GBEs & SOE's in Nepal : Government Business Enterprises and State Owned Enterprises in Nepal: What They Are and Why It Matters for NFRS

If you work in finance, accounting, or audit in Nepal, chances are you have come across the terms State Owned Enterprise (SOE) and Government Business Enterprise (GBE), sometimes used interchangeably, often confused, and almost never explained in one place with clarity.

This article cuts through that confusion. We explain what SOEs and GBEs are, how Nepal’s NFRS framework distinguishes between them, which entities fall into each category, and most importantly, what it means for financial reporting obligations under NFRS 2024.

Whether you are a CA student preparing for AFR papers, a finance manager at a public enterprise, or an auditor working on a government entity engagement, this is the article you need to bookmark.

The Short Answer: SOE vs GBE

Before going deeper, here is the one-line distinction:

SOE is an ownership classification. It means the Government of Nepal owns or controls the enterprise. All 44 public enterprises listed in the Ministry of Finance’s annual Yellow Book are SOEs.

GBE is an accountability classification. It means the enterprise operates commercially, earns its own revenue, and serves a broad external stakeholder base. Under Nepal’s NFRS framework, GBEs are classified as entities with public accountability and must therefore prepare financial statements under the full NFRS rather than the Nepal Public Sector Accounting Standards (NPSAS).

Put simply: all GBEs are SOEs, but not all SOEs are GBEs.

Why Does This Distinction Exist in NFRS?

Nepal’s NFRS framework, developed by the Accounting Standards Board (ASB) Nepal and issued by ICAN, classifies entities based on their level of public accountability, not just their ownership structure. This matters because the standard applied to an entity determines the entire financial reporting framework: how assets are measured, how revenue is recognised, how financial instruments are classified, and what disclosures are required.

Under the NFRS framework, an entity has public accountability if it meets one of the following criteria:

Its debt or equity instruments are traded in a public market (or are in the process of being issued)
It holds assets in a fiduciary capacity for a broad group of outsiders as its primary business (banks, insurers, pension funds, investment managers)
It is a Government Business Enterprise (GBE) or a public entity established under a special act, and does not prepare financial statements under NPSAS
It meets the economic significance thresholds

The GBE classification in point three is what makes this topic so important for practitioners working with Nepal’s public enterprises.

What Makes an Entity a GBE Under Nepal’s NFRS Framework?

The term GBE is not defined by a single statute in Nepal. It derives from the NFRS Preface and the ICAN pronouncements on applicability, drawing from the international concept used in IPSAS (International Public Sector Accounting Standards).

A Government Business Enterprise in Nepal’s context has four core characteristics:

1. Government ownership or control. The Government of Nepal owns a majority of shares or exercises control over the entity’s board and major decisions.

2. Commercial mandate. The entity’s primary purpose is to produce or supply goods and services for sale in the commercial market. It is not merely executing a government policy function.

3. Financial self-sustainability (at least in intent). The entity is designed to fund its operations through its own revenues, such as tariffs, sales proceeds, and fees, rather than relying primarily on annual government budget appropriations.

4. Broad external stakeholder base. The entity’s financial position and performance are material to a wide range of users beyond just the Government of Nepal, including lenders, suppliers, employees, consumers, and the public.

Entities that meet these criteria are expected to apply the same full NFRS as a listed private company, not NPSAS, which is a cash-basis standard used by government ministries and departments.

GBEs vs Non-GBE SOEs: Where the Line Falls

Not every public enterprise operates commercially. Nepal’s 44 SOEs include entities across a wide spectrum from large commercially-oriented corporations like Nepal Telecom to small cultural institutions like Sanskritik Sansthan. The distinction matters enormously for financial reporting.

Core GBEs: Full NFRS Required

These are Nepal’s clearly commercial public enterprises. They earn significant revenue from the market, borrow from financial institutions, and serve large external stakeholder bases:

Public Utility Sector

Nepal Electricity Authority (NEA) sells electricity through tariffs; Nepal’s largest utility by assets
Nepal Doorsanchar Company Ltd. / Nepal Telecom (NTC), a commercial telecom operator, is listed on NEPSE with paid-up capital exceeding Rs 5 billion
Nepal Drinking Water Corporation sells water supply services on a tariff basis

Trading Sector

Nepal Oil Corporation (NOC) sole importer and distributor of petroleum products; it adjusts prices fortnightly in line with Indian market rates
Food Management & Trading Company Ltd. procures and distributes essential food commodities

Service Sector

Nepal Airlines Corporation (NAC), the national flag carrier, sells tickets and operates on commercial aviation routes
Nepal Transit & Warehousing Co. Ltd. commercial logistics and warehousing
Sajha Yatayat, a cooperative transport operator, earns fare revenue

Industrial Sector

Dairy Development Corporation (DDC) commercial production and distribution of milk and dairy products
Hetauda Cement Industry Ltd. and Udayapur Cement Industries Ltd., cement manufacturing and sale
Salt Trading Corporation commercial distribution of salt and related commodities

Financial Sector: all nine financial SOEs are GBEs, as they hold assets in a fiduciary capacity:

Rastriya Banijya Bank Ltd. (RBB) state commercial bank
Nepal Bank Ltd. (NBL) state commercial bank
Agricultural Development Bank Ltd. (ADBL) development and commercial banking
Citizen Investment Trust (CIT) investment and fund management
Deposit & Credit Guarantee Fund (DCGF) financial guarantee institution
Rastriya Jeevan Beema Company Ltd. (formerly Rastriya Beema Sansthan), a state life insurer
Nepal Reinsurance Company Ltd. state reinsurer
Employees Provident Fund (EPF) provident fund management
Social Security Fund (SSF) Social Security Administration

Social and Policy SOEs (Not Primarily GBEs)

These entities exist to serve public policy or social mandates rather than commercial objectives. They are budget-dependent and do not operate primarily as commercial businesses:

Gorkhapatra Corporation, the state newspaper, serves a public communication mandate; receives government subsidy
Rastriya Samachar Samiti (RSS), national news agency; policy-driven
Janak Education Materials Centre Ltd. (JEMCL) provides subsidised school textbooks; loss-making
Rastriya Naachghar, national theatre and cultural centre, government-supported
Sanskritik Sansthan promotes Nepali culture and performing arts; entirely subsidy-dependent

These entities may still be required to apply full NFRS if they meet the economic significance thresholds (borrowings, turnover, balance sheet, employees), but they are not GBEs in the commercial sense, and their financial reporting reality is very different from entities like NEA or NOC.

The NPSAS Exception: When Full NFRS Does Not Apply to GBEs

There is one important escape route from full NFRS for government entities: NPSAS (Nepal Public Sector Accounting Standards), a cash-basis accounting framework developed by ASB Nepal in alignment with the International Public Sector Accounting Standards (IPSAS).

NPSAS is the standard applied by government ministries, departments, constitutional bodies, and other budget-funded entities that do not operate commercially. It is mandatory for federal and provincial government accounts under Nepal’s Financial Procedures Act.

However, GBEs are explicitly excluded from NPSAS. The NPSAS standard itself states that it does not apply to Government Business Enterprises. This means a GBE cannot choose NPSAS to avoid full NFRS compliance. The two frameworks serve fundamentally different types of entity.

The practical outcome is this: if the entity is a GBE or a public entity established under a special act, and you are not using NPSAS, you must apply full NFRS. There is no third option.

NFRS Applicability for GBEs and SOEs

NFRS 2024: Mandatory from Shrawan 1, 2082 (July 17, 2025). The latest edition of NFRS, converged with IFRS as of 2024, is now the operative standard for all public accountability entities, including GBEs and listed SOEs. NFRS 17 (Insurance Contracts) is now fully active, replacing NFRS 4, a change of particular significance for entities like Rastriya Jeevan Beema and Nepal Reinsurance Company.

Key Takeaways for Practitioners

If you are advising a public enterprise client, auditing a GBE, or studying NFRS applicability for your CA examinations, here are the five things to remember:

First, the GBE classification is driven by the commercial nature and public accountability of an entity and not just by government ownership. An entity is a GBE if it operates commercially, earns market revenue, and serves a broad external stakeholder base. Second, GBEs must apply full NFRS. NPSAS is not available to them. The only exception is if the entity is genuinely not a GBE and operates purely as a budget-funded public service entity. Third, the listed SOE with Rs 5 billion paid-up capital category (Nepal Telecom) is a distinct sub-category, it carries both the listed company public accountability and the SOE status, and was brought under NFRS at Phase 1, the earliest point in the rollout. Fourth, NFRS 2024 is now the operative standard for all GBEs and listed SOEs, with mandatory application from Shrawan 1, 2082. Entities that have not yet upgraded their policies and systems from NFRS 2018 to NFRS 2024 need to act urgently. Fifth, NFRS 17 is the single biggest standard change for insurance-sector GBEs. Rastriya Jeevan Beema and Nepal Reinsurance Company should already be deep into NFRS 17 implementation. The deferral period is over.