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. 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 Board and implemented by Institute of Chartered Accountant of Nepal (ICAN).
NFRS is all set for being mandatory by 2017 as the monetary policy 2014-2015 has propounded full compliance. The regulator in accounting standard in Nepal, ICAN has made it mandatory for Listed multinational companies and listed state-owned enterprises with minimum paid up capital of Rs. 5 billion to comply NFRS in preparation of financial statements from 2014-2015.
Likewise, commercial banks including state-owned banks and all Listed state-owned enterprises need to prepare financial statement as per NFRS from 2015-2016 onward. All financial institutions and listed companies will have to report its statements as per NFRS from 2016-2017 onward.
The need of NFRS is primarily seen in multinationals companies, state-owned enterprises, corporate bodies with borrowing of minimum Rs.500 million, banking and financial institutions. If a company has foreign operations i.e. subsidiary, branch, joint venture or associates, the problem then faced is performance review and reports of such undertakings and the comparability among the operations. The state-owned enterprises needs to maintain internationally accepted reporting framework for various worldwide grading purpose. Not all resources are available within a state so importing resources requires accountability towards those who avail resources.
However, there is much confusion faced in shifting to NFRS. Primarily, it is new and requires in depth treatment of financial happenings thus, there is the first time adoption issue and inadequate understanding in information generated. Abiding by NFRS terms may require additional cost to management for staff training, auditor’s fee, additional internal control mechanism and others.