Chapter
Chapter
Chapter
INTRODUCTION
The globe is now an area of interdependent national economies. International trade and
cross boarder capital flows have made them dependent on one another. Due to increasing
integration of international markets companies around the world are in need of
accomplishing their business in a manner to coincide with the international corporate
activities (Chen, 2009:4) which results in global stakeholders. Thus a higher degree of
comparability and uniformity of the financial statements is required to enable global
stakeholders to gain adequate and transparent view of the entity and build up their
confidence in the selected entity. However due to a nation‟s economic, legal and political
system, stage of technological development, cultural, traditional and a host of other
socio-economic factors exercising a decisive influence in the development and current
status of accounting principles a great deal of diversity exists in the accounting and
reporting practices adopted by different countries.
Standardization refers to the imposition of a more rigid and narrow set of rules (Rathore,
1998:189). Business are no longer bounded by national frontiers, their economic
activities have transcended such boundaries and entered the international arena. They not
only buy and sell across national frontiers but also seek capital investment in global
market. Consequently there is pressure for standardization of accounting practices not
only from those who use the financial statements but also from those who regulate and
prepare them. The main pressure for harmonization comes from Multinational
Corporation‟s Investors and Financial Analysts.
1
After tenth congress of the International congress of Accountants held in Sydney in 1972,
the International Accounting Standard Committee (IASC) was formed in 1973 for the
development of accounting standards that could have global acceptance. The committee
was converted into International Accounting Standard Board (IASB) in March 2001. The
International Accounting Standard Board is committed to developing, in the public
interest, a single set of high quality global accounting standards that require transparent
and comparable information in general purpose financial statements.
Since long time back, there was a concern for implementing accounting standards in
Nepal, both in national and international spectrum. A number of seminars and meetings
were organized by the international agencies and donor counties, during the nineties,
which emphasized the essentiality of developing accounting standards not only for the
enhancement of accountability of financial reporting in the corporate sector but also for
easing the flow of foreign investments. The focus was on standardization of financial
statements in order to augment their effectiveness and to mould them in a unified format.
Financial statements are prepared and presented basically for aiding the economic
decision making by the stakeholders, which includes present and potential shareholders,
customer, creditors, investors etc. Companies in Nepal traditionally prepare and present
their financial statements without following standard financial reporting framework
which led to interpretational discrepancies in defining the fundamental elements of
financial statements, i.e. assets, liabilities, equities, income, expenses etc. Further
numbers of diverse criteria were used for recognition and measurement of the elements of
financial statements.
The policy of economic liberalization, incited after the mid eighties, opened up a way for
the development and extension of the Nepalese private sector including the financial
sector. The re-establishment of democracy in 1990 further contributed to the enlargement
of the Nepalese private sector to a large extent. The notion of privatization along with
liberal policies promulgated thereafter relayed a message that the government should not
be engaged in those sectors that could be operated effectively by the private sector. There
2
was a significant growth in macro economy due to expansion of the non agricultural
sectors such as manufacturing, tourism, service sectors etc. Moreover there was an
increasing foreign investment in the Nepalese private sector particularly in the area of
banking, aviation and information technology. Similarly international trade and exports
grew at around 15 percent in US dollar terms throughout the 1990s and the share of
exports and trade in GDP doubled. The converging business environment in Nepal after
the nineties, therefore, explicitly demanded for the harmonization of accounting
procedures and practices in order to facilitate the operation of the private sector including
the financial reporting in a unified manner. Concerns were also made to ensure the rights
of different accounting users to receive reliable, relevant and complete information for
making economic decision in timely manner. Further there was an increasing demand for
making the prevailing accounting procedures and practices compatible with international
standards to augment the confidence of foreign investors as well. The standardization of
accounting procedures and presentation of financial statements also had endeavored
Nepal‟s effort to enter WTO as a full fledged member. The afore-stated factors have
influenced in spurring the demand for imposing accounting standards in Nepalese private
sector.
The essentiality of uniform accounting standards is realized in Nepal after the formation
of the Institute of Chartered Accountants of Nepal (ICAN) in 1997, under the special Act
(The Institute of Chartered Accountants Act, 1997). The institute established Accounting
Standard Committee in 2001. After the amendment of Chartered Accountant Act in 2002,
a separate fully authorized Accounting Standard Board was formed by the then
Government of Nepal with a notification in Nepal Gazette in March, 2003. The Board has
formulated and issued framework for preparation and presentation of financial statements
and 26 Nepal Accounting Standards out of which 19 are mandatory from 1st Shrawan
2065 and 7 are in voluntary compliance stage. Nepal Accounting Standards (NASs) are
formulated by following the International Financial Reporting Standards (IFRSs)
however NASs are not revised in line with revision in IFRSs. The objectives of the Nepal
Accounting Standards issued for mandatory compliance are as under.
3
NAS-01 Presentation of Financial Statements
The objective of this standard is to prescribe the basis for presentation of general purpose
financial statements, to ensure comparability both with the entity‟s financial statements of
previous periods and with the financial statements of other entities.
NAS-04 Inventories
The objective of this standard is to provide the accounting treatment for inventories.
4
NAS-07 Revenue
The objective of this standard is to prescribe accounting treatment of revenue arising
from certain types of transactions and events.
5
NAS-15 Leases
The objective of this standard is to prescribe, for lessees and lessors, the appropriate
accounting policies and disclosure to apply in relation to leases.
NAS-20 Non- Current Assets held for sale and Discontinued Operations
The objective of this standard is to specify the accounting for assets held for sale, and the
presentation and disclosures of discontinued operations.
Though seven years has already passed after the establishment of Accounting Standard
Board of Nepal and twenty six NSAs have been issued so far including six NSAs for
voluntary compliance corporate firms of Nepal seem unaware about the policies and
principles prescribed by the Accounting Standard Board. The intent of this study is to
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measure and evaluate, to what extent the Nepalese corporate firms are aware of
accounting standards. The study will be an effort to pursuit whether only the formulation
of standards is sufficient to raise awareness in the Nepalese corporate sector for their
implementation and to provide feedback to those responsible for effective
implementation of the accounting standards.
There are several laws and regulations governing different organizations and have
different requirements for maintenance of accounts and preparation and presentation of
financial statements. Most of which have emphasized on maintenance of accounts and
financial reporting as per Generally Accepted Accounting Principles however failed to
prescribe the generally accepted accounting principles. Despite of accounts related
provisions contained in various laws and regulations NASs are formulated and issued for
bringing about uniformity in accounting and financial reporting.
Even after the issuance of NASs by ASB, for compliance in preparation and presentation
of financial statements, Nepalese corporate entities seemed lagging behind to follow the
accounting principles and practices as prescribed by NASs. The reasons behind such non
compliance might be the following.
University education is the major source of gaining accounting knowledge but the
course designed by universities is traditional and theoretical based.
The limited number of Chartered Accountants who are the experts in accounting
profession and slow growth in their number. Further most of them are qualified
from Institute of Chartered Accountants of India (ICAI).
Lack of awareness in accountants about accounting standards & consequences of
inappropriate application
Lack of training programs and inability to properly understand the essence of
specific accounting standards.
Resistance to change and deemed convenience with the traditional accounting
practices and principles.
7
The research was mainly focused on to what extent the Nepalese corporate sectors and
the accountants engaged therein are aware of NASs and to identify the causes of
unawareness found. Thus the study had addressed the following research questions.
Do the educational institutions, the course they have designed and their manpower
for delivering the course are sufficient and appropriate for raising awareness of
NASs?
Are the accountants working in Nepalese corporate sector getting proper training on
NASs?
How the awareness of NASs can be raised in order to replace existing traditional
accounting practices?
The fundamental objective of this study was to identify the awareness of accounting
standards in listed corporate entities of Nepal. To achieve the fundamental objective the
study was endeavor to meet the following definite objectives.
To identify the number of accountants having gained training on NASs.
To evaluate sufficiency and appropriateness of the courses offered by Nepalese
universities in raising awareness of accounting standards.
To identify the core causes for unawareness of accounting standards
To make constructive recommendation for promoting awareness of accounting
standards in Nepal.
8
decisions. Compliance with accounting standards results in transparency, comparability
and full disclosure for understandability which enhances greater investor confidence.
Along with the establishment of the Institute of Chartered Accountants of Nepal, demand
for Nepal‟s own accounting standards was increased and the Government also started
realizing the significance of accounting standards. Currently Nepal has 26 accounting
standards crystallized so far.
The study was focused on current level awareness status of NASs in Nepal. The study
had analyzed the awareness of NASs and a little bit of IASs among accounting
practitioners and accounting experts of Nepalese corporate entities. It was endeavored to
disclose the major constraints for awareness of NASs. It had also strived to disclose the
professional status of accounting practitioners of the corporate firms. The study was also
aimed at finding how much attempt has been made by the regulating authorities to spread
the awareness of NASs. Regarding this only public company listed on NEPSE and
members of ACAN has been considered for sampling purposes.
Users of financial statements include present and potential investors, lenders, suppliers,
governments and its agencies, donors etc. They use financial statements to satisfy their
various information needs. Different users have need for different information. Though
all the information needs of all the users cannot be met by the financial statements, most
of the common financial information needs are satisfied by the general purpose financial
statements prepared and presented in compliance with applicable standard financial
reporting framework. Though there are various regulating bodies like: Company
Registrar‟s Office, Nepal Rastra Bank and Securities Board of Nepal etc. These may
enforce entities to use specific form of accounting and reporting. However, the entities
themselves seek easy ways in their favor in maintaining accounts and for financial
reporting. All these incongruity necessitated to formulate and implement a standard set of
9
accounting standards. At present Nepal have 26 accounting standards out of which 19 of
them are mandatory for compliance and 7 of them are to be complied voluntarily.
It has been just seven years of formation of Accounting Standard Board. Recent
development of most of the NASs and low level of regulatory oversight by the
implementing authority Nepalese corporate sector are found reluctant to comply with
NASs for financial reporting. Due to aforementioned state of compliance with NASs by
Nepalese corporate sector and necessity for adoption of IFRS after 2011, finding the state
of awareness about the accounting standards in the corporate sector is a new and
interesting subject for research.
This research will contribute in identifying and analyzing the real causes of; unawareness
of accounting standards, reluctance to apply accounting standards and consequences of
failure to apply and inappropriate application. Thus the result of this research will be
useful to the government, accounting professionals, educational institutions and
regulating bodies and those having interest and stake in accounting.
The whole study was designed as divided in five chapters. The idea will be generated to
fulfill some aspect of the general objective of the study from each chapter. The rationale
behind such designation was to follow simple research methodology. The contents of the
research are as under
10
The First Chapter, Introduction, will cover general background; statement of the
problem; objective of the study; limitation of the study and organization of the study.
The second chapter, Review of literature, deals with the review of available literature. It
takes in review of related books, journals, articles and previous unpublished Master
Degree Dissertation etc. This chapter will mainly cover three parts: Conceptual
framework, Review on related literature and Research gap. Conceptual framework part
will deal with accounting standard, its origin and development, its nature, introduction of
IASs and IFRSs, need for of accounting standards in Nepal, origin and growth of NASs,
nature of NASs, accounting standard setting in Nepal and purpose of NASs. Review of
literature part will deal with the reviews of different literature, which are closely related
to this study. After a detail of related literature, the uncovered research gap will be
highlighted.
The third Chapter, Research methodology, deals with the research methodology
employed in this study. It includes research design, population and sample, data
collection procedure and sources of data, data analysis techniques etc.
The fourth chapter Analysis and Presentation of Data is the important chapter of the
study which implies the presentation and analysis of data as well as major findings of the
study
The fifth chapter, Summary, Conclusions and Recommendations covers the summary of
the study, the main conclusion that flows from the study and offers some
recommendations as well as suggestions for further improvement.
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1.7 Limitations of the Study
12
CHAPTER II
REVIEW OF LITERATURE
This chapter attempts to establish a conceptual framework and make a review of the
relevant studies that have already been done on the research topic so that some new
contribution could be given to the established body of knowledge In this regard, various
books, journals and articles concerned to this topic have been reviewed. This chapter has
been divided into three main parts. The first part of the chapter deals with the conceptual
framework of the study and the second part is concerned with the review of previous
articles, journals and dissertation. The final part discusses the research gap.
The history of accounting is as old as civilization, among the most important professions
in economic and cultural development, and fascinating. Accounting has evolved through
time, changing with the needs of the users of accounting information. These accounting
practices were standardized and materialized as Generally Accepted Accounting
Principles (GAAP). GAAP consist of rules, practices and procedures, the authority of
which stems from their general acceptance and use by the accounting professionals and
the business community. They have evolved from the experiences and thinking of the
member of the accounting profession and influential business people (Hogget &
Edwards, 1990:12). Accounting principles differ from natural laws like the law of
gravity. Accounting principles draw their authority from their acceptance in the business
community rather than from their ability to explain physical phenomena. Thus they really
are generally accepted by those people and organizations that need guiding principle and
standard procedures in accounting of business transactions and reporting thereof.
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The need for GAAP had its beginning with the growth of industrialized society in the
nineteenth century. During that time, the limited companies were in existence. In those
organizations management was appointed as agent of the owners (shareholders) of the
company to conduct the day to day operations with a view to earning profits for the
owners. Management used to report to the owners regarding the operating result of the
business.
As industrialization took the pace and new transactions started to occur business
organization become more complex, different levels of management came in to existence.
Consequently, financial reporting became important, so that the management could report
in the entity's progress to the owners as well as other stakeholders.
In particular, external users of information have to rely in the honesty and integrity of
management in the use of their money; but for various reasons corporate secrecy was
considered to be acceptable behavior. Consequently share investment gained the
reputation of being risky investments, and shareholders were to some extent, at the mercy
of potentially unscrupulous management. If corporate sector entities do not follow the
policy of complete and objective disclosure while preparing their financial statements, the
users of this information do not receive early warning signals about deteriorating
financial conditions and are therefore unable to make timely adjustments. Suddenly an
event may unveil previously undetected risk exposure of the corporate sector and trigger
panic among the investor community.
To provide some protection for investors, government began to legislate for the
preparation of financial statements by companies in order to monitor the behavior of
managers as stewards of the investors‟ funds. However, such efforts only could not
improve the overall condition of business environment. Therefore, in more recent decade,
the GAAP are being formulized gradually by accounting standards issued by the
professional accounting bodies and the Accounting Standards Boards.
14
The existence of accounting standards that have the force of law is a recent development
in the history of accounting. The GAAP may not be adequate to provide sufficient
guidance and rules to deal with the increasing complexity of financial activity. Therefore,
accounting standards have been developed.
Financial reporting system as required by law varies significantly from country to country
and from organization to organization. Differences in accounting practices reflect the
factors that shape business activities in the country, the legal environment in which the
business operates and the primary providers of capital for the business. For example, in
the United Kingdom and United States, reporting requirements are based primarily on the
need to provide useful information for investors and creditors. This need results from
those countries having many companies that raise capital by selling their securities in
well developed capital markets. In Europe and Japan, on the other hand, banks provide
much of capital for business. In those countries, accounting requirements are more
legalistic and are intended to satisfy government reporting requirements, including
income tax reporting. In South America, financial reporting is oriented toward the needs
of governmental planning and follows practices stated by the government. These
differences in accounting practices create problems in trying to analyze and compare
accounting information
As long as an enterprise operates solely within its own borders, differences in financial
reporting practices between countries will not be a significant problem as they will if
business activities are extended across the border. Similarly, cross border financing, in
15
which a company sells its securities in the capital markets of another country, has become
increasingly popular. Business activities that cross borders create the need for more
comparable information between companies that reside in different countries. This, in
turn, has led to an interest in the harmonization of accounting methods and principles
used in different countries throughout the world.
The demand of universally accepted accounting standards prevailed before the 50's of
20th century. The American Institute of Certified Public Accountants, in cooperation
with governmental, business and educational groups, made important contribution to the
development of universally accepted principles of accounting. At present, the
globalization of business enterprises and capital markets has created much interest in
establishing common, worldwide accounting standards.
The general users of accounts need to be sure that reliance can be placed by them on
results of operation and financial position presented by the management and the standards
employed in the preparation of financial statements. In the late 1960s there was a general
outcry that the standards used by different businesses were showing vastly different
picture from the similar data. In the UK a controversy had arisen following the takeover
of AEI Ltd. by GEC Ltd. In fighting the takeover bid made by GEC, the AEI directors
had produced a forecast, in the 10th month of their financial year, that the profit before
tax for the year would be $10 million. After the takeover the accounts of AEI for the
same year showed a loss of 41/2 million. The difference was attributing to being 5
million as matters of fact and 91/2 million to adjustment which was matters substantial
difference in the judgment used. There was a general outcry in the financial pages of the
national press against the failure of the accounting profession to lay down consistence
principles for business to follow (Wood, 1993:201).
In December 1969, the institute of chartered accountants of England and Wales issued a
statement of intent in accounting standards. The council of the institute and other main
accountancy bodies having joined with the institute in helping to produce standards
formed the committee known as the accounting standards committee
16
Because of the International Accounting Standards Committee (IASC) having to obtain
approval from its six professional accountancy body members, it did not appear to be as
decisive and independent as was desired, and in 1990 a new body; the accounting
standards board took over the functions of the IASC. The International Accounting
Standard Board (IASB) is more independent of the accounting bodies and can issue its
recommendations, known as IFRS, without approval from any other body
Accounting standards are authoritative statements of how particular transaction and other
events should be reflected in financial statements. Accordingly, compliance with
17
accounting standard will normally be necessary for the fair presentation of the financial
statements (Neupane, 2003:14).
The scope of application of standards is wide and it encompasses not only accountants
but also all prepares of financial statements for externals users. Such financial statements
are directed towards the common information needs of wide range of users for example:
shareholders, creditors, employees and the public at large. Different users of financial
statements may have information needs for different purpose. They may like to compare
financial statements of different entities. If the accounting practices followed by one
entity differ from another than certain adjustments need to be done to make the financial
statements of various entities comparable. The purpose of financial statement is to
provide fair, real and clear information regarding the result of operation and financial
position of business to the general users of accounts. Users of financial statements may
not have technical knowledge of accounting so the information provided by the financial
18
statement must be understandable. To achieve this objective, the system must comply
with the standard.
Accounting standards provide practical and handy rules to the accountants to execute
their work in effective way. They are generally accepted as firm rules, backed by sanction
for nonconformity. They usually contain concepts and principles to guide professional's
application of accounting standards requiring strong professional judgments (Xiao, J.Z.,
et al, 2004). Accounting standards usually consists of three parts.
A description of the problem to be dealt with.
A reasoned discussion of alternatives for solving the problem.
Practical solution for the identified problem in with theory.
The special requirements needed for the accounting standards can be divided in four
parts.
Type 1 states that accountants must tell people what they are doing by disclosing
the accounting methods and policies they have adopted.
Type 2 emphasizes to achieve uniformity on accounting statement presentation.
Type 3 calls for the disclosure of specific matters in which the users may be
called to exercise their own judgment.
Type 4 requires implicit or explicit decisions to be made about approved asset
valuation and income determination.
Standards are set to obtain somewhat benefits from them. The underlying principles
behind the establishment of accounting standards are:
Standards reduce to a reasonable extent or eliminate altogether confusing
variations in the accounting treatments used in the preparation of financial
statements.
Standards may call for disclosure beyond that required by law.
They provide the professional accountants in public practice guidelines and rules
of action to enable them to exercise due care and maintain integrity and
objectivity in rendering professional services.
19
They facilitate comparison of financial statements of companies situated in
different parts of the world and also of different companies situated in the same
country.
They provide users of accounting information with information about the
financial position, performance, and conduct of firm. This information is assumed
to be clear, consistent, reliable and comparable.
They provide government with database on various variables that are deemed
essential in the matter of taxation, regulation of enterprises, planning and
regulation of the economy and enhancement of economic efficiency in the
achievement of social goals.
They generate interests on principles and theories interested in the accounting
disciplines. The mere promulgation of a standard generated a lot of controversy
and debate in practice and in academic circles, which are better than apathy,
ate(Riahi-Belkaoui,2000:82)
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2.1.3 International Accounting Standards
After a long process of the promulgation for many standards a number of benefits are
expected to result. First harmonization would allow investors in international markets to
make more reliable comparison and international investment would be encouraged so
forth. In other words, by reducing the differences in financial reporting requirements in
21
different countries, barriers to international capital flows would be reduced. A further
benefit of international harmonization would be a reduction in the financial reporting
costs for multinational companies. At present, for each stock exchange in which a
multinational company is listed, it is likely to face the cost of reporting under a different
short of accounting standards, stock exchange listing requirements and corporation‟s
legislation. Harmonization of accounting standards and financial reporting practices
would simply the reporting requirements for multinational companies and reduce the cost
of complying with US financial reporting requirements (Henderson & Pierson,
2000:863).
22
A major problem faced by the IASC is enforcement of its accounting standards. The
ISAC relies upon its member bodies to ensure compliance with IASs. This was an
ineffective mechanism, because the member bodies usually only enforce compliance with
their own standards. In only a few cases compliance with national accounting standards
ensue compliance with international standards. In most cases, there are differences (often
significant) between national accounting standards and IASs. To a large extent, the IASs
have been irrelevant. While there was general support for the idea of IASs and
international harmonization of accounting standards and financial reporting practices,
most member bodies were unwilling to surrender sovereignty over their accounting
standards and reporting practices. This was largely because IASs were insufficiently
perspective, allowing greater choice than member bodies could accept. The IASC was on
the horns of a dilemma. The IASs contained choices to meet the acceptance than at the
national level. In those circumstances, it was unlikely that IASs would be the basis for
world wide comparability of accounting practices.
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international accounting standard, i.e. IAS 1, dealing with the Presentation & Preparation
of Financial Statements‟ was enhanced.
Presently, IFRS is used in many countries in the world including Hong Kong, Russia,
Certain European countries and Australia to name a few. The European commission has
legitimized a regulation in 2001 that requires all listed companies in Europe to adopt
IFRS by 2005 for their consolidated accounts. Many EU members have, however, moved
a step forward by promulgating the accounting regulations demanding private companies
to comply with IFRS. Concerning the accounting standards in the United States, the
Financial Accounting Standards Board (FASB) has traditionally been assigned to
promulgate the United States Generally Accepted Accounting Principles (US-GAAP).
The IASB and the FASB have, however, agreed upon working towards convergence of
two standards in late 2002. The IASB-FASB convergence effort basically comprises two
kinds of projects (Schipper, 2005; 85). The first type embeds short-term projects aimed at
removing many of the numerous individual differences between IFRS, which include
IAS, and US GAAP. Examples of current and proposed short-term convergence efforts
include the accounting treatments of non-monitory exchanges, discontinued operations,
income taxes and interim reporting. The second type of convergence projects on revenue
recognition and purchase method procedures, shared based payments and so on.
24
International Accounting Standards currently in use include IFRS 5 and IAS 1 to IAS 41,
excluding IAS 9, 13, 15 and 35. Additionally, the IASB has a conceptual framework
underlying its financial reporting standards and interpretations, i.e. the framework for the
Preparation and Presentation of Financial Statements. The IASB has also published a
series of interpretations of International Accounting Standards developed by the
International Financial Reporting Interpretation Committee (IFRIC) and approved by the
IASB. Apart from this, the IASB is cooperating with national accounting standard-setters
to achieve convergence in accounting standards around the world. In recent years, the
IASB has established its image as an independent accounting standard-setter for the
private sector. Nepal as a member of WTO is expected to comply with the IASBs
framework as well standards in order to comply with some of the initial requirements
imposed by the WTO (Adhikari, 2005:150).
Accounting standards are the measuring rods of the accounting regarding their
usefulness. These standards become not only yardsticks against which current practice
can be judged and recommendations for improvement can be made but also assist in
establishing the scope of accounting. Accounting standards serve two purposes: first,
helping in evaluating the adequacy of any accounting method and; second, providing a
mechanism for determining the degree of compliance required for information related to
a particular use. As there is importance of a standard language for communication in
human life, there is need of accounting standards in corporate sectors for business
communication via financial reporting system. They help in interpretation of the financial
information presented in the financial statements for the purpose of making decisions
regarding financial activities by the stakeholders like investors, creditors, employees,
sock exchanges, government units, customers and others. It aids to the members of
accounting profession too in satisfying its norms of competence.
25
The globalization of economies poses challenges both for the developed and developing
world. Nepal got membership of WTO on 12 September 2003 and has become a part of a
global trade regime. Nepal itself confronts a multitude of global challenges (internal and
external). Now, the time has come to keep the economic system sound and perfect to
cope up with global challenges. To be competitive, Nepalese corporate sector must
acquire resources at competitive prices. The availability as well as the cost of resources
depends on how well the companies disclose financial information to the suppliers of
resources. Only the financial statements prepared and presented on the basis of specific
standard can give investors valuable insights into „real‟ performance of a firm
comparable with other similar firm. This emphasizes the need to practice accounting
standard in Nepal.
The need for highly quality accounting standards has been felt transparency and
comparability in financial reporting practice in Nepal. With the globalization of financial
and capital markets, the internationalization of accounting standards has inevitably
become a trend. Over time Nepalese accounting standards have been harmonized and
converged towards IFRSs. This apprehension has been fuelled in recent years by a
starling increase in cross border activities. Another major reason for the need of standards
is condition imposed by World Bank, ADB, OECD and development agencies and
agencies for foreign aid and technical assistance.
The practice of accounting standards improves the quality of financial reporting. The
benefits envisaged for the Accounting Standards are as follows:
Reporting requirements becomes more consistent and logical because they will
stem from an orderly set of concepts.
There will not be avoidance of reporting requirements because of the existence of
all embracing provisions.
Practitioners and auditors are better able to understand the financial reporting
requirements they face. Job of accountants becomes much easier. Choosing an
accounting procedure is, for many accountants, time consuming, difficult and
contentious. It may lead to conflict between management, which wants creative
26
accounting, and accountants who believe that another method is mere appropriate.
With uniformity, the chance of conflict over accounting method would be
reduced.
The uniformity of accounting procedures or use of accounting standards allows
comparisons of accounting reports. Similar situation will be reported in a similar
way and results will be directly comparable. Any differences in reported results
will be due to differences in the circumstances and not in the accounting method.
With uniformity accountants would be better able to defend their procedures in
court. Because their choices would be limited, they could not be accused of
choosing an accounting method to meet the needs of any particular group. This is
an important consideration for accountants, particularly in Nepal where they are
increasingly involved in litigation.
Practice of accounting standards may lead to more rational resource allocation if
the performance and financial position of all Companies in an economy could be
meaningfully compared.
Stock exchange should be standardized to attract more investors. This is critical
for market development. For this practice of accounting standards is must. If the
listed companies adopt accounting standards, it helps bringing more companies
into the stock market.
In Nepal, there are several laws and regulations requiring maintenance of proper accounts
and preparation of financial statements by corporate sector organizations. For instance,
the accounting related provisions in the Company Act, 2063; Income Tax Act, 2058 etc.
requires the compliance with Nepal Accounting Standards. However, despite all these
accounting related provisions in these Acts, there had not been any nationally mandated
accounting standard in Nepal until the formation of Accounting Board in 2002 through a
notification in the gazette. It should be noted that NASs are based on the IASs with least
modifications to suit local practices (ASB/Nepal, 2003.)
HMG, donors and other regulating agencies for the past few years have put their utmost
effort to educate and motivate the investors but with little visible impact. The
27
shareholders and potential investors are confused and apprehensive and, as a result, the
distance between promoters and capital market investors is growing. Some of the major
issues which gave rise to the need for NASs, are:
Despite the existence of Nepal Stock Exchange Ltd. (NEPSE) for quite some
time, its performance has not been up to the expected level and people generally
shy away from stock trading. One of the major factors contributing to this
downtrend has been the lack of confidence in the financial statements of the
companies.
There is a sheer absence of a mechanism, which could win the confidence of
investors and convince them of investment security and adequate returns. This
situation can only be improved by providing the investor with timely and reliable
information as to result of operation and financial position which can be helpful in
making correct analysis of financial prospects and providing proper guidance for
sensible investment.
There is no uniformity of standard followed in preparation and presentation of
financial statements. The contents and the style of presentation are not
comparable between entities to entity; be it within the industry or outside. The
investors and other stakeholders have the information produced by all companies,
which cannot be said to be transparent enough to confirm whether the interest of
investor are adequately protected and promoted by the management. When the
financial statements cannot be easily compared inside of Nepal, it will be
unrealistic to expect foreigners to invest in Nepal based on such financial
statements, which is neither based on any standards nor any guidelines
Though Under the Companies act and securities exchange act, companies are
required to produce annual financial statements. However companies adopt
different accounting policies and ways of producing statements, which are not
easily comprehensible and comparable. The other reason has been the need of
complete disclosures for better decision-making. Most of the organization in
Nepal are compatibly lacking on this front.
28
With the entry into the WTO, it becomes all the more important that financial
reporting be done as per the international accounting standards. We have to create
a conducive, transparent, reliable and exemplary financial environment.
The application of accounting standards renders high quality financial information that
satisfies the “qualitative characteristics” of understandability, relevance, reliability and
comparability. Application of accounting standard would there-by benefit Nepalese
organization by providing large pools of foreign capital at lesser cost.
As a signatory to the WTO document, Nepal Government may be required to provide
market access to the financial and professional service sectors. Hence the country‟s
corporate sector and professional (accounting) service need to be adequately strengthened
to maintain their competitive edge in facing the emerging challenges of global
competition and utilize the opportunities beneficially for the economic development of
the Nation.
Nepal attained modern business environment a few decade ago. In the early age of
industrialized era of Nepal, the need of modern accounting system was not felt. When
business transactions started to increase, the need of systematic accounting procedure was
felt. In the early days organizations and accounting professionals used GAAP in practice
of accounting system. Later on high growth of multinational organizations and
consciousness on professional accountants pushed the professional accountants to solve
their common problems collectively. As a result, The Institute of Chartered Accountants
of Nepal (ICAN) came into existence in 1997 by a special act of the Parliament, The
Chartered Accountant Act, 1997 with the objective of regulating the financial reporting
and accounting professions. To build up awareness of accounting standards the Institute
29
attempted to establish a set of accounting standards. Consequently in 2001, the institute
established two internal committee called Accounting Standards Committee and Auditing
standard Committee. The Accounting Standard Committee became instrumental in doing
all the groundwork for the preparation of Accounting Standards. Within a short period
this committee developed exposure drafts of various standards need instantly for the
betterment of accounting profession and financial environment in the country.
Government also supported the committee. After a year, the committee was formally
converted into the Accounting Standards Board (ASB) in 2002 through a notification in
the gazette by the then Government of Nepal under Chartered Accountants Acts, 1997,
section 15 (a) sub section (5). The role of Accounting Standard Boards is to develop
accounting standards that will contribute to the improvement of financial reports. Thus,
ASB/Nepal deigns and prepares accounting standards in Nepal.
As prescribed by the framework, the ASB has already developed and have made effective
nineteen Nepal Accounting Standards by 16th July 2008
Eight more accounting standards, i.e. NAS 13, have already been issued for voluntary
compliance effective from 16th July 2008. These eight standards will be made mandatory
based on the need felt by the Board. The following are the standards pronounced by
Accounting Standards Board Nepal.
Table 2.1
Voluntary Standards
NAS Name Initially Effective Date
Approved Date
14 Employee Benefits 22.07.2007 17.07.2007
21 Business Combination 22.07.2007 17.07.2007
23 Segment Reporting 22.07.2007 17.07.2007
24 Accounting and Reporting by Retirement 07.02.2008 07.02.2008
benefit Plans
25 Investment in Associates 22.07.2007 17.07.2007
26 Earning Per Share 22.07.2007 17.07.2007
27 Intangible Assets 22.07.2007 17.07.2007
30
Table 2.2
Mandatory Standards
NAS Name Initial Revised
Effective Effective Date
Date
1 Presentation of Financial Statements 16.07.2004 16.07.2008
2 Accounting Policies, Changes in Accounting 16.07.2004 16.07.2008
Estimates and Errors
3 Cash Flow Statements 16.07.2004 16.07.2008
4 Inventories 16.07.2004 16.07.2008
5 Events after Balance Sheet Date 16.07.2004 16.07.2008
6 Property, Plant and Equipments 16.07.2004 16.07.2008
7 Revenue 16.07.2004 16.07.2008
8 Borrowing Cost 16.07.2005 16.07.2008
9 Income Taxes 16.07.2005 16.07.2008
10 Accounting for Government Grants and 17.07.2007 16.07.2008
Disclosure of Government Assistance
11 The Effects of Changes in Foreign Exchange 15.07.2006 16.07.2008
Rates
12 Provisions, Contingent Liabilities and 15.07.2006 16.07.2008
Contingent Assets
13 Construction Contracts 15.07.2006 16.07.2008
15 Leases 15.07.2006 16.07.2008
16 Related Party Disclosures 17.07.2007 16.07.2008
17 Interim Financial Reporting 17.07.2007 16.07.2008
18 Impairment of Assets 17.07.2007 16.07.2008
19 Investment Property 17.07.2007 16.07.2008
20 Non- Current Assets held for sale and 17.07.2007 16.07.2008
Discontinued Operations
31
2.1.4.3 Nature of Nepal Accounting Standards
NAS are the benchmarks which have to be complied with to ensure that general purpose
financial statements provide the true and fare view of the affairs of the business and the
financial position as at the reporting date. These are to be used by companies when they
prepare their annual reports to ensure that the users of financial statements get the correct
information for economic decision making. The accounting standards play a significant
role in the accounting profession and practices with regard to application of accounting
treatment to specific element of financial statement or specific commercial activities. At
present NASs are enforced only in companies incorporated under the Companies Act.
However, NASs are equally applicable in all sorts of companies viz Government owned,
private, public, small, large etc.
The objective of the financial statement is to provide information about the financial
position, performance and changes in financial position of an entity that is useful to a
wide range of users for economic decision making. General purpose financial statements
meet the common information needs of most of the users. Financial statements also show
the result of the stewardship of management, or the accountability of management for the
resources entrusted to it. And NASs provide basis for achieving consistency and
uniformity in financial statement. NAS are based on IFRS which are issued by IASB in a
way to suit to the local context.
The board forms technical committee, comprising of professional accountants and other
experts in the field of accounting, for preparation of drafts of NASs. The proposed
32
standards in draft form recommended by the technical committee presented to the board.
The board after reading the draft so presented and makes comments. The technical
committee on the basis of comments from the board revises the drafts and again presents
to the board and the board if deems the draft appropriate publishes it in the web site and
also circulates to the stakeholders for public discussion.
The secretariat of the board distributes exposure drafts and request allowing period of
two months for comments thereon. The board if deems necessary may organize
workshops and seminars on such exposure drafts.
After discussion with the stakeholders the board makes necessary revision in the
exposure drafts based on the recommendation from the stakeholder and issue as Nepal
Accounting Standards (NAS). NASs are first issued for Voluntary Compliance for a
minimum of two months period. After the end of voluntary compliance period the board
makes decision to issue for mandatory compliance as it deems appropriate. ASB/Nepal
assesses the need for revision of NASs considering the changes and developments in the
international financial reporting standards and local environment the makes revision on
the NASs from time to time on the basis of need assessment.
33
Assist users of financial statement in interpreting the information contained in the
financial statements prepared in conformity with NASs.
Provide those who are interested in the work of ASB with information about its
approach to the formulation of Nepal Accounting Standards. (NAS-ASB/Nepal).
The scope of NASs is wide and it encompasses not only the members of ICAN but also
all the concerned who prepares the financial statements for external users. Such financial
statements are directed toward the common information needs of a wide range of users,
for example shareholders, creditors, employees and the public at large.
The designed framework deals with:
The history on accounting standards is not very old in Nepalese context. It has only been
seven years from the establishment of Accounting Standard Board (ASB) in Nepal. Due
to delay in establishment of ASB and implementation of NASs very few individuals from
the corporate sector are seem to be interested in the compliance and similar is the case
with research relating to accounting standards. Only few researches have been conducted
in the field of accounting practice in Nepal. It is realized that no attempt has been made to
evaluate and analyze the awareness of accounting standards in the accounting practitioner
of the Nepalese corporate sector. Though very few researches were made regarding the
34
accounting standards and accounting practice in Nepal, some of these researches related
with this study are attempted to discuss here in the study.
2.2.1 Asian Development Bank (2002): Nepal Government and Accounting Standard.
This study pointed many weaknesses in the system of government account and thus,
suggests adopting either International Public Sector Accounting Standards (IPAS) or
NASs.
35
standards because accounting standards are not generally taught in schools,
collages of professional institutions of Nepal (ASB/ Nepal, 2003)
Major Recommendation:
Government should issue accounting policies and financial statement instructions on the
basis of the accounting standards issued by the Accounting Standard Board (ASB), Nepal
The study was set up as the first quest in the field of Nepalese Accounting Standards. In
the present context the study was found as exploring the problem faced by Nepalese
companies listed in NEPSE. The main objective of the study was to gain insight into the
then reporting practices and compliance with the issued standards.
The study was conducted on the basis of primary and secondary sources of data.
Questionnaires to the accounting practitioners and the experts including the practitioners
of the sampled organizations were used for primary sources of data published financial
statements in the area of study were used as sources of secondary data.
36
2.2.4 Gautam, (2005): Accounting Standards, Practices, Problems and issues
This study was a recent attempt initiated in the field of accounting standards on Nepal,
after issuance of some mandatory accounting standards by ASB/Nepal. The research
seems quite influenced by the questions like: what the problems Nepalese entities and
their practitioners were facing? what are the emerging issues on NAS?, does the NASs
match with the other standards like IASs and IFRSs? Thus the research is considered very
relevant for this study.
The researcher had suggested some emerging issues, as NASs were implemented like
diversified regulating rules on accounting practice, unavailability of NASs in local
37
Languages, lack of competent professional accountants, immature/underdeveloped
practice of accounting systems and ethics, NASs for both private and public companies
etc. In the context of objective achievement the research seemed very close to it and
hence concluded that, most of the requirements of NASs were most similar to existing
practice. Thus, there is not /will not be any problems in execution of NASs.
Since long time back, there was a concern for implementing accounting standards in
Nepal, both in national and international spectrum. A number of seminars and meeting
organized by international agencies and donor countries, during the nineties, emphasized
the essentiality of developing accounting standards not only for the enhancement of
financial accountability in the private sector but also for easing the flow of international
investments. The focus was on standardization of financial statements in order to
augment their effectiveness and to mould them in unified format. In the context of above
facts some of the partial or complete researches can be found in the field of accounting
standards in Nepal. Among all, research conducted on the topic before were concerned
only with the compliance of national and international accounting standards in Nepal.
Previous researches had emphasized and confined with management accounting instead
of covering overall accounting practice in the corporate sector and awareness of
accounting standards among the accounting practioners. Some of the researches have
tried to highlight the compliance of accounting standards but were confined to IAS only.
So far, 26 accounting standards have been issued, nineteen of them have been issued for
compulsory compliance and 7 are issued for voluntary compliance as on first of Shrawan
2065. Even after the issue and implementation, the follow up has not been made neither
from government sectors nor private sectors to observe the outcomes or impact of the
accounting standards implementation. Some of the research works carried out were
concerned with practice of preparation and presentation of financial statements and
problems faced by regulatory authorities however, an empirical research on the practice
of accounting standards, its awareness, effectiveness and impacts have not been measured
though it was needed to explore the deviations of NASs, degree of its awareness in
38
Nepalese corporate sector and requirements in order to get aware about accounting
standards. Thus, there was a massive gap on the topic. This research has uncovered this
research gap. The study is aimed at exploring the degree of awareness of NASs in Nepal
and making broad recommendations on the successful execution of NASs in Nepal.
39
CHAPTER III
RESEARCH METHODOLOGY
This research has been carried out to probe into the state awareness of Accounting
Standards in the Nepalese corporate sector. The study has also made an effort to find out
40
causes hindering the awareness of accounting standards. This research study attempted to
analyze the primary data (i.e. responses and opinions of accounting practitioners) as well
as secondary data (i.e. syllabus covered by the courses offered by Nepalese Universities).
Both types of data were used. Therefore, this was a comprehensive research. Hence, a
survey research designed with descriptive and exploratory approach was followed for
primary data collection and exploratory research design was used for secondary data.
All the practitioners (i.e. Chief Finance/ Account Officers of corporate firms were
considered as the total population of the study. Out of them, for convenience, the
practitioners within Kathmandu Valley were considered as target population for the
study.
Out of target population, 42 corporate firms were sampled as shown in the Table 3.1.
Table: 3.1
Groups of Respondents and their Sample Size
S.N. Denomination of the Respondents Sample Size
1 Accounting Practitioners 39
2 Accounting Experts 36
Total 75
The total population has been concentrated into two strata i.e. accounting practitioners
and accounting experts.
Practitioners include the Chief Finance/ Account Officers of the corporate firms. The
Name list of the listed companies was obtained from office of Nepal Stock Exchange. As
per the nature of the study, the samples of practitioners had been taken using convenient
sampling procedure by taking 39 corporate firms out of 194 listed companies. Experts
41
include chartered accountants members of the Institute of Chartered Accountants of
Nepal
According to the nature of study, the study requires primary as well as secondary data.
Secondary data needed for the study were collected from the published and unpublished
syllabus the courses offered by concerned universities. The framework of Nepal
Accounting Standards and International Accounting Standards/International Financial
Reporting Standards were also used as secondary source of data. Further, relevant
journals, magazines and other publications as well as internet sites of international
journal and concerned organizations were used.
Primary data required for the study were collected by using a schedule of self
administered questionnaires and distributing them to practitioners and experts within
Kathmandu valley.
Every practitioner was asked a total of nine question, comprising of one general question,
five multiple choices closed questions, one multiple choices open end questions and two
open questions. In the same way every experts was asked with a total of eight questions.
42
Secondary data required for the study were obtained through the courses of respective
universities. Courses were collected visiting the respective universities. The other sources
of secondary data were accessed through websites, journals and newspapers.
Analysis is a careful study of available facts so that one can understand and draw
conclusions from one of them on the basis of established principles and sound logic. This
is an important part in research work. Therefore, collected data from secondary and
primary sources were presented in appropriate forms like tables, diagrams and figures.
Research is an observance while analysis was simply descriptive. In research, firstly the
collected questionnaires were classified according to sample population. They were then
edited to ensure their accuracy and completeness. The edited data were then presented by
using tables and charts as per their appropriateness. Comparative tables were prepared on
the basis of existing practices. Charts were prepared to show the relation between
variables.
The collected information was tabulated in a frequency distribution separately for the
purpose of data presentation, analysis and extract findings. The descriptive analysis tools
such as frequencies, percentages and weighted index were applied on arithmetical tool to
analyze and interpret data. The appropriate diagrams were also used to „show the
information collected and results obtained. In order to test the significance of association
amongst the views of accounting practitioners and accounting experts, inferential tools
such as Spearman‟s Rank Correlation Coefficient, Karl Pearsons coefficient of
correlation were used. A brief description of them has been appended below.
43
3.7.1 Weighted Index:
Spearman‟s Rank Correlation Coefficient is used when observation deals with qualitative
attributes. Here the researcher has made an effort to find if two attributes i.e. constraints
for awareness of NASs given by accounting practitioners and accounting experts, were
correlated or not.
It is assumed that,
R1 denotes the ranks of accounting experts view on constraints for awareness of
NASs
R2 denotes the ranks of accounting practitioners view constraints for awareness of
NASs
Spearman‟s Rank Correlation Coefficient, usually denoted by Þ (Rho) is given by the
formula:
þ=1-
Where,
= Sum of the squared of the difference between the pair of ranks
N= Number of the pair of ranks.
Decision: Value of þ ranges between +1 and -1. If the result obtained is positive, the view
given both practitioners and experts are correlated and if it is negative, their views are not
correlated to each other.
44
3.7.3 Karl Pearson’s Coefficient of Correlation
r =
SDx=
SDy=
Where,
N= No. of options provided
= Sum of the product of X and Y
= Average value of X
= Average Value of Y
=Product of and
= Sum of the Square of X
= Sum of the Square of Y
= Square of
= Square of
Decision: If the result is positive, the view given by both the practitioners and the experts
are correlated and if it is negative, their views are not correlated to each other.
45
3.8 Respondent’s Profile
For primary data purpose, two types of questionnaires were distributed to accounting
practitioners and accounting experts differently. 39 questionnaires were distributed to the
practitioners and 36 questionnaires to accounting experts. Out of them, 35 practitioners
and 33 experts replied the questionnaires. Different number and percentages of responses
received from the respondents are presented in the table 3.2 and 3.3 and their respective
figures in figure 3.1 and 3.2 below
Table 3.2
Questionnaires Collected from Accounting Practitioners
No. of No. of Percentage
Stratums Questionnaires Questionnaires of
Distributed Collected response
Commercial Banks 7 7 19
Finance Companies 7 7 19
Insurance Companies 5 5 14
Trading Organization 6 6 17
Manufacturing and 6 6 17
Processing Organization
Development Bank 1 1 3
Hotels 4 1 3
Others 3 2 8
Total 39 35 100
Source: Opinion Survey/2010
46
Figure 3.1
Questionnaires Collected from Accounting Practitioners
Table 3.3
No of Questionnaires Distributed and Collected
No. of No. of
Percentage of
Stratums Questionnaires Questionnaires
response
Distributed Collected
Accounting
39 35 89.74
Practitioners
Accounting
36 33 91.67
Experts
Source: Opinion Survey/2010
Figure 3.2
No of Questionnaires Distributed and Collected
47
CHAPTER IV
DATA PRESENTATION AND ANALYSIS
Raw data do not have any significance unless they are systematically presented and
analyzed. This study also may not remain isolated from the reality. So, this chapter
presents and analyzes information collected from primary sources and analyzes
information collected from primary sources i.e. through questionnaires, informal
discussion and interview method as well as secondary sources i.e. published courses of
concerned universities. For the sake of convenience, this chapter has been classified into
five sections. They are;
For primary data collection, the total population was classified into two strata; accounting
practitioners and accounting experts. The accounting experts include Chief
Finance/Account Officer of the corporate firms, while the accounting experts include
chartered accountant members of t he Institute of Chartered Accountants of Nepal
(ICAN). The accounting practitioners and the accounting experts within Kathmandu
valley were considered as target population. The respondents were requested to response
on questionnaires by four ways.
48
They were also requested to put their views on any concerned issue, comment and
suggestions wherever necessary.
The responses from various respondents have been collected, arranged, tabulated and
analyzed in order to facilitate the descriptive analysis of the study. The format of the
questionnaires and the list of respondents have been placed in annex 1 and annex2
respectively.
49
Table 4.1
Practitioners Response on Awareness with IASs
Options Frequency (%)
Highly Familiar 10 28.57
Moderately Familiar 16 45.72
Less Familiar 7 20
Not at All 2 5.71
Total 35 100
Source: Questionnaire survey 2010
Figure 4.1
Practitioners Response on Awareness with IASs
From the table 4.1 and figure 4.1 above, it is clear that only 28.57% of Nepalese
corporate firms are highly aware with IASs. Almost half of the corporate Firms are
moderately aware about IASs as depicted by 45.72%. About 20% are found to be less
aware and 5.71% of the corporate firms are found as totally ignorant about IASs.
50
4.1.2 Practitioners Response on Awareness with the terms of NASs
The practitioner who is well known with the terms of NASs must be somewhat aware
about its objectives, scope and accounting treatment provided by it. The question aimed
at polling the respondents to the main objective of the study. The responses obtained
were as follows;
Table 4.2
Practitioners Familiarity with the Term NASs
Options Frequency (%)
Highly Familiar 14 40
Moderately Familiar 16 45.71
Less Familiar 4 11.43
Not at All 1 2.86
Total 35 100
Source: Questionnaire survey 2010
Figure 4.2
Practitioners Familiarity with the Term NASs
Table 4.2 and Figure 4.2 depicts that 40% of the practitioners in the Nepalese corporate
sector are highly familiar with the term NAS. 45.71% of the respondents are found
51
moderately familiar. 11.43% are found less familiar with the term NAS while only 2.86%
are totally unaware of the term.
It was aimed in the question that the practitioner who does not know how many NASs are
mandatory issued till the date of survey, he is not aware about the NASs and who can
answer he must have some knowledge about NASs. The responses are obtained as
follows.
Table 4.3
Awareness on Mandatorily Issued NASs
Options Frequency %
13 10 28.57
14 4 11.43
19 8 22.86
26 13 37.14
Total 35 100
Source: Questionnaire survey 2010
It is depicted in the Table 4.3 that Most of the accounting practitioners in the Nepalese
corporate sector are not aware of mandatorily issued NASs as only 22.86% respondent
are correct. Maximum responses are on behalf of 26 NASs (which is the total number of
NASs issued till date including NASs for voluntary compliance). For that 37.14%
respondents have responded
The professional status plays a significant role in the awareness of accounting standards.
From the prior studies it is found that, the professional course of CA has included the
accounting standards on its syllabus. But in most of the universities syllabus, the
accounting standards have not been found included, although this is subject matter of the
52
study. Assuming CAs are more aware on NASs than the university graduates, the
question aimed to measure the awareness situation of NASs in the corporate firms from
the practitioners‟ professional status. The responses obtained are presented in the
following table and figure
Table 4.4
Practitioners’ Professional Status
Options Frequency Percentage
Chartered Accountant 6 17.14
University Graduate 29 82.86
Total 35 100
Source: Questionnaire survey 2010
Figure 4.3
Practitioners’ Professional Status
The above Table 4.4 and Figure 4.3 depicts clearly that the accounting practitioner of
Nepalese corporate firm are mostly from university graduation. 82.86% of the
practitioners are found as university graduate. Only 17.14% of the practitioners are CA or
ACCA member.
53
4.1.5 NASs Training to Employees
Education and training are essential for learning and implementation NASs. Only the
formulation of NASs cannot achieve its desired objectives. To obtain desired objectives,
relevant programs should be initiated to the concerned sectors. For that, accounting
practitioners of different corporate firms should be trained on NASs. With this fact, the
question was to obtain about the NASs training taken or not by the practitioner or his/her
employee. The response given by those are shown in the following table and figure
Table 4.5
Training to Employees on NASs
Options Frequency Percentage
Number of Staff trained with NASs 65 25.38
Number of Staff not trained with NASs 140 74.62
Total number of Staff in Account section 205 100
Source: Questionnaire survey 2010
Figure 4.4
Training to Employees on NASs
Table 4.5 and Figure 4.4 reveals that, out of 205 practitioners and their assistants in
account section under study, only 65 had taken training on NASs i.e. only 31.71 % are
trained. It shows that almost 1/3th of the total accounting practitioners are far from the
NASs trainings. That may be the major reason for being unaware about NASs.
54
4.1.6 Major Constraints for Awareness of NASs
Accounting Standard Board/Nepal has already been executed 26 NASs (including those
issued for voluntary compliance as well). From the preliminary study it was found that,
awareness of NASs has not been widespread. There may be some constraints for
unawareness of accounting standards. In order to know what the major constraints are for
such unawareness of NASs in Nepalese corporate firms, opinions from accounting
practitioners were collected. The responses are presented in the following table
Table 4.6
Major Constraints for awareness of NASs
No. of Respondents Ranking as
Weighted
Index
Rank
Options Not Total
1 2 3 4 5
Responded
Unavailability of
1 2 6 12 14 4 39 141 1st
Training
Expensive 4th
7 8 4 12 4 4 39 103
Training Costs
Language Problem 6 10 8 9 2 4 39 96 5th
Inactive Role of
3 6 7 11 8 4 39 120 3rd
Regulatory body
Lack of
Management 5 3 4 5 18 4 39 133 2nd
Awareness
Source: Questionnaire survey 2010
As depicted in the Table 4.6, unavailability of NASs training programs is found as the
major constraint in awareness of NASs. Management of the corporate firms‟ unawareness
towards the NASs is the second major constraint. Third major constraint is inactive role
of regulatory body. Expensive NASs training cost is found as the fourth constraint and
NASs available only in English language i.e. not available in Nepali is the fifth
constraints respectively.
55
4.1.7 Practitioner’ View on Implementation of NASs
Though, NASs have been issued with mandatory compliance, they are not fully complied
with. It is because there is no active role played by regulating authority. On the other
hand, there is no any provision in case of non compliance. Thus this question attempted
to find the views of practitioners‟ whether NASs should be practiced as recommendatory
requirement (voluntary compliance), mandatory requirement or any other method. The
response was as tabulated in the following table and figure
Table 4.7
Training to Employees on NASs
Options Frequency Percentage
Recommendatory
7 20
Requirement
Mandatory Requirement 25 71.43
Other (if any) 3 8.57
Total 36 100
Source: Questionnaire survey 2010
Table 4.5
Training to Employees on NASs
From the above table and figure, it is clear that 71.43% practitioner's have responded in
favor of mandatory compliance of NASs. The view of practitioners in favor of
56
recommendatory requirement of NASs is 20%/ the other methods NASs to be executed
specifying practitioners are also 20%. 8.57% of the respondents have specified different
methods for implementation of NASs. The major methods NASs to be executed provided
by the practitioners are
For all types of organizations, for initial five years NASs should be issued for
voluntary compliance.
Mandatory form is very difficult and contrabass; so for some years it should be
recommendatory and then after only mandatory.
Some of the NASs should be recommendatory also. So, both recommendatory as
well as mandatory should be followed as per their scope and objectives and as per
the nature of the organizations.
Analysis of experts' opinion survey includes the opinions of the accounting experts‟ i.e.
chartered accountant members of The Institute of Chartered Accountants of Nepal
(ICAN), regarding the awareness of NASs. All the data were collected through primary
sources i.e. questionnaires' response have been analyzed. In this study self administered
questions were used .Out of 9 questions asked, one was related to general information, 7
questions and the rest one was open question. The total number of experts who have
responded was 33 out of 35 to whom questionnaires were distributed.
In connection with the harmonization with the international accounting standards NASs
are formulated. It has been assumed in this study that the expert who was aware with
IASs might be more or less aware with NASs. The responses have been presented in
Table 4.1 and Figure 4.6.
57
Table 4.8
Experts' Response/s on awareness with IASs
Opinions Frequency Percentage
Highly Familiar 23 70
Moderately Familiar 8 24
Less Familiar 2 6
Not at all
Total 33 100
Source: Questionnaire survey 2010
Figure 4.6
Experts' Response/se on awareness with IASs
As shown in the Table 4.8 and Figure 4.6, among 35 accounting experts i.e. CAs 70% are
found highly aware with IASs.24% of CAs are found moderately aware and 6% are
appeared to have less awareness of IASs. No CAs is found to be totally unaware about
the IASs.
The experts who have knowledge of NASs must be somewhat aware about its objectives,
scope and provisions. The question aimed at collecting the respondent‟s opinion on the
main objectives of the study. The obtained responses were as follows.
58
Table 4.9
Experts' Familiarity with the Term NASs
Options Frequency Percentage
Highly Familiar 28 85
Moderately Familiar 4 12
Less Familiar 1 3
Total 33 100
Source: Questionnaire survey 2010
Figure 4.7
Experts' Familiarity with the Term NASs
The Table 4.9 and Figure 4.7 above show that, most of CAs in Nepal i.e. 85% are highly
familiar with the term NASs12% of the CAs are moderately familiar and only 3% of CAs
are found less familiar with that term (out of respondents the question.
It is aimed in the question that the CA who does not know how many NASs are
mandatorily issued till date of survey, he is not aware about the NASs and who can
answer he must have somewhat knowledge about NASs. The responses are obtained as
follows:
59
Table 4.10
Awareness of Mandatory NASs
Options Frequency %
13 1 3.03
14 0 0
19 27 81.82
26 5 15.15
Total 33 100
It is found in Table 4.10 that, accounting experts' in Nepal are highly aware about the
mandatory NASs as 81.82 % of respondent delivered correct responses. All other have
given the wrong answer. In the study it is found that, some of the respondents are CAs
from ICAI. Others not responding are found to be unaware with mandatory NASs, so
they did not respond.
The accounting experts are involved in the organization for accounting and auditing
work. They are directly concerned with the accounting practices followed by the
organizations. Their work experience can show clearly how much the Nepalese
organization is aware with the NASs. With this question, it is attempted to find out the
situation regarding the awareness of NASs in Nepalese corporate firms. The responses
are as shown in Table 4.11 and Figure 4.8.
60
Table 4.11
Awareness on Mandatory Implemented NASs
Options Frequency %
Highly Aware 5 15.15
Moderately Aware 15 45.46
Less Aware 8 24.24
Not at all 5 15.15
Total 33 100
Source: Questionnaire survey 2010
Figure 4.8
Experts' Opinion on Awareness of NASs in Organizations
As depicted in table 4.11 and figure 4.8 the accounting expert have responded that
45.46% of the organization where they are rendering their services are moderately aware
about NASs where as 24.24% are less aware about NASs. In the same way 15.15% of the
organization are highly aware and by the same percentage totally unaware about NASs.
61
4.2.5 Major Constraints for Awareness of NASs
Accounting Standard Board/ Nepal (ASB/N) has already been executed 26 NASs since
16 July 2004. It has been all together 26 standards (i.e. Mandatory Standards, Voluntary
Standards, Standards under Consideration and Exposure Drafts). From the preliminary
study it has found that, awareness of NASs has not been widespread. There may be some
of the constraints which are averting awareness on accounting Standards. In order to
know what constraints are causes for such unawareness of NASs in Nepalese corporate
firms, opinions from accounting experts are collected. The responses are as presented in
Table 4.12.
Table 4.12
Major Constraints for Awareness of NASs
No. of Respondents Ranking as
Weighted
Index
Rank
Options Not Total
1 2 3 4 5
Responded
Unavailability of 1st
4 2 3 4 15 8 36 128
Training
Expensive
5 5 4 11 4 7 36 104 4th
Training Costs
Language
6 8 8 7 2 5 36 84 5th
Problem
Inactive Role of
3 6 7 9 6 5 36 115 3rd
Regulatory body
Lack of
2nd
Management 0 0 3 12 13 8 36 124
Awareness
Source: Questionnaire survey
As depicted in the Table 4.12, unavailability of NASs training programs is found as the
major constraint in awareness of NASs. Management of the corporate firms‟ unawareness
62
towards the NASs is the second major constraint. Third major constraint is inactive role
of regulatory body. Expensive NASs training cost is found as the fourth constraint and
NASs available only in English language i.e. not available in Nepali is fifth constraints
respectively.
Though, NASs have been issued for mandatory compliance, level of compliance is not
apprehending It is because of low level of supervision. On the other hand, there is no any
provision for penalties in case of non compliance. Thus, this question attempted to find
the views of experts whether NASs should be practiced as recommendatory requirement,
mandatory requirement or any other method. Also it is expected that, the experts who
have responded the question have knowledge of NASs. The responses are as tabulated in
Table 4.13 and Figure 4.9.
Table 4.13
Experts' Opinion on Execution Method of NASs
Options Frequency %
Recommendatory 3 9.09
Mandatory 28 84.85
Other (if any) 2 6.06
Total 33 100
Source: Questionnaire survey 2010
63
Figure 4.9
Experts' Opinion on Execution Method of NASs
As depicted in the table 4.13 and figure 4.9, 84.85% experts responded in favor of
mandatory compliance of NASs. 9.09% of the expert have responded for the
recommendatory requirement where as only 6.06% of the expert have suggested other
methods. They are
Mandatory but along with provision for raising awareness.
Recommendatory upto certain period than mandatory.
Implementation after broad discussion and training.
Secondary data are those which are not originated during the course of study but are facts
collected from someone else‟s records. For analytical purpose, syllabuses of courses
offered by different universities of Nepal were observed to see their role on awareness of
NASs. From the analysis of primary data above, it has been found that majority of the
accounting practitioners in Nepalese corporate firms were a university graduate. To
implement NASs effectively, the accounting practitioners should have possessed a sound
knowledge of accounting standards. The accounting practices of practitioners directly
relates with their academic background. What they have learnt in their academic courses,
which they apply while doing their jobs practically. Thus, the awareness of NASs largely
depends upon the courses of different universities as well. Had there been comprehensive
course of study about accounting standards in the syllabus of those universities, the
products of those universities must have somewhat knowledge on accounting standards
64
and that might have been applied in the practical life also. So in the study, it was
attempted to find out whether Nepalese universities are providing knowledge sufficient
enough to produce a NAS aware practitioner or not.
Four Universities of Nepal having management faculty under study were included to
observe their courses. They were Tribhuwan University (T.U), Kathmandu University
(K.U), Pokhara University (Po.U) and Purbanchal University (P.U). Under each of these
Universities, different educational programs were observed and the findings that were
drawn are as below:
Kathmandu University has designed three courses in the field of management and
accounting. They are:-
a) Bachelors of Business Administration (BBA)
b) Master of Business Administration (MBA)
c) Executive Master of Business Administration (EMBA)
K.U has its own assumptions on designing the course structure. It doesn‟t flash out its
overall course contents publicly in detail. It provides a dynamic course structure in every
level and every semester.
In the study, only general outline of the course was provided to the researcher and for
details, the professors for Financial Accounting was consulted. According to them, its
framework on accounting standards was as shown in the Table 4.14, Table 4.15, and 4.16
respectively.
65
Table 4.14
Provisions of Accounting Standards in the Syllabus of K.U
Program BBA (8 semesters)
Semester I
Subject Financial Accounting-I (ACC.201)
Matter General Discussion on IASs and GAAP.
Estimated Lecture Hours 2
Source: Kathmandu University
Table 4.15
Provisions of Accounting Standards in the Syllabus of K.U
Program MBA (4 semesters)
Semester I
Subject Financial Accounting (ACC.501)
General outline on IASs, General outline on NASs,
Matter Principles, Philosophy, infrastructures, guidelines
and convergence of NASs.
Estimated Lecture Hours 3-4
Source: Kathmandu University
Table 4.16
Provisions of Accounting Standards in the Syllabus of K.U
Program EMBA (4 semesters)
Semester I
Subject Financial Accounting (ACC.501)
General outline on IASs, General outline on
NASs, Principles, Philosophy,
Matter
infrastructures, guidelines and convergence
of NASs.
Estimated Lecture Hours 3-4
Source: Kathmandu University
66
4.3.2 Pokhara University (PU)
The courses of different academic programs under the Pokhara University were studied.
Very little amount on Accounting Standards and Generally Accepted Accounting
Principles was found included in the course of study. NASs have not been found included
in the syllabus. The inclusions found are shown in Table 4.17 and 4.18 respectively.
Table 4.17
Provision of Accounting Standards in the Syllabus of PU
Program BBA
Semester I
Subject Financial Accounting
Matter Generally Accepted Accounting Principles (included
under introduction course content)
Preparation of Financial Statements as per IASs (not
included in the syllabus but different colleges and
universities are applying as literature review).
Estimated Lecture Hours About 0.5 LH
Source: Publications of PU
Table 4.18
Provisions of Accounting Standard in the Syllabus of PU
Program MBA
Semester I
Subject Financial Accounting
Matter Accounting as an Information System (Not included in topic
but many of the colleges found as discussing on their other
activities in classes as literature on GAAP).
Source: Publications of PU
67
4.3.3 Purbanchal University
The courses on different college under the affiliation Purbanchal University were studied.
Under Purbanchal University, different academic programs related to Accounting are in
operation like Bachelor of Business Administration (BBA), Master of Business
Administration (MBA), and Executive Master of Business Administration (EMBA) etc.
In the study, at least a little inclusion about Accounting Standards was found in the BBA
program. Semester-I of BBA program under the subject of Financial Accounting-I, some
of the inclusions were found. In unit II i.e. Basic Accounting Concept and Convention is
included under Generally Accepted Accounting Principles (GAAP) and Financial
Reporting System in point no. c among the three points. Unit II has as three lecture hours
so the topic is predicted as equivalent to one lecture hour. Also in the same subject, unit
VII, the whole chapter was related to the accounting standard which included Benefits,
Types, International Accounting Standards, and Accounting Standards in Nepal. No more
content in addition to these were found in the BBA Syllabus. Very little inclusion about
Accounting Standard was found in MBA, semester I, recently designed for the 2066
batch. In the subject of Financial Accounting (MGT 521:3) chapter 1,i.e. „Accounting
Concepts and premises‟ of 10 lecture hours, the term Accounting Standard was included
along with many other terms. It could be predicted that the term was subject matter to
discuss not for even 1 lecture hour. The Accounting Standard was not found discussed in
the other programs of PU.
Tribhuwan University is one of the institutions with large volume of students enrolling
and has colleges widespread in Nepal under its affiliation. It is a government sector
University. The largest numbers of educational disciplines are being offered by TU. BBS,
BBA and MBS are the programs offered under Accounting/Management faculty,
products of which are still working in major volume in Nepalese Organizations. In this
study, all the accounting related programs of Tribhuwan University were observed. But
the term Accounting Standard or NAS were found no-where.
68
4.4 Comparative Analysis of Opinion Survey
To draw the conclusions of the study, different statistical tools have been used to
compare and assess the views of respondents i.e. accounting practitioners and accounting
experts. The Statistical tools used under the study were Spearman‟s rank correlation
coefficient and Pearson‟s Correlation coefficient.
Accounting Practitioners‟ and Accounting Experts‟ opinion on the major constrains for
the awareness of NASs as presented in Table 4.6 and Table 4.14 respectively maybe
consistent or inconsistent to each other. There maybe significant correlation between their
views or may not be. In this regard, test of rank correlation coefficient between the
opinions of accounting experts and accounting practitioners on the reason for
unawareness of NASs was considered.
Table 4.19
Correlation of Accounting Practitioners’ and Experts Opinion
Options R1 R2 D(R1_R2) D2
Unavailability of Training
1 1 0 0
Programs
Expensive Training Costs 4 4 0 0
Languages Problem (i.e. NASs
5 5 0 0
available only in English
Inactive Role of ICAN 3 3 0 0
Lack of Management Awareness 2 2 0 0
Rank Correlation Coefficient i.e. (rho) is obtained by the following formula.
69
(Rho)= For (n-2) degree of freedom
Hence, =1
=1
=1
Decision: =1, that is, there is perfect positive correlation between the views given by
accounting practitioners and accounting exports on the reason for unawareness of NASs.
Accounting practitioners' and accounting experts' opinions on the familiarity with IASs as
presented in the Table 4.1 and Table 4.8 respectively may be consistent or not. There may
be significant correlation between the views. In this regards, test of Pearsonian
correlation coefficient between the opinions of accounting practitioners and accounting
experts on the familiarity with IASs was done.
70
Table 4.20
Computation of Pearsonian Correlation Coefficient
X2 Y2
Options X Y XY
r =
Where,
Cov. (X, Y) = )
x =
Y =
Now,
x = × 409 – 49 = 5.727
Now,
r = = 0.57
71
4.4.2.2 Respondents Observation on the Familiarity with NASs
Accounting practitioners' and accounting experts' opinions on the familiarity with NASs
as presented in the Table 4.2 and Table 4.9 respectively may be consistent or not. There
may be significant correlation between the views. In this regards, test of Pearsonian
correlation coefficient between the opinions of accounting practitioners and accounting
experts on the familiarity with NASs was done.
Table 4.21
Computations of Pearsonian Correlation Coefficient
Options X Y XY X2 Y2
Highly Familiar 14 28 392 196 784
Moderately
16 4 64 256 16
Familiar
Less Familiar 4 1 4 16 1
Not at all 1 0 0 1 0
N=4 ∑X=35 ∑y= 33 ∑XY= 460 ∑ X2=469 ∑ Y2= 801
Correlation coefficient (r) is obtained by the following formula
r =
Where,
Cov. (X, Y) = )
x =
Y =
72
Now,
Cov. (X, Y) = × 460 46.2 = 45.8
x = ×469 – 49 = 9.69
Now,
r = =0.44
The test was conducted to measure the relationship of the views of accounting
practitioners and accounting experts as tabulated in table 4.3 and table 4.10.
Table 4.22
Computations of Pearsonian Correlation Coefficient
Options X Y XY X2 Y2
13 10 1 10 100 1
14 4 0 0 16 0
19 8 27 216 64 729
26 13 5 65 169 25
N=4 ∑X=35 ∑y= 33 ∑XY= 291 ∑ X2=349 ∑ Y2= 755
Correlation coefficient (r) is obtained by the following formula
73
r =
Where,
Cov. (X, Y) = )
x =
Y =
Now,
x = × 349 49 =4.56
Now,
r = = 0.25
Findings are the information and facts consequential to the analysis of data during the
study. During the study, the researcher tried to obtain the facts or information that is
particularly consistent with the research objectives. But, while materializing the main
objectives of the study, some of the other findings were realized in connection with the
objectives of the study.
74
Issuance of NASs is as attempt of ASB/Nepal to implement the harmonized
accounting standards in Nepal in line with global practice. It is the process of
making financial reporting practice comparable with globally accepted practices
in accounting. Thus, it should also be comparable and acceptable over the nation.
But practices in Nepal are some what deviated with existing practices found in the
study. Those deviations are due to various provisions in company act, income tax
act, etc. They do not have any interest or they do not allow getting interested on
NASs because of their own regulating acts. Due to that reason also the corporate
firms are found ignorant of NASs.
It is also found from the study that, information regarding NASs has not been
continuously circulated to the concerned for raising awareness of the NASs to the
practitioners discharging the accounting function in the Nepalese corporate sector.
As most of the practitioners in Nepalese corporate firms are university graduate,
they are found unaware on NASs for non inclusion of accounting standard in the
study material of the Nepalese universities.
A satisfactory level of accounting practitioners is found aware with IASs. It is
found from the study that, accounting experts are more aware about IASs than
practitioner as shown by the result of data analysis that 70 % of the experts are
highly aware about IAS where as only 28.57% practitioners are found highly
aware. Very little number of practitioners and none of the experts are found
totally unaware with IASs.
40% of accounting practitioners and 85% of experts are found highly familiar
with the term NAS. In the same way 81.82% of experts and 22.86% of
practitioners are found familiar with the mandatory issued NASs. It shows a very
positive indication regarding the increasing awareness of NASs. Totally unaware
experts are not found but, 2.86% practitioners are found as totally unaware about
NASs. Majority of the practitioners (around 46%) are found moderately familiar
with NASs.
Most of the CAO/Head of Accounts in Nepalese corporate firms are university
graduates. Only 17.14% of the respondents are found to be professional
accounting practitioners i.e. CAs.
75
Very high number of employee in Nepalese corporate firms account section are
found not trained on NASs. That also shows that most of are unaware with NASs.
In the view of accounting Practitioners in Nepalese corporate firms as well as
experts the major contributing factors for unawareness of NASs is unavailability
of NASs training program. Opinion of the expert as well as accounting
practitioner is same regarding the constraints for awareness of NASs.
Majority of the respondents recommended for the issuance of NASs for
mandatory compliance both in the category of accounting practitioners and
experts. However the percentage of the expert recommending for mandatory
issuance is higher than that of accounting practitioners.
The major issue found in the study is the discrepancy in accounting treatment
prescribed by different regulating laws to different organization. The NASs are
not found as the standard prescribed in all the sectors. The NRBs directives,
insurance act, income tax act has prescribed different treatment for certain
transaction rather than uniformly specifying the compliance with the NASs.
The largely recommended comments and/or suggestion by the both accounting
experts as well accounting practitioners to raise the level of awareness regarding
the NASs in the Nepalese corporate firms‟ culture is providing continuous
training on NASs to the accounting practitioners.
Inadequate enforcement mechanism and weak regulatory oversight by the
implementing agency.
Courses offered by the universities of Nepal are not adequate to provide the
insightful knowledge on accounting standards.
76
CHAPTER V
SUMMARY, CONCLUSIONS AND RECOMMENDATIONS
This chapter attempts to set down the main theme of the research study in précis form.
This chapter includes summary and conclusion of the study and the recommendations to
the concerned sector.
5.1 Summary
Nothing can be isolated from the changes. The whole world is changing day by day with
change in all the factors like economic, social, cultural, political, technological etc.
Globalization is also the outcome of changes. Due to globalization, world has become
like a market. All trade barriers are dissolving gradually and all the nations are competing
with each other to gain the competitive advantages from liberal economic market.
As a part of global economy Nepal has also initiated in the field of harmonization of
accounting practices with the formation of ICAN and ASB/Nepal. After that, nineteen
mandatory and seven voluntary accounting standards are issued till date. But none of the
concerned sectors were found alarmed in the evaluation of implementation effectiveness,
identification of the present status of awareness of NASs and related issues thereof. The
study was conducted being affected from the reality.
The study has been carried out for examining the awareness status of NASs among listed
companies of Nepal. Under study, different literatures in the field of accounting standards
77
were reviewed to examine the findings prior to this study and to direct the study in a
proper manner. Both primary data (i.e. opinions of accounting experts and practitioners)
and secondary data (i.e. course of studies of various Nepalese universities) were used. For
the sampling process, 36 respondents from ACAN members out of 507 were sampled by
using judgmental sampling procedure and 39 companies listed in NEPSE out of 194 were
sampled by random sampling procedure. The syllabuses of four Nepalese universities
were studied for analysis of secondary data. Data collected from both the sources were
analyzed by way of tabulation and diagrammatic presentations.
Through the study, it has been found that, accounting experts were more aware about the
term NAS, NASs issued till date as well as objective and scope of the NASs than that of
accounting practitioners in Nepalese corporate firms. Majority of the practitioners were
found as having moderate awareness of NASs. Among the accountants of Nepalese
corporate firms, large proportion was found to be university graduated and not trained on
NASs. Also the organizations which were audited by the experts were found having
moderate awareness on NASs. Views on the factors causing unawareness regarding
NASs were found to be similar in the opinion of practitioners as well as experts.
The major factors for unawareness of NASs were found as unavailability of NASs
training programs and lack of awareness in management level of the corporate firms.
Expensive training costs and inactive role of regulating authorities were also found as the
major factors causing unawareness of NASs.
Courses designed in different universities of Nepal were not found sufficient and
appropriate to chase away the unawareness of NASs. The major accountant producing
university (i.e. TU) has not incorporated accounting standards in its syllabus. Those
which have it were just insufficient to provide the practical and working knowledge of
the accounting standards. This has been found as one of the major contributory factor for
the unawareness of NASs in the corporate firms of Nepal.
78
Diversified regulating rules on accounting practice, unavailability of NASs in local
language, small number of professional accountants, immature practice of accounting
systems and NASs were found as the prevailing issues in the field of NASs.
5.2 Conclusions
The adoption of NASs has become inevitable for the fair presentation of financial
position and performance. Furthermore from 2011 onwards Nepal has to adopt IFRSs. It
is essential and necessary for Nepalese corporate firms to be along with the procedure to
maintain a place as one of the most attractive capital markets for foreign investors. To
measure and evaluate the economic activities of various organizations in the same
industry, financial reporting practices among the organizations should be homogeneous.
From the study it has been found that, most of the accounting practitioners in Nepalese
corporate firms are unaware about the term NAS, its objective, scope etc. Still it is
noteworthy that uniform and high quality accounting standards with considerable effects
for all adopting companies cannot be accomplished simply with a mutual regulatory
framework. Being able to establish a set of appropriate accounting standards applicable
for all companies across nations, it is in need to consider other interests‟ views in terms
of the interpretation of the standards and the manner of the approaching procedure. The
major reason for being practitioner‟s unawareness is unavailability of training programs
on NASS. The other constraints are lack of management awareness, expensive training
costs, inadequate oversight by the regulatory authorities, non inclusion of comprehensive
matter of study on accounting standards by Nepalese universities etc. From the
comparative analysis, it has been found that, accounting experts are more aware than
accounting practitioners
5.3 Recommendations
79
NASs. From the study it is found that the level of awareness about accounting standard
was found low among the accounting practitioner as compared to the accounting experts
who are found to have sound knowledge of accounting standard. After the statements of
findings of the study, the researcher has acknowledged to make following
recommendations to raise the awareness of accounting standard and to create the
environment conducive for compliance with the accounting standards.
Different acts and rules regulating different organization and other regulatory
laws and regulation should be uniform regarding the accounting transaction as
specified by the accounting standard. There should not be conflict in the
provisions of different acts and rules for the accounting treatment of any specific
transaction.
Training, workshops or seminar programs on NASs should not be like an earning
pot as seen up to now. Training, workshops or seminars should have the power,
which could motivate the trainees rather than making them to avoid it. Cost of
training or workshop should be affordable and the trainer should be professional
and expert having sound knowledge of NASs and IASs.
Training and workshop should be conducted regularly. Furthermore, such
programs should be conducted nationwide instead of being concentrated within
the major cities.
Proper enforcement mechanism should be developed to make sure that the
national accounting standards are complied with. And adequate regulatory
oversight should be exercised.
Statutory regulators should exercise their authority to pressure the preparers of
financial statements to comply with the accounting standards. Regulatory
Authorities in fulfillment of periodic reporting requirements and other disclosure
events should be scrutinized carefully to assure compliance with accounting
standards. Non-compliance should be dealt with severely.
In order to cope with global market, Nepal must adopt internationally accepted
Accounting standards i.e. IFRSs. NASs also should be dynamic and standardized
80
as IFRSs. Therefore the ASB/Nepal should be equipped. It should be provided
with resources to keep pace with the frequent adjusted IFRSs.
Terms used and language used in the NASs are also found as one of the
contributing factor to the low level of awareness of NASs. Thus, NASs should
also be issued in Nepali language as well and the complex terms should be
avoided as far as possible so that the NASs could be easily understood by the
accounting practitioners.
Implementing authority should carry out teaching and training programs in
cooperation with universities or other educational institute.
81
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ICAN(2001): A comparative Study of Accounting Standards. New Delhi, the Institute Of
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85
Pandey I.P. (2004): Accounting Standards and Practices of Listed Companies in Nepal.
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86
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ICAN (2005): Standard Board News. ICAN News letter, Kathmandu, September 16-
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87
Websites:
88
Annex-I
Cover Letter to Accounting Practitioner
Dear Respondent,
This research aims to see the current awareness status of Nepal Accounting Standards
(NASs). This study is being carried out to fulfill the partial requirement of MBS degree. I
request you to give some of your invaluable time to complete the following
questionnaire. I assure you that the information collected will be strictly kept confidential
and will be used only for the research purpose.
Thanking you
Prahlad Gautam
89
Questionnaires to the accounting practitioners
Types of organization:
(a) Commercial Banks (b) Finance Company
(c) Insurance Company (d) Development Bank
(e) Manufacturing and Processing (f) Trading Company
(g) Hotel (h) Others
90
3. Are you familiar with the term Accounting Standards (NASs?)
(a) 13
(b) 14
(c) 19
(d) 26
91
6. Have you or your employee ever taken training on NASs
8. What do you think are the major constraints for awareness of NASs among
practitioners?
92
9. Would you please, provide any issue and comments/ suggestions regarding
the promotion of awareness of NASs?
(a) ………………………………………………………………………………………
………………………………………………………………………………………
………………………………………………………………………………………
…………………………………………
(b) ………………………………………………………………………………………
………………………………………………………………………………………
…………………………………………
(c) ………………………………………………………………………………………
………………………………………………………………………………………
…………………………………………
93
Annex-II
Cover Letter to Accounting Experts
Dear Respondent,
This research aims to see the current awareness status of Nepal Accounting Standards
(NASs). This study is being carried out to fulfill the partial requirement of MBS degree. I
request you to give some of your invaluable time to complete the following
questionnaire. I assure you that the information collected will be strictly kept confidential
and will be used only for the research purpose.
Thanking you
Prahlad Gautam
94
Questionnaires to the Accounting Experts
Name…………………. Formal
Education……………………………
Profession…………………………….. Professional Experience (in
years)…………..
Name of Organization you are Associated with……………………………….
95
4. Do you know how many Mandatory Accounting Standards in Nepal are
issued till date?
(a) 13
(b) 14
(c) 19
(d) 26
5. Do you think most of the Organizations which you are Auditing for are
Aware of NASs?
96
7. What do you think are the major constraints for awareness of NASs among
practitioners?
Strongly Disagree
Strongly Agree
Slightly Agree
firms in Nepal. Please read each of the
Disagree
following statement and encircle at the
appropriate given alternative number
(f) Unavailability of training programs 1 2 3 4 5
(g) Expensive training cost 1 2 3 4 5
(h) Language Problems 1 2 3 4 5
(i) Inactive role of regulatory body 1 2 3 4 5
(j) Lack of management awareness 1 2 3 4 5
8. Would you please, provide any issue and comments/ suggestions regarding
the promotion of awareness of NASs?
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97
Annex III
List of Sample Respondents
Accounting Practitioners
98
Group-3 Insurance Companies
18 1 Everest Insurance Co. Ltd. Hattisar Kathmandu.
19 2 NB Insurance Co. Ltd. Bagbazar, Kathmandu.
20 3 Prime Life Insurance Co., Kathmandu
21 4 Nepal Life Insurance Co. Heritage Plaza, Kamaladi, Kathmandu
Group-4 Trading Organization
22 1 Bishal Bazar Co. Ltd. Sukrapath, Newroad, Kathmandu.
23 2 Nepal Trading Ltd. Sanepa, Lalitpur.
24 3 Nepal Welfare Co. Ltd. Maitidevi, Kathmandu.
25 4 Nepal Wool Trading Co. (P) Ltd. Pulchwok, Lalitpur.
26 5 Plastic Trading Co. Ltd. Teku, Kathmandu.
27 6 Salt Trading Corporation, Kalimati, Kathmandu.
Group-5 Manufacturing and Processing Companies
28 1 Arun Vanaspati Udhyog Ltd. Ganabahal, Kathmandu.
29 2 Harisiddi Brick and Tiles Factory Ltd. Kamaladi, Kathmandu.
30 3 Himalayan Distilary Ltd. Pulchwok, Kathmandu.
31 4 Jyoti Spinning Mills Ltd. Jyoti Bhawan, Kantipath, Kathmandu.
32 5 Shree Bhrikuti Pulp and Paper Nepal Ltd. Nayabaneswor,
Kathmandu
33 6 Gorakhkali Rubber Udyog Ltd. Kalimati, Kathmandu.
Group-6 Hotels
34 1 Soltee Hotel Ltd. Kalimati, Kathmandu.
35 2 Taragoun Regency Hotel, Boudha, Kathmandu.
36 3 Yak and Yeti Hotel Ltd. Darbarmarg, Kathmandu.
Group-7 Others
37 1 Butwal Power Company, Kumaripati, Lalitpur
38 2 National Hydrowpower Company, Kamaladi, Kathmandu.
39 3 Nepal Film Development Co. Ltd. Balaju, Kathmandu.
99
Accounting Expert
100
28 Keshab Neupane
29 Keshab Kanta Paudel
30 Bir Bhadra Lamichane
31 Prakash Baral
32 Gaurav Rijal
33 Santosh Panta
34 Sushil Raj Khanal
35 Subhash Adhikari
36 Bigyan Shrestha
101