: A Study Bangladesh








Dr. Monirul Alam Hossain
Department of Accounting and MIS
University of Hail
P.O. Box 2440
Hail, Kingdom of Saudi Arabia.
Tel: +966568533567
FAX: +966-6-531-0500
E-mail: monirulhossain@yahoo.com or
mahossain108@hotmail.com









Final Draft Submitted for the presentation in the Asian
Academic Accounting Association Conference 2006, Sydney
(17
Th
19
th
September)
2
Disclosure Level and Compliance with IASs of
Non-financial Companies in an Emerging
Economy: A Study Bangladesh


Dr. Monirul Alam Hossain*,

Abstract

Compliance with accounting or financial reporting standards promulgated by International
Accounting Standards Board (previously IASC) has become a crucial issue of the day after a
series of corporate debacles over a decade. Regulators, professional bodies and researchers
around the globe have expressed their concerns about the need for improved accounting and
audit pronouncements and compliance for providing better information than previously required
for the preparation and presentation of corporate financial statements. The present study
primarily focuses on the extent of corporate disclosure based on two International Accounting
Standards adopted in Bangladesh. An index consisting of 53 forms of information was
constructed on the basis of the requirements of two important IASs (IAS-1 and IAS-16). Annual
reports of 106 Bangladeshi manufacturing and trading companies non-financial in nature have
been examined for the year ending 2001-2002. The results showed that the listed non-financial
companies significantly followed the selected accounting standards under review and did bring
remarkable changes in the financial reporting practices made by the listed companies in
Bangladesh. The study also attempted to examine empirically the association between a number
of corporate attributes and levels of disclosure in corporate annual reports of listed non-financial
companies in an emerging economy, Bangladesh. The association between the extent of
disclosure and various corporate characteristics was examined using multiple linear regression
models. It was found that net profit margin of Bangladeshi companies and subsidiary of a
multinational company was significantly associated with the extent of disclosure as per sample
accounting standards.


Key Words: Accounting Standards, Compliance, International Financial Reporting
Standards, Corporate Attributes, International Accounting Standards Board,
Corporate Governance, Transparency, Bangladesh

*
Department of Accounting and MIS, University of Hail, P.O Box- 2440, Hail, Kingdom of Saudi Arabia.

3
Disclosure Level and Compliance with IASs of
Non-financial Companies in an Emerging
Economy: A Study Bangladesh


1. Introduction

The stated objective of establishing the IASC was to pronounce a set of accounting standards for
the member countries with a view to facilitating relevant, reliable, adequate and uniform
disclosure of accounting information in the financial statements of the enterprises under its
global umbrella. Since its inception in 1973, IASC has subsequently taken the name, spell this
out IASB. As the IASB made the transition to adulthood, its focus has become harmonisation of
financial reporting irrespective of geographical boundaries. This change in focus is due to
globalisation, or the multi-nationalisation of companies, has increased the volume of economic
exchanges across nations. The most recent spate of corporate collapses has thus place an
increased mantle of responsibility on the shoulders of the IASB. International Accounting
Standards (IASs) are commonly known now as International Financial Reporting Standards
(IFRSs). In 2001, supported by industry and governments throughout the world, and modeled
after the Financial Accounting Standards Board (FASB) in the U.S., the IASB was created with a
mandate to produce a single set of high-quality, understandable, and enforceable International
Financial Reporting Standards (Jermakowicz and Gornik-Tomaszewski, 2006). The IFRS
include existing IASs issued by the IASC as well as Standards the IASB issued. In 2002, the
Financial Accounting Standards Board (FASB) and the International Accounting Standards
Board (IASB) co-signed the Norwalk Agreement, pledging to work toward a single set of high-
quality global accounting standards. Since that time, the two organizations have joined forces in
drafting several new and updated standards (Gupta, Linthicum, and Noland, 2007) In 2005, the
Securities & Exchange Commission's (SEC) in the USA published a roadmap for the possible
elimination of the reconciliation of International Financial Reporting Standards (IFRS) to US
Generally Accepted Accounting Principles.

If the enterprises within IASB member countries do not comply with the promulgated accounting
or financial reporting standards, global harmonisation will not be achieved. Professional
accounting bodies of the member countries have joined with the IASB to achieve its objectives
by calling for voluntary adoption or, where necessary, legal backing of international standards
and practices. The Institute of Chartered Accountants of Bangladesh (ICAB) and The Institute of
Cost and Management Accountants of Bangladesh (ICMAB) are members of IASB. But it is
alleged that the role of these two bodies in the standard setting process and their implementation
are not in equal in magnitudes. Owing to lack of legal backing, compliance with IASs remains at
voluntary level until those become mandatory very recently by Securities and Exchange
Commission (SEC) for the listed companies of Bangladesh. The present study opts for
empirically examining the following aspects:
(a) Standard setting and implementation process and inherent setbacks leading to non-
compliance
(b) The extent to which the listed non-financial companies in Bangladesh follow IASB
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Accounting Standards;
(c) The extent of disclosure for each of the items of information in its group as well as the
overall grouping; and
(d) Whether there is any association between a number of corporate attributes and the levels
of disclosure ( as per accounting standards) in corporate annual reports of the sample
companies

2. Socio-Economic Settings and Development of Accounting Standards

Compliance with International Accounting Standards depends upon the politico-economic
settings prevalent in a country. Most of the developing countries' industrialization, political
institutions and culture are largely influenced by the socio-political tradition and philosophy of
the colonial power by which they were ruled and therefore, the development of accounting
standards in the developing countries is not an exception to this (Perera; 1989). Accounting
development patterns of most developing countries are either imposed through colonial influence
or by powerful investors or Multinational Companies (MNCs) (Chandler and Holzer; 1984;
Beclkaoui; 1985 and Hove; 1986). Samuels and Oliga (1982) while evaluating accounting
standards in developing countries argue that where economic, socio-political, cultural and
contextual differences between countries, nations and societies exists, there is a problem of
appropriate accounting standards. They argued that there are both conceptual and practical
problems that expose the futility of harmonisation of accounting standards. Hove (1986)
identified four vehicles (i.e., colonial rule, operations of transnational corporations, professional
accounting institutions and the special conditions in foreign aid agreements) by which
accounting technology was imposed by the developed countries on the developing countries. In
many countries, of course, the British influence has had very long standing and this has impacted
on the development of accounting standards.

Bangladesh inherited its politics and large parts of law and administrative structure from the
British. As a part of India, Bangladesh was ruled over by the British for about 200 years until
1947 and then 25 years by Pakistan until 1971. As a matter of fact, the country started with the
lingua franca bottomless basket immediately after the liberation in 1971. Over the years the
country has traversed through the vicious circle of poverty. Lack of governance and dependence
on development aids are claimed to have had a far reaching impact on the socio-economic
development of the country. Rahman and Jannah (2003) in a joint initiative taken by the World
Bank and IMF drawing on Reports on the Observance of Standards and Codes (ROSC) took a
snap-shot of the real socio-economic characteristics of Bangladesh:

Despite sustained domestic and international efforts to improve economic and
demographic prospects, Bangladesh remains poor. The country has a population of about
133 million within a geographic boundary of 143,998 square kilometers (56,160 square
miles). Although more than half of the gross domestic product (GDP) is generated through
the service sector, nearly two-thirds of the population are employed in agriculture. Major
impediments to growth include frequent natural disasters, inefficient state-owned
enterprises, inadequate infrastructure, weak private and foreign investments, and slow
implementation of economic reforms. Weak national financial architecture, inadequate
transparency and accountability, and a dearth of appropriate policy interventions are
among the impediments cited for the countrys slow economic development.

5

Despite enormous bottlenecks, Bangladesh has been striving to rise above the curses of poverty
and exhibits similar characteristics to other developing countries. These characteristics can be
seen in the setting of accounting standards and compliance.

The accounting profession in Bangladesh evolved in the British tradition of self regulation and
professional ethics. Its root can be traced to 1850 when the first Companies Act was enacted in
India (Nicholls and Ahmed, 1995). There is no independent standard-setting organisation in
Bangladesh like the FASB in the U.S.A., the ASB in the UK or the AASB in Australia For
instance, the Australian Accounting Standards Board (AASB) under the oversight of the
Financial Reporting Council (FRC) issues Australian Accounting Standards by way of adopting
accounting or financial reporting standards issued by the International Accounting Standards
Board (Deegan 2005). In Bangladesh, the Institute of Chartered Accountants of Bangladesh
(ICAB) has the sole authority to adopt IASs. ICAB was established in 1973 and became a
member of the International Accounting Standards Committee (IASC) in 1977 and began to
issue Bangladeshi Accounting Standards (BASs). International Accounting Standards (IASs)
were adopted in 1983. The Institute of Cost and Management Accountants of Bangladesh
(ICMAB) established in 1977 is also a member of the IASC. However, the ICAB never invited
the ICMAB to join in the standard-setting process and implementation of accounting standards.
Rather, the ICAB tends to consider the ICMAB as a rival institute and, therefore, does not
include it in the adoption and implementation of national accounting standards. This type of
negative attitude on the part of the ICAB is very harmful and does little to ensure the
enforcement and compliance of national accounting standards in Bangladesh. Apart from this,
there are many company accountants who are not members of the ICAB but are engaged in the
preparation of company financial statements. These company accountants are not likely to follow
the international accounting standards in the preparation of Company Annual Reports (CARs)
where company management has a reservation about following accounting standards. To add to
this melancholy situation, the Bangladesh Accounting Standards (BASs) adopted by ICAB have
no legal backing for compliance.

In October 1997, the Securities and Exchange Commission (SEC) for the first time required
listed companies to follow IASs and International Standards on Auditing (ISAs) as adopted by
the Institute of Chartered Accountants of Bangladesh (ICAB).

In February 2000, the SEC issued
a new rule on the format of audit reports specifying that auditors will verify that the financial
statements have been prepared in accordance with IAS and the audit has been carried out in
accordance with ISA. The SEC claims that its February 2000 rule on audit reports has mandated
full compliance with IAS, although this requirement does not appear to have the force of law
(Rahman and Jannah 2003). The problem is that the rule does not include implementation
guidelines. More over, gaps exist between Bangladesh Accounting Standards and International
Accounting Standards. The ICAB has developed 16 BASs on the basis of IASs. However, as
revised IASs are issued, the BASs are not updated. Moreover, other IASs/IFRS have no
counterparts in BAS. For non-listed companies, financial reporting formats and disclosure
requirements set by the Companies Act 1994 are mandatory. These requirements are not
consistent with IASs. Thus, the Companies Act 1994, framed in the light of British Companies
Act 1913, remains the principal law affecting compliance.



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3. Compliance of Accounting Standards Debate in the Existing Literature

There is a plethora of studies of financial reporting. This section reviews research on compliance
with accounting standards. One of the main purposes of financial statements is to provide more
comparable data about the business enterprise. Accounting standards assist the preparation of
financial statements and comparability of enterprise data in at least four ways: mandating a
specific presentation format, compelling an explicit measurement technique, ensuring an
increasing level of disclosure, and requiring the disclosure of additional information (Cairns
1995). Christopher and Islam (1999) have pointed out that developing countries increasingly
need sophisticated accounting standards as their economies grow and become more complex.
There is evidence that a number of developing countries have not even adopted the IASs as the
basis of their domestic accounting standards (Christopher and Islam, 1999). Furthermore, they
mentioned that some developing countries have developed their accounting standards at variance
with the IASs (e.g., Brazil, India, Mexico, Saudi Arabia, South Africa, Swaziland and
Yugoslovia).
Parry and Khan (1984) carried out a study of published annual reports of 74 entities in
Bangladesh. Their major findings were that reports were generally informative and complied
with legal requirements, but no attempt was taken to comply with IASs. Similar findings were
found in another study undertaken by Parry (1989). Toha (1986) has made an empirical study of
the practical application of IASs in Bangladesh. He found that the application of IASs in
Bangladesh is very limited. Although in some cases there is compliance with IASs, compliance
with disclosure aspects of IASs is very much weak. As a result, he opined that proper
amendment in the Companies Act should be implemented.

Alam (1989) found serious drawbacks in the provisions of the Companies Act, 1913 (currently
the Companies Act 1994) relating to financial statements. He commented that in Bangladesh, the
statutory requirements for the disclosure of accounting information are inadequate. As a result,
development of accounting standards by considering the local national needs or compliance with
the International Accounting Standards may be given utmost consideration. He suggested that
the adopted IASs should be incorporated into legislation to overcome the drawbacks of the
Companies Act. In another study Alam (1990) found that about 10 percent of the companies in
Bangladesh fulfilled the 1987 requirements of the Securities and Exchange Rules. However, due
to the inadequacy of the Companies Act and the Securities and Exchange Rules, 1987, ICAB
adopted Accounting Standards that cover most of the important accounting standards. Alam
commented that the application target of the standards could not be achieved due to the lack of
enforcement power in that it requires special attention of the Government of Bangladesh in
revising the existing Companies Act, 1913. Our observations suggest that the Companies Act
1913 that was enacted by the British legislators in the sub-continent has been repealed by the
enactment of the Companies Act 1994 in Bangladesh without mentioning anything about
compliance with IASs.

Azizuddin (1991) while reviewing the accounting and auditing standards of the South Asian
Federation of Accountants (SAFA) opined that the countries should urge upon the national
government the need for the creation of machinery (a separate standard-setting agency) that will
be authorised to develop and promulgate accounting standards. Hye (1992) suggests that even
7
though the Institute of Chartered Accountants of Bangladesh (ICAB) through its Technical and
Research Committee is adopting International Accounting Standards (IASs), the implementation
thereof could not be ensured for want of legal backing. He maintains that in spite of the
recommendation of the ICAB, the picture depicted by published accounts is not satisfactory at
all.

Hossain (2000) while discussing harmonisation of accounting standards world-wide mentioned
that the accounting standards in Bangladesh are voluntary in nature. He argued that without
statutory backing of accounting standards making compliance mandatory, the harmonisation of
accounting standards in Bangladesh will be a dream never to be achieved. Hossain argues that
unless and until compliance with IASs in Bangladesh is mandatory for the preparers and auditors
of financial statements, it is not possible to have a harmonized financial reporting system within
Bangladesh. Accordingly, Hossain argued that the provisions of the Pakistani Companies
Ordinance Act 1984 requiring mandatory compliance with IASs should be incorporated into the
Bangladesh Companies Act 1994.

Rahman and Jannah (2003) found compliance gaps that demonstrate serious weaknesses in
corporate financial reporting. Compliance gaps were also revealed by a review of published
financial statements, conducted by World Bank consultants. The review involved an examination
of 46 sets of financial statements of major listed companies, including 8 banks and 3 insurance
companies; and interviews with experienced corporate accountants, practicing auditors,
academics, professional bodies, and regulators. The financial statements of these companies
make claims to have been prepared in accordance with both BASs and IASs. Since the SEC of
Bangladesh mandated the use of IAS by listed companies, the checklist used for determining
compliance included selected IAS requirements as benchmarks. In general, the added, actual
accounting and disclosure practices in Bangladesh fall far short of the applicable requirements.
There study revealed that it is very common for the listed sample companies not to comply with
the IAS requirements on consolidation; many companies financial statements did not include
this; most companies that apparently had business segments and geographical segments did not
comply with the segment reporting requirements; export receivables were disclosed at the
exchange rate prevailing on transaction date instead of balance sheet date as required by IAS;
detailed disclosures in accordance with IAS requirements were not found in any sets of financial
statements; in cases where fixed assets were revalued, detailed disclosures required under the
IAS were not available; many companies disclosed the existence of employee pension benefits
but failed to disclose information required by the relevant IAS; many companies did not disclose
the amount of dividend per share and earnings per share; and non-compliance were also found
about prepaid expenses, taxation. Contingencies, leases, interim reports.

Benjamin et al. (1990) examined the quality of disclosure in the corporate annual reports of 76
listed companies in Hong Kong for the years 1984, 1985 and 1986. They examined significant
areas of non-compliance of financial statements with the Companies Ordinance and Securities
Ordinance of Hong Kong, and departures from the Statements of Standard Accounting Practices
(SSAPs) issued by the Hong Kong Society of Accountants (HKSA). They also reviewed whether
non-compliance was closely related to the size of the listed companies, the nature of the listed
companies and the size of the auditing firm. Their analysis of the annual reports revealed major
departures from the disclosure requirements of the Companies Ordinance, Security Ordinance and
the HKSAs requirements. They found that non-compliance with disclosure requirements is closely
8
related to the company size
12
. However, they did not find any significant association between
departure from disclosure requirements and size of auditing firms. The main reasons behind non-
compliance with disclosure requirements were found to be difficulties in interpreting disclosure
requirements and auditing guidelines; insufficient awareness of general accounting concepts; lack of
proficiency of staff; management intention to "improve" the appearance of the companies' financial
position and results of operation; and lack of resources to keep abreast of changes in the disclosure
requirements.

For the reduction of non-compliance of disclosure requirements, they suggested that the directors'
report should be reviewed by the auditors for reasonableness and consistency with other financial
information and certain punitive measures should be instituted against company directors for wilful
departures from a checklist incorporating all the disclosure requirements which should be updated
periodically and whenever new disclosure requirements were promulgated.

Hauworth (1986) stated the problems in the development of world wide accounting standards.
There are the diversity of views regarding the purpose of financial statements, differences in the
extent of development accounting professions, impact of tax laws on financial reporting, varies
nature of the requirements of companies laws, difference in basic economic facts of the
countries, lack of professional announcements and efforts for world-wide accounting standards
(Hauworth, 1986). He suggested that world-wide accounting standards can be developed only
when there is agreement on the objectives of financial statements and there is knowledge of the
basic economic facts of the countries. Briston and Liang (1990) highlighted that Singapore
Society of Accountants (SSA) has adopted International Accounting Standards. Although
Singapore followed the trend found in many British colonial territories, still companies
legislation based mainly on the U.K. Companies act but since independence other sources of
influence are found. Samuels and Oliga (1982) while evaluating accounting standards in
developing countries argues that where economic, socio-political, cultural and contextual
differences between countries, nations and societies exists, there is problem of appropriate
accounting standards. They argued that there are both conceptual and practical problems that
expose the futility of harmonisation of accounting standards. The IASs are meant to apply to
companies within a country whether or not they are multinationals. Therefore, they suggested
that priority must be given to the needs of developing countries in fixing up the feasible
accounting standards.

Taylor and Jones (1999) examined where and how companies that purport to be using
International Accounting Standards (IAS) are referring to IAS in their financial statements. They
found that all firms referred to IAS in the footnotes but referred to IAS in the audit report just
under 50% of the time. Their study revealed that the largest group of companies uses a
combination of home-country and IAS standards and a significant number of firms report the use
of IAS standards with exceptions. Referencing IAS with home country standards or exceptions
reduces comparability and transparency of financial statements. Further, the International
Accounting Standards Committee (IASC) is referenced as the source of IAS in about half of the
cases. El-Gazzar et al. (1999) examined the underlying motivations and characteristics of firms
complying with IAS. This study is of special interest to the International Accounting Standards
Committee (IASC) for assessing the merits of mandating IAS by multinational firms and helps

1.Benjamin et al. (1990) suggested that larger firms will tend to provide fuller financial disclosure and therefore
cause less non-compliance.
9
accounting researchers in understanding the disclosure behaviour of multinationals. Their results
indicated that the magnitude of a firms foreign operations, its financing policy, membership of
certain geographical and trade blocks in the European Union (EU), and multiple listing on
foreign stock exchanges are significantly associated with multinationals compliance with IAS.

Compliance with accounting or financial reporting standards promulgated by International
Accounting Standards Board (previously IASC) has become a crucial issue of the day after a
series of corporate debacles over a decade, and regulators, professional bodies and researchers
around the globe have expressed their concerns about the need for improved accounting and
audit pronouncements and compliance for providing better information than previously required
for the preparation and presentation of corporate financial statements (Hossain, Cooper, and
Islam, 2006). It has already argued that he IASB was established to develop a single set of
enforceable accounting standards that can be applied internationally (Street and Gray 2001). Due
to the efforts provided by the IASB, IOSCO, IFAC and other international bodies, a number of
developing (and developed) countries have adopted IASs/IFRSs as issued by the International
Accounting Standards Board (IASB) either wholly or with minor, modifications (Ali, 2005).
Saudagaran and Diga (1997) and Frost and Ramin (1997) found significant variation in
accounting disclosure practices within and across countries although accounting disclosures are
required by most countries and IAS 1, Presentation of Financial Statements (Ali, 2005).
Therefore, the compliance provides an avenue to researchers to empirically examine the level of
compliance in countries whose national standards are based on IASB standards. The researchers
in International accounting emphasize the importance of compliance with IASs/IFRSs as a
significant element in the quality of financial reporting practices.

Hassan Mahmud (1993) tried to determine the factors that have shaped the corporate financial
reporting practices in Bahrain. He argued that prior researchers have offered two explanations,
environmental factors and cultural importation, for the emergence of financial reporting
practices in developing countries. The researcher observed that Bahrain provided an excellent
environment in which to examine the two explanations since its public and closed corporations
have similar economic characteristics. Only public corporations are legally required to publish
financial reports.
The environmental explanation suggests that a nation's financial reporting practices will be
shaped by its socioeconomic structure while the cultural importation explanation states that the
desire for international legitimacy creates incentives for developing nations to adopt Western
financial reporting practices (Hassan Mahmood; 1993). Hassan Mahmood (1993) posited that
public corporations would try to gain legitimacy for their published reports by adopting Western
standards, while closed corporations would not have a similar incentive. The analysis of (Hassan
Mahmood; 1993 supported prior researchers' findings that colonialism, the need for international
legitimacy, and international audit firms were important factors in gaining acceptance for
Western accounting practices. The adoption of Western financial reporting practices may be
dysfunctional to a developing nation like Bahrain if these practices do not provide relevant
information about corporate performance. Therefore, Bahrain, as well as other developing
countries, needs to proceed cautiously before adopting Western corporate reporting practices.
10
There are a few studies that examined the association between firm characteristics and the level
of compliance with IFRSs and some studies observed that firm characteristics were positively
associated with compliance, whereas others showed inconclusive results, demanding more
research (Ali, 2005). Al-Basteki (1995) examined the extent to which Bahraini publicly traded
corporations adopt international accounting standards, and he found that the majority of the
Bahraini publicly traded corporations reported adoption of IASs.
Leimoni (1996) has found that there is an absence of well-defined reporting practices and
procedures whereby such requirements, whether statutory or legal are strictly followed and
enforced. Leimoni (1996) has argued that an attempt at improving the quality of accounting in
Tonga, as a source of information function, would require a research study to accurately
determine the country's needs, and the role of accounting in the country's economic development
process. He commented that this is very important because there is a lack of awareness in all
sectors of the economy of the role and the potential contribution that accounting can offer in the
economic development effort. The purpose of the study of Leimoni (1996) is to explore the role
of accounting and accountants in the economic development process of Tonga. His study
revealed that accounting development in Tonga is a direct product of its environment with
cultural influences as the major contribution to the prolonged non-existence of any accounting
standards. The study of Leimoni (1996) revealed that accounting has a positive role to play in
the economic development of Tonga which is evident in the need for reliable and timely data for
the preparation of financial statements, allocation of resources, and improvement in the use of
existing resources. Leimoni (1996) argued that the economic development of Tonga is dependent
upon the ability of the government and accountants to develop accepted national accounting
standards that are fully recognised and enforce by law.
Owusu-Ansah (1998) measured the degree of influence of eight corporate attributes on the extent
of mandatory disclosure and reporting of forty nine listed companies in Zimbabwe. Using a
disclosure index of 214 mandated information items, the extent of mandatory disclosure by each
sample company was quantified and was used with other data specific to each sample company
to test the relational hypothesis. The analysis of his multivariate regression models showed that
company size, ownership structure, company age, multinational corporations affiliation, and
profitability have statistically significant positive effect on mandatory disclosure and reporting
practices of the sample companies were reported. However, the quality of external audit,
industry-type and liquidity were found not to be significant statistically.
Kamran and Courtis (1999) integrated prior disclosure studies and identified the underlying
factors that moderated the apparent variation in results in the previous study based on Disclosure
Index Approach. They have used a meta-analysis of 29 studies that confirmed significant and
positive relationships between disclosure levels and corporate size, listing status and leverage.
However, they did not fond any significant association found between corporate profitability or
size of audit firm, with aggregate disclosure levels.


Tower, Hancock and Taplin (1999) examined the extent of compliance with International
Accounting Standards (IAS) in six countries in the Asia-Pacific region. By providing evidence as
to the level of compliance with IAS in financial statements, this study also indicates the extent of
de-facto harmony. The paper also examines various determinants of compliance with IAS and
11
finds that country of location remains the clear driving force. Street, Gray and Bryant (1999)
reported on an empirical study of the accounting policies and disclosures of a sample of major
companies from around the world claiming to comply with IASs in 1996. Their findings revealed
significant non-compliance with IASs including: use of LCM for inventories; violation of the all-
inclusive requirement for reporting profit/loss and of the strict definition of extraordinary items;
failure to capitalize certain development costs; failure to provide all required disclosures for
property, plant, and equipment, particularly those associated with revaluations; failure to comply
with pension disclosure requirements; for companies operating in hyper-inflationary economies,
failure to restate foreign entities in accordance with IAS 29; and charging goodwill to reserves or
amortizing goodwill over a period in excess of the 20 year limit. They commented that the non-
compliance, as evidenced and as IAS 1 Revised becomes effective for 1999 financial statements.

Donna and Bryant (2000) investigated the extent to which the disclosure requirements of the
IASC are complied with or exceeded for companies claiming to use International Accounting
Standards (IASs). In addition, the research seeks to identify significant differences between those
companies with US listings, US filings, and those with no US listings or filings with regard to (1)
compliance with IASC-required disclosures, and (2) level of disclosure (including both
mandatory and voluntary items). Their findings revealed that the overall level of disclosure is
greater for companies with US listings. Their results showed greater disclosure is associated with
an accounting policies footnote that specifically states that the financial statements are prepared
in accordance with IASs and an audit opinion that states that International Standards of Auditing
(ISAs) were followed when conducting the audit. Further, the findings indicate that the extent of
compliance with IASs is greater for companies with US listing or filings. The statistical analyses
provided a higher level of compliance is associated with an audit opinion that states the financial
statements are in accordance with IASs and ISAs were followed when conducting the audit. The
findings of this study indicated that enforcement of IASs may be less of an issue for companies
with listings and filings in the US. However, for companies without US listings and filings,
compliance is indeed of great concern.

Saudagaran and Diga (2000) examined the principal features of the institutional environment for
financial reporting in an economic bloc of emerging economies - the Association of Southeast
Asian Nations (ASEAN). The principal features are highlighted of the institutional structure of
financial reporting regulation in these countries to find out how these features impact on and are
affected by several issues is discusses, particularly the limits of private sector participation in
regulatory affairs, and the need to improve the enforcement in these countries (Saudagaran
and Diga; 2000). After reviewing the international dimensions of financial reporting regulation
in ASEAN, they have considered whether ASEAN's institutional arrangements provide an
auspicious environment in which to pursue accounting harmonization.

Some studies have shown a higher degree of compliance. For example, Owusu Ansah (2000)
empirically examined the degree of compliance with mandatory disclosure requirements in
Zimbabwe. His results indicated a high level of compliance in respect of IASs 2, 4, 7, 8, and 19,
and a full compliance was also observed with respect to IAS 18. In contrast, there were several
instances of non-compliance in IASs disclosure, including IASs 10-12, 14, 16, 17, 21-23, and 26-
28. His results suggested that the mechanism for monitoring and enforcing corporate mandatory
disclosure requirements in Zimbabwe is not stringent (Owusu Ansah, 2000 cited in Ali, 2005).
12
Another study similar to Owusu Ansah (2000) was made by Chamisa (2000) in the context of
Zimbabwe. He examined the extent of compliance with IASC/IFRSs standards by a sample of
Zimbabwe listed companies. The study tried to assess the compliance level before and after the
publication of the first 22 standards issued by the IASC, except for IAS 1 issued in 1975. The
study showed that the listed companies in Zimbabwe voluntarily and significantly complied with
certain provisions of IASs that has provided indirect evidence that IASs are relevant in
Zimbabwe.
Hollis Ashbaugh and Morton Pincus (2001) investigated (1) whether the variation in accounting
standards across national boundaries relative to International Accounting Standards (IAS) has an
impact on the ability of financial analysts to forecast non-U.S. firms earnings accurately, and (2)
whether analyst forecast accuracy changes after firms adopt IAS. IAS are a set of financial
reporting policies that typically require increased disclosure and restrict managements choices
of measurement methods relative to the accounting standards of the sample firms countries of
domicile. Hollis Ashbaugh and Morton Pincus (2001) developed indexes of differences in
countries accounting disclosure and measurement policies relative to IAS, and document that
greater differences in accounting standards relative to IAS are significantly and positively
associated with the absolute value of analyst earnings forecast errors. Further, their study showed
that analyst forecast accuracy improves after firms adopt IAS. They found that after controlling
for changes in the market value of equity, changes in analyst following, and changes in the
number of news reports, the convergence in firms accounting policies brought about by
adopting IAS is positively associated with the reduction in analyst forecast errors.

Chong, Tower and Taplin (2001) examined accounting harmonisation and determinants
explaining accounting measurement policy choice decisions by Asia-Pacific listed manufacturing
companies. Using Thomas (1991) theoretical framework, four contingent variables (country of
reporting, company size, profitability and debt leverage) were examined as possible determinants
of firms accounting choices concerning non-current asset valuation measurement base, goodwill
and depreciation. 130 listed manufacturing companies annual reports were examined from
Australia, Hong Kong, Indonesia, Malaysia and Singapore. Their study involves two phases. The
first phase evaluates accounting harmonisation measurement indices in comparison with the
extant literature. An important innovation is the operationalisation of Archer et al. (1995)
between-country and within-country C indices. Their results indicated variations in the level of
harmony across the five countries for all three accounting measurement practices. The second
phase of their study employed logistic regression to examine possible determinants of accounting
policy choice decisions. Such a combined research approach should lead to a better
understanding of de facto accounting harmonisation and practices. Additionally, their results
indicated that country of reporting, company size, profitability and debt leverage are important
variables influencing listed manufacturing companies accounting policy choice for accounting
measurement policies.

Hooks, Coy and Davey (2002) developed a disclosure index that was and applied to the annual
reports of the 33 electricity retail and distribution companies which comprise the entire industry
in New Zealand. The index was developed using the ideas and opinions of 15 experts
representing broad stakeholder groups. They compared the resulting scores for the extent and
quality of each index item with the level of importance of those items as stated by the panel, and
found that many items were not adequately disclosed, resulting in an information gap between
13
stakeholders' expectations and the disclosures provided by the electricity companies. Singleton
and Globerman (2002) have proposed that the use of a disclosure index averaged over several
years would reduce the likelihood of measurement error, it is less clear that measurement errors
are contributing to any bias in the results.

Joshi and Ramadhan (2002) examined the level of adoption of IASs in Bahrain by closely held
companies and they found that 86 percent (31) of the 36 companies responding to the
questionnaire applied IASs in the preparation of their financial statements, while only five firms
followed the US or UK GAAP. Despite the fact that the degree of adoption varied considerably
from one standard to another, their evidence showed that all the surveyed firms adopted IAS 4,
Depreciation Accounting and IAS 13, Presentation of Current Assets and Current Liabilities, and
about 90 percent of the respondents fully agreed that IASs help to achieve the objectives and
improve the effectiveness of financial reporting.
Hussain, Islam and Maskooki (2002) has made an attempt to investigate the accounting
standards followed by the financial institutions in five selected GCC countries (Bahrain, Saudi
Arabia, Oman, Qatar and the United Arab Emirates) with some policy prescriptions for
harmonisation of the accounting regulations. Their study provides a comparative analysis of
various accounting policies and practices, including loans and provisions, assets, investments,
taxation, liabilities, foreign exchange, revenue recognition, and consolidation of each GCC
countries banking and other financial institutions.
Abd-Elsalam and Weetman (2003) assessed the effect of relative familiarity and language
accessibility on the International Accounting Standards (IASs) disclosures when IASs are first
introduced in an emerging capital market (Egypt) based on the annual reports of listed non-
financial companies. They used a disclosure index measurement to a sample of listed company
annual reports and evaluated relative compliance with IASs in relation to corporate
characteristics. The result of Abd-Elsalam and Weetman (2003) study showed that for relatively
less familiar requirements of IASs/IFRSs, the extent of compliance is related to the type of audit
firm used and to the presence of a specific statement of compliance with IASs. However, they
observed a lower degree of compliance with less familiar IASs disclosure consistently across a
range of company characteristics.
The study of Abd-Elsalam and Weetman ( 2003) assesses the effect of relative familiarity and
language accessibility on the International Accounting Standards (IASs) disclosures in an
emerging capital market. Their study focuses on the annual reports of listed non-financial
companies in Egypt when IASs were first introduced. A disclosure index measurement to a
sample of listed company annual reports was used by the researchers for evaluating relative
compliance with IASs in relation to corporate characteristics. The results of the study shows that
for relatively less familiar requirements of IASs, the extent of compliance is related to the type of
audit firm used and to the presence of a specific statement of compliance with IASs while a
lower degree of compliance with less familiar IASs disclosure is observed consistently across a
range of company characteristics ( Abd-Elsalam and Weetman, 2003).
Al-Razeen and Karbhari (2004) investigated the interaction between the compulsory and
voluntary disclosures in the annual reports of Saudi Arabian companies. The sample comprises
both listed and non-listed companies. They have constructed three separate disclosure indices
14
relating to mandatory disclosure, voluntary disclosure that closely relates to mandatory
disclosure, and voluntary disclosure that is not closely related to mandatory disclosure. Their
results revealed that there is a significant, positive correlation between mandatory disclosure and
voluntary disclosure related to the mandatory disclosure index. Al-Razeen and Karbhari (2004)
found that the relationship of correlation between voluntary disclosure and the other two indices
is found to be weak and not significant. They opined that these weak relationships suggested an
absence of effective co-ordination between the parties involved in preparing the annual report.
Further the study of Al-Razeen and Karbhari (2004) revealed that there is no clear pattern of
relationships to exist between mandatory disclosure and the types of disclosure in the different
industrial sectors in Saudi Arabia.
Yan (2004) examines the value relevance of accounting information in seven Asian countries:
Hong Kong, Malaysia, Singapore, Thailand, Indonesia, the Philippines and Korea, as well as in
country groups and subgroups based on legal origins: the common-law group and the civil-law
group (with subgroups of French origin and German origin). The results of Yan (2004) showed
that the value relevance of accounting information tends to be greater for countries with higher
overall ranking. His analyses indicate that value relevance is affected by country-specific factors
such as accounting measurement rules, financial reporting systems and institutional factors.
Finally, the results are useful for international and domestic accounting standard setters
addressing standards harmonization.
Ali (2005) synthesizes the empirical studies on harmonization of accounting and reporting
practices and compliance with international financial reporting standards (IFRSs) which have
been extensively discussed and debated in the international accounting literature based on
mainly empirical studies. His overall findings of the paper suggest that although some progress
has been achieved, there is still a lack of measurement and formal harmonization among
countries throughout the world including emerging economy.
Ashraf and Ghani (2005) in their study examine the origins, growth, and the development of
accounting practices and disclosures in Pakistan and the factors that influenced them. The
researchers have traced the early days of accounting in the Indian subcontinent and discuss the
British colonial influence. In addition, they examined the development of accounting in Pakistan
through three eras: Independence through 1971, Post 1971-1984, and 1984 to present. Their
study described how the colonial past and later the international financial institutions such as the
Asian Development Bank and the International Monetary Fund played key roles in shaping
accounting and reporting practices of the country. Pakistan's adoption of International Financial
Reporting Standards as national standards has not led to improvement in the quality of financial
reporting. Ashraf and Ghani (2005) argued that Pakistan, even though classified as a common
law country in literature, exhibits most of the properties of code law countries. They concluded
that lack of investor protection (e.g., minority rights protection, insider-trading protection),
judicial inefficiencies, and weak enforcement mechanisms are more critical to explaining the
state of financial reporting in Pakistan than are cultural factors. This insight has policy
implications for developing countries that are making efforts to improve the quality of the
financial reporting of their business entities.

Islam (2006) empirically investigated the compliance with disclosure requirements by some
South Asian Association for Regional Cooperation (SAARC) countries and to explore the
15
possibility of standardization of accounting practice in the SAARC region. The reports of the
sample manufacturing sector of each of four SAARC countries were examined against 124
information-item requirements of the standards, company acts and listing rules of the stock
exchange, which are commonly observed by the sample companies of the countries under study.
The compliance with the obligatory information items was measured using a relative index for
those four countries. The result shows that Sri Lanka complied, on average, with the highest
requirements of the standards, acts and rules, followed by Bangladesh, Pakistan and India. The
study of Islam has revealed that these South Asian countries are gradually making contributions
to world trade, and because these countries are dependent on aid and investments from beyond
their borders, the accounting development processes and accounting systems need to be such that
they satisfy the investors and donors and, at the same time, create an environment for useful
reporting for user groups within the countries (Islam, 2006).

Alsaeed (2006) assessed the level of disclosure in the annual reports of non-financial Saudi firms
and investigated empirically the hypothesized impact of several firm characteristics on the extent
of voluntary disclosure. He developed a disclosure checklist consisting of 20 voluntary items was
developed to assess the level of disclosure in the 2003 annual reports of 40 firms, forming
approximately 56 percent of the total firms incorporated in Saudi Arabia. Alsaeed (2006) also
examined the association between the level of disclosure and some firm characteristics using a
multiple linear regression analysis. His results showed that the mean of the disclosure index was
lower than average, and that firm size was significantly positively associated with the level of
disclosure. However, the remaining variables were found not to be significant at the 5% level in
explaining the variation of voluntary disclosure.


Chavent et al (2006) opined that prior accounting research have examined the extent of
disclosure and its determinants. Chavent et al (2006) argued that these studies have one major
methodological drawback: the disclosure analysis is often restricted to determination of the
disclosure index, that is, the sum of disclosed items, weighted or unweighted. They commented
that the disclosure profile (which reflects the structure of published information) is generally not
part of the research design. Chavent et al (2006) have introduced a divisive (descendant)
clustering method, which splits the sample into homogeneous sub-groups corresponding to
disclosure patterns (or profiles), for clearer determination of the financial characteristics of each
group. This methodology has illustrated by a study of disclosure on provisions by large French
firms. Their results showed that the disclosure pattern is related to provision intensity, size,
leverage and market expectation, but not to profit, return and industry. They proposed that their
new research method is a valuable complementary tool for expanding on disclosure and
determinants studies, moving from disclosure levels to disclosure patterns.


Al-Shammari, Brown and Tarca (2008) investigated the extent of compliance with international
accounting standards (IASs) by companies in the Gulf Co-Operation Council (GCC) member
states (Bahrain, Oman, Kuwait, Qatar, Saudi Arabia, and the United Arab Emirates). Based on a
sample of 137 companies they found that compliance increased over time, from 68% in 1996 to
82% in 2002. Despite strong economic and cultural ties between the GCC states, there was
significant relationship between-country variation in compliance and among companies based on
size, leverage, internationality, and industry. They commented that noncompliance of IASs
16
reflected some ineffectiveness in the functions of external auditors and enforcement bodies,
which may be of interest to countries that have adopted IASs recently.
Hassan (2009) examined the relationship between the UAE corporations-specific characteristics
(size, level of risk, industry type and reserves) and level of corporate risk disclosure (CRD) in an
emerging economy, UAE. By following the positive accounting and the institutional theories to
generate testable hypotheses and explain the empirical findings, he constructed a risk disclosure
index based on accounting standards, prior literature, and the UAE regulatory framework has
been crafted and calculated for each corporation in the sample. The relationship between the
level of CRD and corporations' characteristics is examined using multiple regression analysis.
The study of Hassan (1999) showed that corporate size is not significantly associated with the
level of CRD. However, the corporate level of risk and corporate industry type are significant in
explaining the variation of CRD. Finally, in contrast with reserves-CRD hypothesized
relationship, corporate reserve is insignificant and negatively associated with level of CRD; on
the other hand, the risk disclosure index items reflect their existence in annual reports rather than
their level of importance (Hassan, 1999). The empirical findings of Hassans study suggested
that corporate reserve, as an explanatory variable, needs further investigation as explained in his
paper. He acknowledged that the crafting process of his CRD index depends on the UAE
regulatory framework. However Hassn (1999) opined that his study seems to add to the
extremely limited literature relating to CRD in Arab countries in general and the UAE in
particular.
rk (2009) examined Turkish companies' level of compliance with the disclosure
requirements of the EUFD over the years (1986, 1987, 1991, 1992 and 1995), and assessed
whether companies' level of compliance had been influenced by their corporate characteristics,
such as company size, listing status and industry type. He measured Turkish companies' level of
compliance with the disclosure requirements of the EUFD by an index (i.e. EUFD Disclosure
Compliance Index--EUFDCDI). The index was developed by; constructing disclosure scoring
sheet; obtaining annual reports of 61 sampled Turkish companies over the years; completing
scoring sheet for each companies' annual report; and creating disclosure index. Using the
disclosure index he assessed the companies' compliance with the EU disclosure requirements and
both parametric and non-parametric test, were conducted to determine if there were significant
changes in the extent of disclosure in compliance with the EUFD over the years. In addition,
using the companies EUFDCDI score as dependent variable and corporate characteristics as
independent variables, the Ordinary Least Square regression was run for each year to find out if
the companies' level of compliance with the EU disclosure requirements were influenced by their
corporate characteristics. The results of rks (2009) study revealed that Turkish companies'
compliance with the required disclosure by the EUFD varied within the range of 30-85%, but
their compliance increased significantly from one year to another throughout the selected period.
Further rk (2009) found that listing status is one of the important corporate characteristics of
the Turkish companies affecting their compliance with the EU disclosure requirements.



17

4. Research Methods
4.1 Selection of Accounting Standards

There have been continuous changes in the IASB Accounting Standards in recent years. For the
sake of our study, we considered only two standards that require maximum disclosure of
information. The standards that were chosen are:
IAS-1 Presentation of Financial Statements (effective on or after 1 July 1998)
IAS-16 Property, Plants and Equipment (effective on or after 1 July 1999)

The above standards have been adopted in Bangladesh and cover a wide range of disclosure. For
example, paragraph 104 of IAS 1 states that this standard supersedes the previous IAS 1
(Disclosure of Accounting Policies), IAS 5 (Information to be disclosed in Financial Standards)
and IAS 13 (Presentation of Current Assets and Current Liabilities).

4.2 Sample Companies

A survey of annual reports published by 106 companies listed on Dhaka Stock Exchange (DSE)
was carried out by the present researchers to examine the extent to which those companies have
complied with the mandatory accounting standards. Companies that were listed on Dhaka Stock
Exchange but non financial in nature were selected for the study. The sample represents about
63% of the population of the non-financial companies listed on the DSE. Ten companies were
multinationals. Annual reports were collected through mail and personal visits. The sample
covers the annual reports of companies in Bangladesh for the year 2001-2002. The reason for
selecting this period is that there are dramatic changes in IASs after this period. Furthermore,
timeliness was a consideration given that the annual reports of many companies in Bangladesh
are not usually available immediately after the close of accounting period. Moreover, adaptation
of IASs and promulgation of new BASs will take some considerable time. Therefore, one might
have to wait years to see the impact of the latest IASs / IFRs on company financial reporting in
Bangladesh.

4.3 Items included in the Disclosure Index

There is a problem as to the measurement of disclosure of accounting standards. It may be
strongly argued that the most important medium of external financial disclosure is the corporate
annual report (Hossain, 1999). The major task of the present research is to develop a suitable
disclosure index comprising items of information according to accounting standards that are
expected to be disclosed in corporate annual report from the view-point of developing countries.
Marston and Shrieves (1991) are of the opinion that the usefulness of any disclosure index as a
measure of disclosure is dependent on the selection of items to be included in the index (Hossain,
1998). The selection of items included in the disclosure index is a major task in the construction
of any disclosure index (Marston and Shrieves, 1991). The items of information according to the
mandatory accounting standards included in the disclosure index will be prepared from the
sixteen mandatory accounting standards in Bangladesh. The disclosure index so arrived at will be
distributed to five experts in the area of financial reporting. Based on their suggestion the
18
disclosure index will be modified and take the final form. The set of index items will be applied
to the sample companies' annual reports for the year 2000-2001.

A disclosure index consisting of 53 items of information was constructed after a careful review
of the two selected accounting standards. The disclosure index so arrived at was distributed to
five experts in the area of financial reporting. Based on their suggestion the disclosure index was
modified to take its final form. The 53 items included in the disclosure index constructed for this
study included items which were used in the formulation of items of information as per
accounting standards. The list of the disclosure of accounting standards information can be
found in Appendix A. The items of information included in the disclosure index were regrouped
as:
1. Balance Sheet Items;
2. Income Statements Items; and
3. Accounting Policy Items disclosed on the face of financial statements or in notes or in
Financial History

4.4 Scoring in the Disclosure Index

There are various approaches available to develop a scoring scheme to determine the disclosure
level of corporate annual reports from the works of other researchers. There are researchers who
adopted a dichotomous procedure in which an item scores one if disclosed and zero if not disclosed.
The approach used by other researchers who went a weighted disclosure index to be employed. In
some cases the weights were predetermined by the researchers subjectively. In the unweighted
disclosure index disclosure of accounting standards of individual items has been treated as a
dichotomous variable. Here, the only consideration is whether or not a company discloses an item
of accounting standards information in its corporate annual report. If a company discloses an item
of accounting standards information in its annual report it will be awarded `1' and if not it will be
awarded `0'. The disclosure model for the unweighted accounting standards disclosure thus
measures the total disclosure (TD) score for a company as additive as follows:

TD=
di
i
n
=

1


Where,
d = 1 if the item d
i
is disclosed
0 if the item di is not disclosed
n = number of items

An unweighted index of accounting standards is the ratio of the value of the number of items a
company discloses divided by total value that it could disclose. Under an unweighted disclosure
index of accounting standards, all items of information in the index are considered equally
important to the average user. The unique advantage of using an unweighted index of
accounting standards is that it permits an analysis independent of the perception of a particular
user group (see Hossain, 1998b). If different users of information as per accounting standards are
asked to weigh the importance of different items of information as per accounting standards in
the disclosure index, they may attach different weights to the same items of information as per
19
accounting standards. In the present study, unweighted index has been considered in examining
the relationship between the extent of disclosure and various corporate attributes.


4.5 Identified Variables and Relevant Hypotheses

Since 1971, Accounting researchers have investigated associations between corporate
characteristics and disclosures in corporate annual reports. Christopher and Islam (1999) tried to
develop a framework for explaining and predicting the level of disclosure of the adopted IASs in
the context of developing countries with reference to a number of variables. Very little empirical
work has so far appeared in the literature on the factors determining their acceptance by the
developing countries and no attempts have so far been made to articulate a framework for the
prediction of the acceptance of the IASs in the developing countries (Christopher and Islam,
1999). The dependent variables to be used in this study are Disclosure Index for Accounting
Standards (DIAS). One disclosure index has been calculated for each of the companies studied.
The explanatory variables used in the study have taken into the account previous similar studies
undertaken by other researchers. The corporate attributes considered are size (proxied by sales
and assets), profitability (proxied by rate of return on assets and net profit margin),
multinationality (subsidiaries of the multinational companies), industry type, and international
link of the audit firm. Findings have consistently shown corporate size and listing status to be
significantly associated with disclosure levels, while mixed results have been reported for
leverage, profitability, and audit firm size. The following paragraphs provide a rationale for
taking into consideration the corporate variables chosen as explanatory variables:

1. Size of the Company

There are few studies which have been found that a significant association between the size of
the company and the extent of disclosure in the corporate annual report. Larger companies may
be hypothesised to disclose information items as per accounting standards in their company
annual reports than smaller companies for a variety of reasons. Firstly, the cost of disseminating
and accumulating detailed information may be relatively low for the larger corporation than the
smaller corporation, and large companies have the resources and expertise to produce more
information in their company annual reports and hence little extra cost may be incurred to
increase disclosure. In addition, larger corporations may collect more information to be used for
their internal management systems (Hossain, 1999). Secondly, smaller firms may feel that their
information disclosure activities could endanger their competitive position with respect to other
larger firms in their industry. As a result, smaller companies may tend to disclose less
information than large companies (Hossain, 1999). Thirdly, large companies receive far greater
press coverage and demands for more information are almost inevitable results. Since companies
like to have as favourable a share price as possible greater disclosure may be felt to give more
confidence to investors (Firth, 1979). Finally, Firth (1979) argued that large firms tend to be in
the `public eye` and attract more interest from government bodies, and thus may disclose more
information to enhance their reputation and public image on one hand and to allay public
criticism and government intervention in their affairs on the other hand. This is analogous to
arguments concerning political visibility put forward by Watts and Zimmerman (1986) although
the latter authors are concerned not with disclosure but the choice of accounting policies. There
20
are several measures of size available. In this study, sales turnover and total assets will be used
as the measures of company size. The following specific hypotheses will be tested regarding size
of the firm:

H
1(a)
: firms with greater total assets disclose information as per accounting standards to a
greater extent than do those firms with fewer total assets.

H
1(b)
:

firms with greater sales turnover disclose information as per accounting standards to a
greater extent than do those firms with lower sales turnover.

2. Debt-equity Ratio

The debt-equity ratio has been studied empirically by several researchers to assess whether it
bears any relationship to disclosure level. Researchers such as Chow and Wong-Boren (1987),
Ahmed and Nicholls (1994), Hossain et al (1994), Wallace, Mora and Naser, (1994), Wallace
and Naser (1995) and Inchausti (1997) found no significant association between the debt-equity
ratio and the extent of disclosure. Belkaoui and Kahl (1978) observed a significant negative
relationship between the extent of disclosure and the leverage ratio.

The nature of the relationship between the level of disclosure and gearing is ambiguous.
Companies having more debt in their financial structure can be argued to disclose more as well
as less information in their annual reports. Relatively highly geared companies may disclose
more information to suit the needs of lenders and thus bear increased monitoring costs in the
form of more public disclosure. In addition, such companies may disclose more information to
reassure equity holders in order that they might reduce risk premiums in required rates of return
on equity. On the other hand, there is a possibility that the companies with higher debt-equity
ratios may want to disguise the level of risk and may disclose less information in their corporate
annual reports. In Bangladesh, Development Financial Institutions (DFIs) typically ask
companies who wish to borrow to fulfil a number of requirements for information provision and
the submission of annual reports are important in this respect. Companies with relatively large
borrowings can expect to be monitored more closely by financial institutions and may be
required to furnish information more frequently than companies having smaller amounts of debts
(Ahmed and Nicholls, 1994). As a result, it is likely that companies with large borrowings will
provide more detailed information in their annual reports than companies with small borrowings.
Several measures of leverage have been used in previous studies, including debt to total assets,
total debt as well as the debt-equity ratio. The debt-equity ratio will be used as measure of
leverage in this study. The following specific hypothesis will be tested regarding the debt-equity
ratio:

H
2
: The level of firm leverage is related to the level of IAS compliance.

3. Profitability

Profitability was used by a number of researchers as an explanatory variable for differences in
disclosure level. Researchers have used a number of profitability and profit-related measures in
their studies, such as net profit to sales, earnings growth, dividend growth and dividend stability,
rate of return and earnings margin, and return on assets. Companies having higher profitability
21
may disclose more information in their corporate annual reports than the companies with lower
profitability (or losses) for a number of reasons. If the profitability of a company is high,
management may disclose more detailed information in the corporate annual report in order to
experience the comfort of communicating it as it is good news (Hossain, 1999). On the other
hand, if profitability is low management may disclose less information in order to cover up the
reasons for losses or lower profits. For profitable companies if the rate of return or return on
investment is more than the industry average, the management of a company has an incentive to
communicate more information which is favourable to it as the basis of explanations of good
news and is likely to disclose more information in their corporate annual reports as a result. In
the present study, net profits to sales and rate of return on assets have been used as the measures
of profitability. The following specific hypotheses will be tested regarding profitability:

H
3(a)
: firms with higher net profit to sales disclose information as per accounting standards to a
greater extent than do those firms with lower net profit to sales ratios.

H
3(b)
: firms with higher rates of return on assets disclose information as per accounting
standards to a greater extent than do those firms with lower rates of return on assets.

4. Status of a Subsidiary of a Multinational Company

The subsidiaries in developing countries of parent multinational companies from developed
countries are likely to disclose more information than their local counterparts. This proposition is
supported by Bazley, Brown and Izam (1985), Gay, Farle and Peerson (1993) and Rahman and
Scapens (1987). Several justifications may be offered for the inference this multinationality
variable. First, the parent companies of these multinationals subsidiaries usually operate their
businesses in developed countries where standards of reporting are higher than in developing
countries (Hossain, 1999). The subsidiaries in developing countries can be expected to have to
generate more information to comply with more stringent internal accounting standards of their
parent multinational (Ahmed and Nicholls, 1994) and at the same time have to fulfil the
disclosure requirements of the host countries. Avoiding two different sets of accounts (one for
host and one for the parent company) may also be a consideration (Christopher and Islam, 1999).
Parent company multinationals may require the preparation of their subsidiaries accounts on
international or developed country GAAP for purposes of consolidation or may require the use of
standardised accounting principles for internal performance measurement or control purposes
(Hossain, 1998). As a result, the subsidiaries of multinational companies may disclose additional
information as per accounting standards than local companies without incurring any additional
costs. Second, it has been argued that the political costs for these subsidiaries may be more in
developing countries than in developed countries as there are political pressure groups who
perceive the multinational companies as a source of economic exploitation and view them as
agents of Western imperialism and keep a close eye on the subsidiaries of these multinational
companies as a consequence (Ahmed and Nicholls, 1994). The following specific hypothesis will
be tested regarding the multinationality:

H
4
: firms with the mutinationality connections (subsidiaries of multinational companies) disclose
information as per accounting standards to a greater extent than do with those of their domestic
counterparts.

22




5. International Link of Audit Firm

Some studies have examined empirically the relation between the characteristics of the audit firm
(size of audit firm or international link of the auditing firm) and the extent of disclosure and
found positive association between the audit firm size and the level of disclosure. It may be
argued that audit firms are concerned with the minimum disclosure that is required by law and
other aspects of GAAP. However, it is more likely that the larger audit firms have a stronger
incentive to produce high quality audits in order to maintain their reputation than do smaller
audit firms (Hossain, 1998). If clients prepare financial reports in which disclosure is inadequate
or erroneous, larger audit firms may be more likely to report adversely on the position of the
company (Ahmed and Nicholls, 1994). It has been argued that the percentage of audit companies
with foreign affiliation may significantly influence adoption/non-adoption of an International
Accounting Standard by a developing country (Christopher and Islam, 1999). Although, the
primary responsibility for preparing the annual report rests with the company, the companys
auditors may exercise some influence or provide advice regarding the level of disclosure to give.
It has been argued that larger, better known audit firms may be able to exercise greater influence
and they may be associated with higher disclosure levels (Firth, 1979). As a result, larger audit
firms may have more influence over their clients to disclose more information than the minimum
which is adequate. The following specific hypothesis will be tested regarding the audit firm size
or international link of the audit firm:

H
5
: firms that engage larger international audit firms disclose information as per accounting
standard to a greater extent than do those firms that engage domestic audit firms.

6. Industry Type

Industry type has been used by a few researchers as an explanatory variable for differences in
disclosure level. When the activities in some industrys sector assume significant at a rapid pace,
the company accountants, auditors and the regulators all need guidance on the accounting side
(Christopher and Islam, 1999). It is possible that disclosure in corporate reports in Bangladesh
may not be identical throughout different industries. The existence of a dominant firm with a
high level of disclosure in a particular industry may produce a bandwagon effect on levels of
disclosure adopted by other firms in the same industry (Cooke, 1991). No other firm may wish to
be outscored by the leader firm and as a result, a particular industry may have similar disclosure
policies because of the follow the leader effect (Wallace, 1987; Belkaoui and Kahl, 1978). In
addition, the adoption of different industry-related accounting measurement, valuation and
disclosure techniques and policies may lead to differential disclosure in financial reports
published by enterprises within a country (Wallace, 1987). Manufacturing may disclose certain
items of information while others may not. For example, it is sometimes customary to expect
manufacturing industries to communicate more with the environment than is the case with other
business types (Wallace, 1987). The following specific hypotheses will be tested regarding
industry type:

23
H
6
: firms falling with in a manufacturing concern disclose additional information as per
accounting standard than do those firms falling with in other industry types.


4.6 Multiple Regression Models

Multiple linear regression techniques are used to test hypotheses.
DIAS= o + |
1
ROASSETS + |
2
NPMARGIN + |
3
MNCS + |
4
INDUTYPE + |
5
SALES + |
6

INLINK + |
7
ASSETS + c .................(1.1)

Where, DIAS = total score received each sample company under disclosure of accounting
standards index;
o = the constant, and
c = the error term.

Thus, it was expected that for the sample companies size (sales and assets), profitability (rate of
return on assets, and net profit margin), international link of the audit firm, industry type, and
status of a subsidiary of a multinational company should be positively associated with the extent
of disclosure of accounting standards. The description of the seven independent variables, their
labels and expected signs and relationships are present in Table 1.

(Insert Table 1 about here)

24
5. Findings of the Study

5.1 Disclosure Levels by the Sample Companies

The score received by all individual companies in the sample have been presented in the
Appendix B that ranked the companies in order to their overall disclosure levels as per adopted
sample accounting standards. Summary of descriptive statistics of values according to the
Disclosure Index is provided in Table 2.

(Insert Table 2 about here)

The data in the table offers some insights. The table contains data on the dispersion of the
disclosures (range as given by the differences between minimum and maximum scores and
standard deviation). The table shows that the sample companies on an average disclosed 69.05%
of the informational items as per accounting standards with a minimum and maximum level of
35.85% and 94.34% respectively. The standard deviation of the overall disclosures is 10.9764.

(Insert Table 3 about here)

Table 3 shows the distribution of disclosure performance as per sample accounting standards by
expressing the number of items disclosed as percentage of the total of 53 items comprising the
disclosure index. Column one of the tables distinguishes ranges of disclosure performances.
Table 3 shows the modal percentage of accounting standards disclosure to be 60%-70% of items
made by the sample companies. The study also depicts that 24.64% of the sample companies
disclosed accounting standards informational items in the range of 50%-60%, 33.01%
companies in between 60% and 70% and 24.53% of the sample companies disclosed in the range
of 70% and 80% of the information comprising disclosure index. This can be favourably
comparable with the results of Hossain and Taylor (1998). So, this evidence tends to show that
there was a notable increase in the level of corporate disclosure made by the companies in 1999
than in 1993 (mean disclosure level was 29.33%). However, as the study of Hossain and Taylor
(1998) reported their results based on the CARs for the year 1992-93 which were not prepared
according to the Companies Act 1994, it is very difficult to comment whether or not the
Companies Act 1994 is responsible for the increased level of disclosure made by the Bangladeshi
companies.


5.2 Distribution of the Index Items into Different Parts
of Annual Reports

In the present study, the disclosure index of 53 items of information showing overall disclosure
has been segregated into four major groupings or representation parts of company annual reports.
Appendix C shows the segregation of the overall items into these four parts. Table 4 shows the
standard distribution of the informational items comprising disclosure index in to different parts
of an annual report.
(Insert Table 4 about here)

25
5.2.1 Results of Multivariate Analyses

This section focussed on the discussion on multivariate analysis of correlation co-efficient and
results of two multiple regression models of the corporate disclosure as per accounting standards
and six corporate attributes are presented in the third section. Spearman Rank Correlation Co-
efficient, and Ordinary Least Square (OLS) regression were used to test the hypotheses of the
study.

5.2.2 Correlation Analysis

To examine the correlation between the dependent and independent variables, Pearson product
moment correlation coefficients (r) were computed. A correlation matrix of all the values of r for
the explanatory variables along with the dependent variables was constructed and is reported in
Table 5. The Pearson product-moment coefficients of the correlation between INLINK and
MNCS and between ROASSETS and NPMARGIN, SALES and NPMARGIN, and between
SALES MNCS variables are higher than the coefficient of the correlation between every two of
the other corporate attributes. Table 7 shows a noteworthy collinearity (p s 0.01) between certain
variables (i.e., between SALES and MNCS variables (.4292), between ROASSETS and
NPMARGIN (.6176) and between ASSETS and SALES variables (.5032). However, Kaplan
(1982) suggests that multicollinearity may be a problem when the correlation between
independent variables is 0.90 and above whereas Emory (1982) considered more than 0.80 to be
problematic. It is evident from the table that the magnitude of the correlation between variables
seems to indicate no severe multicollinearity problems. As SALES and ASSETS are the proxies
for size of a company and has serious multicollinearity problems, two regression models were run
in order to see whether or not the have significant relationship with the extent of disclosure as per
accounting standards.

(Insert Table 5 about here)

5.2.3 Results of Regression Analyses

It was hypothesised that for the sample companies, INLINK, SALES, ROASSTES, NPMARGIN,
MNCS, ASSETS and INDUSTRY variables would be positively associated with the extent of
disclosure as per adopted sample accounting standards. However, it was found that only the
relation between disclosure as per accounting standards and the NPMARGIN variable was
negatively and status of a subsidiary of a multinational company was positively significant at 5%
level (see Table 6 and 7).
(Insert Table 6 about here)

Table 8 indicates that the actual sign of two of the variables (i.e., INDUSTRY and NPMARGIN)
were not in the direction predicted. The relationship between disclosure as per accounting
standards and other four variables were found not to be significant. The R
2
under the model was
.2192, which indicates that the model is capable of explaining 21.92% of the variability in
disclosure of information as per accounting standards in the annual reports of sample Bangladeshi
companies under study. The adjusted R
2
indicate that 17.19 percent of the variation in the
dependent variable in the model used here is explained by variations in the independent variables.
26
The F-ratio indicates that the model significantly explains the variations in disclosure as per
accounting standards of annual reports in Bangladesh.

(Insert Table 7 about here)

The results of the regression models give rise to some questions. Firstly, larger companies were
expected to disclose more information comprising the disclosure index for accounting standards.
However, the regression models show that the association between the level of disclosure as per
accounting standards and size of the company (total assets and sales turnover) is not significant
at 5% level. This needs further investigation. Again it was expected that the profitable companies
will disclose more information based on sample accounting standards than those companies with
losses or lower profits. Both the regression models show the profitability where there is inverse
relationship between the extent of disclosure comprising informational items as per adopted
accounting standards and net profit margin of the sample companies. This means, the loss-
making companies or companies with lower profit are disclosing more information than
companies with larger profit.

(Insert Table 8 about here)


The negative value of t- value of the net profit margin (NPMARGIN) confirms this evidence
which is significant at a 5% level. It is interesting to note that of the ten companies, five are
shown to be loss-making concerns for the year under study when their profit and loss accounts
are examined. A closure investigation of the top ranking companies and lowest ranking
companies showed that all of the top ranking companies were profit making companies which
supports our hypothesis that profitable companies would disclose more information as per
accounting standards in their corporate annual reports and out of the ten lowest ranking
companies, five were found to be loss-making concerns for the year under study when their
profit and loss accounts were examined. However, this needs further investigation.

27


6. Conclusions, Limitations and Recommendations for Future
Research

This is an exploratory type of research. In this study the researcher proposed a model of the
determinants of the adoption of IASs by developing countries in general and in Bangladesh in
particular. The model consists of six testable hypotheses that may explain the reasons for the
adoption/non-adoption of an IAS in Bangladesh. The propositions developed by the researchers
have been empirically tested. Appropriate statistical analyses have been empirically performed to
examine the relationship between disclosure of accounting standards made by the sample
companies and several corporate attributes. There may be other factors that may be important for
the disclosure/non-disclosure of accounting standards by the Bangladeshi sample companies.
The Securities and Exchange Commission (SEC) should take proper action to make the adopted
accounting standards as mandatory by incorporating them in the legislation (i.e. the Companies
Act 1994 and the Securities and Exchange Rules 1987).

This study reports that the average disclosure level as per two sample accounting standards of the
sample companies is 69.05% with a minimum and maximum level of 35.85% and 94.34%
respectively which is very much encouraging. This can be favourably comparable with the
results of Hossain and Taylor (1998). This results study showed a notable increase in the level of
corporate disclosure made by the companies in 2002 (69.05%) whereas the study of Hossain and
Taylor (1998) showed mean disclosure level of the sample companies as 29.33% in 1993.
However, as the study of Hossain and Taylor (1998) reported their results based on the CARs for
the year 1992-93 which were not prepared according to the Companies Act 1994, one may argue
that the mandatory information disclosure as laid down in Companies Act 1994 is responsible for
the increased level of disclosure the Bangladeshi companies. As the Companies Act 1994
included many provisions which are mandatory as well as required by the adopted IASs.

The regression model showed that there is inverse relationship between the extent of disclosure
comprising informational items as per adopted accounting standards and profitability of the
sample companies. This means, the loss-making companies were disclosing more information
than companies with more profit. The negative t value of the Net Profit Margin (NPMARGIN) in
the regression analysis confirms this evidence which is significant at a 5% level. This requires
further investigation. Furthermore, another hypothesis of this study was that the subsidiaries of
the multinational companies (MNCS) would disclose additional information in their CARs than
their domestic counterparts. This study showed that four out of top ten ranking companies were
disclosing information as per accounting standards. In addition, the regression models developed
for this study show that MNCS variable is significant at a 5% level which implies that the
subsidiaries of the multinational companies would disclose more accounting standards'
information in their CARs as compared to their counterparts. However, this study also tends to
show that the size of the company (ASSETS) is significant at a 10% level which implies that
firms with higher assets disclosed more information as per accounting standards than the smaller
companies. All other three variables were proved not to be significant either at a 5% or 10%
level.


28
Empirical studies show that the developing countries have not adopted the IASs with enthusiasm
(Christopher and Islam, 1999). This study showed that the measures taken by the ICAB in
adopting accounting standards in Bangladesh have produced many remarkable results. The
attempt made by the ICAB in developing accounting standards in the light of the IASs is
encouraging and may be referred to as revolution for the development of corporate financial
reporting practice in Bangladesh. But the process of adopting and implementing standards are
still questionable. There are some studies in Bangladesh which concluded that the companies of
Bangladesh are reluctant to disclose information and they are only concerned about the minimum
disclosure. There is a big gap between the Companies Act, the Securities and Exchange Rules
and the adopted Accounting Standards regarding disclosure of accounting information. In such a
situation, there was a possibility that the adoption of the accounting standards did not bring any
remarkable changes in the financial reporting practices of Bangladesh. Like Australia,
Bangladesh Government or SEC should constitute a separate Financial Reporting Council
(FRC). A separate standards setting board, suppose Bangladesh Accounting Standards Board
(BASB) consisting of members from government, SEC, ICAB, ICMAB, Investors,
academicians, layers etc. should be formed and work independently under the auspices of FRC to
adopt IASs and IFRSs for better disclosure and harmonisation. Government should give legal
backing for compliance with the adopted standards and enforcement activities. The developed
countries who had better pieces of legislations have pronounced new legislations. For example
Sarbanes-Oxley Act 2002 in USA and CLERP 9 Act 2004 are expected to respond to the needs
of the day. We think, this is high time to bring huge modifications in the Companies Act and
securities regulations in Bangladesh to respond to the corporate governance issues including
setting and implementation of accounting standards for transparency in disclosure.

The IASB has taken wide-reaching measures by pronouncing more standards in response to
perceived global needs that suggest further studies on compliance. It can be argued that many
developing countries/economies do not have the economic and technological capacity and
capability to develop their accounting and reporting standards. They have therefore, accounting
standards issued by a developed country or the International Accounting Standards or IFRSs
issued by the IASC/IASB. The desire to ensure a smooth flow of international investment may
also be a factor for such adoption or adaptation. As follow-up to this, future research is needed
among IFRSs adopting countries to examine whether harmonization or compliance with IFRSs
has been significantly improved after the adoption of IFRSs as their national standards.

This study considers the annual reports for a single year. Further research can be undertaken to
measure the extent of disclosure longitudinally to determine whether quality of disclosure has
improved over time. Such a study would provide additional insights on corporate disclosure
practices in Bangladesh. This study does not consider non-listed or financial companies. Further
research can be undertaken taking into consideration both groups of companies. The number of
accounting standards was limited to IAS-1 and IAS-16. The results may be different if all the
mandatory IASs and/or IFRS were examined, for example, distinctions made between mandatory
items and other bases of disclosure. Market value of companies could be the proxy for the size of
the companies. In addition, this could be used in calculating the proportion of assets-in-place for
these companies. However, market value of the companies was not readily available at the time
of preparation of this paper. The ownership structure of a company variable could be a
29
potentially important explanatory variable in relation to emerging economies where majority of
the ownership of many companies are closely held often by families.
30
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35
Table 1
List of independent variables, their labels and expected signs and
relationships in the regression

Variable Labels
in the OLS

Variables Expected sign and relationship
INTLINK International link of
auditing firms
INLINK has a significant positive relationship
with the level of disclosure of accounting standards

SALES Total of sales SALES has a significant positive relationship with
the level of disclosure of accounting standards


NPMARGIN Net profit margin NPMARGIN has a significant positive relationship
with the level of disclosure of accounting standards

ROASSETS Rate of return on total
assets
ROASSETS has a significant positive relationship
with the level of disclosure of accounting standards

MNCS Multinationality of
companies (Subsidiary
of a multinational
company)
MNCS has a significant positive relationship with
the level of disclosure of accounting standards


ASSETS

Total assets

ASSETS has a significant positive relationship
with the level of disclosure of accounting standards

INDUSTRY Industry Type INDUSTRY a significant positive relationship with
the level of disclosure of accounting standards



Table 2
Descriptive statistics of the disclosure under four sample accounting standards
Percentage of Disclosure of
Index items as per
accounting Standards
Disclosure of Index items
out of 53 items
Mean 69.05% 36.59
Standard Deviation 10.9764 5.8175
Minimum 35.85% 19.00
Maximum 44.34% 50.0


36
Table 3
Disclosure Level as per Sample Accounting Standards
Score range as a percentage of total
number of items in Disclosure Index
Number of
companies
Percentage in the sample
Less than 30%
30%-40%
40%-50%
50%-60%
60%-70%
70%-80%
80%-90%
90% and over
00
01
00
24
35
26
16
04
0.00
0.94
0.00
22.64
33.01
24.53
15.10
3.77
Total 106 100.00

Table 4
Distribution of the Index Items into Different Parts of Annual Reports
Major Parts of Annual Report Number of
Items
Percentage of the total number of
items of information

Balance Sheet Items (BSI)
Income Statement Items (ISI)
Measurement and Valuation Methods/
Accounting Policy (MVM)

Items of Historical Summary (IHS)

23

11

14

05


43.40

20.75

26.42

9.43

Total 53 100.00

Table 5 Spearman Rank Correlation

VARIABLES ASSETS INDUSTRY INLINK MNCS NPMARGIN ROASSETS SALES
ASSETS 1.00
INDUSTRY -.0315 1.00
INLINK .1808* -.0242 1.00
MNCS .1899 .0905 .2980** 1.00
NPMARGIN .0794* -.1865*I .0035 .1468 1.00
ROASSETS .0959 -.0592 .0135 .1809* .6176** 1.00
SALES .5032** .1667 .1667* .4292** .2170** .1522 1.00
** coefficient of correlation significant at 1% level or better (p s.001)
*coefficient of correlation significant at 5% level or better (p s0.05)

37
Table 6
Summary of the regression output (Model One)
Coefficient of multiple regression (Multiple R) .46821
Coefficient of determination (R
2
) .21922
Adjusted R
2
.17190
Standard Error 5.29392
Analysis of Variance
D.F. Sum of Squares Mean Squares
Regression 6 779.02269 129.83712
Residual 99 2774.53391 28.02560
F ratio = 4.63280
------------------ Variables in the Equation ------------------
Unstandardized Coefficients Standardized
Coefficients

Variable B Standard Error Beta T Sig T
(constant) 35.271843 1.730003 20.388 .0000
ASSETS 1.144113E-09 6.0874E-10 .17771631 1.875 .0638
INDUSTRY -.384527 1.736405 -.020254 -.221 .8252
INLINK 1.596411 1.159394 .129665 1.377 .1716
MNCS 6.963006 2.247825 .298661 3.098 .0025
NPMARGIN -.053780 .022471 -.276099 -2.393 .0186
ROASSETS .026493 .043453 .069516 .610 .5435

Table 7
Summary of the regression output (Model Two)
Coefficient of multiple regression (Multiple R) .43833
Coefficient of determination (R
2
) .19213
Adjusted R
2
.14317
Standard Error 5.38499

Analysis of Variance
D.F. Sum of Squares Mean Squares
Regression 6 682.74494 113.79082
Residual 99 2870.81166 28.99810
F ratio = 3.92408
------------------ Variables in the Equation ------------------
Unstandardized Coefficients Standardized
Coefficients

Variable B Standard Error Beta T Sig T
(constant) 35.975572 1.717072 20.952 .0000
INDUSTRY -.527978 1.769084 -.027809 -.298 .7660
INLINK 1.868990 1.170614 .151805 1.597 .1135
MNCS 7.267534 2.444831 .311723 2.973 .0037
NPMARGIN -.054249 .023171 -.278504 -2.341 .0212
ROASSETS .030519 .044175 .080080 .691 .4913
SALES 1.12511E-10 4.0806E-10 .28105 .276 .7833

38
Table 8
Relationship between disclosure as per accounting standards and corporate attributes for Sample
companies
Variable labels Expected sign Actual sign Significance level
ASSETS +
+

INDUSTRY + _
INLINK + +
MNCS +
+
**
NPMARGIN +

*
ROASSETS +
+

* Significance level at 5%
** Significance level at 1%




39

Appendix A
DISCLOSURE INDEX

Balance Sheet Items

Current Assets

1. Cash in hand and banks, classified
2. Marketable Securities,
3. Receivables are classified
4. Inventories are classified
5. Advance Payment of Expenses

Long Term Assets

6. Property, plant and equipment, classified
7. Other long-term assets classified
8. Accumulated Depreciation
9. Intangibles (i.e., R & D, Patents, Goodwill, etc)
10. Long-term Investment
11. Investment in subsidiary and associated companies
12. Market value of securities (if any)
13. Long term contracts

Current Liabilities

14. Payables, classified
15. Current portion of long term liabilities
16. Bank loans
17. Provision for taxes
18. Dividend payable
19. Deferred revenues and advances from customers

Long-term liabilities:

20. Long-term liabilities, classified


Shareholders' Interests:

21. Shareholders' capital, classified
22. The number or amount of share including nominal value of share
23. Reserves and surplus (retained earnings)

Income Statement Items

40
24. Sales and other operating revenues
25. Interest Income
26. Income from investment
27. Interest expense
28. Tax Expense
29. Usual charges and credits
30. Significant inter company transaction
31. Net income
32. Maintenance, repairs and improvements
33. Gains and losses on disposal of assets
34. Depreciation of Assets

Accounting Policy Items

35. Basis of overall valuation
36. Taxes
37. Reserve accounting
38. Depreciation policy
39. Extraordinary items
40. Subsequent events after the balance sheet date
41. Gains and losses on disposal of property
42. Pension costs and retirement plans
43. Commitments and contingencies.
44. Consolidation policy (if any)
45. Translation of foreign currencies including the treatment of foreign exchange gains or losses
46. Methods of revenue recognition
47. Inventory valuation method
48. Changes in Accounting policy and their effects


Historical Summary

49. Name of the company
50. The country of incorporation
51. The balance sheet date
52. Brief description of the nature and activities of the companies
53. Corresponding figure of preceding period
41
Appendix B
The score received by the sample companies along with percentage of disclosure and non-disclosure


Name of the Companies
Number of
items
disclosed
% of
disclosure
% of non-
disclosure
NATINAL TEA COMPANY LTD. 50 94.34 5.66
HILL PLANTATION LTD. 50 94.34 5.66
BOC LIMITED 49 92.45 7.55
MONNO CERAMIC INDUSTRIES LIMITED 48 90.57 9.43
ISLAM JUTE MILLS LIMITED 47 88.68 11.32
BANGLADESH LAMPS LTD. 47 88.68 11.32
STANDARD CERAMIC INDUSTRIES LTD. 45 84.91 15.09
BRITISH AMERICAN TOBBACO BANGLADESH
LIMITED
45 84.91 15.09
WATA CHEMICALS LTD. 44 83.02 16.98
GACHIHATA AQUACULTURE FARMS LTD. 44 83.02 16.98
BANGLDESH THAI ALUMINIUM LTD. 44 83.02 16.98
ASRAF TEXTILE MILLS LTD. 44 83.02 16.98
APEX TANNERY LTD. 44 83.02 16.98
APEX FOODS LTD. 44 83.02 16.98
SHINEPUKUR HOLDINGS LIMITED 43 81.13 18.87
PADMA TEXTILE MILLS LRD. 43 81.13 18.87
MEGHNA SHRIMP CULTURE LTD. 43 81.13 18.87
BEXIMCO FISHERIES LIMITED 43 81.13 18.87
ALLTEX INDUSTRIES LTD. 43 81.13 18.87
AGRICULTURE MARKETING COMPANY LTD. 43 81.13 18.87
MEGHNA VEGITAVBLE OILS INDUSTRIES LIMITED 42 79.25 20.75
BANGLADESH ELECTRICITY MERS LIMITED 42 79.25 20.75
SINGER BANGLADESH LTD. 41 77.36 22.64
DESH GARMENTS LIMITED 41 77.36 22.64
Tallu Spinning Mills Ltd. 41 77.36 22.64
USMANIA GLASS SHEET FACTORY LTD. 40 75.47 24.53
OLYMPIC INDUSTRIES LTD. 40 75.47 24.53
PHARMACO PHARMACEUTICALS LTD. 40 75.47 24.53
MONNO JUTE STAFLLERS LTD. 40 75.47 24.53
DYNAMIC TEXTILE INDUSTRIES LTD. 40 75.47 24.53
BENGAL FINE CERAMICS LTD. 40 75.47 24.53
BATA SHOE CO. BANGLADESH LTD. 40 75.47 24.53
THERAPEUTICS (BANGLADESG) LTD. 39 73.58 26.42
QUASEM DRYCELLS LTD. 39 73.58 26.42
MONA FOOD INDUSTRY LTD. 39 73.58 26.42
42
Appendix B(continued)
The score received by the sample companies along with percentage of disclosure and non-disclosure

Name of the Companies
Number of
items
disclosed
% of
disclosure
% of non-
disclosure
KAY AND QUE (BD) LTD. 39 73.58 26.42
IMAM BUTTON INDUSTRIES LTD. 39 73.58 26.42
GQ BALL PEN INDUSTRIES LTD. 39 73.58 26.42
BEXIMCO SYNTHETICS LIMITED 39 73.58 26.42
BEXIMCO SYNTHETICS LIMITED 39 73.58 26.42
BANGLADESH CHEMICAL INDUSTRIES LIMITED 39 73.58 26.42
AMAM SEA FOOD INDUSTRIES LTD. 39 73.58 26.42
STYLECRAFT LTD. 38 71.7 28.3
NATIONAL POLYMER INDUSTRIES LTD. 38 71.7 28.3
DHAKA FISHERIES LTD. 38 71.7 28.3
BANGLADESH EXPORT IMPORT CO. LTD. 38 71.7 28.3
SQUARE PHARMACEUTICALS LTD. 37 69.81 30.19
SAMATA LEATHER COMPLEX LIMITED 37 69.81 30.19
RAHIMA FOOD CORPORATION LIMITED 37 69.81 30.19
NORTHERN JUTE MANUFACTURING CO. LTD. 37 69.81 30.19
MAQ PAPER INDUSTRIES LTD. 37 69.81 30.19
APEX WEAVING AND FINISHING MILLS LTD. 37 69.81 30.19
PETRO SYNTHETIC PRODUCTS LTD. 36 67.92 32.08
GLAXO WELCOME (BD) LTD. 36 67.92 32.08
EASTERN HOUSING LTD. 36 67.92 32.08
BEXIMCO INFUSIONS LTD. 36 67.92 32.08
BENGAL BISCUITS LTD. 36 67.92 32.08
APEX SPINNING AND KNITING LTD. 36 67.92 32.08
AFTAB AUTOMOBILES LTD. 36 67.92 32.08
SAVAR REFACTORIES LTD. 35 66.04 33.96
MONNO FABRICS LIMITED 35 66.04 33.96
BEXIMCO KNITTING LTD. 35 66.04 33.96
BEXIMCO DENIMS LTD. 35 66.04 33.96
BANGAS LIMITED 35 66.04 33.96
AZIZ PIPES LTD. 35 66.04 33.96
ALLTEX INDUSTRIES LIMITED 35 66.04 33.96
NATIONAL TEA COMPANY LIMITED 34 64.15 35.85
MEGHNA VEGITABLE OIL INDUSTRIES LIMITED 34 64.15 35.85
EAGLE STAR TEXTILE MILLS LTD. 34 64.15 35.85
BENGAL FINE CERAMICS LTD. 34 64.15 35.85
ATLAS BANGLADESH LTD. 34 64.15 35.85
WONDERLAND TOYS LTD. 33 62.26 37.74
SREEPUR TEXTILE MILLS LIMITED 33 62.26 37.74
43
Appendix B (continued)
The score received by the sample companies along with percentage of disclosure and non-disclosure

Name of the Companies Number
of items
disclosed
% of
disclosur
e
% of non-
disclosur
e
MEGHNA CEMENT MILL LTD. 33 62.26 37.74
LEXCO LIMITED 33 62.26 37.74
DULAMIAH COTTON SPINNING MILLS LTD. 33 62.26 37.74
DELTA MILLERS LTD. 33 62.26 37.74
ARAMIT LIMITED 33 62.26 37.74
NATIONAL TUBES LTD. 32 60.38 39.62
CHITTAGONG CEMENT CLINKER GRINDING CO.
LTD.
32 60.38 39.62
BANGLADESH GENERAL INSURANCE LIMITED 32 60.38 39.62
RAHMAN CHEMICAL INDUSTRIES LTD. 31 58.49 41.51
PRIME TEXTILE SPINNING MILLS LTD. 31 58.49 41.51
NILOY CEMENT INDUSTRIES LTD. 31 58.49 41.51
MONNO JUTE STAFFLERS LTD. 31 58.49 41.51
LIBRA PHARMACEUTICALS LTD. 31 58.49 41.51
EASTERN CABLES LTD. 31 58.49 41.51
BANGLDESH LEAF TOBACCO LTD. 31 58.49 41.51
SREEPUR TEXTILE MILLS LTD. 30 56.6 43.4
SONAGOAN TEXTILE MILLS LTD. 30 56.6 43.4
SOMORITA HOSPITAL LTD. 30 56.6 43.4
SAJIB KNITWEAR GARMENTS LTD. 30 56.6 43.4
MODERN INDUSTRIES (BD) LTD. 30 56.6 43.4
MEGHNA CEMENT MILLS LTD. 30 56.6 43.4
KARIM PIPE MILLS LIMITED 30 56.6 43.4
FU-WANG CERAMIC INDUSTRIES LTD. 30 56.6 43.4
ANWAR GALVANIZING LTD. 30 56.6 43.4
AMBEE PHARMACEUTICALS LTD. 30 56.6 43.4
PERFUME CHEMICAL INDUSTRIES LTD. 29 54.72 45.28
MITA TEXTILES LTD. 29 54.72 45.28
CONFIDENCE CEMENT LTD. 29 54.72 45.28
EASTERN LUBRICANTS LTD. 27 50.94 49.06
CHIC TEX LIMITED 27 50.94 49.06
BEXIMCO INFUSION LTD. 27 50.94 49.06
BANGLADESH MONOSPUL MGT. CO. LTD. 27 50.94 49.06
CMC KAMAL TEXTILE MILLS LTD. 19 35.85 64.15

44
Appendix C
Disclosure of Information as per accounting standards by the sample companies by categories

Keys:

Overall: Overall Disclosure of Information as per accounting standards
BSI: Balance Sheet Items
ISI: Income Statement Items
MVM: Measurement and Valuation Methods/Accounting Policies
IHS: Items of Historical Summary



Name of the Companies

% Overall %
BSI
%
ISI
%
MVM
%
IHS
MONNO JUTE STAFLLERS LTD. 75.47 82.61 72.73 57.14 100
LEXCO LIMITED 62.26 65.22 63.64 42.86 100
SREEPUR TEXTILE MILLS LTD. 56.6 56.52 54.55 42.86 100
DESH GARMENTS LIMITED 77.36 82.61 81.82 57.14 100
MONNO FABRICS LIMITED 66.04 69.57 54.55 57.14 100
ALLTEX INDUSTRIES LIMITED 66.04 60.87 54.55 71.43 100
SREEPUR TEXTILE MILLS LIMITED 62.26 69.57 36.36 57.14 100
MEGHNA CEMENT MILL LTD. 62.26 60.87 54.55 57.14 100
MAQ PAPER INDUSTRIES LTD. 69.81 69.57 72.73 57.14 100
BATA SHOE CO. BANGLADESH LTD. 75.47 78.26 72.73 64.29 100
BEXIMCO SYNTHETICS LIMITED 73.58 78.26 72.73 57.14 100
Pharmaco Pharmaceuticals Ltd. 75.47 73.91 90.91 57.14 100
BEXIMCO INFUSIONS LTD. 67.92 73.91 63.64 50 100
SQUARE PHARMACEUTICALS LTD. 69.81 73.91 81.82 42.86 100
SHINEPUKUR HOLDINGS LIMITED 81.13 86.96 72.73 71.43 100
BOC LIMITED 92.45 108.7 90.91 64.29 100
MEGHNA VEGITAVBLE OILS
INDUSTRIES LIMITED
79.25 73.91 81.82 78.57 100
BENGAL FINE CERAMICS LTD. 75.47 73.91 81.82 64.29 100
APEX TANNERY LTD. 83.02 78.26 90.91 78.57 100
BANGLADESH CHEMICAL
INDUSTRIES LIMITED
73.58 73.91 81.82 57.14 100
RAHIMA FOOD CORPORATION
LIMITED
69.81 69.57 72.73 57.14 100
BRITISH AMERICAN TOBBACO
BANGLADESH LIMITED
84.91 78.26 81.82 92.86 100
SAMATA LEATHER COMPLEX
LIMITED
69.81 73.91 54.55 64.29 100
KARIM PIPE MILLS LIMITED 56.6 65.22 63.64 21.43 100
45
Appendix C (Continued)
Disclosure of Information as per accounting standards by the sample companies by categories

Name of the Companies

% Overall %
BSI
%
ISI
%
MVM
%
IHS
ISLAM JUTE MILLS LIMITED 88.68 82.61 100 85.71 100
GACHIHATA AQUACULTURE FARMS LTD. 83.02 78.26 90.91 78.57 100
BANGLADESH ELECTRICITY MERS
LIMITED
79.25 73.91 81.82 78.57 100
THERAPEUTICS (BANGLADESG) LTD. 73.58 69.57 63.64 78.57 100
DYNAMIC TEXTILE INDUSTRIES LTD. 75.47 69.57 63.64 85.71 100
WATA CHEMICALS LTD. 83.02 78.26 81.82 85.71 100
MEGHNA SHRIMP CULTURE LTD. 81.13 73.91 72.73 92.86 100
WONDERLAND TOYS LTD. 62.26 65.22 63.64 42.86 100
PETRO SYNTHETIC PRODUCTS LTD. 67.92 69.57 63.64 57.14 100
STYLECRAFT LTD. 71.7 73.91 63.64 64.29 100
IMAM BUTTON INDUSTRIES LTD. 73.58 69.57 63.64 78.57 100
APEX WEAVING AND FINISHING MILLS
LTD.
69.81 69.57 72.73 57.14 100
BANGAS LIMITED 66.04 69.57 63.64 50 100
MONA FOOD INDUSTRY LTD. 73.58 78.26 72.73 57.14 100
SAVAR REFACTORIES LTD. 66.04 69.57 63.64 50 100
BEXIMCO FISHERIES LIMITED 81.13 82.61 81.82 71.43 100
BANGLADESH LAMPS LTD. 88.68 91.3 90.91 78.57 100
LIBRA PHARMACEUTICALS LTD. 58.49 60.87 54.55 42.86 100
NORTHERN JUTE MANUFACTURING CO.
LTD.
69.81 69.57 72.73 57.14 100
RAHMAN CHEMICAL INDUSTRIES LTD. 58.49 60.87 54.55 42.86 100
QUASEM DRYCELLS LTD. 73.58 73.91 72.73 64.29 100
EAGLE STAR TEXTILE MILLS LTD. 64.15 60.87 45.45 71.43 100
NATIONAL POLYMER INDUSTRIES LTD. 71.7 73.91 54.55 71.43 100
APEX FOODS LTD. 83.02 82.61 81.82 78.57 100
PADMA TEXTILE MILLS LRD. 81.13 73.91 81.82 85.71 100
ASRAF TEXTILE MILLS LTD. 83.02 73.91 90.91 85.71 100
BANGLDESH LEAF TOBACCO LTD. 58.49 56.52 54.55 50 100
SOMORITA HOSPITAL LTD. 56.6 56.52 54.55 42.86 100
NILOY CEMENT INDUSTRIES LTD. 58.49 60.87 45.45 50 100
BEXIMCO SYNTHETICS LIMITED 73.58 78.26 72.73 57.14 100
GLAXO WELCOME (BD) LTD. 67.92 69.57 72.73 50 100
SAJIB KNITWEAR GARMENTS LTD. 56.6 52.17 54.55 50 100
MEGHNA VEGITABLE OIL INDUSTRIES
LIMITED
64.15 69.57 54.55 50 100
PRIME TEXTILE SPINNING MILLS LTD. 58.49 52.17 63.64 50 100
Tallu Spinning Mills Ltd. 77.36 78.26 81.82 64.29 100
46
Appendix C (Continued)
Disclosure of Information as per accounting standards by the sample companies by categories


Name of the Companies

% Overall %
BSI
%
ISI
%
MVM
%
IHS
BEXIMCO INFUSION LTD. 50.94 52.17 45.45 35.71 100
AMBEE PHARMACEUTICALS LTD. 56.6 60.87 45.45 42.86 100
ANWAR GALVANIZING LTD. 56.6 52.17 63.64 42.86 100
STANDARD CERAMIC INDUSTRIES LTD. 84.91 82.61 81.82 85.71 100
HILL PLANTATION LTD. 94.34 100 81.82 92.86 100
NATINAL TEA COMPANY LTD. 94.34 95.65 90.91 92.86 100
MONNO CERAMIC INDUSTRIES LIMITED 90.57 91.3 81.82 92.86 100
KAY AND QUE (BD) LTD. 73.58 73.91 63.64 71.43 100
BENGAL BISCUITS LTD. 67.92 73.91 63.64 50 100
DHAKA FISHERIES LTD. 71.7 73.91 72.73 57.14 100
CHIC TEX LIMITED 50.94 52.17 45.45 35.71 100
BANGLADESH GENERAL INSURANCE
LIMITED
60.38 56.52 63.64 50 100
BANGLADESH MONOSPUL MGT. CO.
LTD.
50.94 52.17 45.45 35.71 100
ALLTEX INDUSTRIES LTD. 81.13 82.61 72.73 78.57 100
DULAMIAH COTTON SPINNING MILLS
LTD.
62.26 69.57 45.45 50 100
AGRICULTURE MARKETING COMPANY
LTD.
81.13 86.96 81.82 64.29 100
ATLAS BANGLADESH LTD. 64.15 65.22 54.55 57.14 100
BEXIMCO KNITTING LTD. 66.04 60.87 72.73 57.14 100
SINGER BANGLADESH LTD. 77.36 73.91 81.82 71.43 100
NATIONAL TUBES LTD. 60.38 60.87 54.55 50 100
FU-WANG CERAMIC INDUSTRIES LTD. 56.6 56.52 45.45 50 100
BEXIMCO DENIMS LTD. 66.04 65.22 63.64 57.14 100
BANGLADESH EXPORT IMPORT CO. LTD. 71.7 73.91 81.82 50 100
MEGHNA CEMENT MILLS LTD. 56.6 60.87 54.55 35.71 100
AZIZ PIPES LTD. 66.04 69.57 63.64 50 100
MITA TEXTILES LTD. 54.72 52.17 54.55 42.86 100
DELTA MILLERS LTD. 62.26 65.22 54.55 50 100
CMC KAMAL TEXTILE MILLS LTD. 35.85 39.13 18.18 21.43 100
CHITTAGONG CEMENT
CLINKER GRINDING CO. LTD.
60.38 56.52 72.73 42.86 100
AMAM SEA FOOD INDUSTRIES LTD. 73.58 65.22 63.64 85.71 100
BANGLDESH THAI ALUMINIUM LTD. 83.02 78.26 81.82 85.71 100
MODERN INDUSTRIES (BD) LTD. 56.6 56.52 45.45 50 100
EASTERN CABLES LTD. 58.49 56.52 54.55 50 100
OLYMPIC INDUSTRIES LTD. 75.47 69.57 72.73 78.57 100
47
Appendix C (Continued)
Disclosure of Information as per accounting standards by the sample companies by categories

Name of the Companies

% Overall %
BSI
%
ISI
%
MVM
%
HIS
EASTERN LUBRICANTS LTD. 50.94 47.83 45.45 42.86 100
PERFUME CHEMICAL INDUSTRIES LTD. 54.72 60.87 45.45 35.71 100
CONFIDENCE CEMENT LTD. 54.72 56.52 45.45 42.86 100
SONAGOAN TEXTILE MILLS LTD. 56.6 60.87 54.55 35.71 100
MONNO JUTE STAFFLERS LTD. 58.49 47.83 72.73 50 100
BENGAL FINE CERAMICS LTD. 64.15 60.87 72.73 50 100
AFTAB AUTOMOBILES LTD. 67.92 65.22 72.73 57.14 100
EASTERN HOUSING LTD. 67.92 65.22 72.73 57.14 100
APEX SPINNING AND KNITING LTD. 67.92 69.57 72.73 50 100
NATIONAL TEA COMPANY LIMITED 64.15 60.87 72.73 50 100
GQ BALL PEN INDUSTRIES LTD. 73.58 78.26 72.73 57.14 100
ARAMIT LIMITED 62.26 56.52 72.73 50 100
USMANIA GLASS SHEET FACTORY LTD. 75.47 78.26 81.82 57.14 100

Appendix D
Table showing the items of information disclosed by the number of sample companies

Item No. No. of Companies Items of Information

ITEM31 10 Significant inter company transaction
ITEM14 13 Long Term Contracts
ITEM12 17 Investment in subsidiary and associated
ITEM13 18 Market value of securities
ITEM45 18 Consolidation Policy (if any)
ITEM02 18 Marketable Securities
ITEM49 21 Changes in Accounting policy and their e
ITEM30 23 Usual charges and credits
ITEM41 23 Subsequent events after Balance Sheet Date
ITEM42 26 Gains and losses on disposal of property
ITEM40 26 Extraordinary items
ITEM34 39 Gains and losses on disposal of assets
ITEM44 42 Commitments and Contingencies
ITEM11 46 Long-term Investments
ITEM09 48 Intangibles (R & D, Patents, Goodwill, e
ITEM16 50 Current portion of long term liabilities
ITEM27 53 Income from investment
ITEM43 60 Pension costs and retirements plans
ITEM26 60 Interest expense
ITEM07 62 Other Long-term assets
ITEM15 66 Payables
ITEM03 69 Receivables
ITEM46 70 Translation of Foreign Currencies
ITEM38 80 Reserve Accounting
ITEM29 83 Tax expense
ITEM08 85 Accumulated Depreciation
48
ITEM21 88 Long-term liabilities
ITEM19 88 Dividend Payable
ITEM20 89 Deferred Revenues and advances from customers
ITEM17 94 Bank loans
ITEM18 94 Provisions for taxes
ITEM37 98 Taxes
ITEM33 100 Repairs and Maintenance
ITEM28 101 Interest expense
ITEM47 102 Methods of Revenue Recognition
ITEM48 103 Inventory valuation method
ITEM04 104 Inventories
ITEM32 104 Net Income


Appendix D (continued)
Table showing the items of information disclosed by the number of sample companies

Item No. No. of Companies Items of Information
ITEM35 104 Depreciation of assets
ITEM39 104 Depreciation policy
ITEM25 105 Sales and other operating revenues
ITEM01 106 Cash in hand and banks
ITEM06 106 Property, Plant and Equipment
ITEM22 106 Shareholders' capital
ITEM23 106 The number or amount of share
ITEM24 106 Reserves and surplus
ITEM36 106 Basis of Overall valuation
ITEM50 106 Name of the company
ITEM51 106 The country of incorporation
ITEM52 106 The balance sheet date
ITEM53 106 Brief description of the nature and activities of the companies
ITEM54 106 Corresponding figure of proceeding
ITEM05 106 Advance Payment of Expenses