NAS for Micro Entities in Nepal — Current Eligibility and Preparation

The notice requires an entity to meet all limits for two consecutive years to qualify, and after qualification to exceed at least one limit for two consecutive years to cease to qualify. Assess public accountability, framework exclusions and any regulator requirement alongside these limits. The framework is not an optional label that can be switched each year to obtain a preferred accounting result.

Record each limit for both years, the source accounts, any reclassification and the conclusion. Use the gross balance-sheet measure specified in the notice. Do not subtract current liabilities from current assets to make the entity appear smaller. Document borrowing and fiduciary facts rather than treating absence of a bank overdraft as absence of all relevant borrowing.

For example, a Nepal service company has annual turnover of NPR 170 million and NPR 190 million in two consecutive years, borrowing of NPR 60 million and NPR 80 million, balance-sheet totals of NPR 160 million and NPR 195 million, and no fiduciary assets. Those figures satisfy the numerical limits. The eligibility conclusion still requires confirmation of no public accountability, the applicable scope and any regulator direction. Keep those conclusions separate from the arithmetic.

If the same company then exceeds one limit in only one year, do not ignore the consecutive-year wording or assume immediate loss of micro status from that fact alone. Assess the complete circumstances, including any independent scope change, and retain the reasoning for the next reporting period.

Eligibility for NAS for MEs does not remove the need for complete records, consistent accounting policies or appropriate financial statements and disclosures. Reconcile sales, receivables, inventory, assets, borrowings, liabilities and equity. Identify owner transactions, related-party balances and obligations omitted from routine bookkeeping. Use the actual NAS for MEs requirements when determining recognition and presentation; a cashbook or tax return is not automatically a compliant financial-statement set.

Tax calculations remain separate. Maintain accounting depreciation and tax-pool depreciation in different schedules and reconcile book profit to taxable income. A simplified reporting framework does not create a tax exemption or dispense with withholding, VAT or company filing obligations.

Update the eligibility working annually and preserve previous conclusions. When the applicable framework changes, identify transition, comparative and disclosure requirements before closing the accounts. Plan data collection early so historical asset costs, opening balances and contractual information are available.

The reviewer should check the amended notice, relevant scope text, entity facts and numerical evidence. Record the reviewer and date in the entity's approval file. This page provides a selection and preparation guide; the official standard and applicable notices govern the entity-specific conclusion.

Use financial records for both relevant years and show how each limit was measured. Borrowings include the categories named in the definition, not only a bank overdraft. The balance-sheet test uses the stated gross basis without offsetting current liabilities against current assets. Fiduciary assets need a separate assessment even when they are not ordinary business inventory.

An entity with turnover of NPR 180 million but borrowing of NPR 120 million does not meet all four micro limits merely because turnover is below NPR 200 million. The timing of the two-year qualification or cessation test and any independent public-accountability condition must also be considered. Keep that conclusion with the accounting-policy and reporting-framework record so that a reviewer can reproduce it.