The International Accounting Standards Board (IASB), based in London, is a global body engaged in developing high-quality accounting standards for use throughout the world. The standards pronounced by the IASB are referred to International Financial Reporting Standards (IFRSs). Besides, the IASB has inherited 34 International Accounting Standards (IASs) from its predecessor organisation, the International Accounting Standards Committee (IASC). A recent study indicates that some 100 countries either require or permit the use of IFRSs for publicly traded firms.

Three major objectives of the IASB include the development of a single set of high quality global accounting standards, promotion of the use and rigorous application of those standards, and work to bring about convergence of national accounting standards and IFRSs.

There was an absence of nationally mandated accounting standards in Nepal before the formulation of an Accounting Standard Committee in 2001. Companies in Nepal, therefore, generated their financial statements without any framework underscoring the basic requirements and ignoring the users’ needs. Financial statements were prepared in accordance with choices and preferences expressed by auditors and the board of directors. This led to a number of interpretations in defining the fundamental elements of financial statements, i.e. assets, equities, incomes, expenses, expenditure and so on.

The ADB’s technical assistance to the Institute of Chartered Accountants of Nepal (ICAN) in 2000/2001 triggered the process of developing accounting standards here. The ICAN facilitated the process by formulating an accounting standards committee. The committee was upgraded and converged into an autonomous accounting standards board on March 10, 2002. The board has developed 20 Nepal Accounting Standards (NASs) applicable to financial statements and reporting of all profit-oriented entities. Eight NASs are already in effect from the year 2004-05. Four NASs have been made mandatory for compliance from July 17. Four more NASs are available for voluntary compliance and one standard is under consideration of the board. Recently, the board has made public the exposure drafts of three proposed NASs.

The board is committed to imposing IFRSs in Nepal’s profit-oriented enterprises. It is, however, acknowledged that some alterations are essential to facilitate proper implementation of IASs and IFRSs in Nepal’s context. A general consensus is that these changes should not make material departures from IASs and IFRSs as far as applicable. NASs are, therefore, being developed with least modifications in IASs and IFRSs in order to meet the local requirements. Moreover, the board is aware that all accounting treatments that are essential for preparing financial statements might have not been embedded in the standards pronounced till date. In the absence of NASs, companies are expected to adhere to IASs and IFRSs in formulating their accounting policies and statements.