Draft of NFRS 18 made public, will also impact insurance companies' profit and loss accounts

Kathmandu. The Accounting Board Nepal has made public the draft of accounting standards related to presentation and disclosure in financial statements, inviting suggestions and feedback from stakeholders.

The Board has published the drafts of NFRS 18 and NFRS 19 under the Nepal Accounting Standards on its website and has requested stakeholders to send suggestions via email to [email protected] by December 8.

According to the Board, once NFRS 18 as per the proposed draft comes into effect, companies will have to classify income and expenses according to a new structure. In particular, income and expenses will be presented under categories including operating, investing, and financing.

Its implementation may also require changes in companies' account headings, accounting systems, ERP, financial statement formats, internal reporting, and consolidation processes. According to the information provided by the Board, in the initial phase, relevant institutions may need to make additional technical preparations and extra investments to prepare the new classification of income and expenses and comparative data.

According to Board Chair Ramesh Dhital, after the implementation of the proposed draft, insurance companies will also have to change their financial statement formats. After its full implementation, the regulatory Nepal Insurance Authority may issue necessary directives to insurers regarding financial statements.

Due to the new arrangement, insurance companies, banks and financial institutions, investment-related businesses, and entities in other sectors may need further consideration and business decisions regarding the classification of income and expenses according to the nature of their main business activities. The impact of NFRS 18 will vary depending on the company's current accounting presentation and the nature of its business.

At a time when insurers are exerting pressure to postpone the implementation deadline of NFRS 17, the Accounting Board Nepal has made public the draft of NFRS 18.

The Board states that since the implementation of NFRS 18 will bring significant changes in the presentation of profit and loss statements and the classification of income and expenses, its impact may also be felt in accounting education and curricula.

According to the Board, necessary revisions may be required in accounting curricula, textbooks, and study materials taught from school level to university level to incorporate the new presentation arrangements, classifications, and defined uses. Similarly, accounting teachers, students, accounting professionals, and other stakeholders may need necessary orientation and capacity development regarding the new arrangement.