| Ready-Made Garments (RMG) Industry in Bangladesh |
| Notes to the Financial Statements |
| As at and for the year ended 30 June 2024 |
| 1.0 | Company and its activities |
| 1.01 | Formation and legal status |
| Ready-Made Garments (RMG) Industry in Bangladesh (hereinafter referred to as “the Company”) was incorporated as a private Company limited by shares on August 12, 2012 under the Companies Act, 1994 vide reg. no C-103985/12. The Company started its commercial operation from November, 2014. |
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| 1.02 | Location of registered office, corporate office and factory |
| The registered office and the Corporate Head Office of the Company is located at Silver Tower (16th,17th ,19th & 20th floor), 52 Gulshan avenue, Gulshan-1, Dhaka-1212, Bangladesh and the factory is located at B.K Bari ( Taltoly, Monipur), Mirzapur,Gazipur, Bangladesh. |
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| 1.03 | Nature of business |
| The Company is a 100% export oriented industry owns and operates a composite woven textile which consist of weaving, dyeing, printing, finishing and ready made garments. |
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| 2.00 | Summary of significant accounting policies and basis of preparation |
| 2.01 | Basis of preparation and presentation of financial statements |
| These financial statements have been prepared on going concern basis under the historical cost convention except for land and building components of property, plant and equipment which are measured at fair value. |
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| 2.02 | Application of standards |
| The following IASs and IFRSs are applicable for the preparation of financial statements for the year under review: |
| 2.03 | Basis of reporting |
| The financial statements are prepared and presented for external users by the Company in accordance with identified financial reporting framework. Presentation has been made in compliance with the requirements of IAS 1- “Presentation of financial statements”. The financial statements comprise of: |
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| 2.04 | Other regulatory compliances |
| The Company is also required to comply with the following major laws and regulations along with the Companies Act 1994: |
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| 2.05 | Statement of compliance |
| The financial statements of the Company have been prepared in accordance with International Accounting Standards (IASs),International Financial Reporting Standards (IFRS), the Companies Act 1994, and other applicable laws and regulations in Bangladesh as per requirements under the Financial Reporting Act 2015. The cash flows from operating activities are prepared under direct method. |
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| 2.06 | Going concern assumptions |
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| As per IAS 1 A Company is required to make assessment at the end of each year to assess its capability to continue as going concern. The Company has adequate resources to continue its operation for foreseeable future and hence, the financial statements have been prepared on going concern basis. As per management assessment there are no material uncertainties related to events or conditions which may cast significant doubt upon the Companies ability to continue as a going concern. |
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| 2.07 | Functional and presentation currency |
| The financial statements have been prepared in Bangladesh Taka (BDT/Tk) which is also the functional currency of the Company. The figures of financial statements have been rounded off to the nearest Taka when otherwise indicated. |
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| 2.08 | Use of estimates and judgments |
| (a) Preparation of financial statements in conformity with IFRS requires managements to make judgments, estimates and assumptions that affect the application of the accounting policies and the reported amounts of assets, liabilities, income and expenses. Actual results may differ from those estimates. |
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| (b) Estimates and underlying assumptions are reviewed on an ongoing basis. Revision to estimates are recognized prospectively. |
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| (c) Information about judgments made in applying accounting policies that have the most significant effects on the amounts recognized in the financial statements. |
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| (d) Information about assumptions and estimation uncertainties that have a significant risk of resulting in a material adjustments in the year under review are included in the following notes. |
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| In particular, significant areas of estimation uncertainty and critical judgments in applying accounting policies that has the most significant effect on the amount recognized in the financial statements are revaluation of land and building, income tax provision (both current and deferred tax) and other provision. |
| In the process of applying entities accounting policies, management has made following judgements, which have the most significant affect on the amounts recognized in the financial statements. |
| Property, plant and equipment |
| Inventories |
| Trade receivables |
| Retirement benefit obligations |
| Deferred tax liabilities |
| Trade and other payable |
| Provision for income tax |
| 2.09 | Reporting period |
| The financial year of the Company consistently cover one year from July 01 to June 30 for all reported periods. These financial statements cover one financial year from July 01, 2023 to June 30, 2024. |
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| 2.10 | Date of authorization |
| These financial statements have been authorized for issue by the Board of Directors on 25 September 2024. |
| 2.11 | Preparation and presentation of financial statements of the Company |
| The Management of the Company is responsible for the preparation and presentation of the financial statements in accordance with International Financial reporting Standards (IFRS), The Companies Act 1994 and other applicable laws and regulations, and maintain such internal control as management determines it necessary to enable the preparation of the financial statements that are free from material misstatement, whether due to fraud or error. |
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| 2.12 | Comparative information |
| The financial statements provides comparative information is respect of the previous period for all amount reported in the current period’s financial statements. Comparative figures have been re-arranged wherever considered necessary to ensure better comparability with the current period without causing any impact on the profit and value of assets and liabilities as reported in the financial statements. |
| 2.13 | Consistency of presentation |
| Unless otherwise stated, the accounting policies and methods of computation used in preparation of the financial statements as at and for the year ended 30 June 2024 a consistent with those policies and methods applied in preparing the financial statements for the year ended 30 June 2023. |
| 2.14 | Current versus non-current classification |
| The Company presents assets and liabilities in the statement of financial position based on current/non-current classification. |
| An asset is current when it is: |
| a) expected to be realized or intended to sold or consumed in the normal operating cycle; |
| b) held primarily for the purpose of trading; |
| c) expected to be realized within twelve months after the reporting period; or |
| d) cash or cash equivalent unless restricted from bin exchange or used to settle a liability for at least twelve months after the reporting period. |
| The Company classifies all other assets as non-current. |
| An liability is current when it is: |
| a) expected to be settled in the normal operating cycle; |
| b) it is held primarily for the purpose of trading; |
| c) it is due to be settled within twelve months after the reporting period; or |
| d) there is no unconditional write to defer the settlement of the liability for at least twelve month after the reporting period. |
| The Company classifies all other liability as non-current. |
| Deferred tax assets and liabilities are classified as non-current assets and liabilities respectively. |
| 2.15 | Statement of cash flows |
| Statement of cash flows has been prepared as per IAS 7: Statement of cash flows using direct method as per the requirement of Securities and Exchange Rules 1987. |
| 3.00 | Significant accounting policies |
| 3.01 | Changes in significant accounting policies |
| The Company has consistently applied the accounting polices to all periods presented in these financial statements. |
| 3.02 | Principle accounting policies |
| Specific accounting policies were selected and applied by the Company’s management for significant transactions and events that have a material effect within the framework of IAS-1 “Presentation of Financial Statements” in preparation and presentation of financial statements. |
| 3.03 | Recognition of property, plant and equipment |
| i. Recognition and measurement |
| Items of property, plant and equipment are measured at cost less accumulated depreciation in compliance with the provisions of IAS 16: property, plant and equipment. The cost of an item of property, plant and equipment comprises its purchase price, import duties and non-refundable taxes, borrowing cost during construction, after deducting trade discount and rebates and any costs directly attributable to bringing the asset to the location and condition necessary for it to be capable of operating in the intended manner. |
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| ii. Subsequent costs |
| The cost of replacing or upgrading part of an item of property, plant and equipment is recognized in the carrying amount of the item if it is probable that the future economic benefits embodied within the part will flow to the Company and its cost can be measured reliably. The costs of the day-to day servicing of property, plant and equipment are recognized in the statement of profit or loss and other comprehensive income. |
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| iii. Depreciation of property, plant and equipment |
| Depreciation on property, plant and equipment is provided on a reducing balance method. |
| Depreciation for addition to property, plant and equipment is charged from the month on which the asset comes into use or being capitalized and depreciation continues to be provided until such time as the written down value is reduced to Taka one. Depreciation on disposals/retirement of Property, plant and equipment ceases from the month in which the disposals/retirement thereof takes place. |
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| The depreciation rate(s) are as follows: |
| Category of Property, plant and equipment |
| Land and land development |
| Building & other construction |
| Plant and machinery |
| Office equipment |
| Fire hydrant & alarming system |
| Tools & equipment |
| Ventilation exhaust fan |
| Gas boiler & generator |
| Furniture & fixture |
| Electrical installation & equipment’s |
| Computer equipment’s |
| Vehicle |
| iv. Gain or loss on disposal/derecognition/retirement: |
| The gain or loss arising on the disposal, derecognition or retirement of an asset is determined as the difference between the sale proceeds and the carrying amount of the asset and is recognized in the statement of profit or loss and other comprehensive income. |
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| 3.04 | Capital work in progress |
| Capital work-in-progress is stated at cost of acquisition and subsequently stated at cost incurred for those assets which are under construction/acquisition until the construction/acquisition is completed or the assets are being ready for use. No depreciation is charged on capital-work-in progress. |
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| 3.05 | Intangible assets |
| Intangible assets includes only accounting software. |
| i. Recognition and measurement |
| Intangible assets that are acquired by the Company and have finite useful lives are measured initially at cost. After initial recognition, it is carried at its cost less accumulated amortization and accumulated impairment loss, if any. Intangible assets are recognized as per IAS 38 “Intangible assets”. |
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| The cost of an intangible asset comprises its purchase price, import duties and non-refundable taxes after deducting trade discounts and rebates; and any directly attributable cost of preparing the asset for its intended use. |
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| ii. Subsequent costs |
| Subsequent costs are recognized in the carrying amount only when it is probable that the future economic benefits embodied within the item will flow to the Company and it’s cost can be measured reliably. All other costs are recognized in profit or loss and other comprehensive income, as incurred. |
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| iii. Amortization |
| Amortization is recognized in the Statement of Profit or Loss and Other comprehensive income on a straight line basis over the estimated useful life of each items of intangible assets from the month they are available for use. Charging of amortization ceases from the month of its derecognition. |
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| The amortization rates based on the estimated useful life of the intangible asset is presented below: |
| Category of intangible assets |
| Software |
| iv. Derecognition |
| An intangible asset is derecognized on disposal or when no future economic benefits is expected from use of it. Gains or losses arising from the derecognition of intangible assets measured as the difference between the net disposal proceeds and the carrying amount of the intangible asset are recognized in the statement of profit or loss and other comprehensive income. |
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| 3.06 | Revaluation of assets |
| The Company’s some land revalued by Mahfel Haq & Co ( chartered accountant) as on 31 May 2018. These lands were revalued using the “fair market price as at its locations and condition” As per the revaluation report the revaluation surplus stood at BDT 1,139,492,065. These revaluation has been recognized in the books of the Company in 30 June 2018. |
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| The Company has further revalued its entire land and land development along with the some subsequent acquired lands as on 15 June, 2021 by Bangladesh Inspection & Consulting, to reflect the fair value of revalued items in the financial statements as on 30 June, 2021. Location of the land is Monipur,B.K Bari ,Gazipur sadar police station for 1434.85 decimal respectively. |
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| The Company has further revalued its entire Building and other infrastructure as on 30 June, 2024 by Bangladesh Inspection & Consulting, to reflect the fair value of revalued items in the financial statements as on 30 June, 2024. Location of the Building is Monipur,B.K Bari ,Gazipur sadar police station. The revaluation surplus amount stands for Tk. 316,890,897 which is included in the Revaluation surplus and asset schedule. |
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| 3.07 | Impairment of assets |
| The Company reviews the recoverable amount of its assets on each reporting period. If there is existence of any indication that the carrying value of assets exceeds the recoverable amount, the Company doesn’t recognizes such impairment loss in accordance with IAS 36 “Impairment of Assets”. |
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| 3.08 | Inventories |
| i. Recognition and measurement |
| Inventories are comprised of raw materials, packing goods, work-in-process, finished goods, stores and spares which are valued at lower of cost or net realizable value in accordance with Para 21 and Para 25 of IAS-2 “Inventories” after making due allowances for any obsolete or slow moving items. The method used for valuation are as follows: |
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| ii. Inventory write off |
| It includes the cost of written off or written down values of redundant, damaged or obsolete items which are dumped and/or old stocks. However, “slow-moving” items are considered as immaterial and capable of being used and/or disposed of at least at their carrying book value. The amount of any write-down of inventory is recognized as an expense. |
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| 3.09 | Financial instruments |
| A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity. |
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| a. Financial assets |
| The Company initially recognizes loans and receivables on the date that they are originated. All other financial assets are recognized initially on the date at which the Company becomes a party to the contractual provisions of the instrument. |
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| The Company derecognizes a financial asset when the contractual rights to the cash flows from the asset expire, or it transfers the rights to receive the contractual cash flows on the financial asset in a transaction in which substantially all the risks and rewards of ownership of the financial assets are transferred. |
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| An entity shall classify financial assets as subsequently measured at amortized cost, fair value through other comprehensive income (FVTOCI) or fair value through profit or loss (FVTPL) on the basis of both: |
| Amortized cost |
| The asset is measured at the amount recognized at initial recognition minus principal repayments, plus or minus the cumulative amortization of any difference between that initial amount and the maturity amount, and any loss allowance. Interest income is calculated using the effective interest method and is recognized in profit and loss. Changes in fair value are recognized in profit and loss when the asset is derecognized or reclassified. |
| At fair value through other comprehensive income |
| The asset is measured at fair value. |
| At fair value through profit or loss: |
| A financial asset is classified as at fair value through profit or loss if it is classified as held for trading or is designated as such on initial recognition. Financial assets are designated as at fair value through profit or loss if the Company manages such investment and makes purchase or sale decisions based on their fair value in accordance with the Company’s documented risk management or investment strategy. Attributable transactions costs are recognized in profit and loss as incurred. Financial assets at fair value through profit or loss are measured at fair value and changes therein which take into account and dividend income are recognized in profit or loss. |
| i. Trade and other receivables |
| The Company is 100% export oriented. It sells products against Master L/C and sales agreement, receive payments through foreign currencies from the bank on maturity date of the L/C and such there is risk in receiving the payments within the maturity date of the L/C. |
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| ii. Cash and cash equivalents |
| Cash and cash equivalents comprise cash in hand, cash at bank including short term deposits which are held and available for use by the Company without any restriction. |
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| b. Financial liabilities |
| Financial liabilities are recognized initially on the trade date at which the Company becomes a party to the contractual provisions of the instrument. The Company derecognizes a financial liability when its contractual obligations are discharged, cancelled or expired. Non-derivative financial liabilities comprise trade and other payables and interest bearing borrowings. |
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| i. Trade and other payables |
| Trade and other payables are recognized at the amount payable for settlement in respect of goods and services received by the Company. |
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| ii. Interest-bearing borrowings |
| Principal amount of loan and borrowings are stated at their outstanding amount. Borrowings repayable within twelve months from the date of reporting period are classified as current liabilities whereas borrowings repayable after twelve months period are classified as non-current liabilities. Accrued interest and accrual of interest are classified as current liabilities. |
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| 3.10 | Equity instruments |
| Ordinary shares are classified as equity. Incremental costs directly attributable to the issue of ordinary shares are recognized as expenses. Paid-up share capital represents total amount contributed by the shareholders and bonus shares issued by the Company. |
| 3.11 | Impairment |
| (i) Non-derivative financial assets |
| Financial assets not classified as at fair value through profit or loss, are assessed at each reporting date to determine whether there is objective evidence of impairment. |
| Objective evidence that financial assets are impaired includes: |
| Financial assets measured at amortized cost |
| The Company considers evidence of impairment for these assets at both an individual asset and a collective level. All individually significant assets are individually assessed for impairment. Those found not to be impaired are then collectively assessed for any impairment that has been incurred but not yet individually identified. Assets that are not individually significant are collectively assessed for impairment. Collective assessment is carried out by grouping together assets with similar risk characteristics. |
| In assessing collective impairment, the Company uses historical information on the timing of recoveries and the amount of loss incurred, and makes an adjustment if current economic and credit conditions are such that the actual losses are likely to be greater or lesser than suggested by historical trends. |
| An impairment loss is calculated as the difference between an asset’s carrying amount and the present value of the estimated future cash flows discounted at the asset’s original effective interest rate. Losses are recognized in profit or loss and reflected in an allowance account. When the Company considers that there are no realistic prospects of recovery of the asset, the relevant amounts are written off. If the amount of impairment loss subsequently decreases and the decrease can be related objectively to an event occurring after the impairment was recognized, then the previously recognized impairment loss is reversed through profit or loss. |
| 3.12 | Non-financial assets |
| At each reporting date, the Company reviews the carrying amounts of its non-financial assets (other than biological assets, investment property, inventories and deferred tax assets) to determine whether there is any indication of impairment. If any such indication exists, then the asset’s recoverable amount is estimated. The recoverable amount of an asset is the higher of its fair value less costs to sell and its value in use. Carrying amount of the asset is reduced to its recoverable amount by recognizing an impairment loss, if and only if, the recoverable amount of the asset is less than its carrying amount. Impairment loss is recognized immediately in profit or loss. As at 30 June 2023, the assessment of indicators of impairment revealed that impairment testing was not required for the Company. |
| For other assets, an impairment loss is reversed only to the extent that the asset’s carrying amount does not exceed the carrying amount that would have been determined, net of depreciation or amortization, if no impairment loss had been recognized. |
| 3.13 | Provisions and contingent liabilities and assets |
| i. Provisions |
| The preparation of financial statements in conformity with IAS-37 Provisions, Contingent Liabilities and Contingent Assets requires management to make estimates and assumptions that affect the reported amounts of revenues and expenses, assets and liabilities, and the disclosure requirements for contingent assets and liabilities during and at the date of the financial statements. |
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| In accordance with para 14 of IAS 37 “Provisions, contingent liabilities and contingent assets”, provisions are recognized in the following situations: |
| a. When the Company has a present obligation as a result of past event;
b. When it is probable that an outflow of resources embodying economic benefits will be required to settle the obligation; and
c. Reliable estimates can be made of the amount of the obligation. |
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| We have shown the provisions in the statement of financial position at an appropriate level with regard to an adequate provision for risks and uncertainties. An amount recorded as a provision represents the best estimate of the probable expenditure required to fulfill the current obligation on the date of statement of financial position. |
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| Other provisions are valued in accordance with IAS 37 “Provisions, contingent liabilities and contingent assets” and if required, in accordance with IAS 19 “Employee benefits”. Other provisions comprise all recognizable risks from uncertain liabilities and anticipated losses from pending transactions. |
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| ii. Contingent liabilities and assets |
| Contingent liabilities and assets are current or possible obligations or assets arising from past events and whose existence is due to the occurrence or non-occurrence of one or more uncertain future events which are not within the control of the Company. In accordance with IAS 37 “Provision, contingent liabilities and contingent assets”, those are disclosed in the notes to the financial statements. |
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| 3.14 | Borrowing costs |
| In compliance with the requirements of IAS 23 “Borrowing costs”, borrowing costs of operational period on short term loan and overdraft facilities from bank are charged off as revenue expenditure as they were incurred. |
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| 3.15 | Leases |
| Accounting for investment in leases |
| As per IFRS 16: “Leases”, the company recognizes leased assets in the balance sheet and presents them as receivable at an amount equal to the net investment in the lease. Under a finance lease all the risks and rewards incident to legal ownership are transferred by the company, and thus the lease payment receivable is treated as repayment of principal and finance income to reimburse and reward for its investment and services. The recognition of finance income is based on a pattern reflecting a constant periodic rate of return on the net investment outstanding in respect of the finance lease. |
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| Recognition of leased assets |
| Company’s leased assets are stated at the gross lease receivables less the unearned lease income. Lease payments relating to the accounting period are applied against the gross investment in the lease to reduce both the principal and the unearned lease income. |
| 3.16 | Revenue recognition |
| Revenue is recognized when the significant risk and reward of ownership are transferred to the buyer, recovery of the consideration is probable, associated costs and possible return of goods can be estimated reliably, there is no continuing management involvement with the goods, and the amount of revenue can be measured reliably. |
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| Non- operating income |
| Interest income is accrued on a time basis by reference to the principal outstanding at the effective interest applicable. |
| 3.17 | Provision for taxation |
| a. | Current tax |
| Corporate tax liability is provided as per fiscal regulations applicable for the current financial year. Tax provision are made assuming that the tax liability will be finalized under section 82(C ) of the Income Tax Ordinance 1984. Based on deduction of AIT under section 53BB of the Income Tax Ordinance 1984 and tax liability on non-operative income will be calculated @ 27.5%. |
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| b. | Deferred tax |
| Deferred tax has been calculated as per IAS 12 “Income taxes” when there is a temporary difference between the carrying amount and the tax base. Deferred tax is calculated by multiplying the temporary differences with applicable tax rate. At present, applicable tax rate for Ready-Made Garments (RMG) Industry in Bangladesh is 12% (unit-1, garments),15% (unit-3,textile) . Deferred tax on revaluation of land is recognized in current year. |
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| 3.18 | Determination and presentation of operating segment |
| The Company determines and presents operating segments based on business segments and internal reporting structure i.e. information provided internally to the Company’s Board of Directors (BOD), which is the Company’s Chief Operating Decision Maker. Information about operating segment has been presented in the financial statements. |
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| An operating segment is a component of the Company that engages in business activities from which it may earn revenue and incur expenses, including revenues and expenses that relate to transactions with the Company’s other components, whose operating results are regularly reviewed by the Company’s Chief Operating Decision Maker (CODM) to make decisions about resources allocated to the segments and assess its performance and for which discrete financial information is available in the financial statement. |
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| 3.19 | Worker Profit Participation Fund |
| As per section 232 (3) of the Bangladesh Labour Act 2015 and 212 of Labour Rules 2015 government shall, in case of 100% export oriented industrial sectors, shall continue Central fund as well as a Board for the management of the Central fund that is yet to be formed. However, for this purpose the Bank has already deducted contribution at source from the Company’s (Garments segment) export proceeds @ 0.03% as per the requirement of section 214 of Labour Rules 2015 that has been charged as expense and accordingly no further provision for WPPF has been maintained. |
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| On the other hand, for this purpose the management has already deducted the Company’s (Textile segment) profit before WPPF & tax @ 5% as per the requirement of section 214 of Labour Rules 2015 that has been charged as expense and accordingly provision for WPPF has been maintained. |
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| 3.20 | Government grants and disclosure of government assistance |
| The Company is getting cash assistance on direct export of RMG products which are settled after deduction of 10% tax as final settlement of tax liability as per the existing regulation. |
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| The Company is getting cash assistance on direct export from RMG products as Bank FE circular No.01, dated, 07/01/2020; FE circular No.9, dated, 04/04/2016; FE circular No.25, dated 08/06/2014; FE circular No.1, dated 08/01/2014;FE circular No.21, dated 09/11/2010; FE Circular No.7, dated 03/06/2003; and FE Circular No.9, dated 05/03/2001. |
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| 3.21 | Foreign currency transactions |
| Transactions in foreign currencies are translated into Bangladesh Taka at the exchange rate prevailing on the date of transactions in accordance with IAS 21 “The effects of changes in foreign exchange rate.” Assets and liabilities in foreign currency at the reporting date are translated into Bangladesh Taka at the rate of exchange prevailing at the reporting date and the exchange differences are recognized in the statement profit or loss and other comprehensive income. |
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| 3.22 | Earnings per share (EPS) |
| The Company presents Earnings per share (EPS) in accordance with IAS 33 “Earnings per share” which has been shown on the face of statement of profit or loss and other comprehensive income.
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| i. Basic earnings per share (BEPS) |
| This has been calculated by dividing the profit or loss attributable during the year by the number of ordinary shares outstanding at the end of the year. |
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| ii. Diluted earning per share (DEPS) |
| No diluted EPS is required to be calculated for the year as there is no dilutive potential ordinary shares during the year under review. |
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| 3.23 | Transaction with related parties |
| As per IAS 24 “Related Party transaction”, parties are considered to be related if one of the party has the ability to control the other party or exercise significant influence over the other party in making financial and operating decisions. The Company carried out transactions in the ordinary course of business at an arm’s length basis at commercial rates with related parties. |
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| 3.24 | Post employment benefits |
| The Company is drafting its policy for retirement benefit obligation to its employees aligning with the requirement of the Labor Act 2006(as amended) and computing the amount of total obligation. The details rules and Trust are yet to form. However during the year the Company kept BDT 30,000,000 as provision for retirement benefit obligation on lump sum basis in order to gradually buildup the fund. The management believes that the amount will cover significant amount of its obligation and it will pay off the subsequent final payment to the retired employees from Company’s operation until the fund fully builds up. |
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| 3.25 | Event after the reporting period |
| Events after the reporting period that provide additional information about the Company’s position at the date of statement of financial position or those that indicate the going concern assumption is not appropriate are reflected in the financial statements. Events after the reporting period that are not adjusting events are disclosed in the notes when material. There is no material event that had occurred after the reporting period to the date of issue of these financial statements, which could affect the figures stated in these financial statements. |
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| Financial risk management |
| The company management has overall responsibility for the establishment and oversight of the company’s risk management framework. Risk management policies, procedures and systems are reviewed regularly to reflect changes in market conditions and the company’s activities. The company has exposure to the following risks from its use of financial instruments. |
| ● Credit risk |
| ● Liquidity risk |
| ● Market risk |
| Credit risk |
| Credit risk is the risk of a financial loss to the company if a customer or counterparty to a financial instrument fails to meet its contractual obligations and arises principally from the company’s receivables. Management has a credit policy in meet its contractual obligations and arises principally from the company’s receivables. Management has a credit policy in place and exposure to credit risk is monitored on an ongoing basis. Risk exposures from other financial assets, i.e. Cash at bank and other external receivables are nominal. |
| Liquidity risk |
| Liquidity risk is the risk that the company will not be able to meet its financial obligations as they fall due. The company’s approach to managing liquidity (cash and cash equivalents) is to ensure, as far as possible, that it will always have sufficient liquidity to meet its liabilities when due, under both normal and stressed conditions, without incurring unacceptable losses or risking damage to the company’s reputation. Typically, the company ensures that it has sufficient cash and cash equivalents to meet expected operational expenses, including financial obligations through preparation of the cash flow forecast, prepared based on time line of payment of the financial obligation and accordingly arrange for sufficient liquidity/fund to make the expected payment within due date. In extreme stressed conditions, the company may get support from the related company in the form of short term financing. |
| 4.03 Market risk |
| Market risk is the risk that any change in market prices such as foreign exchange rates and interest will affect the company’s income or the value of its holdings of financial instruments. The objective of market risk management is to manage and control market risk exposures within acceptable parameters. |
| (a) Currency risk |
| The company is exposed to currency risk on certain revenues and purchases such as revenue from foreign customers and import of raw material, machineries and equipment. Majority of the company’s foreign currency transactions are denominated in USD and EURO and relate to procurement of raw materials, machineries and equipment from abroad. |
| (b) Interest rate risk |
| Interest rate risk is the risk that arises due to changes in interest rates on borrowing. There was no foreign currency loan which is subject to floating rates of interest. Local loans are, however, not significantly affected by fluctuations in interest rates. The company has not entered into any type of derivative instrument in order to hedge interest rate risk as at the reporting date. |
| 3.26 | General |
| Figures appearing in these financial statements have been rounded off to the nearest taka. |
