If you work in accounting or auditing, banking or any other form of financial reporting, you will hear ‘NFRS’ constantly. This guide explains what is NFRS, who sets it, who must follow it, and why it matters in very simple and clear language.

What Is NFRS?

NFRS stands for Nepal Financial Reporting Standards. NFRS means a rulebook for accounting and reporting the financial position and financial performance of a business. So, if you want to understand the financial statements of a business to learn more about its fundamentals, you will need to understand NFRS.

NFRS is not written from scratch. NFRS is adopted from the international framework of accounting known as IFRS (International Financial Reporting Standards). What is NFRS?

Who Issues NFRS?

NFRS is issued by the Accounting Standards Board, Nepal (ASB Nepal). The Government of Nepal formed it through an amendment to the Nepal Chartered Accountants Act. Accounting Standards Board Nepal is responsible for NFRS in Nepal.

The Institute of Chartered Accountants of Nepal (ICAN) also plays a role. ASB Nepal recommends the standards, and ICAN as the statutory body, pronounces them for implementation. The Companies Act requires financial statements to follow the accounting standards enforced by that statutory body. Auditors then report whether the statements conform to NFRS. What is NFRS?

Currently Applicable: NFRS 2024

NFRS has been updated several times to keep pace with IFRS, and the latest NFRS is NFRS 2024

NFRS 2024 can be further divided into:

• The Conceptual Framework
• NFRS
• NAS
• IFRIC
• SIC

The Conceptual Framework contains the concepts and underlying principles upon which the individual standards are based. It contains the basic definitions of an asset, liability, and equity. It explains the basic principles that are applicable in financial reporting, such as going concern and accrual basis. Your absolute first step towards learning financial reporting must be the Conceptual Framework.

You can get an overview of what is contained in each segment in the tables below:

NFRS vs IFRS: What Is the Difference?

The two are very close, but not identical.

• IFRS is issued by the International Accounting Standards Board (IASB) for use worldwide.
• NFRS is Nepal’s version, issued by ASB Nepal and made nationally enforceable by adopting IFRS.

NFRS is a blanket term used for different accounting standards applicable in Nepal. At the top sits the full NFRS, then comes the NFRS for SME (Small and Medium Entities), then comes the NAS for MEs (Micro Entities), and there is another parallel standard known as NAS for NPOs. To clearly understand which one applies to what type of entities, read the applicability guide here.

Why Does NFRS Matter?

1. Comparability: Investors and lenders can compare Nepali companies with each other and with foreign peers.
2. Transparency: Standard rules for recognition, measurement and disclosure reduce room for creative accounting.
3. Investor confidence: Credible reports make it easier to raise capital, attract partners and list on the stock market.
4. Better decisions: Managers get clearer, more reliable numbers.
5. Audit clarity: Auditors have a defined benchmark against which to give their opinion.

Common Challenges in Applying NFRS

Many Nepali organisations find NFRS demanding at first. The usual obstacles are:

• Limited in-house expertise, especially for fair value and expected credit loss calculations.
• Accounting software that isn’t set up for NFRS disclosures.
• Poor records for older assets, leases or financial instruments.
• The time and cost of preparing comparative figures when transitioning.

Starting early and training your finance team helps a great deal.

Frequently Asked Questions

Is NFRS the same as IFRS?
Not exactly. NFRS is based on IFRS and mostly converged with it, but it is issued locally and includes a few Nepal-specific modifications.

Is NFRS mandatory in Nepal? What is NFRS?
It depends on the entity. All domestic companies listed on the stock market must prepare their statements under NFRS. Smaller entities follow NFRS for SMEs or NAS for Micro Entities.

What is the latest version of NFRS? What is NFRS?
NFRS 2024. Updates such as NFRS 18, NFRS 19 and the sustainability standards NFRS S1 and S2 were still in development at the time of writing.

What is the difference between NFRS and NAS?
NFRS standards are numbered like IFRS standards (for example, NFRS 9). NAS standards correspond to the older IAS-based standards (for example, NAS 1). Together they form the full NFRS package.

Who can I contact for official guidance?
ASB Nepal for the standards themselves, and ICAN for implementation dates and professional guidance.

Conclusion

NFRS is Nepal’s version of global financial reporting rules. It makes company accounts clearer, more reliable and easier to compare, which helps investors, lenders, regulators and managers alike. Whether you are a student, an accountant or a business owner, the first step is to know which framework applies to your entity, then keep up as NFRS evolves alongside IFRS.