NFRS based reporting makes the quarterly report of Citizens Bank to appear different; Same dish in a different plate ; What caused the reserve of the bank to rise by Rs 2 arba

Citizens Bank International Limited published its fourth quarter report for the fiscal year 2074/75 based on the Nepal Financial Reporting Standards on Shrawan 15, 2075.The bank had previously published its fourth quarter report on the previous format on Shrawan 06, 2075. However, the newly published quarterly report drew attention of many people as there were seen difference in many amounts than the previous report.

As per the old report, its net profit amounts to Rs 1.40 arba whereas as per the new report the net profit amounts to Rs 1.27 arba. The net profit of the bank has decreased by Rs 13.49 crore in the new report. Not just the profit, the reserve of the bank amounted to Rs 4.62 abra as per the new report. In the old report reserve amounted to only Rs 2.76 arba.

There are no mistakes in both the reports published by the bank. But what caused the huge difference? The answer to this question is the change of method. The fundamental of the previous method of reporting and NFRS is different which has caused such difference in the major indicators.

There is a difference in the method of valuation of assets, method of recognition of revenue, method of creating provisions and such. This creates difference in profit as well as net worth of the company.

The difference has not just been seen in the profit and reserve but also in the loans floated by CZBIL. As per the old report, the loans of the bank amount to Rs 57.95 arba while the new report presents the loan amount as Rs 58.54 crore. The new method allows the banks to consider the late interest receivables on the loans with adequate collateral as loans. So the loans of the bank has surged by about Rs 60 crore. The banks need not maintain provision for the loans with irregular interest after 6 months.

The valuation of the previously acquired Premier Finance has also affected in the determination of profit. In the old report the amount was taken as a part of profit but in the new report the amount was included in the reserve of the bank.

All these changes in the method of valuation will produce an alternate financial report of the commercial banks. For the valuation of the fixed assets the banks will need to consider the fair value or fresh value of the assets. With the implication of this method, the networth of the companies with huge fixed assets like Nepal Bank Limited, Agriculture Development Bank etc will turn out to be the biggest in this year’s financial reports.