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Sunday, January 21, 2018

The basic challenge to the Nepalese market for the Adoptation of IFRS is the hurdle which comes up with the new impairment models under IFRS 9, mainly to the financial institutions due to huge amount of data and lack of in-built models for the reliable projection and forecast of financial covenants. whatever may be the difficulties, It could not be used as an excuse for the reasonable and consistent application of impairment model as outlined by IFRS 9, Hence the initiation from market leaders is vital for the the timely adoptation of global standard. Here is the basic introductory coverage for the impairment model outlined under IFRS 9:





The standard outlines a ‘three-stage’ model (‘general model’) for impairment based on changes in credit quality since initial recognition:

Stage 1 It includes financial instruments that have not had a significant increase in credit risk since initial recognition or that have low credit risk at the reporting date. For these assets, 12-month expected credit losses (‘ECL’) are recognised and interest revenue is calculated on the gross carrying amount of the asset (that is, without deduction for credit allowance). 12-month ECL are the expected credit losses that result from default events that are possible within 12 months after the reporting date. It is not the expected cash shortfalls over the 12-month period but the entire credit loss on an asset weighted by the probability that the loss will occur in the next 12 months.. 

Stage 2 It includes financial instruments that have had a significant increase in credit risk since initial recognition (unless they have low credit risk at the reporting date) but that do not have objective evidence of impairment. For these assets, lifetime ECL are recognised, but interest revenue is still calculated on the gross carrying amount of the asset. Lifetime ECL are the expected credit losses that result from all possible default events over the expected life of the financial instrument. Expected credit losses are the weighted average credit losses with the probability of default (‘PD’) as the weight. 

Stage 3 It includes financial assets that have objective evidence of impairment at the reporting date. For these assets, lifetime ECL are recognised and interest revenue is calculated on the net carrying amount (that is, net of credit allowance). The standard requires management, when determining whether the credit risk on a financial instrument has increased significantly, to consider reasonable and supportable information available, in order to compare the risk of a default occurring at the reporting date with the risk of a default occurring at initial recognition of the financial instrument. 


And, the definition of default should be identified, that is consistent with the definition used for internal risk management purposes for the relevant financial instrument, and it should consider qualitative factors such as financial covenants and forecasts, wherever appropriate. 



Source: IFRS/NFRS 9,PWC Resources etc.

Sunday, November 26, 2017

As per the Notice published by ICAN:

The entities to which NFRSs shall be applicable and the financial year in which fully NFRSs complied Financial Statements to be prepared shall be as follows. However NFRS-9, Financial Instrument shall be applicable with effect from 16 July, 2015 onwards.


Type
Entities Requiring adoption of NFRS
NFRS Complied Financial Statements
A
1.  Listed Multinational Manufacturing Companies
2. Listed State Owned Enterprises (SOEs) with minimum paid up capital of Rs. 5 billions (except Banks and Financial Institutions under BAFIA  Act, 2006)

2014-15
B
 1. Commercial Banks, including State Owned Commercial Banks;
 2. All other Listed State Owned Enterprises (SOEs)
2015-16
C
  1.   All other Financial Institutions not covered under A & B above
  2.   All other SOEs
  3.   Insurance Companies
  4.   All other Listed Companies
  5.   All other Corporate Bodies/Entities not defined as SMEs or entities having borrowing with minimum of Rs. 500 million.

2016-17
D
 NFRS for SMEs  (SMEs as defined and classified by ASB)


While looking into present scenario NFRS for SMEs are postponed till 2074 Asadh for mandatory compliance.......
NFRS 9 is not yet not implemented by any corporates due to practical difficulties over data collection, analysis, estimation, and support from IT system......till further notice NFRS 9 not yet implemented..........!!!!!

You can download NFRS 1-NFRS 13 from link below:

2016-17


Thursday, November 2, 2017

Saturday, October 28, 2017

NFRS

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