All unadjusted prepaid entries, unadjusted prepaid legal expenses, protested (uncollectible debt) bills and other expenses or losses of financial institutions are now shown as 'other assets', classified as bad or lost.
A central bank circular, issued Sunday, says the FIs concerned must maintain provisioning of up to cent per cent against such dud money or asset.
The circular, issued from the Department of Financial Institutions and Markets of Bangladesh Bank, says these instructions will be effective from the quarter ended September 2021.
According to the notification, any prepaid expenses for salary and allowances, travelling, entertainment, advertisement and business development etc that remain unadjusted for 12 (twelve) months or beyond will be classified as 'bad and loss' and 100-per cent provision must be maintained.
"As there is uncertainty in any unsettled legal actions", it says, "unadjusted expenses related to these legal actions will be classified as 'doubtful' and 50-per cent provision must be maintained."
"For settled legal actions, if there remain any unadjusted expenses, these will be classified as 'bad and loss' and 100-per cent provision must be maintained," the central bank instruction says.
If there is any possibility of recovery of protested bill, originated from fraud-forgery, robbery, fund embezzlement and other causes, it will be classified as 'doubtful' in qualitative judgment and 50-per cent provision will be applicable.
"If there is no possibility of recovery, it will be treated as 'bad and loss' and 100-per cent provision must be maintained," the circular says.
It also states that other expenses or losses shown in 'other assets' part will be classified as 'bad and loss' and 100-per cent provision must be maintained.
In terms of the above-mentioned policies the financial institutions will conduct their classification and provisioning of 'other assets' on quarterly basis--on 31 March, 30 June, 30 September and 31 December.
Financial Institutions will submit classification and provisioning statement of other assets within 30 days after the end of the each quarter to the Department of Financial Institutions and Markets of Bangladesh Bank and upload the same in enterprise-data warehouse (EDW) of Bangladesh Bank.
Financial Institutions will ensure reflection of the position of 'other assets' classification and provisioning in annual financial statements as per the dos laid out in this circular.
"Instructions provided in section 5.5 of FID Circular No-08, dated-03 August 2002 and template (FICL 5) for 'Other Assets' attached with FID Circular No-06, dated-20 August 2006 hereby stand superseded by this circular," the circular concludes.
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