1. ASSIGNMENT
ON
ANNUAL REPORT-2011 (GRAMMENPHONE)
SUBMITTED TO:
BANGLADESH UNIVERSITY IN SCHOOL OF BUSINESS
SUBMITTED BY:
MD. RAKIBUL HASAN
MBA 28th BATCH
I D- 201213228004
SUBMITTED COURSE:
INTERNATIONAL ACCOUNTING STANDARD
COM-522
SEMESTER: SPRING
SUBMITTED DATE : 4/05/2012
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2. In the name of Allah, the Beneficent, the Merciful.
May 4, 2012
To,
Course instructor
Master of Business Administration
Bangladesh University
Sub: Submission of the Assignment.
Dear Sir,
It is our pleasure to submit the Assignment on subject IAS (International Accounting
Standards). This has arranged to one as the partial fulfillment of our accounting program.
The financing and accounting program was valuable experience for us. We found our
Assignment work challenging and interesting.
We have tried our level best to follow the guidelines of you. The whole experience of this
Assignment enabled us to get an insight into the real life solution. We will be happy to
provide further clarification regarding this Assignment whenever necessary.
Sincerely yours,
Student of MBA 28th Batch
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3. ACKNOWLEDGEMENTS
First of all we would like to express my humble gratitude to the Almighty Allah who has helped
us to complete the Assignment successfully. We are also grateful to the people who helped us to
complete the Assignment. We must acknowledge our debt to our course instructor Department
of Business Administration, University of Bangladesh for his valuable time, consideration and
expert touch on the report. He has continuously helped, cooperated and advised us how to
prevail over the problem; We have faced in preparing the Assignment. We are also thankful to
him for his valuable suggestions regarding the Assignment.
We are grateful to the department of M. B. A. University of Bangladesh to give us such
opportunity of the practical situation of financial reporting.
Thanks to all
Students of MBA 28th, 27 th and 23 rd batch
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4. Table of Context
Particulars Page
No.
1 History of GP: 5
2 Corporate Governance of Grameenphone 6
3 Board Organization & Structure 6-7
4 Control Environment in Grameenphone 8
5 Board Committees 8-10
6 Corporate information 11
7 Objective 12
8 Findings of Annual Report 13
9 Financial Review - 2011 13-15
10 Conclusion 15
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5. History of GP:
Before Grameenphone’s inception, the phone was for a selected urbanized few. The cell
phone was a luxury: a flouting accessory for the select elite.The mass could not contemplate
mobile telephony as being part of their lives. Grameenphone started its journey with the
Village Phone program: a pioneering initiative to empower rural women of Bangladesh. The
name Grameenphone translates to “Rural phone”. Starting its operations on March 26, 1997,
the Independence Day of Bangladesh, Grameenphone has come a long way. Grameenphone
pioneered the then breakthrough initiative of mobile to mobile telephony and became the first
and only operator to cover 98% of the country’s people with network.
Since its inception Grameenphone has built the largest cellular network in the country with
over 13,000 base stations in more than 7000 locations. Presently, nearly 99 percent of the
country's population is within the coverage area of the Grameenphone network.
Grameenphone has always been a pioneer in introducing new products and services in the
local market. GP was the first company to introduce GSM technology in Bangladesh when it
launched its services in March 1997.
Grameenphone was also the first operator to introduce the pre-paid service in September
1999. It established the first 24-hour Call Center, introduced value-added services such as
VMS, SMS, fax and data transmission services, international roaming service, WAP, SMS-
based push-pull services, EDGE, personal ring back tone and many other products and
services. The entire Grameenphone network is also EDGE/GPRS enabled, allowing access to
high-speed Internet and data services from anywhere within the coverage area. There are
currently nearly 2.6 million EDGE/GPRS users in the Grameenphone network.
Today, Grameenphone is the leading telecommunications service provider in Bangladesh
with more than 36 million subscribers as of December 2011.
Furthermore,
• Grameenphone has so far invested more than BDT 17,093 crore to build the network
infrastructure
• Grameenphone is one of the largest taxpayers in the country, having contributed more
than BDT 24,517 crore in direct and indirect taxes to the Government Exchequer over
the years.
• There are now more than 1600 GP Service Desks across the country covering nearly
all upazilas of all districts and 94 Grameenphone Centers in all the divisional cities
• Grameenphone has more than 5000 full and temporary employees.
• 300,000 people are directly dependent on Grameenphone for their livelihood, working
for the Grameenphone dealers, retailers, scratch card outlets, suppliers, vendors,
contractors and others.
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6. Corporate Governance of Grameenphone:
Grameenphone (GP) firmly believes that business operation means dealing with the
stakeholders with trust and confidence and there is a link between stakeholders' value and
governance. With that objective in view, GP has been working relentlessly to create
long-term stakeholders value through providing as well as maintaining vastly
innovative, easy-to-use and best-value telecommunications services in the market. In
pursuing these objectives, the Board of Directors of the Company is committed to high
standards of Corporate Governance which it believes are critical to business integrity and
performance. As a responsible corporate citizen, GP is also committed to maintaining full
ransparency and positive business conduct internally and towards the community with which
GP carries out its business, including its suppliers, customers and business partners. At the
same time the Company expects that all its Board of Directors, employees and
suppliers would act with honesty, integrity and openness. Being a public listed
company, the Board of Directors of Grameenphone has a pivotal role to play in
meeting stakeholders’ interests. In discharging such obligations, the Board of Directors
and the Management Team of Grameenphone are committed to maintaining effective
Corporate Governance through a culture of accountability, transparency, well-understood
policies and procedures. The Board of Directors and the Management Team also endeavor
to comply with all applicable laws of Bangladesh and all internally documented regulations,
policies and procedures. Hence, GP is a diligently transparent company and maintains
highest level of integrity and accountability practiced on a global standard.
Board Organization & Structure
a) Role of the Board
The Directors of the Board are appointed by the Shareholders at the Annual General Meeting
(AGM) and accountable to the Shareholders. The Board is responsible for ensuring that
the business activities are soundly administered and effectively controlled. The
Directors of the Board keep themselves informed about the Company's financial position and
ensure that its activities, accounts and asset management are subject to adequate control. The
Board also ensures that Grameenphone Policies & Procedures and Codes of Conduct are
implemented and maintained, and the Company adheres to generally accepted principles for
good governance and effective control of Company activities. In addition to the other legal
guidelines, the Board has also adopted “Governance Guidelines for the Board” for
ensuring better governance in the work and the administration of the Board. The Board is also
guided by a Delegation of Authority which spells out the practices and processes in
discharging its responsibilities.
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7. b) Board Composition
The Board in GP is comprised of nine Directors, including the Chairman who is elected from
amongst the members. In compliance with the Corporate Governance Guidelines issued by
the Securities and Exchange Commission (SEC) and as per the provision of the Articles of
Association (AoA) of the Company, the Board of Directors has appointed an Independent
Director in 2010. We believe that our Board has the optimum level of knowledge, composure
and technical understanding about Company’s business which, combined with its diversity of
culture and background stands as the perfect platform to perform and deliver. Stands as the
perfect platform to perform and deliver.
C. Board Meetings
The AoA of the Company requires the Board to meet at least four times a year or more when
duly called for in writing by a Board member. Dates for Board Meetings in a year are decided
in advance and Notice of each Board Meeting is served in writing well in advance. Such
Notice contains detailed statement of business to be transacted at each meeting. The Board
meets for both scheduled meetings and on other occasions to deal with urgent and important
matters that require attention.
d) Division of work for the Board and Chief Executive Officer (CEO)
The roles of the Board and Chief Executive Officer are separate and deligation of
responsibilities is clearly established, set out in writing and agreed by the Board to
ensure transparency and better corporate governance. To that end, GP has also adopted
“Governance Guidelines for Chief Executive Officer”. The CEO is the authoritative head for
day-to-day management in GP. He acts to reasonably ensure that GP operates business as
per the Articles of Association, decisions made by the Board and Shareholders, as
well as according to Grameenphone Policies and Procedures and applicable regulatory
legislations.
e) Subsidiary’s Relationship
The Board of Directors of the subsidiary company of GP is obliged to provide the Board of
Directors of GP with any information which is necessary for an evaluation of the Company’s
position and the result of the Company’s activities. GP notifies the subsidiary company’s
Board of Directors about the matters which may be of importance to the Company as a
whole. GP also notifies the subsidiary company’s Board of Directors about decisions which
may be of importance to the subsidiary company before a final decision is made.
f) Access to Information
The Board recognizes that the decision-making process is highly dependent on the quality of
information furnished. In furtherance to this, every Director has access to all
information within the Company. Throughout their tenure in office, the Directors are
continually updated on the Company’s business and the regulatory and industry specific
environments in which it operates. These updates are by way of written briefings and
meetings with senior executives and, where appropriate, external sources.
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8. Board Committees
For better, quicker and furnished flow of information and thereby exercising effective
governance, the Board has also constituted a number of Committees and has delegated certain
responsibilities to the Board Committees to assist in discharging responsibilities. The role
of Board Committees is to advise and make recommendations to the Board. Each
Committee operates in accordance with the Terms of Reference (TOR) approved by the
Board. The Board reviews the TOR of the Committees from time to time. The Board appoints
the members and the Chairman of each Committee.
Control Environment in Grameenphone
In implementing and ensuring the right Governance in Grameenphone, the Board and
Management Team ensure the following:
a) Beyond Budgeting Management Model
“Beyond Budgeting” is a strategic management model that focuses on relating strategy
with actions and emphasizes on regular monitoring of the KPIs with a realistic
predictive model – the five-quarter rolling forecast. This enables a forward-looking and
action oriented approach towards managing the business. The resource allocations are
dynamic and are based on the intended actions linked with the strategy. It aims to build a
culture of freedom through responsibility and thereby leading to increased
responsiveness to surrounding changes.
The model focuses on initiatives to minimize the gap between the targets (KPIs) and
forecasts. The corporate level initiatives are cascaded down at divisional as well as
individual levels and reviewed and monitored on a continuous basis against the forecasts,
which serves as a radar screen, showing the future outcome of actions undertaken. Targets/
KPIs are set on relative terms to reflect the changes in business environment and thus
ensuring a performance culture focused on attainting the target and steering the
Company towards fulfilling its strategic ambitions.
b) Financial Reporting
Grameenphone has strong financial reporting procedures in line with the requirements
of International Financial Reporting Standard (IFRS), Bangladesh Accounting Standard
(BAS) and other related local legislations. In Grameenphone, financial reports are
generated from ERP (Enterprise Resource Planning) system. Apart from the statutory
reporting, Grameenphone also maintains regular reporting to its group company,
Telenor which consolidates all its subsidiaries’ financial information in its consolidated
Financial Statements.
c) Operational Excellence
Operational Excellence has been one of the key focus areas for Grameenphone since 2008.
One of its major cost and operational efficiency initiatives has been the swapping of network
equipment. This will not only improve the network quality and capacity, but will also reduce
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9. fuel and power consumptions significantly. Moving to its corporate headquarter
“GPHouse” and associated benefits such as waste water recycling, reduced illumination
requirement, paperless approval systems and various scale effects are some of the notable
efficiency drives in addition to numerous large and small efficiency initiatives across the
company. Grameenphone has also made significant strides in green initiatives which have
reduced its carbon footprint and led to increased utilization of solar energy. From year 2011,
Grameenphone has undertaken a companywide Cost Transformation Project which aims
towards streamlining GP processes thereby optimizing costs and making the Company
more efficient in the years to come.
d) Business Review and Financial Review
Business Review and Financial Review are conducted quarterly. The purpose of Business
Review is to ensure strategic control and follow-up of results based on the prevailing strategic
objectives and value drivers and key changes to risk exposure. Financial Review provides
the internal quarterly results follow-up for the Company. The purpose is to provide an
analysis of the economic and financial situations, which will then form the basis for
external reporting and presentations, and to provide quality assurance for the financial
reporting. In addition, internal review on monthly financial results is conducted by
CEO and CFO on a monthly basis.
e) Management of Assets
Grameenphone, in its pursuit of best quality network for its subscribers, has been investing in
cutting edge telecom technology since its inception. Transparency and accountability is
ensured at all stages from acquisition to disposal to protect the interest of Shareholders.
Internationally accepted safety measures have been implemented and periodic physical
verification is undertaken on test basis to safeguard the assets and to ensure
representational faithfulness of reported numbers. All the assets are adequately insured
against industrial risks with local and international insurance companies.
f) Statutory Audit
Statutory Audit of the Company is governed by the Companies Act, 1994 and Securities and
Exchange Rules 1987. As per these regulations, auditors are appointed at each Annual
General Meeting (AGM) and their remuneration is also fixed by the Shareholders at the
AGM. Appropriate structure is in place as per corporate governance best practices to ensure
independence of statutory auditors. In addition to the audit of annual financial statements,
the auditors also carry out interim audit and review the quarterly financials of the
Company. 34/35Annual Report 2011Corporate Governance
g) Internal Audit
Internal Audit supports the Company in achieving its objectives by bringing a
systematic and disciplined approach to evaluate and improve the effectiveness of its
risk management, control and governance processes. In order to ensure organizational
independence of Internal Audit, the Head of Internal Audit reports functionally to the
Audit Committee and administratively to the Chief Executive Officer.
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10. Grameenphone Internal Audit is empowered to carry out its activities in Grameenphone and
its subsidiaries. Internal Audit activity is governed by the Internal Audit Charter, which
is approved by the Board. Grameenphone Internal Audit department discharges its
assurance and consulting activities through management of three distinct audit streams:
Finance, Technology and General Business processes. Additionally, a separate team is
responsible for quality assurance of internal audit activity. A risk-based annual audit
plan is in place, which takes into consideration the strategic imperatives and major
risks surrounding Grameenphone, while considering pervasive audit needs.
Grameenphone Internal Audit also works closely with Telenor Group Internal Audit in
sharing knowledge and resources to ensure achievement of internal audit deliverables.
h) Internal Control
Corporate Governance is well-built in GP and is reached to even greater height in terms of
sound internal control pursuits within the organization. In 2011, the practice has been
shifted from passive to active as
control owner/performers are now getting more involved, aware and proactive to
ensure internal control rather than being enforced. Partnering among Board of Directors,
Management and Employees of the Company has made this continuous success story
of pursuing Sarbanes Oxley Act in GP since 2006. The outcome of the effort is award
winning and true fair representation of financial report.The scope of Internal Control over
Financial Reporting (ICFR) includes Company Level Control (CLC) along with General
Computer Control (GCC) as well to ascertain operational efficacy, consistent and dependable
financial reporting, information security and legal compliance. This reasonable assurance has
become even more crucial after being a listed company in the country’s Stock Exchanges.
i) Dividend Policy
The Board of Directors has established a consistent Dividend Policy which forms the basis
for the proposals on dividend payments that it makes to the Shareholders taking into
consideration the business performance of the Company and its strategic initiatives. The
Board believes that it is in the best interest of Grameenphone to draw up a long-term
and predictable Dividend Policy. The objective of the policy is to allow the Shareholders
to make informed investment decisions.
j) Risk Management & Risk Mitigation
Risk Management at Grameenphone is concerned with earning competitive returns
from the Company’s various business activities at acceptable risk level. It supports the
Company’s competitiveness by developing a culture, practice and structure that
systematically recognizes and addresses future opportunities whilst managing adverse
effects (i.e. threats) through recognizing risk and acting appropriately upon it. The
Company has well defined risk management policy, procedures and processes to mitigate
strategic and enterprise level risks.
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11. ''FOR THE YEAR ENDED 31 DECEMBER 2011''
A. Corporate information
Grameenphone Ltd (hereinafter referred to as "GP"/"Grameenphone"/"the company")
is a public limited company incorporated in Bangladesh in 1996 under the Companies
Act 1994 and has its registered address at GPHOUS Bashundhara, Baridhara, Dhaka
1229. GP was initially registered as a private limited company and subsequently convert into
a public limited company on 25 June 2007. During November 2009, GP listed its shares with
both Dhaka and Chittagong Stock Exchanges. The immediate parent of GP is Telenor Mobile
Communications AS and the ultimate parent is Telenor AS both the companies are
incorporated in Norway. On 28 January 2010, Grameenphone formed a wholly owned
subsidiary namely Grameen phone IT Ltd (hereinafter referred to as "GPIT"/ "the subsidiary
company"), to provide IT services to GP a to external customers. GPIT launched its
commercial operation on 1 April 2010. These financial statements as at and for the year
ended 31 December 2011 include consolidated and separate finance statements. The
consolidated financial statements comprise the company and its subsidiary (together
referred to as " group"/"the group"). The separate financial statements present the
financial position and performance of Grameenpho Ltd. Statement of financial position
as at the beginning of 1 January 2010 represents individual financial statement
Grameenphone Ltd as it had no subsidiary at that date. The group is primarily involved in
providing mobile telecommunication services (voice, data and other related services)
Bangladesh and IT related services. The company also provides international roaming
services through international roaming agreements with various operators of different
countries across the world. The Mobile Cellular License of Grameenphone, which was
acquired in 1996, expired on 10 November 2011 and is due renewal immediately thereafter.
As per the License Renewal Guidelines issued by MoPT (Ministry of Posts a
Telecommunications), Grameenphone has made necessary applications and also made
payment of all requisite fees regard to the said application.
However, disagreements arose between Bangladesh Telecommunication Regulatory
Commission (BTRC) and the renewing operators on the issues of applicable VAT deduction
on license fees and applicati of Market Competition Factor (MCF) to spectrum acquired in
2008. Grameenphone, among other operators, referred the two issues to Supreme Court
for clarification, on which the license renewal process became pending. However, t
Supreme Court has made it clear that GP operation is to continue without any
hindrance or obstruction whatsoev Following from the Supreme Court instruction, BTRC
also issued letter to GP assuring that our operation will continue is until these two issues
are sorted out by the Court, upon which renewed license will be forthcoming. GP
management believes that the license will definitely be renewed in course of time, because
both BTRC and Grameenphone have intere in renewing the licence and license renewal per
se is not the issue in contention. On 18 January 2012, the hearing of it case in High Court
commenced with the participation of both GP and BTRC counsels, which is expected to be
conclude within a very short time. Management therefore does not believe that there is any
significant uncertainty about the entit ability to continue as a going concern. These financial
statements accordingly have been prepared on the basis of going concern assumption.
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12. B. Objective:
The objective of the financial statement presentation project is to establish a global standard
that will guide the organisation and presentation of information in the financial statements.
Many companies are having a financial year ending December 31, and May each year will be
the month whereby all shareholders would receive the annual reports of their companies with
FYE December 31. For an ordinary retail investor, the only complete information of a
company is from the annual report. The annual report contains data and information that
form the basis of fundamental analysis of the company. But unfortunately, the herd of
investor and traders do not really understand the significance of annual report, and they do
not even bother to read the report they receive in CD or hardcopy every year. The worse is
that they depend solely on analyst reports from their brokers which they will receive weeks
after the annual report has been released. In order to avoid such types of problem every
company should follow the rules and guidelines of IASs in lieu of making a useful financial
statement.
Follow the proper guideline of IFRS and IAS is the most important to make a perfect annual
report. A useful financial statement is to a wide range of users in making economic decisions
For listed company of Bangladesh IFRSs guidelines based financial statement in the
annual report is so important to investors.
From the analysis of the annual report, we can achieve the following objectives:
1. Understanding the current operating performance, financial performance and future growth
prospects
2. Knowing the major owners, the Board and Management Team to assess their qualifications
and professional status and management quality
3. Identifying red flags in operations and management, and an investor may try to get answers
from the Board how they view the problems and what actions they are taking to resolve the
problems in the AGM.
4. Knowing the performance of various business segments
5. Assessing the strengths, weaknesses and growth potentials of the company
6. Knowing the major market participants and changes of their shareholdings
7. It will help in formulating investment decisions and strategies after a full analysis.
Annual report analysis is not about merely calculating financial ratios using the data from the
report, but it is about using those financial data and ratios and information provided to form a
prediction of the company.
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13. C.1 Findings of Annual Report:
1. Presentation of Financial Statement- IAS-1 (Notes 1 to 53)
2. Property , plant and equipment- IAS-16, Notes-4
3. Intangible Assets- IAS-38, Notes-5
4. Inventories- IAS-2, Notes-8
5. Revenue- IAS-18, Notes-34
6. Earning per share- IAS-33, Notes-45
7. Employee benefits- IAS-19, Notes-24
8. Income tax- IAS-12, Notes-29
9. Cash flow statement- IAS-7, Notes-12 (1-53)
10. etc
There are many financial elements presented in financial statement in different categories.
C.2 Financial Review - 2011
Grameenphone has maintained its leadership in the mobile industry once again in the year
2011 amidst heavy competition and unprecedented macroeconomic challenges.While
competition opted for price position, GP continued with its quality acquisition and
added 6.5 million subscribers to its subscription base.Macroeconomic factors like
double digit inflation, currency devaluation, multiple price hikes for fuel and power
brushed a dent in operating expenditure, however, business performance was strong
and still due to impressive revenue performance and operational efficiency measures
in spending areas. Reduction in SIM tax compensated a portion of the escalated opex
through reduced subsidy.
With innovative low cost distribution facilities and customized price plans for economy
users, GP has moved a step closer to the unreachable rural consumers. To promote
internetusage to the mass, Grameenphone has promoted the ‘Internet Utshob’ with 101
nationwide events in collaboration with “Prothom-Alo”, which was attended by more
than 300,000 students across the country. This was the biggest ever internet campaign in
Bangladesh so far.
Grameenphone has successfully completed its network up-gradation. This dramatic network
transformation has resulted in improved service quality, and energy & cost efficiency as well
as future readiness.
Subscriptions
 Subscriber base reached 36.5 million at the end of 2011.
 During the year, subscription base increased by 22% with 6.5 million additions.
 Active internet user increased to 5.2 million from 2.6 million of 2010.
 In a competitive market, GP managed to retain its subscriber market stable at around
43%.
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14. Revenue
 Increment of 19% (BDT 1,433 crore) in total revenue was driven by traffic revenue from
subscription growth and revenue from wholesale business.
 Impressive 24% growth in data revenues against 100% increase in active users was
mainly driven by low-cost mini-pack internet packages.
 New price plan ‘Spondon’ for time-conscious users and segmented micro campaigns
designed as per users’ need has given a good uplift in revenue.
 Stronger distribution network in the deep rural areas has given easy access to affordable
telecommunication services to rural subscribers
Operating expenditure
 Total operating expenditure in 2011 increased by 10% (BDT 374 crore) from 2010
against 19% revenue growth reflects the output of cost efficiency measures taken
throughout the year.
 The increase in spending was mainly from revenue driven costs and higher network
maintenance expenses resulted from Four-fold fuel price hike.
 The increase in spending was partly offset by reduced subsidy followed by SIM tax
reduction.
 A total savings of BDT 220 crore has been achieved through the operational excellence
initiatives during the year.
Net profit after Taxes
 Net profit margin increased to 21% from 14% of 2010, which was driven by BDT 819
corer increment in profit in 2011 compared to last year.
 Increase in profit after tax for the year 2011 compared to 2010 was mainly driven by
revenue growth and lower depreciation expenses, which was partly offset by higher
income taxes and losses on foreign exchange during the year.
 As a result, EPS for 2011 increased to BDT 13.99 from BDT 7.93 of 2010.
Total Assets
 Total asset base decreased marginally by BDT 60 crore between 2010 and 2011 mainly
due to higher depreciation of fixed assets compared to yearly addition and swapping of
network equipments with lower book value.
 Cash balance decreased due to payment of final dividend for the year 2010, interim
dividend for the year 2011 and the first installment of renewal fees for 2G License and
spectrum.
 Capital expenditure during 2011 was BDT 1,296 crore compared to BDT 846 crore of
2010, which was mainly spent for network modernization.
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15. Total Liabilities
 Total liabilities increased by BDT 1,089 crore during the year mainly on account of
payables against income tax and capital expenditures.
 The increase was partly offset by settlement of long term borrowings obligation and
reduced deferred tax liabilities.
Total Equity
 Total equity decreased by BDT 1,149 crore during the year 2011 due to payment of final
dividend for the year 2010 and interim dividend for the year 2011.
 This was partly offset by BDT 1,889 crore net profit generated from operations during the
year.
Conclusion:
An annual report is the only a pattern of a company which can evaluation a company’s
current position from all the way. Listed companies of Bangladesh prepare their financial
report or annual report by the guidelines of BFRS (Bangladesh Financial Reporting Standard)
and IFRS (International Financial Reporting Standard). In this regards, we think a company
maintain everything of financial instruments to make a standard financial statement. As a
result every company can ensure their stability in the present competition market by
calculation his present financial situation and future cash flow statement. We have learned
many important points from this report and can realized how it is important for our
developing business at all. If every company expose their annual report per yearly we think
those listed company can keep develop day by day by proper calculation of business position
on various environment and economic situation.
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