Independent University, Bangladesh

Assignment On FEKDIL LTD.

Submitted By:
Nabila Tabassum
ID-1930102
Course ID- ACN 305
SEC-02

Submitted To:
Md. Safiuddin ACMA, ITP
Lecturer (Department of Accounting)
Independent University, Bangladesh.

Submission Date- 4/09/2022

 LETTER OF TRANSMITTAL

3rd August, 2022

To,

Md. Safiuddin ACMA, ITP

Lecturer (Department of Accounting)

School of Business & Entrepreneurship (SBE)

Independent University, Bangladesh

Subject: Submission of Report

Respected Faculty,

It is a great pleasure for me to submit my report on “FEKDIL LTD”. The purpose of the report
was to acknowledge how the performance of the company has been over the course of time by
explaining the ratios. Then to identify whether the company has met with the minimum criteria
according to Standards of IAS and IFRS.I have tried my level best to follow the guidelines
provided by you and i have applied relevant concepts that i have learned throughout the course.
It is worth mentioning that i have enjoyed the whole event during preparing this report. So it
became an extremely interesting experience for me. I am very glad that you have given me the
opportunity and all the support to prepare this report from which i could learn so many things.

I hope you find this report satisfactory.

Thank you

Sincerely yours

Nabila Tabassum
 ACKNOWLEDGEMENT

First, we want to pay our gratitude to the almighty Allah for the preparation of the report
successfully.

Then, i would like to thank my respected course instructor MD. Safiuddin Sir to give me the
opportunity to do this work as well as for giving an overall concept on the process of preparation.
He helped me with proper instruction and theoretical knowledge for this report. So with due
respect I express my gratitude to him.

It was a great effort to do this report and i hope the effort will work out.
Table of Contents
Section 1: Summary of Enron Case: ........................................................................................................ 5
Section 2: A list of IAS and IFRS as adopted by Bangladesh. Make a disclosure checklist of
relevant IAS/ IFRS as applicable for your studied company. .............................................................. 7
Section 3: According to IAS-1 line items of the Financial Statements (Balance Sheet) and the
disclosures of my studied company................................................................................................... 10
Section 4: Criteria for recognizing and measuring of provisions, contingent assets, and contingent
liabilities:.............................................................................................................................................. 11
Section 5: The composition of current liabilities and non-current liabilities section of My studied
company: ............................................................................................................................................. 13
Section 6: Ratios of Current Ratio and Quick ratio ............................................................................ 16
Section 7: Debt to Asset ratio ............................................................................................................. 18
Section 8: Composition of Shareholder’s Equity Section and calculations of EPS, Diluted EPS and
P/E ........................................................................................................................................................ 19
Section 9: Final Comment ................................................................................................................... 20
10. ATTACHMENTS OF PICTURES: ................................................................................................... 21
Section 1: Summary of Enron Case:
The Enron controversy included the Enron Corporation, an American energy firm with
headquarters in Houston, Texas. Following the company's bankruptcy filing, which was made
public in October 2001, Arthur Andersen, one of the top five audit and accounting teams in the
world at the time, virtually ceased to exist. Enron was noted as the biggest audit failure at the
time in addition to being the biggest insolvency reorganization in U.S. history.

Kenneth Lay merged Houston Natural Gas and InterNorth to create Enron in 1985. Lay created a
team of executives that, through the use of accounting irregularities, special purpose
corporations, and inadequate financial reporting, were able to conceal billions of dollars in debt
from failing ventures and projects a few years ago, when Jeffrey Skilling was hired. Andrew
Fastow, the chief financial officer of Enron, and other executives deceived the audit committee
and board of directors about high-risk accounting procedures and put pressure on Arthur
Andersen to disregard the problems.

Revenue Recognition: Enron and other energy providers made money by building and
maintaining power stations, natural gas pipelines, warehousing, and processing facilities in
addition to offering services like market trading and risk management. Merchants are permitted
to record the market value as revenues and the costs of the commodities sold when they accept
the risk of purchasing and selling goods. An "agent," in contrast, offers the consumer a service
but does not take on the same hazards as merchants when buying and selling. When categorized
as agents, service providers may declare trading and brokerage charges as revenue, though not
for the complete transaction value.

Between 1996 and 2000, Enron's revenues increased by more than 750%, rising from $13.3
billion in 1996 to $100.7 billion in 2000. This expansion of 65% per year was extraordinary in
any industry, including the energy industry, which typically considered growth of 2–3% per year
to be respectable. For just the first nine months of 2001, Enron reported $138.7 billion in
revenues.

Market-to-Market Accounting: Skilling insisted that mark-to-market accounting be used when

he joined Enron, arguing that it would accurately reflect economic worth. The strategy was
adopted by Enron as the first nonfinancial corporation to account for its intricate long-term
contracts. Once a long-term contract has been signed, mark-to-market accounting mandates that
income be evaluated as the actual value of net future cash flow. It was frequently difficult to
predict whether these contracts would be profitable and what those costs would be. Investors
were frequently given inaccurate or misleading information as a result of the significant
differences between stated profits and cash.

Special Purpose Entities: To conceal its debt, Enron formed hundreds of fake businesses.
Sponsors established shell corporations, while private equity investors and loan finance provided
the funding. In its tax shelters for the Thomas and Condor deals, the company used partnerships;
for the Apache deal, financial asset securitization investment trusts (FASITs); and for the
Cochise acquisition, REMICs and REITs.

After the stock price of Enron fell to less than $1 by the end of November 2001, from a high of
US$90.75 per share in mid-2000, shareholders sued for $40 billion. As the U.S. Securities and
Exchange Commission (SEC) launched an inquiry, Dynegy, a rival corporation from Houston,
made a very low-ball bid to buy the business. After the sale fell through, Enron went into
bankruptcy under the US Bankruptcy Code on December 2, 2001. Up until the WorldCom crisis
the following year, Enron's $63.4 billion in assets making it the biggest corporate bankruptcy in
American history.

Prosecutions against numerous Enron executives resulted in a number of them receiving prison
sentences, including Lay and Skilling. As a result of Arthur Andersen's conviction for
improperly destroying records related to the SEC inquiry, the company's authorization to audit
public firms was revoked, thus forcing its closure. When the decision was reversed by the U.S.
Supreme Court, Arthur Andersen had already lost most of its clients and was no longer in
business. Despite suffering billion-dollar losses in annuities and stock values, Enron's employees
and stockholders only won modest compensation from lawsuits.

New laws and regulations were passed as a result of the scandal to increase the reliability of
financial statements for public firms. The Sarbanes-Oxley Act, one bit of legislation, enhanced
the penalties for falsifying, destroying, or manipulating records in the course of government
investigations or for trying to mislead shareholders. The law enhanced the obligation for auditing
companies to maintain their objectivity and independence from their clients
Section 2: A list of IAS and IFRS as adopted by Bangladesh.
Make a disclosure checklist of relevant IAS/ IFRS as
applicable for your studied company.

SL IAS & Name of the IAS and IFRS Applicable for Reference
NO IFRS No FEKDIL
1 IAS 1 Presentation of Financial Applicable but Annual Report,
Statements Under Reviews pg-56
2 IAS 2 Inventories Applicable but Annual Report,
Under Reviews pg-56
3 IAS 7 Statement of Cash Flows Applicable Annual Report,
pg-61(7.17)
4 IAS 8 Accounting Policies, Changes in Applicable Annual Report,
Accounting Estimates and Errors pg-61-(7.16-2nd
points)
5 IAS 10 Events after the Reporting Period Applicable but Annual Report,
Under Reviews pg-56
6 IAS 12 Income Taxes Applicable but Annual Report,
Under Reviews pg-56
7 IAS 16 Property, Plant and Equipment Applicable but Annual Report,
Under Reviews pg-56
8 IAS 19 Employee Benefits Applicable but Annual Report,
Under Reviews pg-56
9 IAS 20 Accounting for Government
Grants and Disclosure of
Government Assistance
10 IAS 21 The Effects of Changes in Foreign Applicable but Annual Report,
Exchange Rates Under Reviews pg-56
11 IAS 23 Borrowing Costs Applicable but Annual Report,
Under Reviews pg-56
12 IAS 24 Related Party Disclosures Applicable Annual Report,
pg-83(47.00 and
47.01)
13 IAS 26 Accounting and Reporting by
Retirement Benefit Plans
14 IAS 27 Separate Financial Statements
15 IAS 28 Investments in Associates and Applicable Annual report,
Joint Ventures (pg-65, 9.01-
List of associate
Undertakings as
per IAS-28)
16 IAS 29 Financial Reporting in
Hyperinflationary Economies
17 IAS 32 Financial Instruments: Presentation
18 IAS 33 Earnings per Share Applicable but Annual Report,
Under Reviews pg-57
19 IAS 34 Interim Financial Reporting
20 IAS 36 Impairment of Assets Applicable but Annual Report,
Under Reviews pg-57
21 IAS 37 Provisions Contingent Liabilities Applicable but Annual Report,
and Contingent Assets Under Reviews pg-57
22 IAS 38 Intangible Assets Applicable but Annual Report,
Under Reviews pg-57
23 IAS 39 Financial Instruments: Recognition
and Measurement
24 IAS 40 Investment Property
25 IAS 41 Agriculture
1 IFRS 1 First-time Adoption of International
Financial Reporting Standards
2 IFRS 2 Share-based Payment
3 IFRS 3 Business Combinations
4 IFRS 5 Non-current Assets Held for Sale and Applicable Annual
Discontinued Operations Report, pg-58,
7.01.04
(Depreciation-
3rd para)
5 IFRS 6 Exploration for and Evaluation of Mineral
Resources
6 IFRS 7 Financial Instruments: Disclosures
7 IFRS 8 Operating Segments
8 IFRS 9 Financial Instruments
9 IFRS 10 Consolidated Financial Statements
10 IFRS 11 Joint Arrangements
11 IFRS 12 Disclosure of Interests in Other Entities
12 IFRS 13 Fair Value Measurement Applicable Annual
but Under Report, pg-57
Reviews
13 IFRS 14 Regulatory Deferral Accounts
14 IFRS 15 Revenue from Contracts with Customers Applicable Annual
but Under Report, pg-57
Reviews
15 IFRS 16 Leases
16 IFRS 17 Insurance Contracts
Section 3: According to IAS-1 line items of the Financial
Statements (Balance Sheet) and the disclosures of my
studied company.
SL NO Line Items Compliance Reference
A Property, plant and equipment Disclosed Annual report, pg-
51, notes-8,
2138130133
B Investment property
C Intangible assets Disclosed Annual report, pg-
51, 3521839
D Financial assets (excluding amounts
shown under (e), (h), and (i))
E Investments accounted for using the
equity method
F Biological assets

G Inventories Disclosed Annual Report, pg-

51, notes-12,
1577469232
H Trade and other receivables Disclosed Annual Report, pg-
51, notes-11,
1476898809
I Cash and cash equivalents Disclosed Annual report, pg-
51, Notes-13,
206134150
J Assets held for sale
K Trade and other payables Disclosed Annual Report, pg-
51, Notes-24,
5866108
 L Provisions Disclosed Annual Report, pg-
51, notes-26,
8086553
M Financial liabilities (excluding amounts
shown under (k) and (l))
N Current tax liabilities and current tax
assets, as defined in IAS 12
O Deferred tax liabilities and deferred tax Disclosed Annual Report, pg-
assets, as defined in IAS 12 51, Notes-20,
69838140
P Liabilities included in disposal groups
Q non-controlling interests, presented
within equity
R Issued capital and reserves attributable
to owners of the parent.

Section 4: Criteria for recognizing and measuring of

provisions, contingent assets, and contingent liabilities:
An entity must recognize a provision if, and only if: [IAS 37.14]

a present obligation (legal or constructive) has arisen as a result of a past event (the obligating
event),
payment is probable ('more likely than not'), and
the amount can be estimated reliably.

An obligating event is an event that creates a legal or constructive obligation and, therefore,
results in an entity having no realistic alternative but to settle the obligation. [IAS 37.10]

A constructive obligation arises if past practice creates a valid expectation on the part of a third
party, for example, a retail store that has a long-standing policy of allowing customers to return
merchandise within, say, a 30-day period. [IAS 37.10]

A possible obligation (a contingent liability) is disclosed but not accrued. However, disclosure is
not required if payment is remote. [IAS 37.86]
In rare cases, for example in a lawsuit, it may not be clear whether an entity has a present
obligation. In those cases, a past event is deemed to give rise to a present obligation if, taking
account of all available evidence, it is more likely than not that a present obligation exists at the
balance sheet date. A provision should be recognized for that present obligation if the other
recognition criteria described above are met. If it is more likely than not that no present
obligation exists, the entity should disclose a contingent liability, unless the possibility of an
outflow of resources is remote. [IAS 37.15]

Criteria for measuring of a provision:

The amount recognized as a provision should be the best estimate of the expenditure required to
settle the present obligation at the balance sheet date, that is, the amount that an entity would
rationally pay to settle the obligation at the balance sheet date or to transfer it to a third party.
[IAS 37.36] This means:

 Provisions for one-off events (restructuring, environmental clean-up, settlement of a

lawsuit) are measured at the most likely amount. [IAS 37.40]
 Provisions for large populations of events (warranties, customer refunds) are measured at
a probability-weighted expected value. [IAS 37.39]
 Both measurements are at discounted present value using a pre-tax discount rate that
reflects the current market assessments of the time value of money and the risks specific
to the liability. [IAS 37.45 and 37.47].

In reaching its best estimate, the entity should consider the risks and uncertainties that surround
the underlying events. [IAS 37.42]

If some or all of the expenditure required to settle a provision is expected to be reimbursed by

another party, the reimbursement should be recognized as a separate asset, and not as a reduction
of the required provision, when, and only when, it is virtually certain that reimbursement will be
received if the entity settles the obligation. The amount recognized should not exceed the amount
of the provision. [IAS 37.53]

In measuring a provision consider future events as follows:

  Forecast reasonable changes in applying existing technology [IAS 37.49]
 Ignore possible gains on sale of assets [IAS 37.51]
 Consider changes in legislation only if virtually certain to be enacted [IAS 37.50]

Contingent Liabilities:

Since there is common ground as regards liabilities that are uncertain, IAS 37 also deals with
contingencies. It requires that entities should not recognize contingent liabilities – but should
disclose them, unless the possibility of an outflow of economic resources is remote. [IAS 37.86]

Contingent Assets:

Contingent assets should not be recognized – but should be disclosed where an inflow of
economic benefits is probable. When the realization of income is virtually certain, then the
related asset is not a contingent asset and its recognition is appropriate. [IAS 37.31-35]

FEKDIL has just disclosed provision in its Annual Report (Annual Report, page-61, notes-
7.20 – 3rd para) but there is no record of contingent assets and contingent liabilities.

Section 5: The composition of current liabilities and non-

current liabilities section of My studied company:
SL NO Current-Liabilities Compliance Reference
1 Subscription refundable(For IPO) Disclosed Annual Report, pg-
51, nots-22, 3109695
2 Dividend payable Disclosed Annual Report, pg-
51, 2205647
3 Mid-term loan Disclosed Annual Report, pg-
51, nots-23,
37508571
4 Accounts Payable Disclosed Annual Report, pg-
51, nots-24, 5866108
5 Accepted Bills payable Disclosed Annual Report, pg-
51, nots-25,
244486909
6 Provision for expenses Disclosed Annual Report, pg-
51, nots-26, 8086553
7 Tax payable Disclosed Annual Report, pg-
51, nots-27,
27598987
8 Short-Term Loan Disclosed Annual Report, pg-
51, nots-
28,620314141
9 Current portion of Long-Term loam Disclosed Annual Report, pg-
51, nots-29,
109085891
10 Payable for asset purchase Disclosed Annual Report, pg-
51, nots-30, 4001234
11 Worker’s profit participation fund Disclosed Annual Report, pg-
(WPPF) 51, nots-31
12 Other Liabilities Disclosed Annual Report, pg-
51, nots-32, 2196336

SL NO Non-Current Liabilities Compliance Reference

1 Employee Benefits Disclosed Annual Report, pg-
51, notes-18,
1225843
2 Long-Term Loan Disclosed Annual Report, pg-
51, notes-19,
46375251
3 Deferred Tax Liabilities Disclosed Annual Report, pg-
51, notes-20,
69838140
4 Deferred Tax Liabilities for other Disclosed Annual Report, pg-
comprehensive income 51, notes-21,
29226543
Section 6: Ratios of Current Ratio and Quick ratio

Name and Formula Results

2019-2020 2020-2021
Current ratio= (current (3339300145/ (3332598703/
assets/current liabilities) 931164977)= 1064460073)=
3.58615 3.13079

Comment
The current ratio is a ratio that compares all of a company's current assets to all of its current
liabilities. It is calculated as in most cases, they are assets that are cash or that will be converted
into cash in a year or less, as well as obligations that will be paid in a year or less, respectively.
Company current ratio is low, which indicates that company will have a tough time meeting your
immediate obligations such as debt and liabilities. As a rule of thumb, a current ratio of one or
above is considered favorable, and anything less than one is considered cause for concern. Here
we see in 2021 and 2022 both year company ratio3.58 and 3.13 is good enough. We see that
company current ration is more then one which indicate company healthy financial performance.

Quick ratio = (current assets - (1868094220/ (906037904/

inventory/current liabilities) 931164977)= 2.00619 1064460073)
= 0.85117

Comment
The quick ratio is believed to be a more conservative indicator than the current ratio, which
includes all current assets as a measure of their ability to pay for future liabilities. The higher the
result of the ratio test, the better a firm's liquidity and financial health. the lower the result of the
ratio test, the more likely it is that the company will difficulty paying its debts. Here we can see
in 2020 company quick ratio 2.00 which indicate better a firm's liquidity and financial health. On
the other hand, in 2021 company quick ratio is 0.85 which is low and that indicate in this year
company suffer and they face difficulty paying its debts.
Section 7: Debt to Asset ratio

Name and formula Results

2019-2020 2020-2021
(114384060/ (138312434/
Debt to asset ratio=
5728676400)= 5889569923)=
(total debt/total assets)
0.01997 0.02348

Comment
The debt to total assets ratio is an indicator of a company's financial leverage. It tells you the
percentage of a company's total assets that were financed by creditors. In other words, it is
the total amount of a company's liabilities divided by the total amount of the company's
assets.
The ratio of debt to assets is a very important way to figure out how financially risky a
company is. A ratio greater than 1 means that a lot of the company's assets are paid for by
debt, which means the company is more likely to go bankrupt. So, the safer a company is,
the lower the ratio. Here we see company Debt to asset ratio in 2020 was 0.01997 and in
2021 ratio was 0.023 which is less then 1 that means company’s assets are paid for by debt,
which means the company is more likely to go bankrupt.

Debt to equity ratio = (114384060/ (138312434/

(Total debt/ total 4151787183)= 4261060073)
Equity) 0.02755 = 0.03245

The debt-to-equity ratio is used to figure out how well a company can pay its bills. It basically
shows how healthy a company is as a whole. If the debt-to-equity ratio is high, more money
is being lent to the company at the risk of losing it. If the potential debts are too high, there
is a chance that the company will go out of business. A low debt-to-equity ratio is preferred
by many investors and lenders because it protects their interests. If business is going down.
So here we in 2020 and 2021 debt-to-equity ratio was 0.0275 and 0.0324.

Section 8: Composition of Shareholder’s Equity Section and

calculations of EPS, Diluted EPS and P/E
Shareholder’s Equity Compliance Reference
Section
Issued, Subscribed and paid Disclosed Annual Report, pg-51, notes-
up capital 14, 2187441710
Share premium Disclosed Annual Report, pg-51, notes-
15, 425000000
Retained Earnings Disclosed Annual Report, pg-51, notes-
16, 1089826164
Revaluation Surplus Disclosed Annual Report, pg-51, notes-
17, 558792199

Diluted Earnings per share 2019-2020 2020-2021

Not disclosed in Financial Not disclosed in Financial
Statement. Statement.
 Name and formula Results
2019-2020 2020-2021
Earnings per share (1017481166/119480919) (156216522/ 22005647) = 7.098929
(EPS) = (net income – =8.515846501
preferred dividends) ÷
average outstanding
common shares.
Outstanding shares of common stock a higher EPS suggests more value since investors would
pay more for a company's shares if they believe the company's profits are higher relative to its
share price. According to may analysis company earns significantly less EPS in 2020-2021
than in 2019-2020.
(15.20/8.51) = 1.78 (19.40/ 7.09) = 2.73
Compute P/E ratio =
(market price per
share/EPS)

P/E ratios are used by investors and analysts to compare the value of a company's shares to the
value of the shares of another company. It can also be used to compare how a company is doing
now to how it was doing in the past, or to compare how different markets are doing now
compared to how they were doing in the past.

We can see that the company ratio in 2020 is 1.78, indicating that their current stock price was
not so high relative to earnings when compared to their EPS. However, its P/E ratio was
increased to 2.73 in 2021. That's not so positive indicator for the business.

Section 9: Final Comment

After analysis company ratio, here we see company need to improve their quick ratio because in
2021 their quick ratio very low. So, if company Control overhead expenses and change their
payment cycle it is help to improve their quick ratio health. Also, company need to work with
debt to asset ratio because this ratio very low. The company can raise sales and revenue without
increasing operating expenses. Increased sales can reduce debt and enhance the debt-to-assets
ratio. They also need improve P/E ratios their when a company pays dividends, its P/E ratio can
go up.

10. ATTACHMENTS OF PICTURES: