NFRS 1

Nepal Financial Reporting Standard 1

First-time Adoption of Nepal Financial Reporting Standards

OM
.C
CA
TN
DI
AU

ASB-NEPAL 1

www.auditnca.com
ebooknepal.com
 NFRS 1

CONTENTS

from paragraph

NEPAL FINANCIAL REPORTING STANDARD 1

FIRST-TIME ADOPTION OF NEPAL FINANCIAL REPORTING STANDARDS

OBJECTIVE 1
SCOPE 2
RECOGNITION AND MEASUREMENT 6
Opening NFRS statement of financial position 6

OM
Accounting policies 7
Exceptions to the retrospective application of other NFRSs 13
Estimates 14

.C
Exemptions from other NFRSs 18
PRESENTATION AND DISCLOSURE 20
Comparative information 21
Non-NFRS comparative information and historical summaries 22
CA
Explanation of transition to NFRSs 23
Reconciliations 24
Designation of financial assets or financial liabilities 29
TN

Use of fair value as deemed cost 30

Use of deemed cost for investments in subsidiaries, jointly
controlled entities and associates 31
Use of deemed cost for oil and gas assets 31A
DI

Use of deemed cost for operations subject to rate regulation 31B

Use of deemed cost after severe hyperinflation 31C
Interim financial reports 32
AU

EFFECTIVE DATE 34
WITHDRAWAL OF NFRS 1 (ISSUED 2003) 40

APPENDICES
A Defined terms
B Exceptions to the retrospective application of other NFRSs
C Exemptions for business combinations
D Exemptions from other NFRSs
E Short-term exemptions from NFRSs

ASB-NEPAL 2

www.auditnca.com
ebooknepal.com
 NFRS 1

Nepal Financial Reporting Standard 1 First-time Adoption of Nepal Financial Reporting Standards (NFRS 1) is
set out in paragraphs 1–40 and Appendices A–E. All the paragraphs have equal authority. Paragraphs in
bold type state the main principles. Terms defined in Appendix A are in italics the first time they
appear in the NFRS. Definitions of other terms are given in the Glossary for Nepal Financial
Reporting Standards. NFRS 1 should be read in the context of its objective and the Basis for Conclusions,
the Preface to Nepal Financial Reporting Standards and the Conceptual Framework for Financial Reporting. NAS 8
Accounting Policies, Changes in Accounting Estimates and Errors provides a basis for selecting and applying
accounting policies in the absence of explicit guidance.

OM
.C
CA
TN
DI
AU

ASB-NEPAL 3

www.auditnca.com
ebooknepal.com
 NFRS 1

Nepal Financial Reporting Standard 1

First-time Adoption of Nepal Financial Reporting Standards

Objective

1 The objective of this NFRS is to ensure that an entity’s first NFRS financial statements, and
its interim financial reports for part of the period covered by those financial statements,
contain high quality information that:

(a) is transparent for users and comparable over all periods presented;

(b) provides a suitable starting point for accounting in accordance with Nepal Financial

OM
Reporting Standards (NFRSs); and

(c) can be generated at a cost that does not exceed the benefits.

Scope

2 An entity shall apply this NFRS in:

(a) its first NFRS financial statements; and

.C
CA
(b) each interim financial report, if any, that it presents in accordance with NAS 34
Interim Financial Reporting for part of the period covered by its first NFRS financial
statements.

3 An entity’s first NFRS financial statements are the first annual financial
TN

statements in which the entity adopts NFRSs, by an explicit and unreserved statement
in those financial statements of compliance with NFRSs. Financial statements in
accordance with NFRSs are an entity’s first NFRS financial statements if, for example, the
entity:
DI

(a) presented its most recent previous financial statements:

(i) in accordance with national requirements that are not consistent with
NFRSs in all respects;
AU

(ii) in conformity with NFRSs in all respects, except that the financial
statements did not contain an explicit and unreserved statement that they
complied with NFRSs;

(iii) containing an explicit statement of compliance with some, but not all,
NFRSs;

(iv) in accordance with national requirements inconsistent with NFRSs, using

some individual NFRSs to account for items for which national
requirements did not exist; or

(v) in accordance with national requirements, with a reconciliation of some

amounts to the amounts determined in accordance with NFRSs;

ASB-NEPAL 4

www.auditnca.com
ebooknepal.com
 NFRS 1

(b) prepared financial statements in accordance with NFRSs for internal use only,
without making them available to the entity’s owners or any other external users;

(c) prepared a reporting package in accordance with NFRSs for consolidation purposes
without preparing a complete set of financial statements as defined in NAS 1
Presentation of Financial Statements ( as revised in 2008) -; or

(d) did not present financial statements for previous periods.

4 This NFRS applies when an entity first adopts NFRSs. It does not apply when, for example,
an entity:

(a) stops presenting financial statements in accordance with national

requirements, having previously presented them as well as another set of financial

OM
statements that contained an explicit and unreserved statement of compliance with
NFRSs;

(b) presented financial statements in the previous year in accordance with

national requirements and those financial statements contained an explicit

.C
and unreserved statement of compliance with NFRSs; or

(c) presented financial statements in the previous year that contained an explicit
and unreserved statement of compliance with NFRSs, even if the auditors
qualified their audit report on those financial statements.
CA
5 This NFRS does not apply to changes in accounting policies made by an entity that already
applies NFRSs. Such changes are the subject of:

(a) requirements on changes in accounting policies in NAS 8 Accounting Policies, Changes in

TN

Accounting Estimates and Errors; and

(b) specific transitional requirements in other NFRSs.

Recognition and measurement

DI

Opening NFRS statement of financial position

6 An entity shall prepare and present an opening NFRS statement of financial position at the date
AU

of transition to NFRSs. This is the starting point for its accounting in accordance with NFRSs.

Accounting policies

7 An entity shall use the same accounting policies in its opening NFRS statement of
financial position and throughout all periods presented in its first NFRS financial
statements. Those accounting policies shall comply with each NFRS effective at the end
of its first NFRS reporting period, except as specified in paragraphs 13–19 and
Appendices B–E.

8 An entity shall not apply different versions of NFRSs that were effective at earlier dates. An entity
may apply a new NFRS that is not yet mandatory if that NFRS permits early application.

ASB-NEPAL 5

www.auditnca.com
ebooknepal.com
 NFRS 1

Example: Consistent application of latest version of NFRSs

Background

The end of entity A’s first NFRS reporting period is 31 December 20X5. Entity A
decides to present comparative information in those financial statements for one
year only (see paragraph 21). Therefore, its date of transition to NFRSs is the
beginning of business on 1 January 20X4 (or, equivalently, close of business on 31
December 20X3). Entity A presented financial statements in accordance with its
previous GAAP annually to 31 December each year up to, and including, 31
December 20X4.

OM
Application of requirements

Entity A is required to apply the NFRSs effective for periods ending on 31 December
20X5 in:

.C
preparing and presenting its opening NFRS statement of financial position at 1
January 20X4; and

preparing and presenting its statement of financial position for 31 December 20X5
(including comparative amounts for 20X4), statement of comprehensive income,
CA
statement of changes in equity and statement of cash flows for the year to 31
December 20X5 (including comparative amounts for 20X4) and disclosures
(including comparative information for 20X4).

If a new NFRS is not yet mandatory but permits early application, entity A is
TN

permitted, but not required, to apply that NFRS in its first NFRS financial statements.

9. The transitional provisions in other IFRSs apply to changes in accounting policies made by an
DI

entity that already uses IFRSs; they do not apply to a first-time adopter’s transition to IFRSs,
except as specified in Appendices B–E.

10 Except as described in paragraphs 13–19 and Appendices B–E, an entity shall, in its opening
NFRS statement of financial position:
AU

(a) recognise all assets and liabilities whose recognition is required by NFRSs;

(b) not recognise items as assets or liabilities if NFRSs do not permit such recognition;

(c) reclassify items that it recognised in accordance with previous GAAP as one type of
asset, liability or component of equity, but are a different type of asset, liability or
component of equity in accordance with NFRSs; and

(d) apply NFRSs in measuring all recognised assets and liabilities.

11 The accounting policies that an entity uses in its opening NFRS statement of financial position
may differ from those that it used for the same date using its previous GAAP. The resulting
adjustments arise from events and transactions before the date of transition to NFRSs.

ASB-NEPAL 6

www.auditnca.com
ebooknepal.com
 NFRS 1

Therefore, an entity shall recognise those adjustments directly in retained earnings (or, if
appropriate, another category of equity) at the date of transition to NFRSs.

12 This NFRS establishes two categories of exceptions to the principle that an entity’s opening
NFRS statement of financial position shall comply with each NFRS:

(a) paragraphs 14–17 and Appendix B prohibit retrospective application of some

aspects of other NFRSs.

(b) Appendices C–E grant exemptions from some requirements of other NFRSs.

Exceptions to the retrospective application of other NFRSs

13 This NFRS prohibits retrospective application of some aspects of other NFRSs. These

OM
exceptions are set out in paragraphs 14–17 and Appendix B.

Estimates

.C
14 An entity’s estimates in accordance with NFRSs at the date of transition to NFRSs shall
be consistent with estimates made for the same date in accordance with previous
GAAP (after adjustments to reflect any difference in accounting policies), unless there
is objective evidence that those estimates were in error.
CA
15 An entity may receive information after the date of transition to NFRSs about estimates that it
had made under previous GAAP. In accordance with paragraph 14, an entity shall treat the
receipt of that information in the same way as non-adjusting events after the reporting period
in accordance with NAS 10 Events after the Reporting Period. For example, assume that an
entity’s date of transition to NFRSs is 1 January 20X4 and new information on 15 July 20X4
requires the revision of an estimate made in accordance with previous GAAP at 31 December
TN

20X3. The entity shall not reflect that new information in its opening NFRS statement of
financial position (unless the estimates need adjustment for any differences in accounting
policies or there is objective evidence that the estimates were in error). Instead, the entity shall
reflect that new information in profit or loss (or, if appropriate, other comprehensive income)
for the year ended 31 December 20X4.
DI

16 An entity may need to make estimates in accordance with NFRSs at the date of transition to
NFRSs that were not required at that date under previous GAAP. To achieve consistency with
NAS 10, those estimates in accordance with NFRSs shall reflect conditions that existed at the
date of transition to NFRSs. In particular, estimates at the date of transition to NFRSs of
AU

market prices, interest rates or foreign exchange rates shall reflect market conditions at that
date.

17 Paragraphs 14–16 apply to the opening NFRS statement of financial position. They also apply
to a comparative period presented in an entity’s first NFRS financial statements, in which case
the references to the date of transition to NFRSs are replaced by references to the end of that
comparative period.

Exemptions from other NFRSs

18 An entity may elect to use one or more of the exemptions contained in Appendices C–E. An
entity shall not apply these exemptions by analogy to other items.

19 Some exemptions in Appendices C–E refer to fair value. In determining fair values in

ASB-NEPAL 7

www.auditnca.com
ebooknepal.com
 NFRS 1

accordance with this NFRS, an entity shall apply the definition of fair value in Appendix A and
any more specific guidance in other NFRSs on the determination of fair values for the asset or
liability in question. Those fair values shall reflect conditions that existed at the date for which
they were determined.

Presentation and disclosure

20 This NFRS does not provide exemptions from the presentation and disclosure requirements in
other NFRSs.

Comparative information

21 To comply with NAS 1, an entity’s first NFRS financial statements shall include at least three
statements of financial position, two statements of comprehensive income, two separate

OM
income statements (if presented), two statements of cash flows and two statements of changes
in equity and related notes, including comparative information.

Non-NFRS comparative information and historical summaries

.C
22 Some entities present historical summaries of selected data for periods before the first period
for which they present full comparative information in accordance with NFRSs. This NFRS does
not require such summaries to comply with the recognition and measurement requirements of
NFRSs. Furthermore, some entities present comparative information in accordance with
previous GAAP as well as the comparative information required by NAS 1. In any financial
CA
statements containing historical summaries or comparative information in accordance with
previous GAAP, an entity shall:

(a) label the previous GAAP information prominently as not being prepared in accordance with
NFRSs; and
TN

(b) disclose the nature of the main adjustments that would make it comply with NFRSs.
An entity need not quantify those adjustments.

Explanation of transition to NFRSs

DI

23 An entity shall explain how the transition from previous GAAP to NFRSs affected its
reported financial position, financial performance and cash flows.

Reconciliations
AU

24 To comply with paragraph 23, an entity’s first NFRS financial statements shall include:

(a) reconciliations of its equity reported in accordance with previous GAAP to its equity
in accordance with NFRSs for both of the following dates:

(i) the date of transition to NFRSs; and

(ii) the end of the latest period presented in the entity’s most recent annual
financial statements in accordance with previous GAAP.

(b) a reconciliation to its total comprehensive income in accordance with NFRSs for
the latest period in the entity’s most recent annual financial statements. The
starting point for that reconciliation shall be total comprehensive income in

ASB-NEPAL 8

www.auditnca.com
ebooknepal.com
 NFRS 1

accordance with previous GAAP for the same period or, if an entity did not report
such a total, profit or loss under previous GAAP.

(c) if the entity recognised or reversed any impairment losses for the first time in
preparing its opening NFRS statement of financial position, the disclosures that
NAS 36 Impairment of Assets would have required if the entity had recognised
those impairment losses or reversals in the period beginning with the date of
transition to NFRSs.

25 The reconciliations required by paragraph 24(a) and (b) shall give sufficient detail to enable
users to understand the material adjustments to the statement of financial position and
statement of comprehensive income. If an entity presented a statement of cash flows under its
previous GAAP, it shall also explain the material adjustments to the statement of cash flows.

OM
26 If an entity becomes aware of errors made under previous GAAP, the reconciliations required
by paragraph 24(a) and (b) shall distinguish the correction of those errors from changes in
accounting policies.

27 NAS 8 does not apply to the changes in accounting policies an entity makes when it adopts
NFRSs or to changes in those policies until after it presents its first NFRS financial statements.

.C
Therefore, NAS 8’s requirements about changes in accounting policies do not apply in an
entity’s first NFRS financial statements.

27A If during the period covered by its first NFRS financial statements an entity changes its
accounting policies or its use of the exemptions contained in this NFRS, it shall explain the
CA
changes between its first NFRS interim financial report and its first NFRS financial statements,
in accordance with paragraph 23, and it shall update the reconciliations required by paragraph
24(a) and (b).

28 If an entity did not present financial statements for previous periods, its first NFRS financial
TN

statements shall disclose that fact.

Designation of financial assets or financial liabilities

29 An entity is permitted to designate a previously recognised financial asset as a financial asset

DI

measured at fair value through profit or loss in accordance with paragraph D19A. The entity
shall disclose the fair value of financial assets so designated at the date of designation and their
classification and carrying amount in the previous financial statements.

29A An entity is permitted to designate a previously recognised financial liability as a financial

AU

liability at fair value through profit or loss in accordance with paragraph D19. The entity shall
disclose the fair value of financial liabilities so designated at the date of designation and their
classification and carrying amount in the previous financial statements.

Use of fair value as deemed cost

30 If an entity uses fair value in its opening NFRS statement of financial position as deemed cost
for an item of property, plant and equipment, an investment property or an intangible asset (see
paragraphs D5 and D7), the entity’s first NFRS financial statements shall disclose, for each line
item in the opening NFRS statement of financial position:

(a) the aggregate of those fair values; and

(b) the aggregate adjustment to the carrying amounts reported under previous GAAP.

ASB-NEPAL 9

www.auditnca.com
ebooknepal.com
 NFRS 1

Use of deemed cost for investments in subsidiaries, jointly controlled entities and associates

31 Similarly, if an entity uses a deemed cost in its opening NFRS statement of financial position
for an investment in a subsidiary, jointly controlled entity or associate in its separate financial
statements (see paragraph D15), the entity’s first NFRS separate financial statements shall
disclose:

(a) the aggregate deemed cost of those investments for which deemed cost is their
previous GAAP carrying amount;

(b) the aggregate deemed cost of those investments for which deemed cost is fair value;
and

(c) the aggregate adjustment to the carrying amounts reported under previous GAAP.

OM
Use of deemed cost for oil and gas assets

31A If an entity uses the exemption in paragraph D8A(b) for oil and gas assets, it shalldisclose that
fact and the basis on which carrying amounts determined under previous GAAP were

.C
allocated.

Use of deemed cost for operations subject to rate regulation

CA
31B If an entity uses the exemption in paragraph D8B for operations subject to rate regulation, it
shall disclose that fact and the basis on which carrying amounts were determined under
previous GAAP.

Use of deemed cost after severe hyperinflation

TN

31C If an entity elects to measure assets and liabilities at fair value and to use that fair value as the
deemed cost in its opening NFRS statement of financial position because of severe
hyperinflation (see paragraphs D26–D30), the entity’s first NFRS financial statements shall
disclose an explanation of how, and why, the entity had, and then ceased to have, a functional
currency that has both of the following characteristics:
DI

(a) a reliable general price index is not available to all entities with transactions
and balances in the currency.
AU

(b) between the currency and a relatively stable foreign currency does not exist.

Interim financial reports

32 To comply with paragraph 23, if an entity presents an interim financial report in accordance
satisfy the following requirements in addition to the requirements of NAS 34:

(a) Each such interim financial report shall, if the entity presented an interim financial
report for the comparable interim period of the immediately preceding financial
year, include:

(i) a reconciliation of its equity in accordance with previous GAAP at the end of that
comparable interim period to its equity under NFRSs at that date; and

ASB-NEPAL 10

www.auditnca.com
ebooknepal.com
 NFRS 1

(ii) a reconciliation to its total comprehensive income in accordance with NFRSs for
that comparable interim period (current and year to date). The starting point for
that reconciliation shall be total comprehensive income in accordance with
previous GAAP for that period or, if an entity did not report such a total, profit or
loss in accordance with previous GAAP.

(b) In addition to the reconciliations required by (a), an entity’s first interim financial
report in accordance with NAS 34 for part of the period covered by its first NFRS
financial statements shall include the reconciliations described in paragraph 24(a)
and (b) (supplemented by the details required by paragraphs 25 and 26) or a cross-
reference to another published document that includes these reconciliations.

(c) If an entity changes its accounting policies or its use of the exemptions contained in
this NFRS, it shall explain the changes in each such interim financial report in

OM
accordance with paragraph 23 and update the reconciliations required by (a) and
(b).

33 NAS 34 requires minimum disclosures, which are based on the assumption that users of the
interim financial report also have access to the most recent annual financial statements.

.C
However, NAS 34 also requires an entity to disclose ‘any events or transactions that are
material to an understanding of the current interim period’. Therefore, if a first-time adopter did
not, in its most recent annual financial statements in accordance with previous GAAP, disclose
information material to an understanding of the current interim period, its interim financial report
shall disclose that information or include a cross-reference to another published document that
includes it.
CA
Effective date

34 An entity shall apply this NFRS if its first NFRS financial statements are for a periodbeginning
on or after XXXX. Earlier application is permitted.
TN

35-39M [Deleted]

Withdrawal of NFRS 1 (issued 2003)

DI

40 [Deleted]
AU

ASB-NEPAL 11

www.auditnca.com
ebooknepal.com
 NFRS 1

Appendix A

Defined terms

This appendix is an integral part of the NFRS.

date of transition to NFRSs The beginning of the earliest period for which an entity
presents full comparative information under NFRSs in its first
NFRS financial statements.

deemed cost An amount used as a surrogate for cost or depreciated cost at

OM
a given date. Subsequent depreciation or amortisation
assumes that the entity had initially recognised the asset or
liability at the given date and that its cost was equal to the
deemed cost.

fair value Fair value is the price that would be received to sell an asset or

.C
paid to transfer a liability in an orderly transaction between
market participants at the measurement date. (See NFRS 13)

first NFRS financial statements The first annual financial statements in which an entity adopts
Nepal Financial Reporting Standards (NFRSs), by an
CA
explicit and unreserved statement of compliance with NFRSs.

first NFRS financial statements The latest reporting period covered by an entity’s first NFRS
reporting period financial statements.
TN

first-time adopter An entity that presents its first NFRS financial statements.

Nepal Financial Reporting Standards and Interpretations adopted by the Accounting

Standards (NFRSs) Standards Board (ASB). They comprise:
DI

(a) Nepal Financial Reporting Standards;

(b) Nepal Acc ounting Standar ds ;

AU

(c) IFR IC I nt er pr et at i o ns ; an d

(d) SIC Interpretations.*

opening NFRS statement of An entity’s statement of financial position at the date of

financial position transition to NFRSs

previous GAAP T h e b as i s of ac c o u n t in g t h a t a first-time adopter

u s e d before adopting NFRSs.

ASB-NEPAL 12

www.auditnca.com
ebooknepal.com
 NFRS 1

Appendix B

Exceptions to the retrospective application of other NFRSs

This appendix is an integral part of the NFRS.

B1 An entity shall apply the following exceptions:

(a) derecognition of financial assets and financial liabilities (paragraphs B2 and B3);

(b) hedge accounting (paragraphs B4–B6);

(c) non-controlling interests (paragraph B7);

OM
(d) classification and measurement of financial assets (paragraph B8); and

(e) embedded derivatives (paragraph B9).

.C
Derecognition of financial assets and financial liabilities

B2 Except as permitted by paragraph B3, a first-time adopter shall apply the

derecognition requirements in NFRS 9 prospectively for transactions occurring on or after
the date of transition to NFRSs. For example, if a first-time adopter derecognised non-
CA
derivative financial assets or non-derivative financial liabilities in accordance with its
previous GAAP as a result of a transaction that occurred before the date of transition to
NFRSs, it shall not recognise those assets and liabilities in accordance with NFRSs
(unless they qualify for recognition as a result of a later transaction or event).
TN

B3 Despite paragraph B2, an entity may apply the derecognition requirements in NFRS 9
retrospectively from a date of the entity’s choosing, provided that the information needed
to apply NFRS 9 to financial assets and financial liabilities derecognised as a result of past
transactions was obtained at the time of initially accounting for those transactions.
DI

Hedge accounting

B4 As required by NFRS 9, at the date of transition to NFRSs, an entity shall:

(a) measure all derivatives at fair value; and

AU

(b) eliminate all deferred losses and gains arising on derivatives that were reported in
accordance with previous GAAP as if they were assets or liabilities.

B5 An entity shall not reflect in its opening NFRS statement of financial position a hedging
relationship of a type that does not qualify for hedge accounting in accordance with NAS
39 (for example, many hedging relationships where the hedging instrument is a cash
instrument or written option; or where the hedged item is a net position). However, if an
entity designated a net position as a hedged item in accordance with previous, it may
designate an individual item within that net position as a hedged item in accordance with
NFRSs, provided that it does so no later than the date of transition to NFRSs.

B6 If, before the date of transition to NFRSs, an entity had designated a transaction as a
hedge but the hedge does not meet the conditions for hedge accounting in NAS 39,

ASB-NEPAL 13

www.auditnca.com
ebooknepal.com
 NFRS 1

the entity shall apply paragraphs 91 and 101 of NAS 39 to discontinue hedge accounting.
Transactions entered into before the date of transition to NFRSs shall not be
retrospectively designated as hedges.

Non-controlling interests

B7 A first-time adopter shall apply the following requirements of NFRS 10 prospectively from
the date of transition to NFRSs:

(a) the requirement in paragraph B94 that total comprehensive income is attributed to the
owners of the parent and to the non-controlling interests even if this results in the non-
controlling interests having a deficit balance;

(b) the requirements in paragraphs 23 and B93 for accounting for changes in the parent’s

OM
ownership interest in a subsidiary that do not result in a loss of control; and

(c) the requirements in paragraphs B97–B99 for accounting for a loss of control over a
subsidiary, and the related requirements of paragraph 8A of NFRS 5 Non-current Assets Held
for Sale and Discontinued Operations.

.C
However, if a first-time adopter elects to apply NFRS 3 retrospectively to past business
combinations, it shall also apply NFRS 10 in accordance with paragraph C1 of this NFRS.

Classification and measurement of financial assets

CA
B8 An entity shall assess whether a financial asset meets the conditions in paragraph
4.1.2 of NFRS 9 on the basis of the facts and circumstances that exist at the date of
transition to NFRSs.
TN

Embedded derivatives

B9 A first-time adopter shall assess whether an embedded derivative is required to be

separated from the host contract and accounted for as a derivative on the basis of the
conditions that existed at the later of the date it first became a party to the contract and
DI

the date a reassessment is required by paragraph B4.3.11 of NFRS 9.

AU

ASB-NEPAL 14

www.auditnca.com
ebooknepal.com
 NFRS 1

Appendix C

Exemptions for business combinations

This appendix is an integral part of the NFRS. An entity shall apply the following requirements to business
combinations that the entity recognised before the date of transition to NFRSs.

C1 A first-time adopter may elect not to apply NFRS 3 retrospectively to past

business combinations (business combinations that occurred before the date of
transition to NFRSs). However, if a first-time adopter restates any business combination to
comply with NFRS 3 it shall restate all later business combinations and shall also
apply NFRS 10 from that same date. For example, if a first-time adopter elects to
restate a business combination that occurred on 30 June 20X6, it shall restate all
business combinations that occurred between 30 June 20X6 and the date of transition

OM
to NFRSs, and it shall also apply NFRS 10 from 30 June 20X6.

C2 An entity need not apply NAS 21 The Effects of Changes in Foreign Exchange Rates
retrospectively to fair value adjustments and goodwill arising in business
combinations that occurred before the date of transition to NFRSs. If the entity does not

.C
apply NAS 21 retrospectively to those fair value adjustments and goodwill, it shall
treat them as assets and liabilities of the entity rather than as assets and liabilities of the
acquiree. Therefore, those goodwill and fair value adjustments either are already
expressed in the entity’s functional currency or are non-monetary foreign currency
items, which are reported using the exchange rate applied in accordance with previous
CA
GAAP.

C3 An entity may apply NAS 21 retrospectively to fair value adjustments and goodwill arising
in either:
TN

(a) all business combinations that occurred before the date of transition to NFRSs; or

(b) all business combinations that the entity elects to restate to comply with NFRS 3, as
permitted by paragraph C1 above.

C4 If a first-time adopter does not apply NFRS 3 retrospectively to a past business combination,
DI

this has the following consequences for that business combination:

(a) The first-time adopter shall keep the same classification (as an acquisition by the
legal acquirer, a reverse acquisition by the legal acquiree, or a uniting of interests)
as in its previous GAAP financial statements.
AU

(b) The first-time adopter shall recognise all its assets and liabilities at the date of
transition to NFRSs that were acquired or assumed in a past business combination,
other than:

(i) some financial assets and financial liabilities derecognised in accordance

with previous GAAP (see paragraph B2); and

(ii) assets, including goodwill, and liabilities that were not recognised in the
acquirer’s consolidated statement of financial position in accordance with
previous GAAP and also would not qualify for recognition in accordance
with NFRSs in the separate statement of financial position of the acquiree
(see (f)–(i) below).

ASB-NEPAL 15

www.auditnca.com
ebooknepal.com
 NFRS 1

The first-time adopter shall recognise any resulting change by adjusting retained earnings
(or, if appropriate, another category of equity), unless the change results from the
recognition of an intangible asset that was previously subsumed within goodwill (see
(g)(i) below).

(a) The first-time adopter shall exclude from its opening NFRS statement of financial
position any item recognised in accordance with previous GAAP that does not
qualify for recognition as an asset or liability under NFRSs. The first-time adopter
shall account for the resulting change as follows:

(i) the first-time adopter may have classified a past business combination as an
acquisition and recognised as an intangible asset an item that does not qualify for

OM
recognition as an asset in accordance with NAS 38 Intangible Assets. It shall reclassify
that item (and, if any, the related deferred tax and non-controlling interests) as part
of goodwill (unless it deducted goodwill directly from equity in accordance with
previous GAAP, see (g)(i) and (i) below).

.C
(ii) the first-time adopter shall recognise all other resulting changes in retained
*
earnings.

(b) NFRSs require subsequent measurement of some assets and liabilities on a basis
that is not based on original cost, such as fair value. The first-time adopter shall
CA
measure these assets and liabilities on that basis in its opening NFRS statement of
financial position, even if they were acquired or assumed in a past business
combination. It shall recognise any resulting change in the carrying amount by
adjusting retained earnings (or, if appropriate, another category of equity), rather than
goodwill.
TN

(c) Immediately after the business combination, the carrying amount in accordance with
previous GAAP of assets acquired and liabilities assumed in that business
combination shall be their deemed cost in accordance with NFRSs at that date. If
NFRSs require a cost-based measurement of those assets and liabilities at a later
date, that deemed cost shall be the basis for cost-based depreciation or amortisation
DI

from the date of the business combination.

(d) If an asset acquired, or liability assumed, in a past business combination was not
recognised in accordance with previous GAAP, it does not have a deemed cost of
zero in the opening NFRS statement of financial position. Instead, the acquirer shall
AU

recognise and measure it in its consolidated statement of financial position on the

basis that NFRSs would require in the statement of financial position of the acquiree.
To illustrate: if the acquirer had not, in accordance with its previous GAAP,
capitalised finance leases acquired in a past business combination, it shall capitalise
those leases in its consolidated financial statements, as NAS 17 Leases would
require the acquiree to do in its NFRS statement of financial position. Similarly, if the
acquirer had not, in accordance with its previous GAAP, recognised a contingent
liability that still exists at the date of transition to NFRSs, the acquirer shall recognise
that contingent liability at that date unless NAS 37 Provisions, Contingent Liabilities
and Contingent Assets would prohibit its recognition in the financial statements of the
acquiree. Conversely, if an asset or liability was subsumed in goodwill in accordance
with previous GAAP but would have been recognised separately under NFRS 3, that
asset or liability remains in goodwill unless NFRSs would require its recognition in the
financial statements of the acquiree.

ASB-NEPAL 16

www.auditnca.com
ebooknepal.com
 NFRS 1

(e) The carrying amount of goodwill in the opening NFRS statement of financial position
shall be its carrying amount in accordance with previous GAAP at the date of
transition to NFRSs, after the following two adjustments:

(i) If required by (c) (i) above, the first-time adopter shall increase the carrying
amount of goodwill when it reclassifies an item that it recognised as an
intangible asset in accordance with previous GAAP. Similarly, if (f) above requires
the first-time adopter to recognise an intangible asset that was subsumed in
recognised goodwill in accordance with previous GAAP, the first-time adopter
shall decrease the carrying amount of goodwill accordingly (and, if applicable,
adjust deferred tax and non-controlling interests).

(ii) Regardless of whether there is any indication that the goodwill may be impaired,
the first-time adopter shall apply NAS 36 in testing the goodwill for impairment

OM
at the date of transition to NFRSs and in recognising any resulting impairment
loss in retained earnings (or, if so required by NAS 36, in revaluation surplus).
The impairment test shall be based on conditions at the date of transition to
NFRSs.

.C
(f) No other adjustments shall be made to the carrying amount of goodwill at the date of
transition to NFRSs. For example, the first-time adopter shall not restate the carrying
amount of goodwill:

(i) to exclude in-process research and development acquired in that business

CA
combination (unless the related intangible asset would qualify for recognition in
accordance with NAS 38 in the statement of financial position of the acquiree);

(ii) to adjust previous amortisation of goodwill;

TN

(iii) to reverse adjustments to goodwill that NFRS 3 would not permit, but were made
in accordance with previous GAAP because of adjustments to assets and
liabilities between the date of the business combination and the date of transition
to NFRSs.
DI

(g) If the first-time adopter recognised goodwill in accordance with previous GAAP as a
deduction from equity:

(i) it shall not recognise that goodwill in its opening NFRS statement of financial
position. Furthermore, it shall not reclassify that goodwill to profit or loss if it
AU

disposes of the subsidiary or if the investment in the subsidiary becomes

impaired.

(ii) adj ustm ents r es ulting fr om the s ubs equent res olution of a contingency
affecting the purchase consideration shall be recognised in retained earnings.

(h) In accordance with its previous GAAP, the first-time adopter may not have
consolidated a subsidiary acquired in a past business combination (for example,
because the parent did not regard it as a subsidiary in accordance with previous
GAAP or did not prepare consolidated financial statements). The first-time adopter
shall adjust the carrying amounts of the subsidiary’s assets and liabilities to the
amounts that NFRSs would require in the subsidiary’s statement of financial position.
The deemed cost of goodwill equals the difference at the date of transition to NFRSs
between:

ASB-NEPAL 17

www.auditnca.com
ebooknepal.com
 NFRS 1

(i) the parent’s interest in those adjusted carrying amounts; and

(ii) the cost in the parent’s separate financial statements of its investment in
the subsidiary.

(k) The measurement of non-controlling interests and deferred tax follows from the
measurement of other assets and liabilities. Therefore, the above adjustments to
recognised assets and liabilities affect non-controlling interests and deferred tax.

C5 The exemption for past business combinations also applies to past acquisitions of
investments in associates and of interests in joint ventures. Furthermore, the Date
selected for paragraph C1 applies equally for all such acquisitions. C1 applies equally for
all such transactions.

OM
.C
CA
TN
DI
AU

ASB-NEPAL 18

www.auditnca.com
ebooknepal.com
 NFRS 1

Appendix D

Exemptions from other NFRSs

This appendix is an integral part of the NFRS.

D1 An entity may elect to use one or more of the following exemptions:

(a) share-based payment transactions (paragraphs D2 and D3);

(b) insurance contracts (paragraph D4);

(c) deemed cost (paragraphs D5–D8B);

(d) leases (paragraphs D9 and D9A);

OM
(e) [deleted]

(f) cumulative translation differences (paragraphs D12 and D13);

(g) investments in subsidiaries, jointly controlled entities and associates (paragraphs D14

.C
and D15);

(h) assets and liabilities of subsidiaries, associates and joint ventures (paragraphs D16 and
D17);
CA
(i) compound financial instruments (paragraph D18);

(j) designation of previously recognised financial instruments (paragraphs D19–D19D);

(k) fair value measurement of financial assets or financial liabilities at initial recognition
TN

(paragraph D20);

(l) decommissioning liabilities included in the cost of property, plant and equipment
(paragraphs D21 and D21A);

financial assets or intangible assets accounted for in accordance with IFRIC 12 Service
DI

(m)
Concession Arrangements (paragraph D22);

(n) borrowing costs (paragraph D23);

(o) transfers of assets from customers (paragraph D24);

AU

(p) extinguishing financial liabilities with equity instruments (paragraph D25); and

(q) s ever e hyper inf lation (par agr aphs D26–D30). An entity shall not apply these
exemptions by analogy to other items.

(r) joint arrangements ( paragraph D31) : and

(s) Stripping cost in the production phase of a surface mine ( Paragraph D32).

An entity shall not apply these exemptions by analogy to other items.

ASB-NEPAL 19

www.auditnca.com
ebooknepal.com
 NFRS 1

Share-based payment transactions

D2 A first-time adopter is encouraged, but not required, to apply NFRS 2 Share-based

Payment to equity instruments that were granted on or before the date of transition to
NFRS. A first-time adopter is also encouraged, but not required, to apply NFRS 2 to equity
instruments that were granted after date of transition to NFRSs and vested before the
later of (a) the date of transition to NFRSs and (b) effective date. However, if a first-time
adopter elects to apply NFRS 2 to such equity instruments, it may do so only if the entity
has disclosed publicly the fair value of those equity instruments, determined at the
measurement date, as defined in NFRS 2. For all grants of equity instruments to which
NFRS 2 has not been applied (eg. equity instruments granted on or before 7 November
2002), a first-time adopter shall nevertheless disclose the information required by paragraphs
44 and 45 of NFRS 2. If a first-time adopter modifies the terms or conditions of a grant of
equity instruments to which NFRS 2 has not been applied, the entity is not required to
apply paragraphs 26–29 of NFRS 2 if the modification occurred before the date of
transition to NFRSs.

OM
D3 A first-time adopter is encouraged, but not required, to apply NFRS 2 to liabilities arising
from share-based payment transactions that were settled before the date of transition to
NFRSs. A first-time adopter is also encouraged, but not required, to apply NFRS 2 to
liabilities that were settled before the effective date . For liabilities to which NFRS 2 is

.C
applied , a first time adopter is not required to restate comparative information to the extent
that information relates to a period or date that is earlier than the date of transition to
NFRSs.

Insurance contracts
CA
D4 A first-time adopter may apply the transitional provisions in NFRS 4 Insurance Contracts.
NFRS 4 restricts changes in accounting policies for insurance contracts, including changes
made by a first-time adopter.
TN

Deemed cost

D5 An entity may elect to measure an item of property, plant and equipment at the date of
transition to NFRSs at its fair value and use that fair value as its deemed cost at that date.
DI

D6 A first-time adopter may elect to use a previous GAAP revaluation of an item of property,
plant and equipment at, or before, the date of transition to NFRSs as deemed cost at the date
of the revaluation, if the revaluation was, at the date of the revaluation, broadly comparable to:

(a) fair value; or

AU

(b) cost or depreciated cost in accordance with NFRSs, adjusted to reflect, for example,
changes in a general or specific price index.

D7 The elections in paragraphs D5 and D6 are also available for:

(a) investment property, if an entity elects to use the cost model in NAS 40 Investment
Property; and

(b) i nt an g i bl e as s ets t h at m eet:

(i) the recognition criteria in NAS 38 (including reliable measurement of original
cost); and
(ii) the criteria in NAS 38 for revaluation (including the existence of an active
market).
An entity shall not use these elections for other assets or for liabilities.
ASB-NEPAL 20

www.auditnca.com
ebooknepal.com
 NFRS 1

D8 A first-time adopter may have established a deemed cost in accordance with previous GAAP
for some or all of its assets and liabilities by measuring them at their fair value at one
particular date because of an event such as a privatisation or initial public offering.
(a) If the measurement date is at or before the date of transition to NFRSs, the entity may
use such event-driven fair value measurements as deemed cost for NFRSs at the
date of that measurement.

(b) If the measurement date is after the date of transition to NFRSs, but during the
period covered by the first NFRS financial statements, the event-driven fair value
measurements may be used as deemed cost when the event occurs. An entity
shall recognise the resulting adjustments directly in retained earnings (or if
appropriate, another category of equity) at the measurement date. At the date of
transition to NFRSs, the entity shall either establish the deemed cost by applying the
criteria in paragraphs D5–D7 or measure assets and liabilities in accordance with the
other requirements in this NFRS.

OM
D8A Under national accounting requirements exploration and development costs for oil and gas
properties in the development or production phases are accounted for in cost centres that
include all properties in a large geographical area. A first-time adopter using such accounting
under previous GAAP may elect to measure oil and gas assets at the date of transition to
NFRSs on the following basis:

.C
(a) exploration and evaluation assets at the amount determined under the entity’s
previous GAAP; and

(b) assets in the development or production phases at the amount determined for the
CA
cost centre under the entity’s previous GAAP. The entity shall allocate this amount
to the cost centre’s underlying assets pro rata using reserve volumes or reserve
values as of that date.

The entity shall test exploration and evaluation assets and assets in the
development and production phases for impairment at the date of transition to
TN

NFRSs in accordance with NFRS 6 Exploration for and Evaluation of Mineral Resources
or NAS 36 respectively and, if necessary, reduce the amount determined in
accordance with (a) or (b) above. For the purposes of this paragraph, oil and gas
assets comprise only those assets used in the exploration, evaluation,
development or production of oil and gas.
DI

D8B Some entities hold items of property, plant and equipment or intangible assets that are used,
or were previously used, in operations subject to rate regulation. The carrying amount of
such items might include amounts that were determined under previous GAAP but do not
qualify for capitalisation in accordance with NFRSs. If this is the case, a first-time adopter
AU

may elect to use the previous GAAP carrying amount of such an item at the date of transition
to NFRSs as deemed cost. If an entity applies this exemption to an item, it need not apply it
to all items. At the date of transition to NFRSs, an entity shall test for impairment in
accordance with NAS 36 each item for which this exemption is used. For the purposes of this
paragraph, operations are subject to rate regulation if they provide goods or services to
customers at prices (ie rates) established by an authorised body empowered to establish
rates that bind the customers and that are designed to recover the specific costs the entity
incurs in providing the regulated goods or services and to earn a specified return. The
specified return could be a minimum or range and need not be a fixed or guaranteed return.

Leases

D9 A first-time adopter may apply the transitional provisions in IFRIC 4 Determining whether an
Arrangement contains a Lease. Therefore, a first-time adopter may determine whether an
arrangement existing at the date of transition to NFRSs contains a lease on the basis of facts
and circumstances existing at that date.

ASB-NEPAL 21

www.auditnca.com
ebooknepal.com
 NFRS 1

D9A If a first-time adopter made the same determination of whether an arrangement contained a
lease in accordance with previous GAAP as that required by IFRIC 4 but at a date other than
that required by IFRIC 4, the first-time adopter need not reassess that determination when it
adopts NFRSs. For an entity to have made the same determination of whether the
arrangement contained a lease in accordance with previous GAAP, that determination would
have to have given the same outcome as that resulting from applying NAS 17 Leases and
IFRIC 4.

D10 - D11 [Deleted]

Cumulative translation differences

D12 NAS 21 requires an entity:

(a) to recognise some translation differences in other comprehensive income and

accumulate these in a separate component of equity; and

OM
(b) on disposal of a foreign operation, to reclassify the cumulative translation difference for
that foreign operation (including, if applicable, gains and losses on related hedges)
from equity to profit or loss as part of the gain or loss on disposal.

.C
D13 However, a first-time adopter need not comply with these requirements for cumulative
translation differences that existed at the date of transition to NFRSs. If a first-time adopter
uses this exemption:
CA
(a) the cumulative translation differences for all foreign operations are deemed to be
zero at the date of transition to NFRSs; and

(b) the gain or loss on a subsequent disposal of any foreign operation shall exclude
translation differences that arose before the date of transition to NFRSs and shall
include later translation differences.
TN

Investments in subsidiaries, jointly controlled entities and associates

D14 When an entity prepares separate financial statements, NAS 27 requires it to account for its
DI

investments in subsidiaries, jointly controlled entities and associates either:

(a) at cost; or

( b) in acc or dance with NFRS 9.

AU

D15 If a first-time adopter measures such an investment at cost in accordance with NAS 27, it
shall measure that investment at one of the following amounts in its separate opening NFRS
statement of financial position:

(a) cost determined in accordance with NAS 27; or

(b) deemed cost. The deemed cost of such an investment shall be its:

(i) fair value at the entity’s date of transition to NFRSs in its separate financial
statements; or

(ii) previous GAAP carrying amount at that date.

ASB-NEPAL 22

www.auditnca.com
ebooknepal.com
 NFRS 1

A first-time adopter may choose either (i) or (ii) above to measure its investment in
each subsidiary, jointly controlled entity or associate that it elects to measure using a
deemed cost.

Assets and liabilities of subsidiaries, associates and joint ventures

D16 If a subsidiary becomes a first-time adopter later than its parent, the subsidiary shall, in its
financial statements, measure its assets and liabilities at either:

(a) the carrying amounts that would be included in the parent’s consolidated financial
statements, based on the parent’s date of transition to NFRSs, if no adjustments were
made for consolidation procedures and for the effects of the business combination
in which the parent acquired the subsidiary; or

(b) the carrying amounts required by the rest of this NFRS, based on the
subsidiary’s date of transition to NFRSs. These carrying amounts could differ from

OM
those described in (a):

(i) when the exemptions in this NFRS result in measurements that depend on
the date of transition to NFRSs.

.C
(ii) when the accounting policies used in the subsidiary’s financial statements
differ from those in the consolidated financial statements. For example, the
subsidiary may use as its accounting policy the cost model in NAS 16 Property,
Plant and Equipment, whereas the group may use the revaluation model.
CA
A similar election is available to an associate or joint venture that becomes a first-
time adopter later than an entity that has significant influence or joint control over
it.

D17 However, if an entity becomes a first-time adopter later than its subsidiary(or associate or
TN

joint venture) the entity shall, in its consolidated financial statements, measure the assets
and liabilities of the subsidiary (or associate or joint venture) at the same carrying amounts
as in the financial statements of the subsidiary (or associate or joint venture), after adjusting
for consolidation and equity accounting adjustments and for the effects of the business
combination in which the entity acquired the subsidiary. Similarly, if a parent becomes a first-
DI

time adopter for its separate financial statements earlier or later than for its consolidated
financial statements, it shall measure its assets and liabilities at the same amounts in both
financial statements, except for consolidation adjustments.

Compound financial instruments

AU

D18 NAS 32 Financial Instruments: Presentation requires an entity to split a compound financial
instrument at inception into separate liability and equity components. If the liability
component is no longer outstanding, retrospective application of NAS 32 involves separating
two portions of equity. The first portion is in retained earnings and represents the cumulative
interest accreted on the liability component. The other portion represents the original equity
component. However, in accordance with this NFRS, a first-time adopter need not separate
these two portions if the liability component is no longer outstanding at the date of transition
to NFRSs.

Designation of previously recognised financial instruments

D19 NFRS 9 permits a financial liability (provided it meets certain criteria) to be designated as a
financial liability at fair value through profit or loss. Despite this requirement an entity is
permitted to designate, at the date of transition to NFRSs, any financial liability as at fair

ASB-NEPAL 23

www.auditnca.com
ebooknepal.com
 NFRS 1

value through profit or loss provided the liability meets the criteria in paragraph 4.2.2 of
NFRS 9 at that date.

D19A An entity may designate a financial asset as measured at fair value through profit or loss in
accordance with paragraph 4.1.5 of NFRS 9 on the basis of the facts and circumstances that
exist at the date of transition to NFRSs.

D19B An entity may designate an investment in an equity instrument as at fair value through other
comprehensive income in accordance with paragraph 5.7.5 of NFRS 9 on the basis of the
facts and circumstances that exist at the date of transition to NFRSs.

D19C If it is impracticable (as defined in NAS 8) for an entity to apply retrospectively the effective
interest method or the impairment requirements in paragraphs 58–65 and AG84–AG93 of
NAS 39, the fair value of the financial asset at the date of transition to NFRSs shall be the
new amortised cost of that financial asset at the date of transition to NFRSs.

OM
D19D An entity shall determine whether the treatment in paragraph 5.7.7 of NFRS 9 would create
an accounting mismatch in profit or loss on the basis of the facts and circumstances that
exist at the date of transition to NFRSs.

Fair value measurement of financial assets or financial liabilities at initial recognition

.C
D20 Despite the requirements of paragraphs 7 and 9, an entity may apply the requirements in the
last sentence of paragraph B5.4.8 and in paragraph B5.4.9 of NFRS 9 prospectively to
transactions entered into on or after the date of transition to NFRSs.
CA
Decommissioning liabilities included in the cost of property, plant and equipment

D21 IFRIC 1 Changes in Existing Decommissioning, Restoration and Similar Liabilities requires
specified changes in a decommissioning, restoration or similar liability to be added to or
deducted from the cost of the asset to which it relates; the adjusted depreciable amount of
TN

the asset is then depreciated prospectively over its remaining useful life. A first-time adopter
need not comply with these requirements for changes in such liabilities that occurred before
the date of transition to NFRSs. If a first-time adopter uses this exemption, it shall:

(a) measure the liability as at the date of transition to NFRSs in accordance with NAS 37;
DI

(b) to the extent that the liability is within the scope of IFRIC 1, estimate the amount that
would have been included in the cost of the related asset when the liability first
arose, by discounting the liability to that date using its best estimate of the historical
risk-adjusted discount rate(s) that would have applied for that liability over the
intervening period; and
AU

(c) calculate the accumulated depreciation on that amount, as at the date of transition to
NFRSs, on the basis of the current estimate of the useful life of the asset, using the
depreciation policy adopted by the entity in accordance with NFRSs.

D21A An entity that uses the exemption in paragraph D8A(b) (for oil and gas assets in the
development or production phases accounted for in cost centres that include all properties in
a large geographical area under previous GAAP) shall, instead of applying paragraph D21 or
IFRIC 1:

(a) measure decommissioning, restoration and similar liabilities as at the date of

transition to NFRSs in accordance with NAS 37; and

(b) recognise directly in retained earnings any difference between that amount
and the carrying amount of those liabilities at the date of transition to NFRSs
determined under the entity’s previous GAAP.

ASB-NEPAL 24

www.auditnca.com
ebooknepal.com
 NFRS 1

Financial assets or intangible assets accounted for in accordance with IFRIC 12

D22 A first-time adopter may apply the transitional provisions in IFRIC 12.

Borrowing costs

D23 A first-time adopter may apply the transitional provisions set out in paragraphs 27 and 28 of
NAS 23, as revised in 2008. In those paragraphs references to the effective date shall be
interpreted as 16 July 2008 or the date of transition to NFRSs, whichever is later.

Transfers of assets from customers

D24 A first-time adopter may apply the transitional provisions set out in paragraph 22of IFRIC 18
Transfers of Assets from Customers. In that paragraph, reference to the effective date shall
be interpreted as 1 July 2009 or the date of transition to NFRSs, whichever is later. In
addition, a first-time adopter may designate any date before the date of transition to NFRSs

OM
and apply IFRIC 18 to all transfers of assets from customers received on or after that date.

Extinguishing financial liabilities with equity instruments

D25 A first-time adopter may apply the transitional provisions in IFRIC 19 Extinguishing Financial

.C
Liabilities with Equity Instruments.

Severe hyperinflation

D26 If an entity has a functional currency that was, or is, the currency of a hyperinflationary
CA
economy, it shall determine whether it was subject to severe hyperinflation before the date
of transition to NFRSs. This applies to entities that are adopting NFRSs for the first time, as
well as entities that have previously applied NFRSs.

D27 The currency of a hyperinflationary economy is subject to severe hyperinflation if it has both
TN

of the following characteristics:

(a) a reliable general price index is not available to all entities with transactions
and balances in the currency.

exchangeability between the currency and a relatively stable foreign currency

DI

(b)
does not exist.

D28 The functional currency of an entity ceases to be subject to severe hyperinflation on the
functional currency normalisation date. That is the date when the functional currency no
longer has either, or both, of the characteristics in paragraph D27, or when there is a change
AU

in the entity’s functional currency to a currency that is not subject to severe hyperinflation.

D29 When an entity’s date of transition to NFRSs is on, or after, the functional currency
normalisation date, the entity may elect to measure all assets and liabilities held before the
functional currency normalisation date at fair value on the date of transition to NFRSs. The
entity may use that fair value as the deemed cost of those assets and liabilities in the
opening NFRS statement of financial position.

D30 When the functional currency normalisation date falls within a 12-month comparative period,
the comparative period may be less than 12 months, provided that a complete set of financial
statements (as required by paragraph 10 of NAS 1) is provided for that shorter period.

Joint arrangements

D31 A first time adopter may apply the transition provisions in the NFRS 11 with the following
exception. when changing from proportionate consolidation to the equity method, a first time
ASB-NEPAL 25

www.auditnca.com
ebooknepal.com
 NFRS 1

adopter shall test for impairment the investment in accordance with NAS 36 as at the
beginning of the earliest period presented, regardless of whether there is any indication that
the investment may be impaired. Any resulting impairment shall be recognised as an
adjustment to retained earnings at the beginning of the earliest period presented.

Stripping Cost in the production phase of a surface mine

D32 A first time adopter may apply the transition provisions set out in the paragraphs A1 to A4 of
IFRIC 20 Stripping cost in the production phase of a surface mine. In that paragraphs
reference to the effective date shall be interpreted as the beginning of the first NFRS
reporting period.

OM
.C
CA
TN
DI
AU

ASB-NEPAL 26

www.auditnca.com
ebooknepal.com
 NFRS 1

Appendix E

Short-term exemptions from NFRSs

This appendix is an integral part of the NFRS.

Exemption from the requirement to restate comparative information for NFRS 9

E1 In its first NFRS financial statements, an entity that (a) adopts NFRSs for annual periods
beginning before the effective date and (b) applies NFRS 9 shall present at least one year of
comparative information. However, this comparative information need not comply with NFRS
7 Financial Instruments: Disclosures or NFRS 9, to the extent that the disclosures required
by NFRS 7 relate to items within the scope of NFRS 9. For such entities, references to the
‘date of transition to NFRSs’ shall mean, in the case of NFRS 7 and NFRS 9 only, the
beginning of the first NFRS reporting period.

OM
E2 An entity that chooses to present comparative information that does not comply with NFRS 7
and NFRS 9 in its first year of transition shall:

(a) apply the recognition and measurement requirements of its previous GAAP in place

.C
of the requirements of NFRS 9 to comparative information about items within the
scope of NFRS 9.

(b) disclose this fact together with the basis used to prepare this information.
CA
(c) treat any adjustment between the statement of financial position at the comparative
period’s reporting date (ie the statement of financial position that includes
comparative information under previous GAAP) and the statement of financial
position at the start of the first NFRS reporting period (ie the first period that includes
information that complies with NFRS 7 and NFRS 9) as arising from a change in
accounting policy and give the disclosures required by paragraph 28(a)–(e) and (f)(i) of
TN

NAS 8. Paragraph 28(f)(i) applies only to amounts presented in the statement of

financial position at the comparative period’s reporting date.

(d) apply paragraph 17(c) of NAS 1 to provide additional disclosures when compliance
with the specific requirements in NFRSs is insufficient to enable users to understand
DI

the impact of particular transactions, other events and conditions on the entity’s
financial position and financial performance.

Disclosures about financial instruments

AU

E3 A first-time adopter may apply the transition provisions in paragraph 44G of NFRS 7.

E4 A first-time adopter may apply the transition provisions in paragraph 44M of NFRS 7.

Employee Benefits

E5 A first-time adopter may apply the transition provisions in paragraph 173(B) of NAS 19.

ASB-NEPAL 27

www.auditnca.com
ebooknepal.com