Puja Baniya Business
Commercial banks will have to publish their financial statements as per the Nepal Financial Reporting Standards (NFRS) from this fiscal-end.
NFRS is the new accounting and reporting method developed by the Accounting Standards Board Nepal, based on the International Financial Reporting Standards (IFRS) for the uniformity of the financial reports across the world and more than 120 countries have already adopted the IFRS.
Though the regulator of accounting standards in Nepal, Institute of Chartered Accountants of Nepal (ICAN), had made NFRS mandatory in commercial or class ‘A’ financial institutions from fiscal 2015-16, banks have not yet implemented it citing that the regulator of financial institutions, Nepal Rastra Bank (NRB), had not issued circular directing them to develop financial reports as per NFRS. However, the central bank recently issued a circular that NFRS is mandatory from ongoing fiscal.
The commercial banks will reportedly develop the financial statements as per the NFRS and also in the regular format, according to Bhuvan Kumar Dahal, CEO of Sanima Bank.
The commercial banks had not abided by the instructions given by the accounting standard regulator primarily because they lacked the expertise to develop the financial statements according to the NFRS. In this backdrop, the central bank circular has allowed bankers to develop two statements and urged that the differences of profit and loss between NFRS-compliant financial statements and regular financial statements be disclosed clearly.
Under the NFRS system, companies that obtain loan from the banks would be required to comply with similar reporting standards, which would facilitate in fair value calculation of the loans. Bankers say, if done in a systematic manner, it would take several years to fully comply with the NFRS in publishing their financial statements.
Dahal of Sanima Bank said that implementation of NFRS is challenging for banks due to fair value measurements of the loans and other items. “The use of fair value accounting could result in a lot of volatility and subjectivity to the financial statements.”
Prakash Jung Thapa, president of ICAN, said that the banks have to change their financial statements of the last two consecutive fiscal years as per NFRS standard to publish their financial statements as per the new accounting and reporting format from this fiscal. ICAN has made it mandatory for the auditors to prepare the report as per NFRS standard for those who have converted their previous financial statements of two consecutive fiscals as per NFRS.
ICAN has set different deadlines in coordination with other concerned regulators to gradually implement NFRS for all multinationals, listed companies, government-owned entities, corporate bodies and the firms that obtain loans from financial institutions. As per ICAN’s regulation, multinational companies and state-owned enterprises with minimum paid-up capital of Rs five billion (such as Nepal Telecom) have adopted NFRS since 2014-15. ICAN has also proposed that the NFRS be implemented in all public companies, all corporate bodies, and small and medium enterprises that borrow minimum of Rs 500 million.
December 6, 2017
December 6, 2017
December 8, 2017