Analysis of Foreign Currency Translation for Trust Bank Limited 2020

This report examines the foreign currency translation practices of Trust Bank Limited in Bangladesh, focusing on the year 2020. The analysis is based on the bank's consolidated financial statements, including the balance sheet, cash flow statement, and statement of changes in equity. The report details how the bank accounts for foreign currency transactions, including the use of exchange rates as per IAS 21, and the treatment of translation gains and losses. It highlights the conversion methods for different currencies, the handling of commitments and contingent liabilities, and the consolidation of financial statements of foreign operations. The study reveals the impact of currency fluctuations on the bank's equity and profit and loss, providing a clear understanding of the financial implications of foreign exchange transactions. The report also examines the translation of assets, liabilities, income, and expenses of the bank's offshore banking units (OBUs).

Foreign Currency Transaction
Translation of Foreign exchange gain and loss of Trust bank limited Bangladesh.
Consolidated financial statements are financial statements that present the assets, liabilities,
equity, income, costs, and cash flows of a parent and its subsidiaries as if they were a single
economic entity. Trust Bank Limited have used consolidated balance sheet, cash flow and
financial report for the year 2020.The annual report for 2021 was un-audited that why I chose
the year 2020. As in their consolidated balance sheet they showed their gain from foreign
currency translation BDT. In their cash flow they have mentioned that their cash in hand at
the end of the year and Balance with Bangladesh bank and its agent but they did not show
their foreign currency in cash individually. And again in Consolidated Balance Sheet under
Capital/Shareholder Equity it shows the Foreign Currency Translation Reserve of 2198346
BDT. In 2020, we can see in the Consolidated Statement of Changing in Equity, Foreign
currency Translation Reserve was 2198346 BDT (Balance as at 1st January 2020 =2232421,
Restated Balance=2232421, Current Translation Difference= -34075). Whereas on the year
2019, we can see in the Consolidated Statement of Changing in Equity, Foreign currency
Translation Reserve was 2232421 BDT (Balance as at 1st January 2019 =2024844, Restated
Balance=2024844, Current Translation Difference= +207577).
a) Foreign currency
Items included in the financial statements of each entity in the group are measured using the
currency of the primary economic environment in which the entity operates that is the
functional currency. The financial statements of the group and the Bank are presented in BDT
which is the Bank’s functional and presentation currency.
b) Foreign currencies translation
Foreign currency transactions are converted into equivalent BDT using the prevailing
exchange rates on the dates of respective transactions as per IAS-21, “The Effects of Changes
in Foreign Exchange Rates”. Foreign currency balances held in US Dollar are converted into
BDT at weighted average rate of inter-bank market as determined by Bangladesh Bank on the
closing date of every month. Balances held in foreign currencies other than US Dollar are

converted into equivalent US Dollar at buying rates of New York closing of the previous day
and converted into equivalent BDT.
Assets and liabilities & income and expenses of Off-shore Banking Units have been
converted into BDT currency @ US$1 = Taka 84.80 (closing rate as at 31 December 2020)
and Tk. 84.85 (average rate as at 31 December 2020). 216 Annual Report 2020
c) Commitments
Commitments for outstanding forward foreign exchange contracts disclosed in these financial
statements are translated at rates mentioned in contracts. Contingent liabilities/commitments
for letters of credit and letters of guarantee denominated in foreign currencies are expressed
in BDT terms at the rates of exchange prevailing on the balance sheet date.
d) Translation gains and losses
The resulting exchange transaction gains and losses are included in the profit and loss
account, except those arising on the translation of net investment in foreign subsidiary.
e) Foreign operations
The results and financial position of the Group’s operations whose functional currency is not
Bangladeshi Taka are translated into Bangladeshi Taka as follows:
i) Assets and liabilities are translated at the exchange rate prevailing at the balance sheet date.
ii) Income and expenses in the income statement are translated at an average rate
approximating the exchange rates at the yearend;
iii) Resulting exchange differences are recognized as a separate component of equity.
iv) As per IAS 21, ‘Foreign Currency Transactions’ that is foreign currency denominated
both monetary and non-monetary items of the OBUs are translated at historical rate because
the OBUs are considered as an integral part of the Bank’s operation not a foreign operation
due to specific regulations governing the OBU and its unique nature.
f) Consolidation of Financial Statements of foreign operations
In Consolidation, foreign exchange differences arising from the translation of net investments
in foreign entities, as well as any borrowings are taken into capital reserve. When a foreign

operation is disposed of, such currency translation differences are recognized in the income
statement as part of the gain or loss on disposal.