ASA University Review, Vol. 6 No. 2, July–December, 2012
Cash Flow Statement Disclosures in Pharmaceutical Companies: Bangladesh Perspective Mst. Joynab Siddiqua* Mohd. Takdir Hossan* Abstract
Cash flow statement is a vital part of the financial statements. Preparation of cash flow statement is required as per Companies Act 1994 and the public limited companies enlisted with stock exchange are to prepare this statement as per other statutory laws and regulations. The acceptance of International Accounting Standard- 7: Cash Flow Statement has added a new dimension to the preparation and presentation of financial statements in Bangladesh. The companies are now preparing this statement as an integral part of their financial statements. This paper examines empirically the current practices followed by sample companies in preparation of cash flow statement and concludes that the sample companies are in line (with few exceptions) with the requirements of International Accounting Standard (IAS)-7 or Bangladesh Accounting Standard (BAS)-7. It also proposes some suggestions for improving the presentation of the statement
Key words: Cash flow statement, IAS/BAS, Listed Company, Disclosure.
The purpose of a cash flow statement is to provide information on the cash flow from a company’s operating, investing and financing activities to enable the users of its financial statements to evaluate the ability of the company to generate cash and to use the historic cash flows to predict future cash flows. The cash flow information enhances the comparability of the operating performance by various companies, because it eliminates the effects that arise from the use of different accounting treatments for the same transactions and events. The use of cash flow information is gaining importance in the analysis of financial statements (Epstein 1991; Yap 1997; Jones and Widjaja 1998; Previts and Bricker 1994). Cashflow information is considered less open to manipulation than information on earnings, because it is based on the actual receipt and payment of cash only and not on the accrual and other accounting principles. Rees (1995:75) adds that the cash flow statement can be more informative than the other statements. However, the literature on the cash flow statement indicates that there are grey areas in cash flow reporting that are open to various interpretations (Everingham and Watson 2002). The perceived simplicity of the cash flow statement may therefore create synthetic confidence in the reliability of companies’ cash flow reporting and the comparability of various companies’ cash flow information. The acceptance of IAS-7: The Cash Flow Statement has added a new dimension to the preparation and presentation of financial statements in Bangladesh. This paper is an attempt to investigate into the state of cash flow reporting by the listed Bangladeshi
Lecturers, Department of Business Administration, ASA University Bangladesh
ASA University Review, Vol. 6 No. 2, July–December, 2012
Textiles and Clothing companies in general. The focus is not on the quality of the reporting of the companies but rather on what the reporting levels are in general.
Objectives of the study
The major objectives of the study are as follows: 1. to identify the current practice of cash flow statement of Pharmaceutical companies in Bangladesh. 2. to provide present cash flow statement format, structure and reporting on the basis of information provided in the annual reports of the selected listed Pharmaceutical companies in Bangladesh.
Methodology of the study
The study was conducted in accordance with secondary information obtained from various sources. The overview of standardization of financial reporting and the regulatory framework has been based on laws, regulation, and guideline and also on various published sources of information taken from International Accounting Standard Board (IASB) and Bangladesh Accounting...
References: Annual Reports of Sample Pharmaceutical Companies Listed in Dhaka Stock Exchange and Chittagong Stock Exchange 2009. Aziz Uddin, A.B.M and Bala., S.K.( 2001), “Cash Flow Reporting in Bangladesh”, The Cost & Management, Nov- Dec. ICMAB, p. 13. FASB Discussion Memorandum (1980), Reporting Funds Flow, Liquidity and Financial Flexibility, FASB, Stanford. Thomas H. Beechy. Joan E. D. Conrod, Intermediate Accounting, second Edition, Chpter 5, Exhibit 5-1 pp.191 Ghosh, Santi N. (2001),“Workshop Material on IAS # 7 : Cash Flow Statements” compiled under the Institute of Chartered Accountants of Bangladesh (ICAB)Project, Development of Accounting and Auditing Standards in Bangladesh, The World Bank. Government of Bangladesh (GOB) (1994), The Companies Act 1994 (Act No. 18 of 1994). Gup, B.E. & Samson, W.D. 1993. An analysis of patterns from the statement of cash flows. Financial Practice & Education, 3(2):73-79. Hendrickson, Eldom.S(1982), Accounting Theory, Richard D. Irwin, Inc., Illinois, p. 236. Hertenstein, J. & McKinnon, S. 1997. Solving the puzzle of the cash flow statement. Business Horizons, 40(1):69-76. International Accounting Standards Committee (IASC) (2000), International Accounting Standards 2000 International Accounting Standards Committee, London, “International Accounting Standard IAS 7 (revised 1992): Cash Flow Statements” in pp. 139165.International Federation of Accounting (IFAC) (1992), IFAC Handbook 1992: Technical Pronouncements (New York: IFAC). “IAS 7 (October 1977): Statement of Changes in Financial Position” in pp. 812- 816. Khan, M.H. & Akter, M.S. & Ghosh, S.K (2005), “Cash Flow Statement Disclosures: A Study of Banking Companies in Bangladesh”. Available at www.pcte.edu.in/site/OJMR/Finance/cashflow.pdf Keiso, Donald, E.and Jerry.J.Weygandt (1998), Intermediate Accounting, John Wiley & Sons, Inc. New York, 9th Edition, pp. 1275-76. Lee, T.A. 1982. Cash flow accounting and the allocation problem. Journal of Business Finance & Accounting, 9(3):341-352. Lee, T.A (1972), “A Case for Cash Flow Reporting”, Journal of Business Finance, Vol. 4, No. 2, pp. 27-36 as quoted in Studies of Accounting Theory, Steyn, B.W. & Hamman, W.D. 2003. Cash flow reporting: are listed companies complying with AC 118? Meditari, 11:167-180. Weygandt, Kieso, Kimmel, Accounting Principles, 9th edition, John, Wilely and Sons, Inc, pp. 732-733 Wallace, R.S.O. and Choudhury, M.S.I.And Pendelbary, M.(1997), “Cash Flow Statements: An International Comparison of Regulatory Positions”, The International Journal of Accounting, Vol. 32, No, 1, pp. 1-22
Cash Flow Statement Disclosures in Pharmaceutical Companies
List of the twelve Pharmaceutical companies studied.
1. 2. 3. 4. 5. 6. 7. 8. 9. 10. 11. 12. GlaxcoSmithKline Bangladesh Limited (2009) The IBN SINA Pharmaceutical Industry Ltd. (2009) BEXIMCO PHARMACEUTICAL LTD. (2009) ORION INFUSION LTD. (2009) ACI Formulation Limited (2009) Ambee Pharmaceutical Limited (2009) Square Pharmaceutical Ltd. (2009) Libra Infusions Limited (2009) BEACOM Pharmaceuticals Limited (2009) Rahman Chemicals Limited (2009) Renata Limited (2009) Therapeutics (Bangladesh) Limited (2009)
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