Introduction to NFRS

Nepal Financial Reporting Standards (NFRS) are a set of accounting standards developed by the Accounting Standards Board (ASB) of Nepal. Established in 2003 under the Nepal Chartered Accountants Act, 1997, the ASB aims to align Nepal's financial reporting practices with International Financial Reporting Standards (IFRS) to ensure consistency, transparency, and comparability in financial statements. NFRS provides a common framework for financial reporting, enhancing the quality and reliability of financial information across various sectors.

Implementation of NFRS in Nepal

The implementation of NFRS in Nepal had been a phased process:​

• 2014-15: Listed multinational manufacturing companies and listed state-owned enterprises (SOEs) with a minimum paid-up capital of NPR 5 billion commenced NFRS adoption.​
• 2015-16: Commercial banks, including state-owned commercial banks, transitioned to NFRS.​
• 2016-17: Other financial institutions, insurance companies, listed companies, and SOEs adopted NFRS.​
• 2019-20: Small and Medium-sized Entities (SMEs) began implementing NFRS for SMEs. ​

This structured approach allowed entities to prepare adequately for the transition, addressing challenges related to system upgrades, staff training, and compliance.

NFRS for SMEs: Latest Developments

Recognizing the unique needs of SMEs, the ASB introduced the Nepal Financial Reporting Standard for Small and Medium-sized Entities (NFRS for SMEs) in 2017. Initially set for mandatory implementation from July 17, 2019, the effective date was extended to July 17, 2023, to provide SMEs with additional preparation time. Early adoption was encouraged during this period.

Despite these measures, SMEs have encountered challenges in transitioning to NFRS, including:​

• Lack of Dedicated Regulatory Body: Absence of a specific authority to oversee and support SMEs in NFRS adoption.​
• Resource Constraints: Limited financial and human resources to facilitate the transition.​
• Awareness and Training: Need for increased awareness and training programs tailored to SMEs. ​

Addressing these challenges requires collaborative efforts from regulatory bodies, professional associations, and the SMEs themselves to ensure successful implementation.

NAS for NPOs: Recent Updates

The Nepal Accounting Standard for Not-for-Profit Organizations (NAS for NPOs) was issued in 2018 to standardize financial reporting among NPOs. Mandatory implementation dates are as follows:

• International Non-Governmental Organizations (INGOs): From July 16, 2023.
• Other NPOs (including NGOs, not-for-profit associations, and similar entities): From July 16, 2024. ​

To assist NPOs in this transition, the Institute of Chartered Accountants of Nepal (ICAN) has developed model financial statements, providing templates and guidelines for compliance with NAS for NPOs.

Conclusion

The adoption of NFRS and NAS for NPOs marks a significant advancement in Nepal's financial reporting landscape, promoting transparency, accountability, and alignment with international standards. While challenges persist, particularly for SMEs and NPOs, ongoing support from regulatory bodies and professional organizations is crucial to facilitate a smooth transition and ensure the long-term benefits of standardized financial reporting in Nepal.