Nepal Accounting Standards for Micro Entities - NAS for MEs in Nepal, Overview of NAS for MEs in Nepal – Key Points You Should Know

NAS for MEs in Nepal: Overview of NAS for MEs in Nepal – Key Points You Should Know

NAS for MEs (Nepal Accounting Standards for Micro Entities) is a simplified financial reporting framework implemented in Nepal from 1 Shrawan 2080 for micro enterprises. It helps small businesses maintain accounts in an easier, cost-effective way, while complying with basic financial transparency requirements.

📚 Covered Topics

• Format of Financial Statements under NAS for ME
• Gaps between current GAAP and NAS for ME
• Property, Equipment, Employee Benefits, Investment, Forex
• Conversion of Financial Statements
• Reconciliation of Equity and Profit

📌 Applicable Frameworks

Category	Applicable Framework
Large Entities	Full NFRS
Small and Medium Entities (SMEs)	NFRS for SMEs
Micro Entities (MEs)	NAS for MEs

📊 Threshold Criteria for Applicability

Criteria	Large Entities	SMEs	Micro Entities
Borrowings from BFIs	Rs. 50 crores and more	Rs. 5–50 crores	Rs. 5 crores or less
Assets in Fiduciary Capacity	Rs. 50 crores and more	Rs. 5–50 crores	Rs. 5 crores or less
Balance Sheet Total	Rs. 100 crores and more	Rs. 10–100 crores	Rs. 10 crores or less
Annual Turnover	Rs. 100 crores and more	Rs. 10–100 crores	Rs. 10 crores or less
Employees	More than 300	Medium	Fewer than 50

Note: All listed entities or those in the process of listing are treated as Large Entities regardless of thresholds.

📅 Effective Date of NAS for MEs 2018

• Voluntary Compliance: Until 2080 Ashadh end
• Mandatory Compliance: From 2080 Shrawan 01

📘 Download & Learn More

• 📄 Model Financial Statements under NAS for MEs (ICAN Website)
• 📚 Visit Official ASB Page on NAS for MEs 2018
• 📥 Download NAS for MEs 2018 Book (Full PDF)

📖 NAS for MEs 2018 – Table of Contents

1. Introduction to NAS for MEs
2. Section 1: Intended Scope of this Standard
3. Section 2: Concepts and Pervasive Principles
4. Section 3: Financial Statement Presentation
5. Section 4: Statement of Financial Position
6. Section 5: Statement of Income
7. Section 6: Statement of Changes in Equity
8. Section 7: Statement of Cash Flows
9. Section 8: Notes to the Financial Statements
10. Section 9: Accounting Policies, Estimates and Errors
11. Section 10: Financial Instruments
12. Section 11: Inventories
13. Section 12: Property, Plant and Equipment (PPE)
14. Section 13: Leases
15. Section 14: Provisions and Contingencies
16. Section 15: Equity
17. Section 16: Revenue
18. Section 17: Government Grants
19. Section 18: Borrowing Costs
20. Section 19: Impairment of Assets
21. Section 20: Employee Benefits
22. Section 21: Income Tax
23. Section 22: Foreign Currency Translation
24. Section 23: Events after the End of the Reporting Period
25. Section 24: Related Party Disclosures
26. Section 25: Transition to the NAS for MEs

Model Financial Statements for MEs – Contents:

• Background
• Statement of Financial Position
• Statement of Income
• Statement of Changes in Equity
• Statement of Cash Flows
• Significant Accounting Policies and Notes to Accounts
• Explanatory Notes
• Appendix A: Effective Date & Transition

🔍 GAP Analysis: Property, Plant and Equipment

Aspect	GAAP (Old Method)	NAS for ME
Depreciation	Pool-based, Income Tax Act	Asset-wise, useful life method
Profit/Loss on Disposal	Only if pool dissolved	Always recorded
Repairs & Maintenance	Limited to 7% of base	No limit – fully expensed
Asset Records	Pool-wise record enough	Must be asset-by-asset

Note: NAS for ME does not allow asset revaluation or deferred tax treatment.

👩‍💼 Employee Benefits (Long-term)

• Old: Expense recorded only on payment
• NAS for ME: Must create provision based on amount payable if employee left today
• Simple calculation allowed, not actuarial

📈 Investment in Shares

• Held for Trading: Valued at fair market value
• Available for Sale: Valued at lower of cost or market

💱 Foreign Currency Transactions

• Transaction recorded at spot rate
• Year-end translation at closing rate
• Any exchange difference goes to Profit or Loss

🧾 FAQs (Frequently Asked Questions)

• Q: Depreciation under NAS ≠ Tax depreciation. Which one to follow?
  A: Prepare separate depreciation schedules—one for financial reporting, another for tax.
• Q: Can I disclose tax rates in Notes to Accounts?
  A: No, that would be incorrect presentation under NAS.
• Q: Useful life estimate—how?
  A: Based on management's judgment, asset nature, quality, and usage pattern.
• Q: Can we use tax depreciation rates?
  A: Yes, but must disclose it was done as an estimate, not copy-pasted.

📌 Conclusion

NAS for MEs in Nepal is a practical, simplified standard designed to reduce the compliance burden for small businesses. It allows financial statements to be prepared with fewer complexities while still ensuring quality and transparency.

If you're a small business owner, accountant, or student in Nepal, understanding NAS for ME is critical for compliance and future growth.

Need help with adoption, templates, or Excel formats? Let me know in the comments!

📌 Please contact a professional accountant, registered auditor, or tax advisor before applying any of the standards mentioned in this summary. This post is for informational purposes only.