Kathmandu. KATHMANDU: Nepal Insurance Authority (NEA) has released the Nepal Financial Report Standards (NFRS-17) Implementation Directive, 2083 BS.

The directive has provisions related to double financial statements. Insurance companies are required to prepare their double-quarterly financial statements from the fourth quarter of the fiscal year 2082/83. One of which will be as per NFRS 17 and the other as per the previous notification of the Authority.

From July 1, the companies will have to submit a double-audited annual financial statement for regulatory approval from the authority. This will include ‘General Purpose Financial Statements’ based on NFRS 17 and ‘Special Purpose Financial Statements’ based on Financial Statement Guidelines, 2080.

While calculating the distributable profit of dividend distribution and consolidated fund insurance companies, the basis on which the lower profit is shown in the Financial Statement Directive, 2080 and NFRS 17 will be recognized. If the accumulated profit as per NFRS 17 exceeds the Financial Statement Directive, 2080, the difference should be set aside in the Regulatory Reserve Fund.

The fund cannot be used for dividend distribution or other purposes without the approval of the Authority. The Implementation Schedule Directive has set a definite timetable for the completion of the work in a phased manner. The directive has been issued to make the financial reporting system for insurance companies more transparent, reliable and of international standard.

The directive has been brought in exercise of the powers given by Section 166 of the Insurance Act, 2079. Its main objective is to bring uniformity in the presentation of financial reports, clarify accountability and support a risk-based supervision system in the insurance sector.

The Delegation of Responsibilities and Task Force Formation Directive sets out the responsibilities of various agencies for the implementation of NFRS 17. The Directory will be responsible for the preparation and ownership of financial statements, statistics and accounting policies.

Similarly, there is the issue of independent review of actuary evaluation and issuance of annual actuary certificate. Each insurance company is required to form a project management team comprising the chief executive, chief financial officer, IT chief, risk analyst and actuary expert. The team should be established within 7 days of the issuance of the directive.

The insurance companies will have to submit the position paper to the Authority within 90 days of the issuance of the directive.

This will include the company’s accounting policy, actuarial methods and key projections. A high-level technical committee has been formed under the coordination of the Executive Director of Insurance Authority of Nepal for the nationwide implementation and monitoring of NFRS-17.

The committee comprises representatives of NEA, Institute of Chartered Accountants of Nepal and Accounting Board of Nepal (CABON).