Nepal Accounting Standard (NAS) for Micro Entities

(MEs) 2018
Chapter Section Provisions Remarks
Criteria
a) Micro entities are those entities with the following
thresholds (all):
(i) Annual Turnover of NRs 100 million or less;
(ii)Borrowing from banks or financial institutions or
public funnds or from entities holding assets in
fiduciary capacity of NRs 50 million or less;
(iii)Statement of Financial Position total of NRs 100
million or less; and
(iv)Holding assets in fiduciary capacity of NRs 50 million
or less
An entity must meet all of these limits in 2 consecutive
years to qualify as a micro entity and onced qualified,
must exceed at least 1 of these limits for 2 consecutive
years to cease to qualify.

b) Micro Entities are not specifically required to follow

NFRS or NFRS for SMEs but can prepare financial
statements in accordance with the Nepal Accounting
Standard for Micro Entities(NAS for MEs) on consistent
basis.

1 Intended Scope of this Standard

2 Concepts and Pervasive Principles
The objective of financial statemsnts of a micro entity
applying the NAS for Mes is to provide information
about the financial position, performance and cash
flows of the entity that is useful for economic decision
making.

3 Financial Statement Presentation

a. Fair presentation
b.Compliance with NAS for Mes
c.Going concern
d.Frequency of reporting
e.Consistency of presentation
f.Comparative information
g.Materiality and aggregation
4 Statement of Financial Position
The statement of financial position presents the entity's
assets,liabilities and equity as of a specifc date.

5 Statement of Income
This statement shall present items of income and
expenses recognized in determining profit or loss of
the reporting period.
6 Statement of Changes in Equity
 7 Statement of Cash Flows
A statement of cash flows shall present cash flows for a
reporting period classified by operating activities,
investing activities and financing activities.

8 Notes to the Financial Statements

The notes shall:
a. present information about the basis of preparation of
the financial statements and the specific accounting
policies used;
b. disclose the information required by this that is not
presented elsewhere in the financial statements; and

c. provide information that is not presented elsewhere

in the financial statements but is relevant to an
understanding of any of them.
9 Accounting Policies, Estimates and Errors
a. Selection and application of accounting policies
b. Changes in accounting policies
c. Applying changes in accounting policies
d. Changes in accounting estimates
e. Corrections of prior period errors
Disclosures
a. Disclosure of a change in accounting policy
b. Disclosure of a changge in estimate
c. Disclosure of prior period errors
10 Financial Instruments
A financial instrument is a contract that gives to a
financial asset of one entity and a financial liability or
equity instrument of another entity.
11 Inventories
Measurement of inventories: An entity shall measure
inventories at the lower of cost and estimated selling
price less costs to complete and sell.

12 Property, Plant and Equipment (PPE)

Property, plant and equipment accounted for under
this section are tangible assets that:
a. are held for use in the production or supply of goods
or services, for rental to others, or for administrative
purposes; and
b. are expected to be used during more than one
period.
13 Leases
Two types of leases:
Finance lease
Operating lease
Entity has to treat differently two types of lease
14 Provisions and Contingencies
An entity shall recognize a provision only when:
(a) the entity has an obligation at the reporting date as
a result of a past event;
(b) it is probable that the entity will be required to
transfer economic benefits in settlement;and
© the amount of the obligation can be estimated
reliably.
Proper Disclosures about contingent assets and
liabilities.
15 Equity
Equity is the residual interest in the assets of an entity
after deducting all its liabilities.
16 Revenue
Revenue is the gross inflow of economic benefits
during the period arising in the course of the ordinary
activitiies of an entity when those inflows result in
increase in equity,other than increases relating to
contributions from equity participants.

17 Government Grants
An entity shall recognize government grants and shall
measure at the value of the asset received or
receivable. An entity shall disclose the government
grants.

18 Borrowing Costs
Borrowing Costs are interest and other costs that an
entity incurs in connection with the borrowing of funds.

An entity shall recognise all borrowing costs as an

expense in the statement of income in the period in
which they are incurred.
An entity shall disclose total interest expense
recognized during the reporting period.
19 Impairment of Assets
this section shall be applied in accounting for the
impairment of Assets except financial assets dealt in
section 10 and assets arising from employee benefits
dealt in section 20.

20 Employee Benefits
General recognition principle for all employee benefits

Specific employee benefits

21 Income Tax
Income tax includes all domestic and foreign taxes that
are based on taxable profit.
Recognition and Measurement
Withholding tax on dividends
22 Foreign Currency Translation
 Functional Currency: An entity's functional is the
currency of the primary economic environment in
which the entity operates.
Reporting foreign currency transactions in the
functional currency
Reporting at the end of subsequent reporting periods

Use of a presentation currency

23 Events after the End of the Reporting Period
(a) Adjusting events: An entity shall adjust these events
in the financial statements
(b) Non-adjusting events: An entity shall not adjust
these events but disclosure of these events is must

Dividends is not the liability of the entity

24 Related Party Disclosures
Purpose of related party disclosures
Definition of related party
Disclosures:
a. Disclosure of parent-subsidiary relationships
b. Disclosure of key management personnel
compensation
c. Disclosure of related party transactions
25 Transition to the NAS for Mes
This section applies to a first-time adopter of the NAS
for MEs regardless of whether its previous accounting
framework was full NFRSs or another set of GAAP such
as income tax basis.

First-time adoption
Procedures for preparing financial statements at the
date of transition
Disclosures
Explanation of transition to the NAS for MEs
Reconciliationns