New financial reporting standards cause confusions
August 10, 2018 08:53 AM NPT
KATHMANDU, Aug 10: Nepal Financial Reporting Standards (NFRS) has caused confusions among commercial banks who are publishing their financial statements as per the new standards for the first time.
Commercial banks are required to publish their financial statements of Fiscal Year 2017/18 as per this new accounting system from this year as part of a plan that requires other public companies, including development banks and finance companies, to follow the suit in the upcoming fiscal years.
However, bankers say that commercial banks have been confronting various challenges, including confusion over valuing assets and liabilities, shortage of manpower and lack of regulatory clarity, among others.
“There are several confusions that banks have been facing in implementation of the NFRS. One of the major challenges is the taxation on profit of banks, resulting from preparation of the NFRS-compliant financial statement,” Nepal Banker Association (NBA) President said Gyanendra Dhungana, said speaking at an interaction on ‘Understanding NRS Complied Financial Statements and Regulatory Challenges’ organized by the NBA and Society of Economic Journalists-Nepal (SEJON) in Kathmandu on Thursday. Banking regulators also acknowledge the challenges in implementation of the NFRS.
“The objective of the NFRS is in line with the international standards so that the world can understand our balancesheets while we can also easily understand the world’s balancesheets,” said Narayan Prasad Paudel, an executive director at the Nepal Rastra Bank. “However, there are still many issues that lack clarity and we will address them gradually,” he added.
The confusion is also evident in financial results that the commercial banks have been publishing for the fourth quarter report of the last fiscal year. Some commercial banks have published the NFRS-complied financial statements, while some have chose to publish the financial results as per the old format.
The central bank requires commercial banks to publish both financial statements this time.
“We had told commercial banks to publish financial statements in both formats after we realized that investors might be confused with the NFRS-compliant financial statements alone,” said Maheshwor Lal Shrestha, another executive director at the NRB. “We will take action against those banks that have not followed our instruction and published financial statement in single format only.”
Santosh Lamsal, a chartered accountant, said that companies will eventually be accustomed with the new financial reporting standard. “Once the new reporting standard is implemented and companies become used to with this, this kind of confusions will end,” he added.