Financial Crime World

Nepal’s Financial Reporting Requirements: A Step Towards Transparency and Accountability

In a bid to promote transparency and accountability in business, Nepal has introduced the Nepal Financial Reporting Standards (NFRS), a set of guidelines that aim to ensure financial reporting is comparable, understandable, reliable, and relevant to users both within and outside the country.

Objectives of Financial Statements

The objective of financial statements, as per NFRS, is to provide information about an entity’s financial position, performance, and cash flows that is useful for making economic decisions. To achieve this, financial statements must present information on:

  • Assets
  • Liabilities
  • Equity
  • Income and expenses
  • Contributions by and distributions to owners
  • Cash flows

Key Features of NFRS

The key features of the NFRS include:

  • Fair presentation: Financial statements should provide a faithful representation of an entity’s transactions, events, and conditions.
  • Compliance with standards: Entities must comply with the NFRS guidelines to ensure consistency in financial reporting.
  • Going concern assumption: Financial statements assume that the entity will continue to operate for the foreseeable future.
  • Accrual basis of accounting: Expenses and income are recognized when earned or incurred, regardless of when payment is made or received.
  • Materiality and aggregation: Material items are disclosed separately, while immaterial items may be aggregated.
  • Offsetting: Similar items are offset against each other in the financial statements.
  • Frequency of reporting: Financial statements must be reported on a regular basis (e.g., annually).
  • Comparative information: Entities must provide comparative information to facilitate comparison with previous periods.
  • Consistency of presentation: Financial statements should be presented consistently from period to period.

Applicability and Implementation Dates

The applicability of NFRS depends on the nature of the entity, with different categories having different implementation dates. The following are the implementation dates for each category:

  • Category A entities, including listed multinational manufacturing companies and state-owned enterprises with minimum paid-up capital of Rs. 5 billion, were required to implement NFRS from FY 2014-15.
  • Category B entities, which include commercial banks and other listed state-owned enterprises, were required to implement NFRS from FY 2015-16.

Benefits of NFRS

The implementation of NFRS is expected to promote transparency and accountability in Nepal’s business sector, making it easier for investors and stakeholders to make informed decisions. The standards are also designed to ensure that financial statements are:

  • Comparable across different entities
  • Reliable and trustworthy

Additional Resources

For more information on the NFRS, please visit the following websites:

  • Institute of Chartered Accountants of Nepal (ICAN)
  • Nepal Accounting Standard Board (ASB)