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ALARABANK

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ALARABANK 08-Jul-2020

(Continuation news of ALARABANK): and in 'International Accounting Standard 1 Presentation of Financial Statements'. However, the- Bank would continue to liaison with regulators and related stakeholders and observe the market practice for uniformity and comparability, and-take necessary actions in line with regulatory guidelines and market practice. (end)

ALARABANK 08-Jul-2020

(Continuation news of ALARABANK): impact of these lease items in the Balance Sheet and Profit and Loss Account of the Bank for the year 2019 is not considered to be material. Therefore, considering the above implementation issues the Bank has not taken IFRS 16 adjustments on the basis of overall materiality as specified in the materiality guidance in the 'Conceptual Framework for Financial Reporting' (cont.9)

ALARABANK 08-Jul-2020

(Continuation news of ALARABANK): defined 'low value asset ' which are to be excluded from IFRS 16 requirement and considered lease of 'ATM Booths and other installations' as low value asset. Thereafter, the Bank has reviewed lease arrangements for 'office premises' for consideration under IFRS 16. As per the preliminary assessment of leases for 'office premises', the Bank has concluded that the potential (cont.8)

ALARABANK 08-Jul-2020

(Continuation news of ALARABANK): (Appendix B) of IFRS 16 provide some qualitative guidance on low value asset, but these guidance is focused towards moveable asset. Immovable asset like rental of premises (i.e. real estate) is not covered on those guidance, nor any benchmark on quantification guidance on low value items have been agreed locally in Bangladesh. Nevertheless, as a first step the Bank has (cont.7)

ALARABANK 08-Jul-2020

(Continuation news of ALARABANK): regarding treatment of lease rent, depreciation on ROU assets and interest on lease liability for income tax purposes and applicability of VAT on such items. Finally, paragraph 5 of IFRS 16 provide the recognition exemptions to short-term leases and leases for which the underlying asset is of low value. Although, paragraphs B3 to B8 of the Application Guidance (cont.6)

ALARABANK 08-Jul-2020

(Continuation news of ALARABANK): profit or loss account over the lease term replacing the previous heading 'lease rent expenses. While implementing IFRS 16, the Bank observed that IFRS 16 is expected to have impact on various regulatory capital and liquidity ratios as well as other statutory requirements issued by various regulators. In addition, there are no direction from National Board of Revenue (NBR) (cont.5)

ALARABANK 08-Jul-2020

(Continuation news of ALARABANK): recognizing a right-of-use (ROU) asset (i.e. the right to use the office building, branches, service center, call center, warehouse, etc.) and a corresponding lease liability. The asset and the liability are initially measured at the present value of unavoidable lease payments. The depreciation of the lease asset (ROU) and the interest on the lease liability is recognized in the (cont.4)

ALARABANK 08-Jul-2020

(Continuation news of ALARABANK): with such a rental agreement being classified as operating lease would have been considered as an off-balance sheet item. However, IFRS 16 does not require a lease classification test and hence all leases shall be accounted for as on balance sheet item (except some limited exception i.e. short-term lease, leases for low value items). Under IFRS 16, an entity shall be (cont.3)

ALARABANK 08-Jul-2020

(Continuation news of ALARABANK): IFRS 16 defines that a contract is (or contains) a lease if the contract conveys the right to control the use of an identified asset for a period of time in exchange for consideration. IFRS 16 significantly changes how a lessee accounts for operating leases. Under previous IAS 17, an entity would rent an office building or a branch premises for several years (cont.2)

ALARABANK 08-Jul-2020

Emphasis of Matter: We draw attention to note 2.8.4 of the financial statements, which describes matters related to implementation of 'FRS 16 Leases' including preliminary assessment of its impact as assessed by management. Our opinion is not modified in respect of this matter. Note 2.8.4 IFRS 16: Leases: IFRS 16 Leases is effective for the annual reporting periods beginning on or after 1 January 2019. (cont.1)

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