Executive Summary

This is a research report that contains the Compliance of BAS-18 in Pharmaceutical &
Chemical industry of Bangladesh. Recognition of revenue is one of the most significant
concerns in the field of Accounting. This research shows the revenue recognition criteria
developed by ICAB in BAS 18 which originally adopted from IAS 18. This research is
originated for reviewing the revenue recognition practices by pharmaceutical and chemical
industry of Bangladesh based on some selected pharmaceutical and chemical company.

Table of Contents

Table of Content
Chapter: 1 Introduction
1.1 Background Of The Report
1.2 Objectives
1.3 Literature review
1.4 Scope
1.5 Methodology
1.6 Limitations
Chapter: 2 Overview Of Bangladesh Accounting Standards (BAS)
2.1 General Overview of BAS
2.2 BAS Guidelines
Chapter: 3 Overview of Bangladesh Accounting Standards 18(BAS-18)
3.1 General Overview of BSA-18
3.2 Revenue Measurement &Recognition Guidelines
Chapter: 4 Overview the Pharmaceutical & Chemical Industry of Bangladesh
4.1 General Overview of Pharmaceutical & Chemical Industry of Bangladesh
4.2 Contribution to GDP by Pharmaceutical & Chemical Industry
4.3 Problems of Pharmaceutical & Chemical Industry
Chapter: 5 Compliance of BAS-18 In Pharmaceutical & Chemical Industry of Bangladesh
5.1 List of Selected l Companies
5.2 Revenue Recognition Criteria
5.3 Setting Evaluation Standard
5.4 Data Analysis
Chapter: 6 Findings And Analysis
6.1 Findings
6.1 Analysis
Chapter: 7 Recommendation & Conclusion
7.1 Recommendation
7.2 Conclusion
Chapter: 8 References

Chapt
er 1

Introduct
ion

1.1 Background of the report

We the students of Master of Business Administration (M.B.A) of Jahangirnagar University
study the subjects related to business including Accounting, Management, Finance, Marketing,
Mathematics etc. The faculty of business studies tries to familiarize these each student so that
they can move comfortably in the business environment. As a part of that, to have a deep
knowledge, faculty of business studies arranges a thesis program, where a student have do a
research on a topic or on an organization.
Bangladesh Accounting Standards are the authoritative statements of how particular types of
transactions and other events should be reflected in financial statements prepared by the
business firms in Bangladesh listed in the Stock Exchanges of our country. According to
Securities and Exchange Rules 1987, every listed company is required to prepare its financial
statements in conformity with Bangladesh Accounting Standards.
The purpose of this research study is to gain insight into the potential effectiveness of
Bangladesh Accounting Standard (BAS)-18, Revenue. The results of this study are intended
to serve in the development of financial reporting that can be used by the pharmaceutical
industry of Bangladesh through effective revenue recognition policies and reporting. At the
present time, much doubt exists as to the application of this BAS-18 guideline. This research
will shed light on the application of BAS-18, revenue recognition and financial reporting.
The most important outcome of the study will be the ability to develop consistent and
effective reporting practice regarding the reporting of the pharmaceutical industry of
Bangladesh.

1.2 Objectives

Broad Objective
The general objective of this research is to complete the thesis program and submit a report.
As per requirement of EMBA program of Jahangirnagar University, one student needs to
work in a topic or on a business organization to acquire practical knowledge about actual
Business operation. The objective of this report is to get a good understanding of overall
process and procedure of Bangladesh Accounting Standard (BAS)-18, the revenue
recognition guideline and their uses in Pharmaceutical and chemical companies in
Bangladesh.
Specific Objective

To present an overview of "BAS".

A general description of the BAS-18.
To identify various revenue recognition guideline.
Use of BAS-18 in 15 selected Pharmaceutical and chemical companies.
Measure the compliance of BAS-18 by the Pharmaceutical and chemical companies.

Literature Review
In A Fresh Look at Revenue Recognition it is suggested that the FASB (Financial
Accounting Standards Board) and the IASB (International Accounting Standards Board) are
making progress toward a better, more consistent way for companies to recognize and measure
their revenue. The author has discussed the proposed model, as outlined in the discussion paper
issued on December 19th 2008, entitled, "Preliminary views on revenue recognition in
contracts with customers" (IASB, 2008) and asks how this differs from current practice.
(Pounder, 2009, page 16-61)
The Conceptual Framework developed by International Accounting Standards Board (IASB)
and which is adopted by Institute of Chartered Accountants of Bangladesh (ICAB) in the name
Bangladesh Accounting Standards (BAS). In the BAS, it is suggested that revenuearises in the
course of the ordinary activities of an entity and is referred to by a variety of differentnames
including sales, interest, dividends and royalties.

Scope

This research covers Bangladesh Accounting Standard (BAS)-18, Revenue. It includes the
process and procedure of recognition of revenue. This research includes the implementation
of BAS-18 only in the pharmaceutical and chemical industries of Bangladesh.

Methodology
For smooth and accurate study everyone has to follow some rules & regulations. The study
materials were collected from only one source:
Secondary sources:The only source of the information is secondary sources. The reason of
using secondary data as this research is based on the annual report. The sources are:

Company website.
Annual report.
Internet.
Various publications on BAS-18.
Reports on pharmaceutical companies.

Limitations of the Report

There were some problems while I have undergone the research. A wholehearted effort was
applied to conduct the research and to bring a reliable and fruitful result. In spite of having the
wholehearted effort, there exits some limitations, which acted as barrier. The limitations were

The research is limited only to the Revenue recognition process of 15 selected

pharmaceutical and chemical companies of Bangladesh based on their annual reports.

Another Problem was time constraints. The duration of my thesis program was only three

months. But this time is not enough for a complete and fruitful study.
For the confidentiality concern, access to some detailed financial information was not
available.

Chapt
er 2
Overview Of
Bangladesh

Accounting
Standards
(BAS)

2.1General overview of BAS

2.2 BAS guidelines

Chapt
er 3
Overview of
Bangladesh

Accounting
Standard
18-Revenue

3.1 General Overview of BAS-18

BAS-18 was effected in Bangladesh on at or after 1 January 2007 adopted from International
Accounting Standard-18.The objective of BAS 18 is to prescribe the accounting treatment for
revenue arising from certain types of transactions and events.According to Securities and
Exchange Rules 1987, every listed company is required to prepare its financial statements in
conformity with Bangladesh Accounting Standards.
Key definition
Revenue: the gross inflow of economic benefits (cash, receivables, other assets) arising from
the ordinary operating activities of an entity (such as sales of goods, sales of services,
interest, royalties, and dividends). [BAS 18.7]

3.2 Revenue Measurement & Recognition Guidelines

3.2.1Measurement of revenue:
Revenue should be measured at the fair value of the consideration received or receivable.
[BAS 18.9] An exchange for goods or services of a similar nature and value is not regarded as
a transaction that generates revenue. However, exchanges for dissimilar items are regarded as
generating revenue. [BAS 18.12]
If the inflow of cash or cash equivalents is deferred, the fair value of the consideration
receivable is less than the nominal amount of cash and cash equivalents to be received, and
discounting is appropriate. This would occur, for instance, if the seller is providing interestfree credit to the buyer or is charging a below-market rate of interest. Interest must be
imputed based on market rates. [BAS 18.11]
3.2.2Recognition of revenue:
It is probable that any future economic benefit associated with the item of
revenue will flow to the entity, and
The amount of revenue can be measured with reliability

BAS 18 provides guidance for recognising the following specific categories of revenue:
Sale of goods:

Revenue arising from the sale of goods should be recognised when all of the following
criteria have been satisfied: [IAS 18.14]

The seller has transferred to the buyer the significant risks and rewards of
ownership
The seller retains neither continuing managerial involvement to the
degree usually associated with owner
The amount of revenue can be measured reliably
It is probable that the economic benefits associated with the transaction
will flow to the seller, and
The costs incurred or to be incurred in respect of the transaction can be
measured reliably ship nor effective control over the goods sold

Rendering of services:
For revenue arising from the rendering of services, provided that all of the following criteria
are met, revenue should be recognized by reference to the stage of completion of the
transaction at the balance sheet data (the percentage-of-completion method): [BAS 18.20]
The amount of revenue can be measured reliably;
It is probable that the economic benefits will flow to the seller;
The stage of completion at the balance sheet date can be measured
reliably; and
The costs incurred, or to be incurred, in respect of the transaction can be
measured reliably.

When the above criteria are not met, revenue arising from the rendering of services should be
recognized only to the extent of the expenses recognized that are recoverable (a "costrecovery approach". [BAS 18.26]
Interest, royalties, and dividends
For interest, royalties and dividends, provided that it is probable that the economic benefits
will flow to the enterprise and the amount of revenue can be measured reliably, revenue
should be recognized as follows: [BAS 18.29-30]
Interest: using the effective interest method as set out in BAS 39
Royalties: on an accruals basis in accordance with the substance of the
relevant agreement
Dividends: when the shareholder's right to receive payment is established

3.2.3 Disclosure [BAS 18.35]

Accounting policy for recognizing revenue

Amount of each of the following types of revenue:
Sale of goods
Rendering of services
Interest
Royalties
Dividends

Within each of the above categories, the amount of revenue from exchanges of goods or
services
Implementation guidance
Appendix A to BAS 18 provides illustrative examples of how the above principles apply to
certain transactions.

Chapt
er 4

Overview
the
Pharmaceuti
cal &
Chemical
Industry of
Bangladesh

4.1 General overview of pharmaceutical& chemical industry

The pharmaceutical industry at a glance

Pharmaceutical remains one of the most technologically advanced sectors in the country.
Availability of skilled manpower at a competitive cost helps produce quality medicines

which are at orderable

Leading companies have been already accredited by major global regulatory authorities
As an increasing number of originator brand products goes o_ patent every year, this
creates opportunities for Bangladeshi generic drug companies to supply generic versions of

those drugs to the developed and regulated markets.

Pharmaceutical industry is the 3rd largest tax paying industry in the country employing

over 100000 people

The sector has maintained a steady double digit growth over the last few years and
currently domestic market is valued at $1.5 billion while export sales stands at only $70

million.
According to industry experts the country can achieve exponential growth in medicine
export fetching billions of dollars in export within a short span of time, if adequate support
in infrastructure development and other areas are provided without any more delay

4.2 Contribution to GDP by pharmaceutical& chemical industry

4.3 Problems pharmaceutical& chemical industry

Chapt
er 5

Compliance
of BAS-18 in
Pharmaceuti
cal &
Chemical
Industry of
Bangladesh
5.1 List of Selected Companies

In Dhaka Stock Exchange popularly known as DSE, there are 27 listed companies under
pharmaceutical and chemical industry. Among them 15 company has been selected as sample
in random basis. The companies are:

Serial number

Name of the companies

Marico Bangladesh Ltd

Glaxo SmithKline

Reckitt Benckiser(Bd.)Ltd

BeximcoPharma

ACI Limited

Beximco Synthetics

The IbnSina

Orion Pharma Ltd

Square Pharmaceuticals Ltd

10

Renata Ltd

11

JMI Syringes & Medical Devices Limited

12

Global Heavy Chemicals Ltd

13

Active Fine Chemicals Ltd

14

Pharma Aids Limited

15

AFC Agro Biotech Ltd

5.2 Compliance category

The research has been conducted based on three category of compliance as per BAS-18.
They are:
1. Key points for measurement of revenue
2. Key points for recognition of revenue
3. Key areas for disclousers

5.3 Setting Evaluation Standard for compliance

To get a result it is necessary to set standards. In this research, standards for campling
standard is given below

Serial Number

Status of Compliance

Marks

Full

1.00

Partial

0.50

None

0.00

5.4 Data Tables

Chapt
er 6
Findings &
Analysis

6.1 Findings

6.2 Analysis

Chapt
er 7

Recommend
ation &
Conclusion

7.1Recommendation

7.2Conclusion

Chapt
er 8
References