Chapter 5 · Part 5 — Statement of Changes in Equity
Movement rows, bonus shares and the cross-statement ties
Profit, OCI, reserve transfers and dividends; why free shares are not free; and the five checks that prove you have read this statement correctly.
Non-controlling interest
The minority's share of a partly-owned subsidiary's equity. Fully covered in Part 1.35.
Group movement: 489,124 + 71,248 (share of TCI) − 29,500 (dividends to minorities) = 530,872.
Nil in the Bank column — the standalone accounts consolidate nothing.
Total equity
The sum across all columns. Covered in Part 1.36.
THE MOVEMENT ROWS
Balance at Shrawan 1 / Balance at Asar end
Simple definition. The opening and closing equity positions.
Technical definition. The equity balance at the beginning of the reporting period (Shrawan 1, the first day of the Nepali fiscal year) and at its end (Asar end, the last day).
The Nepali fiscal year.
┌─────────────────────────────────────────────────────────────┐ │ NEPALI FISCAL YEAR (Bikram Sambat) │ │ │ │ Shrawan 1 ────────────────────────────────► Asar end │ │ (~mid-July) (~mid-July) │ │ │ │ FY 2082/83 = Shrawan 1, 2082 → Asar 32, 2083 │ │ = ~16 July 2025 → 16 July 2026 │ │ │ │ QUARTERS: │ │ Q1 Shrawan–Ashwin (ends ~mid-Oct) │ │ Q2 Kartik–Poush (ends ~mid-Jan) │ │ Q3 Magh–Chaitra (ends ~mid-Apr) │ │ Q4 Baisakh–Asar (ends ~mid-Jul) │ └─────────────────────────────────────────────────────────────┘
(NMB: opening NPR 32,174,608 thousand → closing NPR 38,059,771 thousand, Bank standalone.)
Related terms. Index §"Reading columns" · Part 14
Adjustment/Restatement
Simple definition. Corrections to prior-year figures, applied to opening equity rather than to this year's profit.
Technical definition. Adjustments to opening retained earnings arising from correction of prior-period errors or changes in accounting policy, applied retrospectively under NAS 8 Accounting Policies, Changes in Accounting Estimates and Errors.
The NAS 8 distinction that matters.
┌───────────────────────────────────────────────────────────────────┐ │ CHANGE IN ACCOUNTING ESTIMATE │ │ e.g. revising the useful life of computers from 5 to 4 years │ │ → applied PROSPECTIVELY │ │ → hits CURRENT and FUTURE profit │ │ → NO restatement of prior years │ └───────────────────────────────────────────────────────────────────┘ ┌───────────────────────────────────────────────────────────────────┐ │ CHANGE IN ACCOUNTING POLICY or CORRECTION OF ERROR │ │ e.g. adopting a new standard, or discovering a prior-year │ │ misstatement │ │ → applied RETROSPECTIVELY │ │ → adjust OPENING RETAINED EARNINGS │ │ → RESTATE comparatives │ │ → current-year profit is NOT distorted by prior-year errors │ └───────────────────────────────────────────────────────────────────┘
Why this row exists and why you should read it. A restatement is a signal. It means something was wrong before, or the rules changed. A bank that restates repeatedly has weak financial reporting controls.
(NMB, Bank: nil. Group: NPR (33,297) thousand in the current year and NPR (1,751) thousand in the prior year — small, and arising in the subsidiaries.)
The report's own caveat. "The figures reported in interim financial report are subject to change upon otherwise instructions of statutory auditor and/or regulatory authorities." This is standard for unaudited interim statements. Quarterly figures can and do change when the annual audit completes — a reason to treat Q1–Q3 numbers as provisional.
Related terms. Adjusted/Restated balance · Part 8 Rounding off and Comparative Figures
Adjusted/Restated balance
The opening balance after applying restatements — the true starting point for the year's movements.
Adjusted/Restated balance = Balance at Shrawan 1 ± Adjustment/Restatement
(NMB, Bank: 32,174,608 + 0 = 32,174,608. Group: 32,896,309 − 33,297 + 16,626 = 32,879,638.)
Profit for the year / for the period
The bottom line from the P&L, entered in the retained earnings column. Fully covered in Part 2.24.
(NMB, Bank: NPR 4,013,671 thousand.)
Other comprehensive income
OCI for the period, entered in the fair value reserve and other reserve columns according to the nature of the underlying items. Fully covered in Part 3.
(NMB, Bank: (173,367) to fair value reserve + (36,686) to other reserve = (210,053) total, tying exactly to the OCI statement. OK)
Total comprehensive income
Profit plus OCI. See Part 3.13.
(NMB, Bank: 4,013,671 − 210,053 = 3,803,618. OK)
Transfer to reserves
Simple definition. Moving profit out of "free" retained earnings into reserves that cannot be distributed.
Technical definition. Appropriations from retained earnings to statutory, regulatory and earmarked reserves as required by BAFIA, the Companies Act 2063 and the NRB Unified Directives.
The full breakdown. (NMB, Bank, NPR thousand.)
TO general reserve 802,734
TO exchange equalisation reserve 41,202
TO regulatory reserve 709,748
TO other reserve 651,702
─────────
Total appropriated 2,205,386
FROM retained earnings (2,205,386)
─────────
NET EFFECT ON TOTAL EQUITY 0 ← ZEROAs a proportion of profit.
2,205,386 ÷ 4,013,671 = 54.95% → Nearly 55% of the year's profit was locked into non-distributable reserves.
Journal entry (aggregate).
Dr Retained earnings 2,205,386,000
Cr General reserve 802,734,000
Cr Exchange equalisation reserve 41,202,000
Cr Regulatory reserve 709,748,000
Cr Other reserve 651,702,000Effect on regulatory capital. None — all these reserves are part of CET1 [R]. The capital does not move; only its distributability changes.
Analyst interpretation. The appropriation rate is the clearest single measure of how much of a Nepali bank's profit is genuinely available to shareholders. Compute it every year:
Transfer to reserves
Appropriation rate = ────────────────────────── × 100
Profit for the period
NMB FY2082/83: 54.95%A rising rate means either regulatory requirements tightened or — more likely — the quality of profit deteriorated, pushing more into the regulatory reserve.
Related terms. 5.3–5.9 · Part 7 (entire) · Part 15
Transfer from reserves
Simple definition. Releasing amounts from a reserve back into distributable retained earnings.
Technical definition. Reversal of a prior appropriation, permitted when the condition that required it no longer exists.
When a release is permitted — each has a specific trigger:
| Reserve | Release trigger |
|---|---|
| Regulatory reserve | The underlying item reversed — accrued interest was collected, the DTA was utilised, the NBA was sold, goodwill was written off [R] |
| Exchange equalisation reserve | Exchange loss in a later year, or per NRB rules [R] |
| Debenture redemption reserve | The debenture has been repaid |
| CSR / Training fund | The mandated expenditure was actually incurred |
Why a regulatory-reserve release is good news.
Reserve was created because interest was accrued but not received.
│
▼
The customer eventually PAYS.
│
▼
The reason for the block has gone.
│
▼
Dr Regulatory reserve
Cr Retained earnings
│
▼
The profit becomes DISTRIBUTABLE, with no new profit earned.This is why the Part 7 lines are written as "(-)/reversal (+)" — they work in both directions.
(NMB, Bank: NPR (120) thousand from other reserve — trivial, likely a completed CSR or training obligation.)
Related terms. 5.18 · Part 7
Transfer from Merger
Simple definition. Equity brought in from an institution the bank absorbed.
Technical definition. Reserves and equity balances transferred on a merger or acquisition accounted for under NFRS 3 and the NRB Merger and Acquisition Bylaws 2073.
(NMB: nil in both years — no merger during the period, consistent with Note 39.)
Why the line exists. Nepal's consolidation drive (Part 1.14) made merger transfers a routine SoCE row. Retained in the format for comparability.
Related terms. Part 1.14 Goodwill · Part 8 Business Combination
Contribution from and distributions to owner
Simple definition. A heading grouping all transactions with shareholders in their capacity as shareholders.
Technical definition. The section of the SoCE presenting owner transactions — share issues, dividends and bonus issues — separately from comprehensive income, as required by NAS 1.
Why NAS 1 requires the separation.
┌──────────────────────────────────────────────────────────────┐
│ PERFORMANCE (comprehensive income) │
│ Value the bank CREATED through its business │
│ → Profit + OCI │
└──────────────────────────────────────────────────────────────┘
vs
┌──────────────────────────────────────────────────────────────┐
│ OWNER TRANSACTIONS (contributions and distributions) │
│ Value shareholders PUT IN or TOOK OUT │
│ → Share issues, dividends, bonus shares │
└──────────────────────────────────────────────────────────────┘
Mixing them would let a company present a capital raise
as if it were performance.(NMB, Bank: total contributions and distributions = 3,918,335 − 1,836,671 = NPR 2,081,665 thousand net inflow, comprising the NPR 3bn PNCPS plus NPR 918,335 bonus capitalisation, less NPR 918,335 bonus from retained earnings and NPR 918,335 cash dividend.)
Related terms. 5.22–5.26 · Part 3.13
Share issued to merged entity / Share issued / Merger Transfer
Simple definition. Shares given to the shareholders of an institution being absorbed, as payment for the merger.
Technical definition. Ordinary shares issued as consideration in a business combination, measured at fair value at the acquisition date under NFRS 3.
(NMB: nil — no merger this period.)
How it would work.
Dr Net assets acquired (at fair value) 3,900,000,000
Dr Goodwill 600,000,000
Cr Share capital (shares issued) 4,500,000,000See the worked example in Part 1.14.
Related terms. Part 1.14 · Part 8 Business Combination, Acquisition method
Share based payments
Simple definition. The value of shares or share options given to employees as part of their pay.
Technical definition. Equity-settled share-based payment transactions measured at the fair value of the equity instruments granted at grant date, recognised as an expense over the vesting period with a corresponding increase in equity, under NFRS 2 Share-based Payment.
*(NMB: nil. Confirmed independently in the related-party note: "Share Based Payment — Nil" under Key Management Personnel compensation.)*
Why nil is normal in Nepal. Employee share option schemes are uncommon in Nepali banks. Regulatory constraints on share issuance, the promoter/public share structure and the absence of an established ESOP framework all contribute. This is also why diluted EPS equals basic EPS (Part 3.17).
Related terms. Part 3.17 Diluted EPS · Part 10 Share Based Payment
Dividends to equity holders
Simple definition. The heading covering both cash and stock dividends paid to shareholders.
Technical definition. Distributions to owners recognised as a deduction from equity when declared and approved, comprising cash dividends and bonus (stock) dividends.
The Nepali dividend structure — always two components.
┌──────────────────────────────────────────────────────────────────┐ │ A NEPALI BANK'S DIVIDEND IS NORMALLY DECLARED AS A PAIR: │ │ │ │ CASH DIVIDEND STOCK (BONUS) DIVIDEND │ │ ───────────── ────────────────────── │ │ Cash leaves the bank No cash leaves │ │ Equity FALLS Equity UNCHANGED │ │ Reduces CET1 [R] CET1 unchanged │ │ Shareholders get money Shareholders get more shares │ │ Taxable to shareholders [R] Different tax treatment [R] │ │ Share count unchanged Share count RISES → EPS │ │ restated retrospectively │ └──────────────────────────────────────────────────────────────────┘
NMB's declaration. "The bank has paid 5% cash dividend and 5% stock dividend for each stock held as approved by 30th AGM during the interim period."
Base: paid-up capital at Asar end 2082 NPR 18,366,706 thousand
Cash dividend 5% = NPR 918,335 thousand → cash out
Stock dividend 5% = NPR 918,335 thousand → bonus shares
──────────────────────
Total distribution NPR 1,836,670 thousand = 45.76% of profitRecognition timing. A dividend is recognised as a liability (and deducted from equity) only when it is declared and approved by the AGM, not when proposed by the board. A proposed but unapproved dividend is a disclosure, not a liability — a NAS 10 Events after the Reporting Period point.
Related terms. 5.25, 5.26 · Part 4.30 Dividends paid · Part 7
Bonus shares issued / Bonus shares capitalized
Simple definition. Free extra shares given to existing shareholders, funded by converting retained earnings into share capital.
Technical definition. The capitalisation of reserves through the issue of fully paid ordinary shares to existing shareholders in proportion to their holdings, without consideration — a transfer within equity from retained earnings to share capital.
The mechanics.
BEFORE AFTER 5% bonus issue
────── ────────────────────
Share capital 18,366,706 Share capital 19,285,041
Retained earnings 1,901,381 Retained earnings 983,046
Other reserves 11,906,521 Other reserves 11,906,521
────────── ──────────
TOTAL EQUITY 32,174,608 TOTAL EQUITY 32,174,608
══════════ ══════════
IDENTICAL — nothing was created or destroyedJournal entry.
Dr Retained earnings 918,335,000
Cr Share capital 918,335,000No cash. No P&L. No change in total equity.
What actually changes for a shareholder.
Shareholder owns 1,000 shares of a bank whose total equity
is NPR 32,174,608 thousand across 183,667,060 shares.
BEFORE: 1,000 shares × book value NPR 175.17 = NPR 175,170
Ownership: 1,000 ÷ 183,667,060 = 0.000544%
AFTER 5% bonus: shareholder receives 50 more shares
1,050 shares × book value NPR 166.83 = NPR 175,170
Ownership: 1,050 ÷ 192,850,413 = 0.000544%
→ SAME value. SAME ownership percentage. MORE pieces of paper.Effect on EPS. Requires retrospective restatement of all prior periods under NAS 33 — see Part 3.15 for the full worked demonstration.
Effect on regulatory capital. None. The money simply moves from one CET1 component to another. Both retained earnings and paid-up capital are CET1 [R].
Effect on distributable profit. Reduces it, rupee for rupee, because retained earnings fall.
Related terms. Part 1.30 Share capital · Part 3.15 Basic EPS · Part 4.29 (why it is absent from the cash flow statement) · Part 7
Cash dividend paid
Simple definition. Actual money paid out to shareholders.
Technical definition. Distributions of cash to equity holders, deducted from retained earnings and settled in cash.
Journal entry.
On declaration:
Dr Retained earnings 918,335,000
Cr Dividend payable (Other liabilities) 918,335,000
On payment (net of dividend tax [R]):
Dr Dividend payable 918,335,000
Cr Cash 872,918,250
Cr Dividend tax payable 45,416,750The dividend tax rate applicable to distributions by Nepali companies is set by the Income Tax Act 2058 as amended — verify.
Effects.
| Effect | Direction |
|---|---|
| Retained earnings | ↓ |
| Cash | ↓ |
| Total equity | ↓ |
| CET1 / capital adequacy | ↓ [R] |
| Distributable profit carried forward | ↓ |
| Profit or loss | **No effect** — a distribution, not an expense |
Group vs Bank. Group shows NPR (982,734) thousand versus Bank NPR (918,335) thousand. The NPR 64,399 thousand difference is dividends the subsidiaries paid to their own minority shareholders — real cash leaving the Group, but not to NMB's shareholders.
Related terms. Part 4.30 · Part 7 · Part 12 CET 1
Goodwill Recognition
Simple definition. Recording goodwill arising from a merger, with its effect passing through equity.
Technical definition. The equity effect of recognising goodwill on a business combination, presented in the SoCE where the recognition affects retained earnings or reserves directly rather than through profit or loss.
(NMB: nil in both years.)
Why the row exists. It relates to the ICAN carve-out history described in Part 1.14 — when the carve-outs on NFRS 3 were withdrawn in 2079.04.15 and goodwill was recognised in FY 2021/22, the adjustment had an equity effect. The row is retained in the format.
Related terms. Part 1.14 Goodwill and Intangible assets · Part 7 Goodwill recognised
Total contributions by and distributions
Simple definition. The net of everything shareholders put in and took out.
Formula.
Total contributions Share Bonus shares Cash Other owner and distributions = issues + capitalised − dividends ± transactions
(NMB, Bank, NPR thousand.)
Bonus shares capitalized (to share capital) 918,335
Bonus shares (from retained earnings) (918,335)
Cash dividend paid (918,335)
Others (NMB PNCPS 8.25%) 3,000,000
─────────
Total contributions by and distributions 2,081,665Cross-check with the cash flow statement.
Net cash from financing activities (Bank) 2,081,665 OK EXACT MATCH
Because for NMB the only owner transactions with cash effects were the PNCPS issue and the cash dividend — the bonus issue nets to zero and is non-cash. When these two figures match, both statements are internally consistent.
Related terms. 5.21–5.27 · Part 4.32 Net cash from financing activities
The three cross-statement ties to verify in the SoCE
┌─────────────────────────────────────────────────────────────────────┐ │ TIE 1 — Profit │ │ SoCE "Profit for the period" = P&L "Profit for the period" │ │ 4,013,671 = 4,013,671 OK │ ├─────────────────────────────────────────────────────────────────────┤ │ TIE 2 — OCI │ │ SoCE "Other comprehensive income" (across reserve columns) │ │ = OCI statement "OCI for the period, net of income tax" │ │ (173,367) + (36,686) = (210,053) = (210,053) OK │ ├─────────────────────────────────────────────────────────────────────┤ │ TIE 3 — Closing equity │ │ SoCE closing balance = Balance sheet "Total equity" │ │ 38,059,771 = 38,059,771 OK │ └─────────────────────────────────────────────────────────────────────┘ Plus two useful secondary checks: • Transfer to reserves must net to ZERO in the total column • Total contributions and distributions ≈ financing cash flow (after removing non-cash bonus shares)
Part 5 — Revision table
| Term | Meaning | Effect on total equity | Key issue |
|---|---|---|---|
| Share Capital | Par value + AT1 | ↑ on issue; **0** on bonus | Two growth routes, only one adds value |
| Share premium | Above-par subscription | ↑ on issue | Restricted from distribution |
| General reserve | Statutory appropriation | **0** | ~20% of profit [R]; part of CET1 |
| Exchange equalisation reserve | FX gain block | **0** | NRB appropriation, not OCI |
| Regulatory reserve | Non-cash profit block | **0** | **Best earnings-quality indicator** — 17.7% of profit |
| Fair value reserve | FVOCI accumulated gains | ↑↓ with OCI | Fell NPR 173m — equity market |
| Revaluation Reserve | PPE revaluation surplus | ↑↓ with OCI | Nil — cost model |
| Retained earning | Free accumulated profit | ↑ with profit | The pivot column |
| Other reserve | CSR, training, debenture redemption | **0** | Ties exactly to Part 7 appropriations |
| Non-controlling interest | Minority's equity | ↑↓ | Group only |
| Total equity | Net worth | — | Control total |
| Balance at Shrawan 1 / Asar end | Opening / closing | — | Nepali FY: mid-July to mid-July |
| Adjustment/Restatement | Prior-year corrections | ↑↓ | NAS 8; repeated restatements = weak controls |
| Adjusted/Restated balance | Corrected opening | — | The real starting point |
| Profit for the year | P&L bottom line | ↑ | Lands in retained earnings |
| Other comprehensive income | OCI for the period | ↑↓ | Lands in reserves |
| Total comprehensive income | Profit + OCI | ↑↓ | Ties to the OCI statement |
| Transfer to reserves | Appropriations | **0** | 55% of NMB's profit locked up |
| Transfer from reserves | Reserve releases | **0** | A release **increases** distributable profit |
| Transfer from Merger | Merger equity | ↑ | Nil; Nepal merger-era line |
| Contribution from and distributions to owner | Owner transactions heading | — | NAS 1 separates performance from owner deals |
| Share issued to merged entity | Merger consideration | ↑ | Nil |
| Share based payments | ESOP cost | ↑ | **Nil** — hence no EPS dilution |
| Dividends to equity holders | Distribution heading | ↓ (cash part) | Always a cash + stock pair in Nepal |
| Bonus shares issued/capitalized | Retained earnings → capital | **0** | **Not free money** — restates EPS retrospectively |
| Cash dividend paid | Cash to shareholders | ↓ | Never an expense; reduces CET1 |
| Goodwill Recognition | Merger goodwill equity effect | ↑↓ | Nil; ICAN carve-out legacy |
| Total contributions by and distributions | Net owner transactions | ↑↓ | Should reconcile to financing cash flow |
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