KATHMANDU: The Accounting Board of Nepal (IBB) has released the draft of Nepal Financial Reporting Standards (NFRS) 18. The draft of the accounting document ‘NFRS 18, Presentation and Disclosure in Financial Statements’ has been made public in a significant change to the existing format for companies to present their profit and loss

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NFRS is the accounting standard that companies and other bodies have to follow while preparing financial statements in Nepal.

The Accounting Board has been issuing these standards in line with the standards of the International Accounting Standards Board (IASB). The IASB released the International Financial Reporting Standards (IFRS) on April 18, 2024. This standard will be implemented internationally from January 1, 2027. It will replace the long-standing IAS 1. NFRS 18 is an attempt to adopt the same international standards in Nepal.

According to Ramesh Kumar Dhital, chairman of the Board of Auditors, NFRS 18 will change the way companies present their financial statements. At present, it is difficult to compare financial statements as companies show income and expenses in their own way. The new system will make it mandatory for all companies to report income and expenses in the categories of operations, investments and finances.

Under this, the main financial indicators, including operating profit, should be clearly shown. If the company uses its own measure such as ‘adjusted profit’, then it will also have to disclose its basis and relationship with the profit according to the account.

Companies may also have to make changes to the accounting and ERP systems to implement the new system. It may take more time and expense in the initial phase to adjust the old data to the new format.

Classification into banks, insurance and investment companies can be somewhat challenging, as their main transactions are related to interest, investments, and financial activities. Therefore, the impact of NFRS 18 will vary depending on the company’s business and current accounting system.

The board has sought suggestions from all stakeholders on the draft. The board has said that the draft will be finalized on the basis of suggestions and feedback received.