IIUC Business Review ISSN 1991-380X Volume 4, December 2015 (P. 51-80) Evaluation of Disclosures in Annual Report- A Study on the Listed Textile Companies in Bangladesh Mohammad Rokibul Kabir1 Abstract: For a vibrant capital market it is necessary to have well informed decision making by the investors. The main source of such information is the annual report provided by a company. The study is an attempt to find whether the listed textile companies are making sufficient disclosures in their annual report. To measure the extent of disclosures, two un-weighted disclosure indices have been constructed. One of these is a 144 point index for the overall disclosures while the other is a 35 point index for the voluntary disclosures only. The required data have been collected from the secondary sources, i.e. the annual reports of the selected companies from year 2008 to 2011. The collected data have been analyzed by using statistical tools like mean, percentile and t-test. Computer aided statistical software SPSS 20 was used to calculate the results of the above mentioned tests. The study reveals that there are significant differences in disclosure practices among the sample companies. But the level of disclosures is not satisfactory as the average disclosure score is 45.3787 out of 144 which is only 31.51% of the total allocated score. Again, the average voluntary disclosure score is 5 out of 35 (14.29%) which is not satisfactory at all. Key Words: Disclosures, Voluntary Disclosures, Textile, Disclosure index. 1 Assistant Professor, Department of Business Administration, International Islamic University Chittagong. IIUC Business Review, Volume 4 1. Introduction Financial reporting is the communication of financial information useful for making investment, credit, and other business decisions (Chiappetta, Shaw & Wild, 2009). Such communications include general purpose financial statements such as income statements, balance sheets, equity reports, cash flow reports, and notes to these statements. It is the process of presenting financial data about a company’s financial health, operating performance, and flow of its fund. Financial Statements and other related disclosures are usually presented in Annual Reports of the companies. Thus, it is of utmost importance from the view point of the companies to provide necessary information in their annual reports for both of their stockholders and stakeholders so that they can take well judged economic and other related decision regarding a specific company. Thus, the study has been undertaken to explore the present level of disclosure practices by the listed textile companies in Bangladesh. 2. Statement of the Problem In Bangladesh most of the people, especially the investors are very little aware of the corporate disclosures. The practices of corporate disclosures here are not at a satisfactory level (Uddin et al. 2006). Nowadays, some companies are seen to be interested in practicing voluntary disclosures along with mandatory disclosure. In fact, in recent years, this practice has got much popularity in Bangladesh (Hossain et al. 2004). But to what extent such practices are being accomplished is a matter of question. 3. Objectives of the Study The main objective of the study is to know about the level of mandatory and voluntary disclosure practices of the listed textile companies in Bangladesh. The Specific objectives of the study are,  To measure the level of mandatory and voluntary disclosures by the sample companies in their annual reports.  To know whether there is any significant difference in mandatory disclosure practices among the selected listed companies in Bangladesh. 52 Evaluation of Disclosures in Annual Report- A Study on the Listed Textile Companies in Bangladesh  To explore whether there is any significant difference in voluntary disclosure practices among the selected listed companies in Bangladesh. 4. Regulatory Requirements for Disclosures What should be disclosed depends on the basic objectives of financial accounting and reporting. This is also related to the class of users. All that information, which meets the needs of users in serving all the objectives, should be disclosed. This also depends upon the environment prevailing in a country. In underdeveloped economics, companies only disclose the balance sheet, profit and loss account; auditor’s report, and a few schedules and appendices. In developed economics, where the economic environment is predominant, besides the above, a president’s letter, a five-year or ten-year summary highlighting additional financial information, such as turnover, capital investment, profit, dividend, important ratios, and the company’s view about its future plans and prospects are also published. Further, in countries where the social environment dominates besides the economic one, information on value added, employees, customers, government, foreign exchange, etc. is also given in annual financial reports. Hence, it is difficult to prescribe the same ‘medicine’ for ‘all patients’. However, the following information will be useful to all categories of users in all countries: 1. The traditional financial statements, namely balance sheet, income statement, the statement of retained earnings, statement of cash flows, chairman’s speech, director’s report, auditor’s report are usually included in the published annual reports of all the listed companies. This gives information on how the company has done in the past year, what its financial position was, and what the sources and uses of ‘funds’ were. This is regarded as the minimum information required to be supplied to external users. 2. Besides the above, the laws of the land and professional pronouncements also require the following information to be disclosed in Bangladesh many countries: 53 IIUC Business Review, Volume 4  Disclosure of accounting policies, including those on valuation of assets.  Any changes in accounting policies on methods of valuation, methods of charging depreciation, determination of earnings, etc.  Events occurring after the balance sheet date.  Disclosure of segment-wise accounting information.  Interim reports of the company’s performance and financial position.  Supplementary information on accounting adjustments for changes in prices.  Accounting for foreign transactions.  Future prospects of the company. In preparing financial statements and annual report a company must follow the accounting standards, Companies Act 1994, Security and Exchange Commission Ordinance 1969 and Rules 1987, Income Tax Ordinance 1984 and Bangladesh Industrial Enterprise (Nationalization) Order 1972. 5. Literature review Jahur and Riyadh (2000) in their article ’Rules and Regulations Influencing the Public Annual Accounts of Listed Companies in Bangladesh-An Evaluative Study’ –stated present rules and regulations influencing the Published Annual Accounts of listed companies in Bangladesh. They evaluated the reporting practices of listed companies whether they follow the regulatory guidelines. The authors examined annual report of different economically important industries. Concentration was given to discuss existing legal aspect including some important provisions influencing the reporting practices. Researchers showed disappointing scenario regarding non-compliance by listed companies. Williams (2001) argues that published annual reports are used as a medium for communicating both quantitative and qualitative corporate information to shareholders, potential shareholders (investors) and other users. Although publication of an annual report is a statutory requirement, companies normally voluntarily disclose information in excess of the mandatory requirements. 54 Evaluation of Disclosures in Annual Report- A Study on the Listed Textile Companies in Bangladesh Company management recognizes that there are economic benefits to be gained from a well-managed disclosure policy. Ali (2002) explored the relationship between corporate governance and financial disclosures. In the article “Corporate Governance Financial Disclosure” he showed that the corporate governance reporting is important for the shareholders and other stakeholders to assess the true nature of the risk and uncertainties in the reporting period of financial statements. He pointed out that reporting of non-compliance with accounting standards is part of corporate governance reporting. He reported as per International Accounting Standards (IAS), a complete set of financial statements includes: (a) a balance sheet (b) an income statement (c) a cash flow statement (d) a statement showing either changes in equity or changes in equity other than those arising from capital transactions with owners and distributions to owners (e) accounting policies and other explanatory notes to the financial statements, (f) if any firm do not present all the statements mentioned above or if any firm’s footnotes (explanatory notes) do not have all disclosures prescribed by the Accounting Standards, such non-compliance should be reported as part of corporate governance reporting. Then a special committee constituted by the board should monitor presentation of financial statements and compliance with Accounting Standards. Ahmed and Ali (2006) in the article titled “The Legal and Institutional Frame work for Corporate Financial Reporting Practice in South Asia” –examined the legal and institutional environment for corporate financial reporting practices in three South Asian countries of the South Asian Association for Regional Co-operation (SAARC), namely Bangladesh, India and Pakistan. This paper also explored the possibility of regional harmonization in financial reporting. It observed that the three countries share similar social, political, economic and other environmental factors. Greater similarities were observed in areas of financial reporting requirements in company law, minor differences were found in the areas of SEC law and the standard-setting process among the countries. The researcher concluded that the prevailing similarities should facilitate regional accounting harmonization. 55 IIUC Business Review, Volume 4 Haque and Khan (2007) in the article titled “Corporate Disclosure through Director Report –Compliance of the Companies Act, 1994” studied the important issues regarding corporate disclosure through director’s report. They determined the degree of compliance of the information needed to be presented in the director’s report after analyzing annual reports of a sample of 54 companies. Among them only 8% companies provided 67%, 35% companies provided 44%, 8% companies provided 33% and 4% companies provided 22% information in the director report r equired as per the Companies Act, 1994. Financial reporting aids the investors to make investment decision while lending agencies take credit decisions on the basis of information provided in the annual reports of companies. It also assists in cash management by providing information about future cash inflows and outflows. Financial reporting contains details of assets, liabilities and change in equity. Thus, meeting legal requirements in preparing financial statements is a must which can be more useful if additional information regarding various issues is included (Hossain, 2010). In Bangladesh, most of the prior research studies in disclosure area highlighted on a particular issue of voluntary reporting such as disclosure on corporate governance, voluntary disclosure on human resource, reporting on green awareness issues, particularly environmental disclosure, a very few studies on social reporting and a few work on making comparison between financial voluntary disclosure and mandatory one (Ahmed and Akhter, 2007). Thus, there is a scope to study the extent of mandatory and voluntary disclosures in the annual reports of the listed companies in Bangladesh. This research aims to mitigate the research gap in the field of comparative analyses of both mandatory and voluntary disclosure practices of different companies. 6. Methodology of the study 6.1 Introduction Data of the study were drawn from the annual reports of the listed textile companies for the period starting from 2008 to 2011. The study adopted the disclosure index method for the measurement of the extent of disclosure made by the sample companies. The level 56 Evaluation of Disclosures in Annual Report- A Study on the Listed Textile Companies in Bangladesh of disclosure is measured by selecting items that are disclosed in annual reports and giving each textile company a score based on the number of disclosures actually made. Than the mean scores of period 2008 to 2011 have been taken for comparison. 6.2 Selection of the Sample Companies There are twenty listed textile companies which are listed both in Dhaka Stock Exchange and Chittagong Exchange from where fifteen “A” category companies have been selected as the other companies were not listed on or before 2008. All these fifteen companies as listed below are selected as sample for the study. Name of the sample textile companies are: Apex Spinning Ltd., Anlima Yarn Ltd., Beximco Synthetics Ltd., Delta Spinners Ltd., Dulamia Cotton Mills Ltd., H.R. Textile Ltd., Makson Spinning Ltd., Metro Spinning Ltd., Mithun Spinning Ltd., Prime Textile Ltd., Safko Spinning Mills Ltd., Saiham Textile Mills Ltd., Sonargaon Textile Mills Ltd, Square Textile Limited and Tallu Spinning Mills Ltd. In fact, sample covers the whole population of the study which ensures the characteristics of population in full. 6.3 Secondary Data Sources The whole study is based on secondary data. All the relevant data were collected from the companies’ annual reports for the year 2008 to 2011. 6.4 Construction of Un-weighted Disclosure Index In order to measure and analyze the extent of disclosure in the annual reports of the listed textile companies a Un-weighted Disclosure Index (UDI) was constructed having a common base containing 144 (Appendix I) items of information (both mandatory and voluntary items), which were presented under 9 headings. The nine heading are Company Profile Items (CPI), Accounting Policy Items (API), and Balance Sheet Items-Assets (BSIA), Balance Sheet Items –Liabilities (BSIL), Income Statement Items-Cr. (ISIC), Income Statement Items –Dr. (ISID), Projections and Budgetary Disclosure (PBD), Ratios, Statistics and Other Details (RSD) and Measurement and Valuation Method (MVM). The annual reports of the listed companies under study 57 IIUC Business Review, Volume 4 were analyzed to determine the extent to which they contained the items of information included in the disclosure index. In constructing the UDI dichotomous scoring, each of the 144 score items was used (disclosure = 1, non-disclosure =0). Hence, the maximum possible score attainable by a firm was 144 with minimum theoretical score of 0 (Hossain 2010). 6.5 Construction of Un-weighted Disclosure Index for Voluntary Disclosures: For voluntary disclosure index un-weighted method has also been applied. The items have been chosen from the NAA Committee Report about voluntary disclosures.(Porwal, 2001). Un-weighted Disclosure Index (UDI) was constructed having a common base containing 35 (Appendix-II) items of information (voluntary items), which were presented under 4 headings. The four heading are Disclosure of Community Development, Disclosure of Human Resource Development, Disclosures of Physical Resource and Environmental Contribution and Disclosures of Product and Service. The annual reports of the listed companies under study were analyzed to determine the extent to which they contained the items of information included in the disclosure index. In constructing the UDI dichotomous scoring, each of the 35 score items was used (disclosure = 1, non-disclosure =0). Hence, the maximum possible score attainable by a firm was 35 with minimum theoretical score of 0. 6.6 Hypotheses: Hypothesis I: Ho: The variation in disclosures in annual report among the listed companies is not significant. Hypothesis II: Ho: The variation in voluntary disclosures in annual report among the listed companies is not significant. 7. Scope of the study The study focuses on the financial reporting practices of the listed textile companies in both DSE and CSE. The study covers only listed companies in stock exchange not the whole textile industry. The listed textile companies mainly produce polyesters yarn, drawn yarn, cotton yarn, knitting and finishing textile products. 58 Evaluation of Disclosures in Annual Report- A Study on the Listed Textile Companies in Bangladesh 8. Limitations of the Study The study has the following limitations • The study does not reflect the overall textile industry. • The study covers only the listed textile companies but inclusion of other non-listed companies could make the study more meaningful. • Determinants of disclosures are not identified in this study but the exploration of it could make the study more valuable. 9. The Textile Industry of Bangladesh Textile Industries have been an extremely important part of Bangladesh's economy for a very long time for a number of reasons. The textile industry is concerned with meeting the demand for clothing, which is a basic necessity of life. It is an industry that is more labor intensive than any other in Bangladesh, and thus plays a critical role in providing employment for people. Currently, the textile industry accounts for 45% of all industrial employment in the country and contributes 5% of the total national income. However, although the industry is one of the largest in Bangladesh and is still expanding, it faces serious problems, principally because the country does not produce enough of the raw materials necessary, unfavorable trade policies, and inadequate incentives for expansion. As a result, Bangladesh's textile industry relies heavily on imports, and the country does not earn as much foreign exchange from its textile industry as it should. (BTMA) 9.1 Growth Potential in Textile: Table: 4 Growths in Primary Textile Sector (Spinning) 59 IIUC Business Review, Volume 4 The textile industry in Bangladesh has grown in an unplanned manner and a critical demand-supply gap has arisen for both yarn and fabric. The crisis will naturally deepen unless appropriate backward linkages, the incorporation of the fundamental steps in the textile industry all through to the RMG industry, can be built to meet the rapidly approaching challenges in the global textile market. As the population is growing and the standard of living is increasing in Bangladesh, the demand for textiles is increasing rapidly. This presents an urgent need to dramatically increase capacities in spinning, weaving, knitting, and dyeing, printing, and finishing sub-sectors. This will require the adoption of the most modern and appropriate technology to ensure quality products at competitive prices. 10. Descriptive Analysis of Findings 10.1 Mandatory Disclosures: Table: 5 Descriptive Statistics N Minimum Maximum Mean Std. Deviation Disclosure 15 37.28 65.26 45.3787 6.25805 Valid N (list wise) 15 Graph # 1 firm-wise average disclosure score of the listed textile companies under study From the above table-5 (Found by analysis through SPSS) it is found that the highest disclosure in annual report is 65.26 out of 60 Evaluation of Disclosures in Annual Report- A Study on the Listed Textile Companies in Bangladesh 144 while the lowest is 37.28. It is also revealed from the graph-1 that Square Textile has provided the highest disclosure in annual report and Delta Spinning provides the lowest. The mean disclosure index is 45.3787 with a standard deviation of 6.25805 In order to test our null hypothesis # 1 to see whether there is significant variation in disclosure score among listed textiles firms, we conducted t test. Table: 6 One-Sample Test Test Value = 0 T Df Sig. Mean 95% Confidence (2- Difference Interval of the tailed) Difference Lower Upper Disclosure 28.084 14 .000 45.37867 41.9131 48.8443 Accordingly our null hypothesis is- Ho1 # The variation in disclosures in annual report among the listed companies is not significant. In order to see whether there is significant difference in variation in disclosures in annual report among the listed companies we conducted t test i.e. using SPSS Software we conducted Paired Sample t test. We have found that the result is significant at 5% level. Thus, the null hypothesis is rejected which means there are significant variations in disclosures in annual report among the listed companies. 10.2 Voluntary Disclosures: Table: 7 Descriptive Statistics N Minimum Maximum Mean Std. Deviation Voluntary Disclosures 15 3.00 9.00 5.0000 1.88982 Valid N (list wise) 15 61 IIUC Business Review, Volume 4 Graph # 2 Firm-wise average voluntary disclosure score of the listed textile companies under study From the above table-7 (Found by analysis through SPSS) it is found that the highest disclosure in annual report is 9 out of 35 while the lowest s 3. It is also revealed from the graph that Saiham Textile has provided the highest disclosure in annual report and Beximco Synthetic, Apex Spinning and Anlima Yarn provided the lowest. The mean disclosure index is 5.00 with a standard deviation of 1.88982. In order to test our null hypothesis # 2 to see whether there is significant variation is disclosure score among listed textiles firms, we conducted t test. Table:8 One-Sample Test Test Value = 0 T Df Sig. Mean 95% Confidence (2- Difference Interval of the tailed) Difference Lower Upper Voluntary Disclosures 10.247 14 .000 5.00000 3.9535 6.0465 Accordingly our null hypothesis is- Ho2 # The variation in voluntary disclosures in annual report among the listed companies is not significant. In order to see whether there is significant difference in variation in voluntary disclosures in annual report among the listed companies we conducted t test by using SPSS Software. We have found that the result is significant at 5% level. Thus, the null hypothesis is rejected which means there are significant variations 62 Evaluation of Disclosures in Annual Report- A Study on the Listed Textile Companies in Bangladesh in voluntary disclosures in annual report among the listed companies. 11. Summary of Findings: The key findings of the study can be summarized as,  The present level of disclosures by the companies studied is not satisfactory at all as the average disclosure score is 45.3787 out of 144 which is only 31.51%  The present level of voluntary disclosures by the companies studied is very poor as the average disclosure score is 5.00 out of 35 which is only 14.29%  There is a significant difference in disclosure practices among different companies.  There is a significant difference in voluntary disclosure practices among different companies.  Details of accounting policies including those on valuation of assets, any changes in accounting policies on methods of valuation, methods of charging depreciation, determination of earnings, etc. are needed to be disclosed in annual report but the current level of such disclosures is not satisfactory. 12. Recommendations: Based on the finding the following recommendation can be suggested:  All textile companies should disclose more items in annual reports which are very much important so that the existing shareholders and potential investors can make informed and well-judged decision in this regard.  Companies should provide more voluntary disclosures like environmental disclosure as these companies have serious effects on environment.  The textile companies should follow the provisions of Companies Act, 1994, SEC rules and IASs/IFRSs as adopted in Bangladesh, and other relevant Laws in the industry in preparing their annual reports.  Companies should disclose accounting policies including those on valuation of assets, any changes in accounting policies on methods of valuation, methods of charging depreciation, determination of earnings, etc. in their annual report so that the 63 IIUC Business Review, Volume 4 users may get a transparent view on the companies’ accounting policies.  The regulatory authorities might use the findings of the study to find whether the listed companies are complying with the regulations.  On the basis of the findings of the study the regulatory authorities should ask the poor complying companies for explanations.  The regulatory authority should be more strict in monitoring the compliances by the companies for disclosures  Accounting standards adopted by ICAB should be mandatory and compliances with such standards should be monitored by both the BSEC and ICAB.  Ethical Codes of Conduct as prescribed by the ICAB should be strictly followed by professional accountants and auditors. Any deviation should be carefully examined.  Since, the level of voluntary disclosures is very poor, BSEC might provide some incentives for the companies having significant voluntary disclosures.  The Income Tax Authority might allow tax credit for the companies which will meet a certain level of disclosure requirements in their annual reports. 13. Conclusion Annual Report of a company provides information which is used by the potential users in making business and economic decisions. It is the process of presenting financial and other data about a company’s financial health, operating performance, flow of its fund and other relevant issues. It also gives the investors of the capital market and managers to predict about company. Every company has to provide sufficient disclosures in its annual report to make the capital market vibrant. Keeping these in mind an attempt has been taken in this study to measure the level of disclosures-both mandatory and voluntary in the annual reports of the listed textile companies in Bangladesh. Though, the present level of disclosure practices is not satisfactory, it is expected from the listed companies that they will provide more information in near future as the BSEC has become very strict in this regard in recent time. It is also believed that if the companies provide 64 Evaluation of Disclosures in Annual Report- A Study on the Listed Textile Companies in Bangladesh sufficient disclosure it would play important role in making well judged economic decisions. In this regard the recommendations provided in this study may be applied by the competent authorities to ensure sufficient disclosures by the listed companies in Bangladesh. At the end the study leaves scope for further studies regarding the issues like, ‘A Comparative analysis regarding financial disclosures among the SAARC countries’, ‘Role of Corporate Governance in Financial Reporting’, Compliance with IAS/IFRS (BAS/BFRS) and its impact on capital market efficiency’, ‘ Factors influencing the reluctance of the investors in using financial disclosures’ Reference Ahmed, K. and Ali, J. (2006), The Legal and Institutional Framework for Corporate Financial Reporting Practice in South Asia, Research in Accounting Regulation. Vol.19, pp37 Ahmed, R. and Akhter, B. (2007), Voluntary Reporting in Bangladesh, Journal of Business Studies, South East University, Vol.3, No.2, pp.32. Ali M.A. (2002), Corporate Governance Financial Disclosure, The Bangladesh Accountant. October-December, 2002 Issue, pp. 75- 81. Chiappetta, B., Shaw, K. and Wild, J. (2009). Principles of Financial Accounting (19th ed.) (McGraw-Hill/Irwin). Haque, S. and Khan, H. (2007), Corporate Disclosure Through Directors’ Report –Compliance of the Companies Act, 1994, The Cost and Management, January-February.Vol.35, No.1, pp. 28-37. Hossain, S. (2010), Financial Reporting Practices of Listed Pharmaceutical Companies in Bangladesh, PhD Thesis published by The National University, Bangladesh. Hossain, D. M., Khan, A. R. and Yasmin, I. (2004), The Nature of Voluntary Disclosure on Human Resource in the Annual Reports of Bangladesh Companies, Journal of Business Studies, Vol.25, No.1 pp. 221-231. Jahur, H. and Rayadh, M. (2000), Rules and Regulations Influencing the published Annual Accounts of Listed Companies 65 IIUC Business Review, Volume 4 in Bangladesh –An Evaluative Study, The Chittagong University Journal of Law. Vol.5, pp. 179-200. Porwal, L.S. (2009), NAA Committee Report on CSR, Accounting Theory, 3rd Edition,pp.471(New Delhi, Tata McGraw-Hill Publishing Company Limited). Uddin, M.R., Iqbal, M.M. and Reza, S.M (2006), Disclosure Practices: a Comparison of Commercial Banks and Insurance Companies in Bangladesh, The Cost and Management, Vol. 34, No.1 January-February, 2006, pp.16-28. Williams, S. M. (2001), Is Intellectual Capital Performance and Disclosure Practices Related? Journal of Intellectual Capital, Vol.2, pp.192–203. 66 Evaluation of Disclosures in Annual Report- A Study on the Listed Textile Companies in Bangladesh Appendix-I Disclosure Index Un-weighted Index of SCORE Number Disclosure OBTAINED TOTAL A. Company Profile Items 1 Name of the Firm - 1 2 Corporate headquarters 1 3 Date of Incorporation 1 Year of incorporation as a 4 limited liability company 1 5 Year of listing on the DSE 1 6 Audit firm(s) 1 Corresponding figure of 7 preceding period 1 SUB TOTAL 7 B. Accounting Policy Items 1 Basis of accounting 1 Subsequent events after the 2 balance sheet date 1 3 Consolidation Policy (if any) 1 4 Reporting currency 1 Methods of Revenue 5 recognition 1 Changes in Accounting policy and their cumulative 6 effects 1 Basis of measurement 7 (historical or other) 1 8 Method of calculating EPS 1 Changes in Accounting 9 Estimates 1 Disclosure of monitory impact of any change in 10 Accounting policy 1 Changes in accounting 11 principles 1 Information about 12 compliance with BAS 1 SUB TOTAL 12 67 IIUC Business Review, Volume 4 C. Balance Sheet Item ( Assets ) 1 Details about quick assets Cash in hand ( including i. foreign currency ) 0.5 ii. Balance with Bank 0.5 1 Development and prepaid 2 expenses ( if capitalized ) 1 3 Cash and cash equivalents 1 Information on disclosure of 4 investment items i. Treasury bills – 1 0.1 National investment bonds - ii. 1 0.1 iii. Prize bonds 0.1 iv. Debenture 0.1 v. Other bonds – 1 0.1 vi. Shares 0.1 vii. Debenture and bonds 0.1 viii. Gold 0.1 ix. Worthless stock 0.1 x. Other investments 0.1 1 Information relating to 5 investment i. Cost of marketable securities 0.2 Market value of marketable ii. securities 0.2 Investments accounted for iii. using the equity method 0.2 iv. Portfolio investment 0.2 v. Valuation basis 0.2 1 Information relating fixed assets 6 Classification of Fixed assets 1 7 Cost 1 8 Market 1 9 Revaluation amount 1 10 Basis for valuation 1 68 Evaluation of Disclosures in Annual Report- A Study on the Listed Textile Companies in Bangladesh Information as to other assets – Commission on brokerage 11 on shares and debentures 1 Information relating to – Preliminary formation and organization expense ( if it is 12 capitalized ) 1 Non financial assets ( 13 classified ) 1 Information about security of 14 loan 1 Loan taken by directors and 15 officers 1 Loans and advances to 16 customers 1 17 i. Classification amount 0.33 ii. Doubtful amount 0.33 Iii. Bad amount 0.34 1 Information as to intangible 18 assets – i. Goodwill 0.34 ii. Other intangible assets 0.33 Iii. Amortization policy 0.33 1 SUB TOTAL 18 Balance sheet Item ( D. Liabilities ) 1 Details shareholders interest i. Issued Capital 0.5 Shareholder’s equity or paid ii. up capital 0.5 1 2 Information as to – i. Provisions 0.25 ii. Provision for taxation 0.25 Provision for loans and Iii. interest suspense account 0.25 Provision for bad and iv. doubtful investment 0.25 69 IIUC Business Review, Volume 4 1 3 Information as to- i. Statutory reserve 0.25 Revaluation Reserve(if not ii. capitalized) 0.25 Surplus profit and loss iii. account 0.25 iv. Gratuity and benevolent fund 0.25 1 4 Information as to: Commitments - Directors i. (classified) 0.5 Commitments - Contingent ii. Liabilities 0.5 1 5 Details about- Borrowing from banks in i. Bangladesh 0.25 Borrowing from agents, financial institutions and ii. banks outside Bangladesh 0.25 iii. Secured borrowing amount 0.25 iv. Unsecured borrowing 0.25 1 6 Information about- Nature and amount of i. security given 0.34 ii. Other commitments 0.33 iii. Other borrowed fund 0.33 1 Information as to principal deposits- Pension or 7 insurance fund 1 Information about - long term 8 Debt with security 1 Information about – Mortgages on assets against 9 loan 1 10 Information as to- Particular of redemption of i. long term debt 0.5 70 Evaluation of Disclosures in Annual Report- A Study on the Listed Textile Companies in Bangladesh Current portion of long term ii. debt 0.5 1 Information about – non current interest bearing 11 liabilities 1 Information relating to – 12 Income tax payable 1 13 Details as to – Liabilities and subsidiary i. companies 0.25 ii. Proposed dividend 0.25 Prepaid deferred tax at the iii. end of the period 0.5 1 14 Information as to – i. Bill payable 0.5 ii. Interest payable 0.5 1 Information about – Trade 15 and other payable 1 SUB TOTAL 15 Income statement Items ( Cr. E. ) 1 Details as to – i. Interest and similar income 0.33 Interest income from ii. debentures 0.33 Interest on bill and Treasury iii. bills 0.34 1 Income from balances with 2 banks/financial institutions 1 Details about – Dividend 3 income 1 Information as to – 4 Investment income 1 Details as to – Gains less losses arising from 5 investment securities 1 6 Information as to – 71 IIUC Business Review, Volume 4 i. Profit from ordinary activities 0.25 ii. Profit from operations 0.25 iii. Profit from invested shares 0.5 1 7 Information as to – Gains less losses arising from i. dealing securities 0.25 Gains arising from dealing ii. securities 0.25 Gains on foreign currency iii. transaction 0.25 Gains less losses arising from iv. dealing in foreign currencies 0.25 1 8 Information about – i. Non financial income 0.5 Income from non financial ii. assets 0.5 1 Information on income from 9 rent, taxes, insurance, license fees, royalties and other 1 income SUB TOTAL 9 Income statement Items ( Dr. F. ) 1 Information as to – i. Salaries, allowances and fees 0.2 Stationary, postage, stamp etc. and general ii. administrative expenses 0.2 Printing and advertisement iii. expenses 0.2 Internet, Telegram, Telephone and iv. Communication expenses 0.2 Fees and commission v. expenses 0.2 1 2. Information as to – Legal 2 expenses 1 72 Evaluation of Disclosures in Annual Report- A Study on the Listed Textile Companies in Bangladesh 3. Information as to – Taxes 3 on income 1 4 4. Information as to – Chairman and directors i. Remuneration 0.5 ii. Auditors fees 0.5 0 1 5 Information as to – i. Dividend paid for the period 0.5 Appropriation against profit ii. on dividends 0.5 1 6 Information as to – Provision for classified loans i. and advances 0.2 ii. Provision for gratuities 0.2 Provision for diminution value of investment securities iii. (if any) 0.2 Provision for decline in value iv. of trading securities and other 0.2 Bad and doubtful provisions on loan and provision for bad v. and doubtful debts against 0.2 adversely classified and advances 1 7 Information as to – Appropriation against profit i. on statutory reserve 0.5 Appropriation against profit ii. on general reserve 0.5 1 8 Details as to – Depreciation of fixed assets i. and amortization expenses 0.2 Repair expenses of ii. machinery 0.2 iii. Repair expenses of furniture 0.2 iv. Repair expenses of buildings 0.2 v. Depreciation on repairs and 0.2 73 IIUC Business Review, Volume 4 maintenance 1 9 Information as to – Interest expenses and similar i. charges 0.5 ii. Tax expenses for the period 0.25 Taxes, including deferred iii. taxes 0.25 1 10 Disclosure as to – Extraordinary items – Loss on expropriation of car i. engine 0.2 Extraordinary items – Insurance proceeds from earthquake disaster ii. settlement 0.2 Losses arising from dealing iii. securities 0.2 Foreign currency translation iv. and hedging 0.2 v. Other operating expenses 0.2 1 11 Information about – Amount expended on human i. resource 0.25 Loss from sale of or dealing ii. with non-banking assets 0.25 Allowances for doubtful iii. debts 0.25 iv. Charitable donations 0.25 1 SUB TOTAL 11 Information useful to projections and budgetary G. disclosure Disclosure as to loss on sale 1 on investment 1 Disclosure as to profit on sale 2 on investment 1 3 Disclosure as to loss on 1 74 Evaluation of Disclosures in Annual Report- A Study on the Listed Textile Companies in Bangladesh unusual items Disclosure as to provision for diminution in the value of 4 investment 1 Information as to proposed 5 capital expenditure in future 1 Information about offer of 6 new services 1 Information about labor 7 management relationship 1 Information about number of days in strike by the 8 employers ( yearly ) 1 Information about bank 9 issuing bonus shares 1 Information about pension 10 and retirement plans 1 Information about employees 11 social welfare scheme 1 Information about number of cases filed for recovery of 12 loan 1 Information about cash 13 inflow 1 Information about cash 14 outflow 1 Information relating to sale of 15 property and other assets 1 Information relating to transfer of research and 16 development 1 17 Inflation adjusted accounts 1 Information about Tax 18 refunds receivable 1 SUB TOTAL 18 Ratios, Statistics and other H. Details Information about ratios indicating profitability 1 Return on capital employed 1 2 Return on share holders' 1 75 IIUC Business Review, Volume 4 Equity 3 Return on equity funds 1 4 EPS 1 5 DPS 1 6 Earning yield 1 7 Dividend yield 1 8 Rate of return on investment 1 9 Return on total assets 1 10 Debt – equity ratio 1 11 Debt to total capital ratio 1 12 Debt to total assets ratio 1 13 Proprietary ratio 1 14 Capital gearing ratio 1 15 Interest coverage ratio 1 16 Dividend coverage ratio 1 17 Total coverage ratio 1 18 Cash flow coverage ratio 1 Information relating to statistics and other details Comparative income 19 statement ( at least 1 year ) 1 Comparative balance sheet ( 20 at least 1 year ) 1 Cash budgeting projection up 21 to 5 years 1 Extent of dependence on a 22 few customers 1 Review of the year and prospects for the future ( 23 discussion of the factors 1 which will influence bank’s next year performance ) Forecast of next year 24 earnings 1 Statement of the firm’s 25 objectives and policies 1 No of shareholders and share 26 held by them 1 Information on number of 27 employees 1 SUB TOTAL 27 76 Evaluation of Disclosures in Annual Report- A Study on the Listed Textile Companies in Bangladesh Information useful to measurement and valuation I. method 1 Amount of depreciation 1 Fixed assets valuation 2 method 1 3 Basis of overall valuation 1 Method used in calculating 4 depreciation 1 5 Depreciation policy 1 Consistency of method rate 6 of depreciation 1 7 Rate of depreciation 1 Gains and losses on disposal 8 of property 1 Pension costs and retirement 9 plans 1 Estimated useful life and 10 change in estimate ( if any ) 1 The reason for change in method and rate of 11 depreciation 1 The monetary impact on 12 profit 1 13 The tax effect for the change 1 Consistency of useful lives of 14 assets 1 Disclosure of significant 15 financial transactions 1 Disclosure about related party 16 transactions 1 Accounting policy adopted 17 for the recognition of revenue 1 Method adopted to determine the stage completion of 18 transactions 1 Disclosure of significant category of revenue 19 recognized during the period 1 The nature and amount of 20 commitments to extent credit 1 77 IIUC Business Review, Volume 4 that are irrevocable The nature and amount of 21 contingent liabilities and commitments arising from off 1 balance sheet items Disclosure of maturity date of 22 liabilities 1 Disclosure of significant concentration of assets and liabilities and off balance sheet items in terms of geographical areas, customer 23 or industry groups 1 Disclosure of significant net 24 foreign currency exposure 1 25 Other concentration risks 1 Disclosure about appropriation of retained 26 earnings 1 Disclosure of secured liabilities and the carrying amount of the assets pledged 27 as security 1 SUB TOTAL 27 GRAND TOTAL 144 78 Evaluation of Disclosures in Annual Report- A Study on the Listed Textile Companies in Bangladesh Appendix-II Voluntary Disclosure Index Disclosure Items Score Achieved Total 2011 2010 A. Disclosure of Community Development (CD):- CD Donation to Charity 1 Sponsorship to sports CD and culture 1 CD Welfare of Children 1 CD Anti-drug Campaign 1 Poverty alleviation CD scheme 1 Freedom Fighters' CD welfare 1 CD Employment generation 1 CD Woman development 1 Merit and talent CD development 1 CD Rural development 1 Research and Development for CD country 1 Establishment of CD Bridges 1 CD Anti-drug Campaign 1 Sub Total 13 B. Disclosure of Human Resource (HR):- Training seminar and HR workshop 1 Credit facilities under HR various loan policies 1 HR Staff welfare fund 1 HR Library for employees 1 Employee family HR welfare 1 Good working HR environment 1 79 IIUC Business Review, Volume 4 HR Employee recreation 1 Number of the employees in the HR company 1 Employees recruitment HR procedure 1 HR Group insurance policy 1 Employee satisfaction HR survey 1 HR Internship Program 1 HR In housing training 1 Sub Total 13 C. Disclosure of Physical Resources and Environment Contribution Training on environment and social PE management course 1 Tree plantation PE (Greening) 1 Donation to Farakka PE Committee 1 PE Smoking free area 1 Sub Total 4 D. Disclosure of product and service (PS):- PS Product quality 1 PS Packing 1 PS Advertising 1 PS Warranty provisions 1 PS Product safety 1 Sub Total 5 Grand Total 35 80