The world seems to be uniting under a single financial reporting language.

International

Financial Reporting Standards (IFRS) is becoming the universally recognized accounting

standard in a multitude of jurisdictions across the globe. As of now, IFRS has been accepted in

over 115 countries. Nepal is also complying with the IFRS, starting with listed companies and

state-owned enterprises, over a three-year period starting in 2014.

Nepal Financial Reporting Standards is the set of accounting standards issued by Accounting

Standards Board of Nepal on the basis of International Financial Reporting Standards (IFRS).

NFRS can be regarded as common accounting and reporting language. These standards aim to

bring a common base for evaluation through uniform presentation, measurement, treatments and

disclosure of financial events. In Nepal all financial institutions and listed companies will have

to report its statements as per NFRS from 2016-2017 onward.

NFRS can be regarded as common accounting and reporting language. NFRS aims to bring a

common base for evaluation through uniform presentation, measurement, treatments and

disclosure of financial events. Subjecting the diversity of business scenario and accounting

complexity, there are 40 standards issued by Accounting Standard.

One of the foremost requirements to operate a Business successfully is to have a good financial

reporting system in place. Keeping this in mind, Accounting Professionals and Accounting

Bodies across the globe, during last decade, had tried to put a financial reporting system in place

which is harmonized, robust and have extensive applicability. (Jain, 2011)

The major objectives of NFRS is to ensure that an entity’s first NFRS financial statements, and

its interim financial reports for part of the period covered by those financial statements, contain

high quality information that:

a) Is transparent for users and comparable over all periiods presented

b) Provides a suitable starting point for accounting in accordance with Nepal Financial

reporting Standards; and

 c) Can be generated at a cost that does not exceed the benefits.

Since, a proper and standard financial statement could be prepared based on the NFRS whose

assumptions are in line with International financial reporting standards, provides information

that can be understood by every investors. Thus, investors can know about the actual position of

the company they wanted to invest.

Related accounting treatments are given here as per NAS 1 presentation of financial

statements, a complete set of financial statements comprises:

 A statement of financial position (balance sheet) as at the end of the period;


 A statement of comprehensive income for the period;

 A statement of changes in equity for the period;

 A statement of cash flows for the period; and

 Notes to accounts, including a summary of significant accounting policies and other

explanatory information.

But, the format has arranged the various statements in the following order:

 Revenue accounts- the NAS has given no place to revenue accounts as a part of financial

statements; rather such accounts are treated as a part of shadow accounting. Such

accounts may be presented by way of an explanatory statement.


 Profit and loss account- NAS has given it the second priority after balance sheet.

Balance sheet of an entity shows the financial position of the entity and thus should be

presented as the first document.


 Balance sheet – already discussed above.

 Statement of changes in equity- as per the NAS, figures relating to current year as well

relating to previous year should be presented, but the format requires the figures of

current year only.

  Statement of cash flows- The NAS requires an entity to present the cash flows statement adopting

either direct method or indirect method, but the format compels use of direct method only.

 Annexures are also not arranged in line with the various main statements. Annexure 6 and 12 to 26 are

forming part of balance sheet, annexure 2, 5 and 7 to 12 are forming part of profit and loss account and

annexure 1 is forming part of revenue accounts.

As per paragraph 78 and 80 of NAS 1, ―All items of income and expense recognized in a period shall be

included in profit or loss unless a Standard or an Interpretation requires otherwise. As per NAS 7, revenue or

gain from investment shall be treated as revenue of the company as accrued. The total income from investment,

as accrued, should be shown as revenue in income statement prepared for the financial year. The NAS also

requires all the expenses and incomes to be shown in the profit and loss account under the specific heads of

accounts either on the face of profit and loss account or through notes.

As per NAS 14 on “Employee benefits”, an entity shall recognize the expected cost of short term employee

benefits expected to be paid in exchange for that service in the form of paid absences at undiscounted amount,

when the employees render service that increases their entitlement to future paid absences and are measured at

expected cost of accumulating paid absences as the additional amount that the entity expects to pay as a result

of the unused entitle that has accumulated at the end of the reporting period.

As per NFRS, goodwill cannot be amortized. It is because periods and patterns in which economic benefit from

goodwill is consumed are hardly estimated.

As we know that different countries around the world are using financial reporting and accounting standards

as per their own laws and convenience which creates confusion among the users of financial statements. This

confusion leads to inefficiency in capital markets across the world. Thus, globalization of capital markets

recognized the need for a single set of high quality, universally acceptable accounting standards. This

provoked many countries to pursue convergence of national accounting standards with IFRS.
 Annexure I

Consolidated Statement of Financial Position

As on …….Asar 20…….
Group Bank
Note Current Year Previous Year Current Year Previous Year
Assets
Cash and cash equivalent 4.1
Due from Nepal Rastra Bank 4.2
Placement with Bank and Financial Institutions 4.3
Derivative financial instruments 4.4
Other trading assets 4.5
Loan and advances to B/FIs 4.6
Loans and advances to customers 4.7
Investment securities 4.8
Current tax assets 4.9
Investment in susidiaries 4.10
Investment in associates 4.11
Investment property 4.12
Property and equipment 4.13
Goodwill and Intangible assets 4.14
Deferred tax assets 4.15
Other assets 4.16
Total Assets

Note Current Year Previous Year Current Year Previous Year

Liabilities
Due to Bank and Financial Instituions 4.17
Due to Nepal Rastra Bank 4.18
Derivative financial instruments 4.19
Deposits from customers 4.20
Borrowing 4.21
Current Tax Liabilities 4.9
Provisions 4.22
Deferred tax liabilities 4.15
Other liabilities 4.23
Debt securities issued 4.24
Subordinated Liabilities 4.25
Total liabilities
Equity
Share capital 4.26
Share premium
Retained earnings
Reserves 4.27
Total equity attributable to equity holders
Non-controlling interest
Total equity
Total liabilities and equity
Contingent liabilities and commitment 4.28
Net assets value per share
 Annexure II
Consolidated Statement of Profit or Loss
For the year ended …...Asar 20…….
Group Bank
Note Current Year Previous Year Current Year Previous Year
Interest income 4.29
Interest expense 4.30
Net interest income
Fee and commission income 4.31
Fee and commission expense 4.32
Net fee and commission income
Net interest, fee and commission income
Net trading income 4.33
Other operating income 4.34
Total operating income
Impairment charge/(reversal) for loans and other losses 4.35
Net operating income
Operating expense
Personnel expenses 4.36
Other operating expenses 4.37
Depreciation & Amortisation 4.38
Operating Profit
Non operating income 4.39
Non operating expense 4.40
Profit before income tax
Income tax expense 4.41
Current Tax
Deferred Tax
Profit for the period

Profit attributable to:

Equity holders of the Bank
Non-controlling interest
Profit for the period

Earnings per share

Basic earnings per share
Diluted earnings per share