GAAP & IFRS

Generally Accepted Accounting Principles

&
International Financial Accounting Standards.

Group 1 Ankita Shrestha I Bina Gupta I Kritika KC I Kushal Chandra Shrestha

Sajan Thapa I Salim L. Awale I Swarna Maharjan
GAAP(Generally Accepted Accounting Principles)
Rules, standards, procedure & practices
Creation of uniform financial reports
Private U.S. businesses are not required
Consistency, fairness, honesty and accuracy

US GAAP, JAPAN GAAP, other GAAP

 HISTORY OF GAAP
SEC proposed, switch to IFRS from U.S. GAAP by 2014

SEC replaced CAP with the Financial Accounting Standards Board (FASB)

2008
AIA created Committee on Accounting Procedure
1973

1939 Concept of GAAP introduced for the 1st time

1936
SEC asked for assistance from the American Institute of Accountants (AIA)
1934

1930 Securities and Exchange Commission (SEC) was created.

1929
Stock Market Crash (a.k.a. The Great Depression )
GAAP(Generally Accepted Accounting Principles)
INTERNATIONAL GAAP NON GAAP
US GAAP
Japan GAAP
German GAAP
PRINCIPLES OF US GAAP
Accounting Accounting Accounting
concepts principles conventions
Business entity Cost principle Materiality
concept Revenue principle Consistency
Money measurement Matching principle Conservatism
concept Full disclosure Cost-benefit analysis
Going concern principle Industry practices
concept
Accounting period
concept
IFRS(International Financial Reporting Standards)?
Price :$1 110.58

Time : 3 min 280 sec

Container : 64g 0.050 kg

IFRS(International Financial Reporting Standards)?
Price : Rs 150 Rs 110.58

Time : 3 min 4 min

Container : 64g 50g

IFRS(International Financial Reporting Standards)
Set of accounting standards
Known as International Accounting Standards (IAS)
Developed by International Accounting Standard Board (IASB)
IFRS is a global language
Understandability and making comparisons easier.
IFRS(International Financial Reporting Standards)
Modified form of IAS.
Principles-based standards
Principles while accounting for transaction and events in Financial
Statements.
Developed by International Accounting Standards Board (IASB)
 HISTORY OF IFRS
Timeline

Now more than 100 countries uses the completed IFRS or synchronized form

More than 70 countries were using it

Now IFRS published, titled IFRS 1 First-time Adoption of International Financial Reporting
Standards.
2005
The IAS was implemented in countries European Union
2003
2002
Replaced by International Accounting Standards Board (IASB) in1 st April, 2001
2001
1973 International Accounting Standard were issued by International Accounting
Standards Committee (IASC)
IFRS(International Financial Reporting Standards)
IFRS 1 First-time Adoption of International Financial Reporting Standards
IFRS 2 Share-based Payment
IFRS 3 Business Combinations
IFRS 4 Insurance Contracts
IFRS 5 Non-current assets held for sales and discontinued operations
IFRS 6 Exploration for & Evaluation of mineral resources
IFRS 7 Financial Instruments: Disclosures
IFRS 8 Operating Segments
IFRS 9 Financial Instruments
IFRS 10 Consolidated Financial Statements
IFRS 11 Joint Arrangements
IFRS 12 Disclosure of Interest in other entities
IFRS 13 Fair Value Measurement
IFRS 14 Regulatory Deferral Accounts
IFRS 15 Revenue from Contracts from Customers
IFRS 16 Leases
ADVANTAGES OF IFRS
Allows for greater comparability
Beneficial to new and small investors
Creates more flexibility while adapting
Cost & time benefits
Acquiring multinational company
Reduction in accounting & operation cost
Access to international market
DISADVANTAGES OF IFRS
High cost
Prone to manipulation
Not globally accepted
FOR WHOM ?
Investors
Multinational Companies
Regulators
Securities Industry and Stock Exchanges
Developing Countries
IFRS(International Financial Reporting Standards)
BRAZIL
Adaptation started on Dec 2007
Full implementation on April 2010
Removed risk premium
2010 GDP growth @7.5% from 3.7%
Ranked 4th in 2010 FDI Confidence Index
2011, top 5 in FDI
REGULATORY BODIES
Trustee
The Board
Standing Advisory Council(SAC)
IFRIC (International Financial Reporting Interpretation Committee)
US GAAP VS IFRS
Basis US GAAP IFRS
Balance Sheet Current and noncurrent asset and Categories are required to be
liability categories are separated separated

Intangible Assets Recognizes intangible assets at Only examines intangible assets if

fair value they can be associated with a
future benefit
Documentations Statement of Comprehensive Statement of Comprehensive
Income is required Income is not required
Inventory Write IWD reversals are not permitted IWD reversals are possible under
Downs (IWD) some conditions
Extraordinary Items Listed separately under new Included with other items on the
income income statement
NAS(Nepal Accounting Standards)
Written policy documents
Recognition, measurement, presentation and disclosure
Issued its own NAS in 2001 A.D. to localize them properly
NASs are the standards issued by Accounting Standards Board (ASB)
27 issued Nepalese accounting standards.
 NAS(Nepal Accounting Standards)
NAS 1 Presentation of Financial Statements
NAS 2 Inventories
NAS 7 Statement of Cash Flows
NAS 8 Accounting Policies, Changes in Accounting Estimates and Error
NAS 10 Events after the Reporting Period
NAS 11 Construction Contracts
NAS 12 Income Taxes
NAS 16 Property, Plant & Equipment
NAS 17 Leases
NAS 18 Revenue
NAS 19 Employee Benefits
NAS 20 Accounting for Government Grants and Disclosure of Government Assistance
NAS 21 The Effects of Changes in Foreign Exchange Rates
NAS 23 Borrowing Cost
NAS 24 Related Party Disclosures
NAS 26 Accounting & Reporting by Retirement Benefit Plans
NAS 27 Consolidated & Separate Financial State
NAS 28 Investments in Associates
NAS 32 Financial Instruments: Presentation
NAS 33 Earnings Per Share
NFRS(Nepal Financial Reporting Standards)
Designed as a common language for business
Issued by Nepal Accounting Standard Board in 2013
Rules to be followed by accountants
Comprised of
Nepal Financial Reporting Standards;
Nepal Accounting Standards;
IFRIC Interpretations issued by the International Accounting Standards
Board (IASB);
Application Guidance and SIC interpretations issued by IASB
NFRS(Nepal Financial Reporting Standards)
NFRS 1 First Time Adoption of Nepal Financial Reporting Standards
NFRS 2 Share-based payment
NFRS 3 Business Combination
NFRS 4 Insurance Contracts

NFRS 5 Non-Current Assets Held for Sale & Discontinued Operation

NFRS 6 Exploration for and Evaluation of Mineral Resource

NFRS 7 Financial Instruments: Disclosures
NFRS 8 Operation Segments
NFRS 9 Financial Instrument

NFRS 10 Consolidated Financial Statements

 NFRS(Nepal Financial Reporting Standards)
REGULATORS ICAN
Institute of Charter Accountancy of
Nepal

Diff
ASB AuSB Committe
Accounting Standard
Board
Auditing Standard
Board
es Board
Disciplinary

NFRS
 DEVELOPMENT OF NFRS

Consultation Final draft of

Identification Exchange of Publishing
with ASB standards
and review of views with exposure draft
members and (approval of at
issues to be national and letting it for
Advisory least 7 members
considered regulators public comments
grounds of ASB essential)
GENERAL FEATURES OF NFRS
Fair presentation and compliance with NFRS
Going Concern
Accrual basis
Materiality and Aggression
Frequency of Reporting
Comparative Information
Consistency of presentation
 IFRS VS NFRS
IFRS NFRS
Universal Accounting Standards Customized Accounting Standards

Developed by IASB Standards based on IFRS developed by

Standards mandatory in law &
regulations
Contains standards and law for SMEs
ASB
Mandatory to certain industry. E.g
Banks, Insurance, SOEs, MNCs
NFRS for SME currently
underdevelopments & implementations
FOR WHOM ?
Investors
Multinational Companies
Regulators
Securities Industry and Stock Exchanges
Developing Countries
CHALLENGES
Awareness among users
Training
Effective mechanism
Knowledged professionals
 IMPLEMENTATION TIMELINE
D NFRS for SMEs (SMEs as defined as classified by ASB)
All other SOEs
C Insurance Companies
All other Listed Companies
All other corporate bodies not defined as SMEs
All other Financial Institutions not covered under A & B below
B Commercial Banks, Including State Owned Commercial Banks
All other Listed State Owned Enterprises(SOE)

2016-17

2015-16
A Listed Multinational Manufacturing Companies
2014-15 Listed States Owned Enterprises(SOE) min paid up capital Rs 5b (except
BFIs)
Implementation of IFRS in Nepal
Convergence Method
ASB applying IFRS would work together with IASB
Countries converging with IFRS may deviate to a certain extent from IFRS
E.g Nepal

Adoption method
Implementing IFRS in the same manner as issued by the IASB and would be
100% complaint with the guidelines issued by IASB.
E.g Kenya
WHY DO WE NEED?
Enable us to adopt the international practice in preparation of financial
statement
Makes us presentable with the foreign competitors.
Add a solid foundation for the corporate sector development in Nepal
Help bring in foreign investors
STATUS OF NFRS AT PRESENT
ICAN to implement NFRS for listed companies, on 32 Ashadh 2067
Listed Multinational manufacturing companies and Listed

e.g Bottlers Nepal, Dabur Nepal, Uniliver and Nepal Telecom

In BFIs, execution date 2015/16, only partial

e.g.Standard Chartered Bank and Citizen Bank.

CHALLENGES IN IMPLEMENTATION
Inadequate awareness of IFRS Practices
NFRS/IFRS a decision of Group of Accountants and experts
Not prioritized for enforcement by Regulators

e.g. MOF, MOI, NRB, SEBON, Beema Samiti

Status Quo situation between Regulators and Body corporates
No amendments in existing laws for assistance in enforcement
Insufficient trained manpower
No effective mechanism for implementation
SOLUTIONS TO CHALLENGES
Enforced under National Priority projects from the executive of Nation
Independent auditors have to be updated and trained with the changes
Reduce gap between the trained professional required and trained professional
available
Awareness Program and updating curriculum for Future managers
Co-ordination among regulators and body corporates for effective execution
Updating of existing Laws like Income Tax Act
Designing effective mechanism for implementation
MODIFICATION OF IFRS IN PRACTICE
As per NFRS Current Practice in Nepal
Interest Income in BAFIS Accrual Basis Cash Basis (As per NRBs
requirement)

Loan Loss Provision Principle Based using Rule Based as per Income
expected loss model Tax Rule, 2058

Employee Liability Actuarial Valuation Simple basis of Accrual (as if

Modality all employees retire on BS
date )
Disclosures Strick & elaborative limited
disclosure
CONCLUSION
GAAP
IFRS
NFRS
?? ? ??
THANK
YOU