AS17

Session 6 & 7Session 6 & 7Session Title:Session Title:

Introduction to Accounting Standards, its Introduction to Accounting Standards, its objective, basis of accounting, Accounting objective, basis of accounting, Accounting Standards issued by ICAI and IPSAS Standards issued by ICAI and IPSAS Standards (Accrual basis and Cash Basis) Standards (Accrual basis and Cash Basis) with their objective, Revisiting Accounting with their objective, Revisiting Accounting Framework, International efforts and reforms Framework, International efforts and reforms made in India. TFC and formation of GASAB, made in India. TFC and formation of GASAB, Operational Framework issued by GASAB, Operational Framework issued by GASAB, Progress of GASAB so far, list of IGASs and Progress of GASAB so far, list of IGASs and IGFRSs with their objectives. IGFRSs with their objectives.

SESSION OVERVIEW:SESSION OVERVIEW:

In order to make accounting methods and principles uniform and In order to make accounting methods and principles uniform and comparable and financial reporting show true and fair view of all comparable and financial reporting show true and fair view of all the activities of the government, to the extent possible, the activities of the government, to the extent possible, standards are necessary to be evolved. The basic objective of standards are necessary to be evolved. The basic objective of Accounting Standards is to remove variations in the treatment of Accounting Standards is to remove variations in the treatment of several accounting aspects and to bring about standardization in several accounting aspects and to bring about standardization in accounting and its presentation. In this context, it is appropriate accounting and its presentation. In this context, it is appropriate to discuss Accounting Standards issued by IPSAS (both accrual to discuss Accounting Standards issued by IPSAS (both accrual and cash basis). The twelfth Finance Commission (TFC) and cash basis). The twelfth Finance Commission (TFC) recommended Accrual Accounting for the Union and the State recommended Accrual Accounting for the Union and the State Governments. The GASAB in the office of the C&AG (2002) was Governments. The GASAB in the office of the C&AG (2002) was set up to recommend an operational framework and detailed set up to recommend an operational framework and detailed roadmap for its implementation. GASAB has so far developed roadmap for its implementation. GASAB has so far developed five IGASs namely (i) IGAS 1-Guarantees given by governments: five IGASs namely (i) IGAS 1-Guarantees given by governments: Disclosure requirements (ii) IGAS 2 - Accounting and Disclosure requirements (ii) IGAS 2 - Accounting and classification of grants-in-aid (iii) IGAS 3- Loans and advances classification of grants-in-aid (iii) IGAS 3- Loans and advances made by governments (iv) IGAS 7- Foreign currency transactions made by governments (iv) IGAS 7- Foreign currency transactions and loss or gain by exchange rate variations (v) IGAS 10- Public and loss or gain by exchange rate variations (v) IGAS 10- Public debt and other liabilities of governments : Disclosure debt and other liabilities of governments : Disclosure requirements and four IGFRSs namely (i) IGFRS 2 (i) Property, requirements and four IGFRSs namely (i) IGFRS 2 (i) Property, plant and equipment (ii) IGFRS 3- Revenue from government plant and equipment (ii) IGFRS 3- Revenue from government exchange transactions (iii) IGFRS 4- Inventories (iv) IGFRS 5- exchange transactions (iii) IGFRS 4- Inventories (iv) IGFRS 5- Contingent liabilities (other than guarantees) and contingent Contingent liabilities (other than guarantees) and contingent assets: Disclosure requirements assets: Disclosure requirements

Session Structure:Session Structure:► 1. 1. Introduction to Accounting Standards. Introduction to Accounting Standards.► 2. Objective of Accounting Standards.2. Objective of Accounting Standards.► 3. TFC, 13th Finance Commission, 14th 3. TFC, 13th Finance Commission, 14th

report of 2nd Administrative Reforms report of 2nd Administrative Reforms Commission recommendations and Commission recommendations and formation of GASABformation of GASAB

► 4. Road map and Operational Framework of 4. Road map and Operational Framework of GASAB.GASAB.

► 5. Accounting treatment and measurement 5. Accounting treatment and measurement procedures proposed by GASAB.procedures proposed by GASAB.

► 6. ICAI Accounting Standards and IPSAS6. ICAI Accounting Standards and IPSAS► 7. IGASs and IGFRS (Notified/Under 7. IGASs and IGFRS (Notified/Under

Notification/ prepared/ Proposed by GASAB)Notification/ prepared/ Proposed by GASAB)► 8.Excercise and Group Discussion 8.Excercise and Group Discussion

Introduction:Introduction: Financial Statements specially Appropriation and Financial Statements specially Appropriation and

Finance Accounts of governments are prepared to Finance Accounts of governments are prepared to summarize the end-result of all the activities by the summarize the end-result of all the activities by the government during an accounting period in monetary government during an accounting period in monetary terms.terms.

Combined Finance Accounts compares the financial Combined Finance Accounts compares the financial results of different state governments and union results of different state governments and union government.government.

The government accounting in India are on cash The government accounting in India are on cash basis and accounting follows the rule based.basis and accounting follows the rule based.

Though there is standardized classification structure Though there is standardized classification structure (List of Major and Minor heads) of government activities (List of Major and Minor heads) of government activities are available, but reporting governments may adopt are available, but reporting governments may adopt divergent policies in methods and principles in their divergent policies in methods and principles in their financial reporting.financial reporting.

In order to make accounting methods and principles In order to make accounting methods and principles uniform and comparable and financial reporting show uniform and comparable and financial reporting show true and fair view of all the activities of the true and fair view of all the activities of the government, to the extent possible, Standards are government, to the extent possible, Standards are necessary to be evolved.necessary to be evolved.

What is Accounting Standards?What is Accounting Standards?i.i. Accounting Standards are the statements of code of practices Accounting Standards are the statements of code of practices

of regulatory accounting bodies (C&AG, CGA for government of regulatory accounting bodies (C&AG, CGA for government accounting) that are to be observed in preparation and accounting) that are to be observed in preparation and presentation of financial statements.presentation of financial statements.

ii.ii. that Accounting Standards are rules according to which that Accounting Standards are rules according to which accounts have to be drawn up.accounts have to be drawn up.

iii.iii. In layman terms, accounting standards are written In layman terms, accounting standards are written documents issued by experts, institutes or other regulatory documents issued by experts, institutes or other regulatory bodies covering various aspects of measurement, treatment, bodies covering various aspects of measurement, treatment, presentation and disclosure of accounting transactions, presentation and disclosure of accounting transactions, whether it is based on single entry cash basis or double entry whether it is based on single entry cash basis or double entry accrual basis.accrual basis.

What are the objectives of Accounting Standards?What are the objectives of Accounting Standards?(i) The basic objective of Accounting Standards is to remove (i) The basic objective of Accounting Standards is to remove

variations in the treatment of several accounting aspects and variations in the treatment of several accounting aspects and to bring about standardization in accounting and its to bring about standardization in accounting and its presentation.presentation.

(ii) They intent to harmonize the diverse accounting policies (ii) They intent to harmonize the diverse accounting policies followed in the preparation and presentation of financial followed in the preparation and presentation of financial statements by different reporting entities.statements by different reporting entities.

Accounting Standards issued by various Accounting Standards issued by various authorities:authorities:

(A) (A) Accounting Standards (Accrual basis) issued by the Accounting Standards (Accrual basis) issued by the Institute of Chartered Accountant of India (ICAI) are as Institute of Chartered Accountant of India (ICAI) are as

follows:follows:AccountinAccounting g Standards Standards (ASs) No. (ASs) No.

Accounting Accounting Standards on Standards on

Objectives of the Standards Objectives of the Standards

AS 1 AS 1 Disclosure of Disclosure of Accounting Accounting Policies Policies

in preparation and presentation of the in preparation and presentation of the financial statements financial statements

AS2AS2 Valuation of Valuation of Inventories Inventories

to formulate the method of to formulate the method of computation of cost of inventories / computation of cost of inventories / stock, determine the value of closing stock, determine the value of closing stock / inventory at which the stock / inventory at which the inventory is to be shown in balance inventory is to be shown in balance sheet till it is not sold and recognized sheet till it is not sold and recognized as revenue as revenue

AS3AS3 Cash Flow Cash Flow Statements Statements

This statement exhibits the flow of This statement exhibits the flow of incoming and outgoing cash. incoming and outgoing cash.

AS4AS4 Contingencies Contingencies and Events and Events occurring after occurring after the Balance the Balance Sheet Date Sheet Date

The Accounting Standard deals with The Accounting Standard deals with Contingencies and Events occuring Contingencies and Events occuring after the balance sheet date after the balance sheet date

Accounting Accounting Standards Standards (ASs) No. (ASs) No.



AS5AS5 Net Profit or Net Profit or Loss for the Loss for the period, Prior period, Prior Period items Period items and changes in and changes in Accounting Accounting Policies. Policies.

to prescribe the criteria for certain items to prescribe the criteria for certain items in the profit and loss account so that in the profit and loss account so that comparability of the financial statement comparability of the financial statement can be enhanced. Profit and loss account can be enhanced. Profit and loss account being a period statement covers the being a period statement covers the items of the income and expenditure of items of the income and expenditure of the particular period. This also deals with the particular period. This also deals with change in accounting policy, accounting change in accounting policy, accounting estimates and extraordinary items. estimates and extraordinary items.

AS6AS6 Depreciation Depreciation Accounting Accounting

It is a measure of wearing out, It is a measure of wearing out, consumption or other loss of value of a consumption or other loss of value of a depreciable asset arising from use, depreciable asset arising from use, passage of time. Depreciation is nothing passage of time. Depreciation is nothing but distribution of total cost of asset over but distribution of total cost of asset over its useful life its useful life

AS7AS7 Construction Construction Contracts Contracts

As the period of construction contract is As the period of construction contract is long, work of construction starts in one long, work of construction starts in one year and is completed in another year or year and is completed in another year or after 4-5 years or so. There may be after 4-5 years or so. There may be following two ways to determine profit or following two ways to determine profit or loss: On year-to-year basis based on loss: On year-to-year basis based on percentage of completion or On percentage of completion or On completion of the contract. completion of the contract.

AccountinAccounting g Standards Standards (ASs) No. (ASs) No.

Accounting Accounting Standards Standards on on


AS8AS8 Accounting Accounting for Research for Research and and Development Development

This deals with accounting for research and This deals with accounting for research and developmentdevelopment

AS9AS9 Revenue Revenue Recognition Recognition

The standard explains as to when the revenue should The standard explains as to when the revenue should be recognized in profit and loss account and also be recognized in profit and loss account and also states the circumstances in which revenue states the circumstances in which revenue recognition can be postponed. recognition can be postponed.

AS10AS10 Accounting Accounting for Fixed for Fixed Assets Assets

It is an asset, which is:- Held with intention of being It is an asset, which is:- Held with intention of being used for the purpose of producing or providing goods used for the purpose of producing or providing goods and services. and services.

AS11AS11 The effects of The effects of Changes in Changes in Foreign Foreign Exchange Exchange Rates Rates (Revised (Revised 2003) 2003)

This accounting Standard applicable to accounting for This accounting Standard applicable to accounting for transaction in Foreign currencies in translating in the transaction in Foreign currencies in translating in the Financial Statement Of foreign operation Integral as Financial Statement Of foreign operation Integral as well as non- integral and also accounting for For well as non- integral and also accounting for For forward exchange. Effect of Changes in Foreign forward exchange. Effect of Changes in Foreign Exchange Rate, an enterprises should disclose Exchange Rate, an enterprises should disclose following aspects:following aspects:•Amount Exchange Difference included in Net profit or Amount Exchange Difference included in Net profit or Loss; Loss; •Amount accumulated in foreign exchange translation Amount accumulated in foreign exchange translation reserve; reserve; •Reconciliation of opening and closing balance of Reconciliation of opening and closing balance of Foreign Exchange translation reserve; Foreign Exchange translation reserve;




AS12AS12 Accounting Accounting for for GovernmenGovernment grants t grants

Government Grants are assistance by the Govt. Government Grants are assistance by the Govt. in the form of cash or kind to an enterprise in in the form of cash or kind to an enterprise in return for past or future compliance with return for past or future compliance with certain conditions. certain conditions.

AS13AS13 Accounting Accounting for for investmentinvestments s

It is the assets held for earning income by way It is the assets held for earning income by way of dividend, interest and rentals, for capital of dividend, interest and rentals, for capital appreciation or for other benefits. appreciation or for other benefits.

AS14AS14 Accounting Accounting for for AmalgamatioAmalgamation n

It deals with accounting to be made in books of It deals with accounting to be made in books of Transferee company in case of amalgamation Transferee company in case of amalgamation

AS15AS15 Employees Employees Benefit Benefit (Revised (Revised 2005) 2005)

The scope of the accounting standard The scope of the accounting standard has been enlarged, to include accounting for has been enlarged, to include accounting for short-term employee benefits and termination short-term employee benefits and termination benefits benefits

AS16AS16 Borrowing Borrowing costs costs

It prescribe the treatment of borrowing It prescribe the treatment of borrowing cost (interest + other cost) in accounting, cost (interest + other cost) in accounting, whether the cost of borrowing should be whether the cost of borrowing should be included in the cost of assets or not included in the cost of assets or not




AS17AS17 Segment Segment Reporting Reporting

Disclosure of information regarding multiple Disclosure of information regarding multiple products/services and their operations is called products/services and their operations is called segment reporting segment reporting

AS!8AS!8 Related Related Party Party Disclosures Disclosures

disclosure of related party transaction is disclosure of related party transaction is essential for proper understanding of financial essential for proper understanding of financial performance and financial position of performance and financial position of enterprise enterprise

AS19AS19 Leases Leases Lease is an arrangement by which the lesser Lease is an arrangement by which the lesser gives the right to use an asset for given period gives the right to use an asset for given period of time to the lessee on rent. It involves two of time to the lessee on rent. It involves two parties, parties,

AS20AS20 Earning Per Earning Per share share

The statement is applicable to the enterprise The statement is applicable to the enterprise whose equity shares or potential equity shares whose equity shares or potential equity shares are listed in stock exchange. are listed in stock exchange.

AS21AS21 ConsolidateConsolidated Financial d Financial Statements Statements

the consolidated balance sheet if prepared the consolidated balance sheet if prepared should be prepared in the manner prescribed should be prepared in the manner prescribed by this statement. by this statement.




AS22AS22 Accounting Accounting for taxes on for taxes on Income Income

This accounting standard prescribes the This accounting standard prescribes the accounting treatment for taxes on income. accounting treatment for taxes on income.

AS23AS23 Accounting Accounting for for InvestmentInvestments in s in Associates Associates in in ConsolidateConsolidated financial d financial statements statements

It set out the principles and procedures for It set out the principles and procedures for recognizing the investment in associates in the recognizing the investment in associates in the consolidated financial statements of the consolidated financial statements of the investor, investor,

AS24AS24 DiscontinuiDiscontinuing ng operations operations

The objective of this standard is to establish The objective of this standard is to establish principles for reporting information about principles for reporting information about discontinuing operations. discontinuing operations.

AS25AS25 Interim Interim Financial Financial Reporting Reporting

As per clause 41 of listing agreement the As per clause 41 of listing agreement the companies are required to publish the financial companies are required to publish the financial results on a quarterly basis results on a quarterly basis




AS26AS26 Intangible Intangible Assets Assets

An Intangible Asset is an Identifiable non-An Intangible Asset is an Identifiable non-monetary Asset without physical substance monetary Asset without physical substance held for use in the production or supplying of held for use in the production or supplying of goods or services for rentals to others or for goods or services for rentals to others or for administrative purpose administrative purpose

AS27AS27 Financial Financial Reporting Reporting of Interests of Interests in Joint in Joint Ventures Ventures

'Joint control' is the contractually agreed 'Joint control' is the contractually agreed sharing of control over economic activity. sharing of control over economic activity.

AS28AS28 Impairment Impairment of Assets of Assets

As per AS-28 asset is said to be impaired when As per AS-28 asset is said to be impaired when carrying amount of asset is more than its carrying amount of asset is more than its recoverable amount. recoverable amount.

AS29AS29 Provisions, Provisions, Contingent Contingent Liabilities Liabilities and and Contingent Contingent Assets Assets

Objective of this standard is to prescribe the Objective of this standard is to prescribe the accounting for Provisions, Contingent accounting for Provisions, Contingent Liabilities, Contingent Assets, Provision for Liabilities, Contingent Assets, Provision for restructuring cost restructuring cost




AS30AS30 Financial Financial Instruments : Instruments : Recognition and Recognition and Measurement and Measurement and Limited Revisions to Limited Revisions to AS 2, AS 11 (revised AS 2, AS 11 (revised 2003), AS 21, As 23, 2003), AS 21, As 23, AS 26, AS 27, AS 28, AS 26, AS 27, AS 28, and AS 29 and AS 29

this Standard is to establish principles for this Standard is to establish principles for recognizing and measuring Financial assets, recognizing and measuring Financial assets, financial liabilities and some contracts to buy financial liabilities and some contracts to buy or sell non-financial items or sell non-financial items

AS31AS31 Financial Financial Instruments: Instruments: Presentation Presentation

This Standard is to establish principles for This Standard is to establish principles for presenting financial instruments as liabilities presenting financial instruments as liabilities or equity and for offsetting financial assets or equity and for offsetting financial assets and financial liabilities. and financial liabilities.

AS32AS32 Financial Financial Instruments: Instruments: Disclosures, and Disclosures, and Limited Revision to Limited Revision to Accounting Accounting Standards(AS) 19 , Standards(AS) 19 , leases leases

The objective of this Standard is to require The objective of this Standard is to require entities to provide disclosures in their financial entities to provide disclosures in their financial statements that enable users to evaluate: statements that enable users to evaluate: •the significance of financial instruments for the significance of financial instruments for the entity’s financial position and the entity’s financial position and performance; and performance; and •the nature and extent of risks arising from the nature and extent of risks arising from financial instruments to which the entity is financial instruments to which the entity is exposed during the period and at the reporting exposed during the period and at the reporting date, and how the entity manages those risks date, and how the entity manages those risks

(B) International Public Sector Accounting Standards (B) International Public Sector Accounting Standards (IPSAS) issued by International Federation of (IPSAS) issued by International Federation of Accountings (IFAC)[Effective from 01.01.2004]Accountings (IFAC)[Effective from 01.01.2004]

• The International Federation of Accountants — The International Federation of Accountants — International Public Sector Accounting Standards International Public Sector Accounting Standards Board (the IPSASB) develops accounting standards Board (the IPSASB) develops accounting standards for public sector entities referred to as International for public sector entities referred to as International Public Sector Accounting Standards (IPSASs).Public Sector Accounting Standards (IPSASs).

• The IPSASB recognizes the significant benefits of The IPSASB recognizes the significant benefits of achieving consistent and comparable financial achieving consistent and comparable financial information across jurisdictions and it believes that information across jurisdictions and it believes that the IPSASs will play a key role in enabling these the IPSASs will play a key role in enabling these benefits to be realized.benefits to be realized.

• The adoption of IPSASs by governments will improve The adoption of IPSASs by governments will improve both the quality and comparability of financial both the quality and comparability of financial information reported by public sector entities around information reported by public sector entities around the world.the world.

• IPSASs are being prepared for application by entities IPSASs are being prepared for application by entities adopting the accrual basis of accounting and for adopting the accrual basis of accounting and for application by entities adopting the cash basis of application by entities adopting the cash basis of accounting. accounting.

(a) Accrual Basis(a) Accrual Basis

AccountinAccounting g Standards Standards IPSAS No.IPSAS No.

Accounting Accounting Standards Standards onon

Objectives of the StandardsObjectives of the Standards

IPSAS 1IPSAS 1 Presentation Presentation of Financial of Financial Statements Statements

The objective of this Standard is to The objective of this Standard is to prescribe the manner in which general prescribe the manner in which general purpose financial statements should be purpose financial statements should be presented in order to ensure comparability presented in order to ensure comparability both with the entity’s own financial both with the entity’s own financial statements of previous periods and with the statements of previous periods and with the financial Statements of other entities. financial Statements of other entities.

IPSAS2IPSAS2 Cash Flow Cash Flow Statements Statements

It sets out requirements for the It sets out requirements for the presentation of the cash flow statement and presentation of the cash flow statement and related disclosures. related disclosures.

IPSAS3IPSAS3 Net Surplus Net Surplus or Deficit for or Deficit for the period, the period, Fundamental Fundamental Errors and Errors and changes in changes in Accounting Accounting Policies Policies

The objective of this Standard is to The objective of this Standard is to prescribe the classification, disclosure and prescribe the classification, disclosure and accounting treatment of certain items in the accounting treatment of certain items in the financial statements so that all entities financial statements so that all entities prepare and present these items on a prepare and present these items on a

consistent basis.consistent basis.




IPSAS4IPSAS4 The effect of The effect of changes in changes in Foreign Foreign Exchange Exchange Rates Rates

The principal issues in accounting for The principal issues in accounting for foreign currency transactions and foreign foreign currency transactions and foreign operations are to decide which exchange operations are to decide which exchange rate to use and how to recognize in the rate to use and how to recognize in the financial statements the financial effect of financial statements the financial effect of changes in exchange rates. changes in exchange rates.

IPSAS 5IPSAS 5 Borrowing Borrowing Costs Costs

This Standard generally requires the This Standard generally requires the immediate expensing of borrowing costs. immediate expensing of borrowing costs.

IPSAS 6IPSAS 6 Consolidated Consolidated Financial Financial Statements Statements and and Accounting Accounting for for Controlled Controlled entities entities

This Standard establishes requirements for This Standard establishes requirements for the preparation and presentation of the preparation and presentation of consolidated financial statements, and for consolidated financial statements, and for accounting for controlled entities in the accounting for controlled entities in the separate financial statements of the separate financial statements of the controlling entity. controlling entity.




IPSAS 7IPSAS 7 Accounting Accounting for for Investments Investments in Associates in Associates

This Standard provides the basis for This Standard provides the basis for accounting for ownership interests in accounting for ownership interests in associates. associates.

IPSAS 8IPSAS 8 Financial Financial Reporting of Reporting of Interests in Interests in Joint Joint Ventures Ventures

This Standard provides the basis for This Standard provides the basis for accounting for interests in joint ventures accounting for interests in joint ventures

IPSAS 9IPSAS 9 Revenue Revenue from from Exchange Exchange Transactions Transactions

The objective of this Standard is to The objective of this Standard is to prescribe the accounting treatment of prescribe the accounting treatment of revenue arising from exchange transactions revenue arising from exchange transactions and events. and events.

IPSAS 10IPSAS 10 Financial Financial Reporting in Reporting in HyperinflatioHyperinflationary nary Economics Economics

In a hyperinflationary economy, reporting of In a hyperinflationary economy, reporting of operating results and financial position in operating results and financial position in the local currency without restatement is the local currency without restatement is not useful. not useful.




IPSAS 11IPSAS 11 Construction Construction Contracts Contracts

The objective of this Standard is to The objective of this Standard is to prescribe the accounting treatment of costs prescribe the accounting treatment of costs and revenue associated with construction and revenue associated with construction contracts. contracts.

IPSAS 12IPSAS 12 Inventories Inventories The objective of this Standard is to The objective of this Standard is to prescribe the accounting treatment for prescribe the accounting treatment for inventories under the historical cost inventories under the historical cost system. system.

IPSAS 13IPSAS 13 Leases Leases The objective of this Standard is to The objective of this Standard is to prescribe, for lessees and lessors, the prescribe, for lessees and lessors, the appropriate accounting policies and appropriate accounting policies and disclosures to apply in relation to finance disclosures to apply in relation to finance and operating leases. and operating leases.

IPSAS 14IPSAS 14 Events after Events after the the Reporting Reporting Date Date

The objective of this Standard is to The objective of this Standard is to prescribe:prescribe:

(a) When an entity should adjust its (a) When an entity should adjust its financial statements for events after the financial statements for events after the reporting date; andreporting date; and

(b) The disclosures that an entity should (b) The disclosures that an entity should give about the date when the financial give about the date when the financial statements were authorized for issue and statements were authorized for issue and about events after the reporting date.about events after the reporting date.




IPSAS 15IPSAS 15 Financial Financial Instruments: Instruments: Disclosure Disclosure and and PresentationPresentation

he objective of this Standard is to enhance he objective of this Standard is to enhance financial statement users’ understanding of financial statement users’ understanding of the significance of on-balance-sheet and the significance of on-balance-sheet and off-balance-sheet financial instruments to a off-balance-sheet financial instruments to a government’s or other public sector entity’s government’s or other public sector entity’s financial position, performance and cash financial position, performance and cash flows. In this Standard, references to flows. In this Standard, references to “balance sheet” in the context of “on-“balance sheet” in the context of “on-balance- sheet” and “off-balance-sheet” balance- sheet” and “off-balance-sheet” have the same meaning as “statement of have the same meaning as “statement of financial position.”financial position.”

IPSAS 16IPSAS 16 Investment Investment PropertyProperty

The objective of this Standard is to The objective of this Standard is to prescribe the accounting treatment for prescribe the accounting treatment for investment property and related disclosure investment property and related disclosure requirementsrequirements

IPSAS 17IPSAS 17 Property, Property, Plant and Plant and Investment Investment

The principal issues in accounting for The principal issues in accounting for property, plant and equipment are the property, plant and equipment are the timing of recognition of the assets, the timing of recognition of the assets, the determination of their carrying amounts determination of their carrying amounts and the depreciation charges to be and the depreciation charges to be recognized in relation to them. recognized in relation to them.

AccountiAccounting ng StandardStandards IPSAS s IPSAS No.No.

AccountiAccounting ng StandarStandards onds on


IPSAS 18IPSAS 18 Segment Segment Reporting Reporting

The objective of this Standard is to establish The objective of this Standard is to establish principles for reporting financial information by principles for reporting financial information by segments. The disclosure of this information will:segments. The disclosure of this information will:

(a) Help users of the financial statements to better (a) Help users of the financial statements to better understand the entity’s past performance and to identify understand the entity’s past performance and to identify the resources allocated to support the major activities of the resources allocated to support the major activities of the entity; andthe entity; and

(b) Enhance the transparency of financial reporting and (b) Enhance the transparency of financial reporting and enable the entity to better discharge its accountability enable the entity to better discharge its accountability obligations. obligations.

IPSAS 19IPSAS 19 ProvisionsProvisions, , ContingeContingent nt Liabilities Liabilities and and ContingeContingent Assetsnt Assets

The objective of this Standard is to define provisions, The objective of this Standard is to define provisions, contingent liabilities and contingent assets, identify the contingent liabilities and contingent assets, identify the circumstances in which provisions should be recognized, circumstances in which provisions should be recognized, how they should be measured and the disclosures that how they should be measured and the disclosures that should be made about them. should be made about them.

IPSAS 20IPSAS 20 Related Related Party Party DisclosurDisclosures es

The objective of this Standard is to require the The objective of this Standard is to require the disclosure of the existence of related party relationships disclosure of the existence of related party relationships where control exists and the disclosure of information where control exists and the disclosure of information about transactions between the entity and its related about transactions between the entity and its related parties in certain circumstances. parties in certain circumstances.

(b) Cash Basis IPSAS(b) Cash Basis IPSAS

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PART 1PART 1 REQUIREMENREQUIREMENTT

The purpose of this Standard is to prescribe The purpose of this Standard is to prescribe the manner in which general purpose the manner in which general purpose financial statements should be presented financial statements should be presented under the cash basis of accounting..under the cash basis of accounting..

1.11.1 Scope of the Scope of the requirementrequirement

An entity which prepares and presents An entity which prepares and presents financial statements under the cash basis of financial statements under the cash basis of accounting, as defined in this Standard, accounting, as defined in this Standard, should apply the requirements of Part 1 of should apply the requirements of Part 1 of this Standard in the presentation of its this Standard in the presentation of its general purpose annual financial statements general purpose annual financial statements

1.21.2 Cash BasisCash Basis The cash basis of accounting recognizes The cash basis of accounting recognizes transactions and events only when cash transactions and events only when cash (including cash equivalents) is received or (including cash equivalents) is received or paid by the entity. paid by the entity.

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1.31.3 Presentation Presentation and and Disclosure Disclosure RequirementRequirement

The specific disclosure requirements of The specific disclosure requirements of International Public Sector Accounting International Public Sector Accounting Standards need not be met if the resulting Standards need not be met if the resulting information is not material. information is not material.

1.41.4 General General ConsideratioConsiderationn

It consists standards onIt consists standards on•Reporting PeriodReporting Period•TimelinessTimeliness•Authorization DateAuthorization Date•Information about the entityInformation about the entity•Restrictions on cash balances and access to Restrictions on cash balances and access to borrowingsborrowings

1.51.5 Correction of Correction of errorserrors

When an error arises in relation to a cash When an error arises in relation to a cash balance reported in the financial statements, balance reported in the financial statements, the amount of the error that relates to prior the amount of the error that relates to prior periods should be reported by adjusting the periods should be reported by adjusting the cash at the beginning of the period. cash at the beginning of the period.

Section Section Accounting Accounting Standards on Standards on


1.61.6 Consolidated Consolidated Financial Financial StatementsStatements

consolidated financial statements which present consolidated financial statements which present financial information about the economic entity as a financial information about the economic entity as a single entity without regard for the legal boundaries single entity without regard for the legal boundaries of the separate legal entities. of the separate legal entities.

1.71.7 Foreign Foreign CurrencyCurrency

Governments and government entities may have Governments and government entities may have transactions in foreign currencies such as borrowing transactions in foreign currencies such as borrowing an amount of foreign currency or purchasing goods an amount of foreign currency or purchasing goods and services where the purchase price is designated and services where the purchase price is designated as a foreign currency amount. They may also have as a foreign currency amount. They may also have foreign operations and transfer cash to and receive foreign operations and transfer cash to and receive cash from those foreign operations. In order to cash from those foreign operations. In order to include foreign currency transactions and foreign include foreign currency transactions and foreign operations in financial statements the entity must operations in financial statements the entity must express cash receipts, payments and balances in express cash receipts, payments and balances in reporting currency terms reporting currency terms

1.81.8 Effective Effective date of date of Sections 1.1 Sections 1.1 to 1.7 of Part to 1.7 of Part 1 and 1 and Transitional Transitional

ProvisionsProvisions

Sections 1 to 7 of Part 1 of this International Public Sections 1 to 7 of Part 1 of this International Public Sector Accounting Standard become effective for Sector Accounting Standard become effective for annual financial statements covering periods annual financial statements covering periods beginning on or after 1 January 2004.beginning on or after 1 January 2004.

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1.91.9 PresentatioPresentation of Budget n of Budget Information Information in Financial in Financial StatementsStatements

An approved budget as defined by this An approved budget as defined by this Standard reflects the anticipated revenues or Standard reflects the anticipated revenues or receipts expected to arise in the annual or receipts expected to arise in the annual or multi-year budget period based on current multi-year budget period based on current plans and the anticipated economic conditions plans and the anticipated economic conditions during that budget period, and expenses or during that budget period, and expenses or expenditures approved by a legislative body, expenditures approved by a legislative body, being the legislature or other relevant being the legislature or other relevant authority. authority.

1.101.10 Recipients Recipients of External of External AssistanceAssistance

The entity should disclose separately on the The entity should disclose separately on the face of the Statement of Cash Receipts and face of the Statement of Cash Receipts and Payments, total external assistance received in Payments, total external assistance received in cash during the period. cash during the period.

PART 2PART 2 ENCOURAGENCOURAGED ED ADDITIONAADDITIONAL L DISCLOSURDISCLOSURESES

It sets out encouraged additional disclosures for It sets out encouraged additional disclosures for reporting under the cash basis. It should be reporting under the cash basis. It should be read together with Part 1 of this Standard, read together with Part 1 of this Standard, which sets out the requirements for reporting which sets out the requirements for reporting under the cash basis of accounting. under the cash basis of accounting.

SectioSection n



2.1.22.1.2 Future Future Economic Economic Benefits Benefits and Service and Service PotentialPotential

Assets that are used to generate net cash Assets that are used to generate net cash inflows are often described as embodying inflows are often described as embodying “future economic benefits”. “future economic benefits”.

2.1.3 2.1.3 to to 2.1.5 2.1.5

Going Going Concern Concern

When preparing the financial statements When preparing the financial statements of an entity, those responsible for the of an entity, those responsible for the preparation of the financial statements preparation of the financial statements are encouraged to make an assessment of are encouraged to make an assessment of the entity’s ability to continue as a going the entity’s ability to continue as a going concern concern

2.1.6 2.1.6 to to 2.1.72.1.7

ExtraordinaExtraordinary itemsry items

An entity is encouraged to separately disclose An entity is encouraged to separately disclose the nature and amount of each extraordinary the nature and amount of each extraordinary item. The disclosure may be made on the face item. The disclosure may be made on the face of the statement of cash receipts and of the statement of cash receipts and payments, or in other financial statements or in payments, or in other financial statements or in the notes to the financial statements the notes to the financial statements

SectioSection n



2.1.82.1.8 Distinct Distinct from from ordinary ordinary activitiesactivities

Whether an event or transaction is clearly Whether an event or transaction is clearly distinct from the ordinary activities of the entity distinct from the ordinary activities of the entity is determined by the nature of the event or is determined by the nature of the event or transaction in relation to the activities transaction in relation to the activities ordinarily carried on by the entity rather than ordinarily carried on by the entity rather than by the frequency with which such events are by the frequency with which such events are expected to occur. expected to occur.

2.1.92.1.9 Not Not Expected to Expected to Recur in Recur in the the ForeseeablForeseeable Futuree Future

The event or transaction will be of a type The event or transaction will be of a type that would not reasonably be expected to that would not reasonably be expected to recur in the foreseeable future, taking recur in the foreseeable future, taking into account the environment in which the into account the environment in which the entity operatesentity operates

2.1.102.1.10 Outside the Outside the Control or Control or Influence of Influence of the Entitythe Entity

A transaction or event is presumed to be A transaction or event is presumed to be outside the control or influence of an entity if outside the control or influence of an entity if the decisions or determinations of the entity do the decisions or determinations of the entity do not normally influence the occurrence of that not normally influence the occurrence of that transaction or event. transaction or event.

SectioSection n



2.1.11 2.1.11 to to 2.1.142.1.14

Identifying Identifying ExtraordinaExtraordinary Itemsry Items

Whether or not an item is extraordinary will be Whether or not an item is extraordinary will be considered in the context of the entity’s considered in the context of the entity’s operating environment and the level of operating environment and the level of government within which it operates. government within which it operates.

2.1.15 2.1.15 to to 2.1.172.1.17

AdministerAdministered ed TransactionTransactionss

An entity is encouraged to disclose in the notes An entity is encouraged to disclose in the notes to the financial statements, the amount and to the financial statements, the amount and nature of cash flows and cash balances nature of cash flows and cash balances resulting from transactions administered by the resulting from transactions administered by the entity as an agent on behalf of others where entity as an agent on behalf of others where those amounts are outside the control of the those amounts are outside the control of the entity. entity.

2.1.18 2.1.18 to to 2.1.202.1.20

Revenue Revenue CollectionCollection

Public sector entities may control cash or Public sector entities may control cash or administer cash receipts or payments on behalf administer cash receipts or payments on behalf of the government or other governments or of the government or other governments or government entities. government entities.

2.1.212.1.21 ““Pass-Pass-through” through” Cash FlowsCash Flows

Cash flows arising as a consequence of Cash flows arising as a consequence of transactions as administrative arrangements transactions as administrative arrangements where government entity undertakes as an where government entity undertakes as an agent of another party are sometimes termed agent of another party are sometimes termed “pass-through” cash flows. “pass-through” cash flows.

SectioSection n

AccountinAccounting g Standards Standards on on


2.1.222.1.22 Transfer Transfer PaymentsPayments

amounts appropriated to a government entity (a amounts appropriated to a government entity (a department, agency or similar) may include amounts to department, agency or similar) may include amounts to be transferred to third parties in respect of, for example, be transferred to third parties in respect of, for example, unemployment benefits, age or invalid pensions, family unemployment benefits, age or invalid pensions, family allowances and other social security and community allowances and other social security and community benefit payments. Where this occurs, the entity will benefit payments. Where this occurs, the entity will recognize the cash appropriated for transfer during the recognize the cash appropriated for transfer during the reporting period as a cash receipt, the amounts reporting period as a cash receipt, the amounts transferred during that reporting period as a cash transferred during that reporting period as a cash payment and any amounts held at the end of the payment and any amounts held at the end of the reporting period for transfer in the future as part of reporting period for transfer in the future as part of closing balance of cash. closing balance of cash.

2.1.23 2.1.23 to to 2.1.302.1.30

Disclosure Disclosure of Major of Major Classes of Classes of Cash FlowsCash Flows

An entity is encouraged to disclose, either on the face of An entity is encouraged to disclose, either on the face of the statement of cash receipts and payments or other the statement of cash receipts and payments or other financial statements or in the notes to those statements: financial statements or in the notes to those statements: (a) an analysis of total cash payments and payments by (a) an analysis of total cash payments and payments by third parties using a classification based on either the third parties using a classification based on either the nature of the payments or their function within the nature of the payments or their function within the entity, as appropriate; and (b) proceeds from borrowings. entity, as appropriate; and (b) proceeds from borrowings. In addition, the amount of borrowings may be further In addition, the amount of borrowings may be further classified into type and source classified into type and source

2.1.31 2.1.31 to to 2.1.322.1.32

Related Related Party Party DisclosuresDisclosures

An entity is encouraged to disclose in the notes to the An entity is encouraged to disclose in the notes to the financial statements information required by IPSAS 20 financial statements information required by IPSAS 20 Related Party Disclosures Related Party Disclosures

Section Section AccountinAccounting g Standards Standards on on


2.1.33 2.1.33 to to 2.1.352.1.35

Disclosure Disclosure of Assets, of Assets, LiabilitiesLiabilities

An entity is encouraged to disclose in the notes to the An entity is encouraged to disclose in the notes to the financial statements: (a) information about the assets and financial statements: (a) information about the assets and liabilities of the entity; and (b) if the entity does not make liabilities of the entity; and (b) if the entity does not make publicly available its approved budget, a comparison with publicly available its approved budget, a comparison with budgets budgets

2.1.36 2.1.36 2.1.402.1.40

ComparisoComparison with n with BudgetsBudgets

Public sector entities are typically subject to budgetary Public sector entities are typically subject to budgetary limits in the form of appropriations or other budgetary limits in the form of appropriations or other budgetary authority which may be given effect through authorizing authority which may be given effect through authorizing legislation legislation

2.1.41 2.1.41 to to 2.1.432.1.43

ConsolidatConsolidated ed Financial Financial StatementStatementss

An entity is encouraged to disclose in the notes to the An entity is encouraged to disclose in the notes to the financial statements:financial statements:

(a) the proportion of ownership interest in controlled entities (a) the proportion of ownership interest in controlled entities and, where that interest is in the form of shares, the and, where that interest is in the form of shares, the proportion of voting power held (only where this is different proportion of voting power held (only where this is different from the proportionate ownership interest); (b) where from the proportionate ownership interest); (b) where applicable:applicable:

(i) the name of any controlled entity in which the controlling (i) the name of any controlled entity in which the controlling entity holds an ownership interest and/or voting rights of 50% entity holds an ownership interest and/or voting rights of 50% or less, together with an explanation of how control exists; or less, together with an explanation of how control exists; andand

(ii) the name of any entity in which an ownership interest of (ii) the name of any entity in which an ownership interest of more than 50% is held but which is not a controlled entity, more than 50% is held but which is not a controlled entity, together with an explanation of why control does not exist; together with an explanation of why control does not exist; andand

(c) in the controlling entity’s separate financial statements, a (c) in the controlling entity’s separate financial statements, a description of the method used to account for controlled description of the method used to account for controlled entities.entities.

SectioSection n

AccountiAccounting ng StandardStandards on s on


2.1.44 2.1.44 to to 2.1.482.1.48

AcquisitionAcquisitions and s and Disposals Disposals of of Controlled Controlled Entities Entities and Other and Other Operating Operating UnitsUnits

An entity is encouraged to disclose and present An entity is encouraged to disclose and present separately the aggregate cash flows arising from separately the aggregate cash flows arising from acquisitions and from disposals of controlled acquisitions and from disposals of controlled entities or other operating units. entities or other operating units.

2.1.49 2.1.49 to to 2.1.502.1.50

Joint Joint VenturesVentures

An entity is encouraged to make disclosures about An entity is encouraged to make disclosures about joint ventures which are necessary for a fair joint ventures which are necessary for a fair presentation of the cash receipts and payments of presentation of the cash receipts and payments of the entity during the period and the balances of the entity during the period and the balances of cash as at reporting date cash as at reporting date

2.1.51t2.1.51to o 2.1.522.1.52

Financial Financial Reporting Reporting in in HyperinflHyperinflationary ationary EconomieEconomiess

In a hyperinflationary economy, the presentation of In a hyperinflationary economy, the presentation of the financial statements in the local currency the financial statements in the local currency without restatement is not useful. without restatement is not useful.

Section Section Accounting Accounting Standards Standards on on


2.1.53 2.1.53 to to 2.1.582.1.58

The The RestatemeRestatement of nt of Financial Financial StatementsStatements

An entity that reports in the currency of a hyperinflationary An entity that reports in the currency of a hyperinflationary economy is encouraged to:economy is encouraged to:

(a) restate its statement of cash receipts and payments and (a) restate its statement of cash receipts and payments and other financial statements in terms of the measuring unit other financial statements in terms of the measuring unit current at the reporting date;current at the reporting date;

(b) restate the comparative information for the previous (b) restate the comparative information for the previous period, and any information in respect of earlier periods in period, and any information in respect of earlier periods in terms of the measuring unit current at the reporting date; andterms of the measuring unit current at the reporting date; and

(c) use a general price index that reflects changes in general (c) use a general price index that reflects changes in general purchasing power. It is preferable that all entities that report purchasing power. It is preferable that all entities that report in the currency of the same economy use the same index in the currency of the same economy use the same index

2.1.592.1.59 ComparativComparative e InformationInformation

If comparisons with previous periods are to be meaningful, If comparisons with previous periods are to be meaningful, comparative information for the previous reporting period will comparative information for the previous reporting period will be restated by applying a general price index so that the be restated by applying a general price index so that the comparative financial statements are presented in terms of comparative financial statements are presented in terms of the measurement unit current at the end of the reporting the measurement unit current at the end of the reporting period. period.

2.1.60 2.1.60 to to 2.1.612.1.61

ConsolidateConsolidated Financial d Financial StatementsStatements

If the statement of cash receipts and payments and other If the statement of cash receipts and payments and other financial statements are to be prepared on a consistent basis, financial statements are to be prepared on a consistent basis, the financial statements of any such controlled entity will be the financial statements of any such controlled entity will be restated by applying a general price index of the country in restated by applying a general price index of the country in whose currency it reports before they are included in the whose currency it reports before they are included in the consolidated financial statements issued by its controlling consolidated financial statements issued by its controlling entity. entity.



2.1.62 2.1.62 to to 2.1.632.1.63

Selection Selection and Use of and Use of the the General General Price IndexPrice Index

The restatement of financial statements in accordance The restatement of financial statements in accordance with the approach encouraged by this Standard requires with the approach encouraged by this Standard requires the use of a general price index that reflects changes in the use of a general price index that reflects changes in general purchasing power. It is preferable that all entities general purchasing power. It is preferable that all entities that report in the currency of the same economy use the that report in the currency of the same economy use the same index. same index.

2.1.64 2.1.64 to to 2.1.652.1.65

Assistance Assistance Received Received From Non-From Non-GovernmenGovernmental tal OrganizatioOrganizations (NGOs)ns (NGOs)

Where practicable, an entity is encouraged to apply to Where practicable, an entity is encouraged to apply to assistance received from non-governmental organizations assistance received from non-governmental organizations (NGOs), the required disclosures identified in paragraphs (NGOs), the required disclosures identified in paragraphs 1.10.1 to 1.10.27 of Part 1 of this Standard and the 1.10.1 to 1.10.27 of Part 1 of this Standard and the encouraged disclosures identified in paragraphs 2.1.66 to encouraged disclosures identified in paragraphs 2.1.66 to 2.1.93. 2.1.93.

2.1.66 2.1.66 to to 2.1.932.1.93

Recipients Recipients of External of External AssistanceAssistance

An entity is encouraged to disclose by significant class in An entity is encouraged to disclose by significant class in notes to the financial statements:notes to the financial statements:

(a) the purposes for which external assistance was (a) the purposes for which external assistance was received during the reporting period, showing separately received during the reporting period, showing separately amounts provided by way of loans and grants; andamounts provided by way of loans and grants; and

(b) the purposes for which external assistance payments (b) the purposes for which external assistance payments were made during the reporting period were made during the reporting period



2.22.2 Governments and Other Public Sector Entities Governments and Other Public Sector Entities Intending to Migrate to the Accrual Basis of Intending to Migrate to the Accrual Basis of Accounting Accounting

2.2.1 to 2.2.1 to 2.2.22.2.2

PresentatiPresentation of the on of the Statement Statement of Cash of Cash Receipts Receipts and and PaymentsPayments

An entity which intends to migrate to the accrual basis of An entity which intends to migrate to the accrual basis of accounting is encouraged to present a statement of cash accounting is encouraged to present a statement of cash receipts and payments in the same format as that receipts and payments in the same format as that required by International Public Sector Accounting required by International Public Sector Accounting Standard IPSAS 2 Cash Flow Statements. Standard IPSAS 2 Cash Flow Statements.

2.2.3 to 2.2.3 to 2.2.62.2.6

Scope of Scope of ConsolidatConsolidated ed StatementStatements – s – Exclusions Exclusions from the from the EconomicEconomic

EntityEntity

When an entity adopts the accrual basis of accounting in When an entity adopts the accrual basis of accounting in accordance with the accrual IPSASs, it will not consolidate accordance with the accrual IPSASs, it will not consolidate entities in which control is intended to be temporary entities in which control is intended to be temporary because the controlled entity is acquired and held because the controlled entity is acquired and held exclusively with a view to its subsequent disposal in the exclusively with a view to its subsequent disposal in the near future.near future.

Temporary control may occur where, for example, a Temporary control may occur where, for example, a national government intends to transfer its interest in a national government intends to transfer its interest in a controlled entity to a local government. controlled entity to a local government.

REVISITING ACCOUNTING FRAMEWORK:REVISITING ACCOUNTING FRAMEWORK:

International efforts on Standard setting:International efforts on Standard setting:(1) In 1980’s INTOSAI emphasized standard setting for (1) In 1980’s INTOSAI emphasized standard setting for

governments and in early 1990’s INTOSAI’s Accounting governments and in early 1990’s INTOSAI’s Accounting Standards Committee issued “Accounting Standards Standards Committee issued “Accounting Standards Framework”. Framework”.

(2) Similarly several national governments set up accounting (2) Similarly several national governments set up accounting standard boards/ committeesstandard boards/ committees

(3) IFAC- Public Sector Committee takes lead in issuing IPSAS (3) IFAC- Public Sector Committee takes lead in issuing IPSAS (Cash based and Accrual basis)(Cash based and Accrual basis)

(4) IMF issued Government Financial Standards (GFS) laying (4) IMF issued Government Financial Standards (GFS) laying down statistical reporting standards for governmentsdown statistical reporting standards for governments

(5) In USA, FASAB (Federal Accounting Standard Advisory Board) (5) In USA, FASAB (Federal Accounting Standard Advisory Board) framed SFFAS (Statement of Federal Financial Accounting framed SFFAS (Statement of Federal Financial Accounting Standards), GASAB(Governmental Accounting Standard Standards), GASAB(Governmental Accounting Standard Board) (State & Local as well as agencies) Board) (State & Local as well as agencies)

(6) In Canada, CICA’s (Canadian Institute of Chartered (6) In Canada, CICA’s (Canadian Institute of Chartered Accountant) & FSAB sets standards for government.Accountant) & FSAB sets standards for government.

(7) In Australia and New Zealand, AASB( Australian Accounting (7) In Australia and New Zealand, AASB( Australian Accounting Standard Boards) framed FRS.( Financial Reporting Standards)Standard Boards) framed FRS.( Financial Reporting Standards)

(8) (8) In IndiaIn India::(i) Report of Admn. Reform commission on Accounts and Audit (i) Report of Admn. Reform commission on Accounts and Audit

(1968).(1968).(ii)Multi-tier Classification System introduced (A.K.Mukherjee (ii)Multi-tier Classification System introduced (A.K.Mukherjee

Committee)Committee)(iii) Management Accounting at the Union Government ( 1976 (iii) Management Accounting at the Union Government ( 1976

Budget speech of the Finance Minister)Budget speech of the Finance Minister)(iv) Departmentalization scheme of Union Government introduced in (iv) Departmentalization scheme of Union Government introduced in

1976.1976.(v) Financial Advisory Unit (FA System) introduced in 1980.(v) Financial Advisory Unit (FA System) introduced in 1980.(vi) Classification system rationalized (R.C.Ghai Committee) in 1987(vi) Classification system rationalized (R.C.Ghai Committee) in 1987(vii) EAS Sarma Committee report on FRBM in 2000(vii) EAS Sarma Committee report on FRBM in 2000(viii) Ahuwalia Committee, 2004 (RBI) on(viii) Ahuwalia Committee, 2004 (RBI) onMedium term fiscal policy ( 3 year rolling target – receipts, Medium term fiscal policy ( 3 year rolling target – receipts,

payments, borrowing etc)payments, borrowing etc)Fiscal Policy Strategy Statement (Taxation, Borrowings, Pricing, Fiscal Policy Strategy Statement (Taxation, Borrowings, Pricing,

Guarantees, Subsidy etc.)Guarantees, Subsidy etc.)Macro economic framework statement (GDF, Fiscal balance, BOP Macro economic framework statement (GDF, Fiscal balance, BOP

etc)etc)(ix) Lahiri Committee (2004) introduced Multidimensional (ix) Lahiri Committee (2004) introduced Multidimensional

classification) on functional and economic classificationclassification) on functional and economic classification(x) Twelfth Finance Commission (TFC) recommends Accrual (x) Twelfth Finance Commission (TFC) recommends Accrual

Accounting.Accounting.(xi) New GFR (General Financial Rules) was introduced in 2005.(xi) New GFR (General Financial Rules) was introduced in 2005.

The Twelfth Finance CommissionThe Twelfth Finance Commission TFC (2004) – Transition TFC (2004) – Transition to Accrual Based Accounting and formation of GASAB:to Accrual Based Accounting and formation of GASAB:

1. The Twelfth Finance Commission (TFC) recommended Accrual 1. The Twelfth Finance Commission (TFC) recommended Accrual Accounting for the Union and the State Governments. The Central Accounting for the Union and the State Governments. The Central Government has accepted the recommendation in Principle. At the Government has accepted the recommendation in Principle. At the same time, TFC recognized that transition to accrual based same time, TFC recognized that transition to accrual based accounting is a time consuming process and suggested changeover accounting is a time consuming process and suggested changeover only in medium term.only in medium term.

2. In the Interim period, TFC suggested to add some additional 2. In the Interim period, TFC suggested to add some additional information to the present system of accounting to enable more information to the present system of accounting to enable more informed decision making. TFC has suggested standardization of informed decision making. TFC has suggested standardization of accounting classification upto object head level for all States to accounting classification upto object head level for all States to improve fiscal management. Additional eight statements relating to improve fiscal management. Additional eight statements relating to subsidies, expenditure on salaries, expenditure on pensions, subsidies, expenditure on salaries, expenditure on pensions, committed liabilities, maintenance expenditure, segregation of committed liabilities, maintenance expenditure, segregation of salary and non-salary portions and liabilities and repayment salary and non-salary portions and liabilities and repayment schedule on outstanding debts. The TFC has also suggested that schedule on outstanding debts. The TFC has also suggested that definition of revenue and fiscal deficits be standardized.definition of revenue and fiscal deficits be standardized.

3. Accepting the recommendations in Principle, the GASAB in the office 3. Accepting the recommendations in Principle, the GASAB in the office of the C&AG (2002) was set up to recommend an operational of the C&AG (2002) was set up to recommend an operational framework and detailed roadmap for its implementation. Apart from framework and detailed roadmap for its implementation. Apart from the Central Government, so far 23 State Governments have the Central Government, so far 23 State Governments have accepted the idea of accrual accounting in principle.accepted the idea of accrual accounting in principle.

The Twelfth Finance CommissionThe Twelfth Finance Commission TFC (2004) – Transition TFC (2004) – Transition to Accrual Based Accounting and formation of GASAB: to Accrual Based Accounting and formation of GASAB:

(cont…)(cont…)

4. There are two fold mandate of GASAB:4. There are two fold mandate of GASAB:(i) To establish and improve standards of (i) To establish and improve standards of

governmental accounting and financial reporting governmental accounting and financial reporting and formulate and propose standards that improve and formulate and propose standards that improve the usefulness of financial reports based on the the usefulness of financial reports based on the needs of the users.needs of the users.

(ii) Since the principles of accrual accounting being (ii) Since the principles of accrual accounting being followed in commercial entities cannot be followed in commercial entities cannot be transposed in their entirely in Government transposed in their entirely in Government accounting, GASAB was entrusted with preparation accounting, GASAB was entrusted with preparation of a Roadmap for transition to Accrual Accounting of a Roadmap for transition to Accrual Accounting System and Operational Framework of such a System and Operational Framework of such a system that will prevail in Government.system that will prevail in Government.

The Twelfth Finance CommissionThe Twelfth Finance Commission TFC (2004) – Transition TFC (2004) – Transition to Accrual Based Accounting and formation of GASAB: to Accrual Based Accounting and formation of GASAB:

(cont…)(cont…)

5. The Operational Framework developed / to be improved 5. The Operational Framework developed / to be improved by GASAB would detailed out the broad accounting heads by GASAB would detailed out the broad accounting heads and treatment of transactions relating to:and treatment of transactions relating to:

Revenues and Expenditure AccountingRevenues and Expenditure AccountingFixed Assets AccountingFixed Assets AccountingLong term Liability Accounting.Long term Liability Accounting.Accounting for current Assets and LiabilitiesAccounting for current Assets and LiabilitiesAccounting for period costs – Interest and Depreciation.Accounting for period costs – Interest and Depreciation.Non-financial and Contingent Liabilities.Non-financial and Contingent Liabilities.6. The design of framework suggested by GASAB indicates 6. The design of framework suggested by GASAB indicates

broad deviations from the conventional basis of accrual broad deviations from the conventional basis of accrual accounting due specific requirements emerging from the accounting due specific requirements emerging from the nature of transitions of the Government. The framework nature of transitions of the Government. The framework for transition spread over across five stages depending for transition spread over across five stages depending upon the recognition on accrual basis given to – expenses, upon the recognition on accrual basis given to – expenses, revenue, assets and liabilities at different point of time.revenue, assets and liabilities at different point of time.

A broad framework for transition to the accrual A broad framework for transition to the accrual accounting is as under:accounting is as under:

Stages Stages Expenses Expenses RevenueRevenues s

Assets Assets Liabilities Liabilities ContingenContingent t Liabilities Liabilities

Current Current Stage Stage

Exp- Exp- Current Current and and Capital Capital

Receipts Receipts FinanciFinancial al Assets Assets

Stock of Public Stock of Public Debt and Debt and Borrowings on Borrowings on Public Account Public Account

Guarantees Guarantees

Stage IStage I Current Current Expense Expense on accrual on accrual basis and basis and Capital Capital ExpenditurExpenditure on cash e on cash basis basis

Receipts Receipts FinanciFinancial al Assets Assets

Stock of Public Stock of Public debt and debt and Borrowing on Borrowing on Public Account Public Account ++ PayablesPayables

Guarantees Guarantees

Stages Stages Expenses Expenses RevenueRevenues s

Assets Assets Liabilities Liabilities ContingContingent ent LiabilitiLiabilities es

Stage IIStage II Current Current Expenses Expenses on Accrual on Accrual basis andbasis and Capital Capital ExpenditExpenditure on ure on Cash Cash Basis Basis ( Excludin( Excluding g ExpenditExpenditure on ure on Military Military Assets)Assets)

Non Tax Non Tax RevenueRevenues on s on Accrual Accrual Basis Basis

++

ReceivablReceivableses

++

Tax Tax Revenue Revenue on Cash on Cash Basis Basis

Financial Financial AssetsAssets

++

ReceivablReceivableses

++

Military Military AssetsAssets

Stock of Public Debt Stock of Public Debt and Borrowing on and Borrowing on Public AccountPublic Account

++

PayablesPayables

++

All other All other LiabilitiesLiabilities

(Except (Except Superannuation Superannuation benefits. benefits. Compensated Compensated leaves, provisions leaves, provisions and social security)and social security)

GuarantGuarantees ees

Stage IIIStage III All All expenses expenses on accrual on accrual basisbasis

++

DepreciatiDepreciationon

---do------do--- All AssetsAll Assets(Excluding (Excluding infrastructure, infrastructure, land, heritage, land, heritage, intangible intangible assets) assets)

All liabilities All liabilities (except super- (except superannuation annuation benefits, benefits, compensated compensated leaves, provisions leaves, provisions and social and social security) security)

All All explicit explicit contingcontingent ent liabilitieliabilitiess

Stages Stages Expenses Expenses Revenues Revenues Assets Assets Liabilities Liabilities ContingContingent ent LiabilitiLiabilities es

Stage IVStage IV All All expenses expenses on accrual on accrual basisbasis

++

DepreciatioDepreciationn

++

Provisions Provisions

Non Tax Non Tax Revenues Revenues on Accrual on Accrual Basis Basis

++

ReceivablesReceivables

++

Tax Revenue Tax Revenue on Cash on Cash Basis Basis

All Assets All Assets including including infrastructinfrastructure and ure and landland

(excluding (excluding heritage and heritage and intangible) intangible)

All Assets All Assets including including infrastructure infrastructure and landand land

(excluding (excluding heritage and heritage and intangible) intangible)

All All explicit explicit contingcontingent ent liabilitieliabilitiess

Stage VStage V All All ExpensesExpenses

All All Revenues Revenues on accrual on accrual basisbasis

All AssetsAll Assets All LiabilitiesAll Liabilities All All explicit explicit contingcontingent ent liabilitieliabilitiess

7. Transition through these stages is likely to happen at 7. Transition through these stages is likely to happen at varying pace in different departments of government varying pace in different departments of government entities. entities. GASAB suggests GASAB suggests that Stage I depicted in that Stage I depicted in Table above should be the starting point for Table above should be the starting point for introduction of accrual basis of accounting in introduction of accrual basis of accounting in Governments. Accounting reforms should incrementally Governments. Accounting reforms should incrementally graduate to Stage V, which represents full accrual graduate to Stage V, which represents full accrual accounting. It is, however, noted that there could be accounting. It is, however, noted that there could be certain entities within the Government, e.g. the certain entities within the Government, e.g. the Railways, which may like to straightaway adopt full Railways, which may like to straightaway adopt full accrual due to their preparedness and nature of accrual due to their preparedness and nature of activities activities

(i) (i) Stage-I introduces accrual based recognition Stage-I introduces accrual based recognition principle for current expensesprinciple for current expenses. Capital . Capital expenditures, as well as all revenues, will continue to expenditures, as well as all revenues, will continue to be accounted for on cash basis as at present. be accounted for on cash basis as at present. Recognition of current expenses on accrual basis would Recognition of current expenses on accrual basis would lead to recognition of payables, which will be shown as lead to recognition of payables, which will be shown as a liability. a liability.

(ii) (ii) Stage-II introduces accrual recognition of non-tax Stage-II introduces accrual recognition of non-tax revenues. revenues. Tax revenues will continue to be recognized on Tax revenues will continue to be recognized on cash basis. Recognition of non-tax revenues on accrual cash basis. Recognition of non-tax revenues on accrual basis would lead to recognition of receivables, which will basis would lead to recognition of receivables, which will be included in assets. Military assets will also be be included in assets. Military assets will also be recognized on accrual basis at this stage and included in recognized on accrual basis at this stage and included in assets shown in the Statement of Financial Position. The assets shown in the Statement of Financial Position. The remaining capital expenditure will continue to be shown on remaining capital expenditure will continue to be shown on cash basis. Another change would be inclusion of all other cash basis. Another change would be inclusion of all other liabilities except those on account of superannuation liabilities except those on account of superannuation benefits, compensated leaves, provisions and social benefits, compensated leaves, provisions and social security security

(iii) (iii) Stage-III requires recognition of all expenses on Stage-III requires recognition of all expenses on accrual basis including recognition of depreciationaccrual basis including recognition of depreciation. . No provisions will be recognized at this stage. No provisions will be recognized at this stage. Assets Assets recognized at this stage on accrual basis would recognized at this stage on accrual basis would include all financial and physical assets [with the include all financial and physical assets [with the exception of infrastructure, land, heritage, and exception of infrastructure, land, heritage, and intangibles] and inventoriesintangibles] and inventories. Tax Revenue continues to . Tax Revenue continues to be recognized on cash basis. There is no change in terms be recognized on cash basis. There is no change in terms of liability over Stage-II. of liability over Stage-II. Disclosure of all explicit Disclosure of all explicit contingent liability is madecontingent liability is made..

(iv) (iv) Stage IV requires inclusion of provisions as Stage IV requires inclusion of provisions as expense and extension of physical assets to cover expense and extension of physical assets to cover infrastructure and land on accrual basis. Other infrastructure and land on accrual basis. Other elements are same as that in the previous stage.elements are same as that in the previous stage.

(v) (v) Stage V is introduction of full accrual accounting Stage V is introduction of full accrual accounting for all the four elements – expense, revenues, for all the four elements – expense, revenues, assets and liabilities.assets and liabilities. All expenses, all revenues, all All expenses, all revenues, all assets and all liabilities are recognized on accrual assets and all liabilities are recognized on accrual principles and presented. principles and presented.

(8) In the Road Map, the proposed transition was envisaged (8) In the Road Map, the proposed transition was envisaged in three stages namelyin three stages namely

(i) Value addition within the existing system by additional (i) Value addition within the existing system by additional statements – short term activity;statements – short term activity;

(ii) Value addition in the existing system with minor (ii) Value addition in the existing system with minor modifications to enable greater disclosures such as modifications to enable greater disclosures such as arrears in revenue, committed liabilities, etc. This is a arrears in revenue, committed liabilities, etc. This is a medium term activity; andmedium term activity; and

(iii) Achieving the desired accounting system in the long-(iii) Achieving the desired accounting system in the long-term based on accrual system. term based on accrual system.

Note: Other modalities of Road Map have already been Note: Other modalities of Road Map have already been discussed in Session III.discussed in Session III.

(9) As the Operational Framework provides the overall architecture (9) As the Operational Framework provides the overall architecture of the accounting model, these guidelines also aim at laying of the accounting model, these guidelines also aim at laying down the principles for recognition and measurement for down the principles for recognition and measurement for General Purpose Financial Reporting (GPFR).General Purpose Financial Reporting (GPFR).

(i(i) Objectives of General Purpose Financial Reporting:) Objectives of General Purpose Financial Reporting:Provide financial information about the reporting entity which Provide financial information about the reporting entity which

would be useful in making decisions about providing resources would be useful in making decisions about providing resources to the entity and in assessing whether the government has to the entity and in assessing whether the government has made efficient and effective use of the resources.made efficient and effective use of the resources.

Make financial reporting more transparent.Make financial reporting more transparent.Improve understandability of financial statement by users.Improve understandability of financial statement by users.Make financial statements more relevant.Make financial statements more relevant.Improve performance reporting in keeping with Results Framework Improve performance reporting in keeping with Results Framework

Document (RFD)Document (RFD)(ii) Components of GPFR:(ii) Components of GPFR:GPFS + MDA = GPFRGPFS + MDA = GPFRGPFS : General Purpose Financial StatementsGPFS : General Purpose Financial Statements(a) The Conceptual Framework of International Accounting (a) The Conceptual Framework of International Accounting

Standards (IPSAS)Standards (IPSAS)• On General Purpose Financial Statements (GPFS) provides On General Purpose Financial Statements (GPFS) provides

guidance for the structure and minimum requirement for the guidance for the structure and minimum requirement for the contents of financial statements prepared under accrual basis of contents of financial statements prepared under accrual basis of accounting. accounting.

(i)(i) The complete set of financial statements, keeping in view the The complete set of financial statements, keeping in view the requirement as prescribed by the Government of India, may requirement as prescribed by the Government of India, may include the following statements:include the following statements:

GPFS

Statement of Financial Position

Statement of Financial Performance

Statement of changes in Net Assets

Cash Flow Statements

Appro- priation Accounts

Accounting Policies and Notes to the Financial Statements

MDA : Management and Discussion Analysis

• A management report commenting on financial statements A management report commenting on financial statements highlighting key performance indicatorshighlighting key performance indicators

• To be signed by the Chief Accounting Authority as prescribed in To be signed by the Chief Accounting Authority as prescribed in GFR 64GFR 64

(ii) For a complete set of General Purpose Financial Reporting (ii) For a complete set of General Purpose Financial Reporting (GPFR), Management Discussion and Analysis report is essential.(GPFR), Management Discussion and Analysis report is essential.

(iii) Statement of Financial Position:(iii) Statement of Financial Position: The Statement of The Statement of Financial Position exhibits the balance of assets and liabilities as Financial Position exhibits the balance of assets and liabilities as on a particular date. The assets and liabilities may be further on a particular date. The assets and liabilities may be further classified into current and non current categories. Statement of classified into current and non current categories. Statement of Financial Position must include the following:Financial Position must include the following:

• Assets –Assets – This should include all physical and financial assets, This should include all physical and financial assets, cash and cash equivalents, investment, inventories, receivables cash and cash equivalents, investment, inventories, receivables from exchange and non exchange transactions, capital work in from exchange and non exchange transactions, capital work in progress.progress.

• Liabilities –Liabilities – This should include all debts and borrowings of the This should include all debts and borrowings of the government, payables, and benefits payables to employees.government, payables, and benefits payables to employees.

• The progressive total of capital expenditure available in Finance The progressive total of capital expenditure available in Finance Accounts should reconcile with lump sum figure in the Accounts should reconcile with lump sum figure in the Statement of Financial Position after making adjustment for Statement of Financial Position after making adjustment for valuation of historical assets.valuation of historical assets.

(iv)(iv) Statement of Financial Performance:Statement of Financial Performance: The The Statement of Financial Performance exhibits the Statement of Financial Performance exhibits the revenue and expenses for an accounting period and revenue and expenses for an accounting period and the excess/deficit of revenue over expenses. The the excess/deficit of revenue over expenses. The Statement of Financial Performance must include Statement of Financial Performance must include the following:the following:

• Revenue from exchange transactionsRevenue from exchange transactions• Revenue from non exchange transactionsRevenue from non exchange transactions• Expenditure by function and nature.Expenditure by function and nature.• Surplus/DeficitSurplus/Deficit• Appropriation to earmarked fundsAppropriation to earmarked funds• Cost of borrowingsCost of borrowings(v) Statement of Changes in Net Assets:(v) Statement of Changes in Net Assets: The The

Statement of Changes in Net Assets represents the Statement of Changes in Net Assets represents the changes between two reporting dates reflecting the changes between two reporting dates reflecting the increase or decrease in its assets during the period.increase or decrease in its assets during the period.

(vi) Cash Flow Statements(vi) Cash Flow StatementsThe Cash Flow Statement should provide cash flows during the The Cash Flow Statement should provide cash flows during the

period classifying them into operating, investing and financing period classifying them into operating, investing and financing activities.activities.

1. Cash flows from operating activities are primarily derived from 1. Cash flows from operating activities are primarily derived from the principal cash-generating activities. This includes cash the principal cash-generating activities. This includes cash receipts from taxes, from non-tax revenues, cash payments to receipts from taxes, from non-tax revenues, cash payments to suppliers/contractors, grants in aid received or given.suppliers/contractors, grants in aid received or given.

2. Cash flows from investing activities are derived from 2. Cash flows from investing activities are derived from acquisition and disposal of long term assets and other acquisition and disposal of long term assets and other investments not included in cash equivalents. This includes investments not included in cash equivalents. This includes cash payments to acquire or construct property, cash cash payments to acquire or construct property, cash advances and loans made, etc.advances and loans made, etc.

3. Cash flow from financing activities represents the changes in 3. Cash flow from financing activities represents the changes in the size and composition of the contributed capital and the size and composition of the contributed capital and borrowings.borrowings.

(vii) Appropriation Accounts(vii) Appropriation AccountsAs part of GPFS, Appropriation Accounts would continue to reflectAs part of GPFS, Appropriation Accounts would continue to reflect1. Comparison of budget with actual1. Comparison of budget with actual2. Original with final budget2. Original with final budget3. Detailed reason for variations of actual with final budget3. Detailed reason for variations of actual with final budget

(viii) Accounting Policies and notes to the (viii) Accounting Policies and notes to the Financial Statements: Financial Statements:

1. Accounting policies, rules and practices applied by 1. Accounting policies, rules and practices applied by an entity in preparing and presenting financial an entity in preparing and presenting financial statements be statedstatements be stated

2. Use of reasonable estimates and valuation methods 2. Use of reasonable estimates and valuation methods for assets and liabilities be statedfor assets and liabilities be stated

3. Stages and period of transition be stated3. Stages and period of transition be stated(b) Various stages of Operational Framework highlight (b) Various stages of Operational Framework highlight

maintenance and recognition of Assets and maintenance and recognition of Assets and Liabilities, recognition principles for Current Liabilities, recognition principles for Current Expenses and Receipts new head 'Payables', Expenses and Receipts new head 'Payables', Revenue receipts and new head 'Receivables'. Revenue receipts and new head 'Receivables'.

(ii) Provision for depreciation:(ii) Provision for depreciation:1. Provision of depreciation should be made by allocating the 1. Provision of depreciation should be made by allocating the

value of assets category wise.value of assets category wise.2. Capital assets may be depreciated over their estimated useful 2. Capital assets may be depreciated over their estimated useful

lives unless they are either inexhaustible or infrastructure lives unless they are either inexhaustible or infrastructure assets.assets.

3. The provision should be estimated on a realistic basis and only 3. The provision should be estimated on a realistic basis and only revised where justified in the light of further experience.revised where justified in the light of further experience.

4. The provision of depreciation should be made each year and 4. The provision of depreciation should be made each year and put away in a sinking fund.put away in a sinking fund.

5. As is the accepted principle, land is not depreciated.5. As is the accepted principle, land is not depreciated.(iii) Liabilities:(iii) Liabilities:1.The first step towards accrual based accounting system is 1.The first step towards accrual based accounting system is

identification and categorization of liabilities into distinct identification and categorization of liabilities into distinct groups eg. short term, long term and contingent liabilities.groups eg. short term, long term and contingent liabilities.

2. Guarantees should be disclosed in accordance with Indian 2. Guarantees should be disclosed in accordance with Indian Government Accounting Standard (IGAS 1) on 'Guarantees Government Accounting Standard (IGAS 1) on 'Guarantees given by Governments: a disclosure requirement' notified by given by Governments: a disclosure requirement' notified by Government of India in December 2010.Government of India in December 2010.

3. Accounting and classification of Grants-in-Aid should be 3. Accounting and classification of Grants-in-Aid should be disclosed in accordance with Indian Government Accounting disclosed in accordance with Indian Government Accounting Standard (IGAS 2) notified by Government in May 2011 Standard (IGAS 2) notified by Government in May 2011

4. Liabilities of the Government including Stock 4. Liabilities of the Government including Stock of Public Debt and Borrowings on Public of Public Debt and Borrowings on Public Account and Liabilities on account of Account and Liabilities on account of superannuation benefits,superannuation benefits,

compensated leave, provisions and social compensated leave, provisions and social security are to be provided for on accrual basis.security are to be provided for on accrual basis.

5. Recognition of expenses relating to 5. Recognition of expenses relating to superannuation benefits, compensated leaves, superannuation benefits, compensated leaves, provisions and social security may be taken provisions and social security may be taken after actuarial valuation.after actuarial valuation.

6. Contingent liabilities other than guarantees, 6. Contingent liabilities other than guarantees, Claims made by third parties against the Claims made by third parties against the Government should also be disclosed.Government should also be disclosed.

(iv) Recognition of all expenses and (iv) Recognition of all expenses and payables:payables:

Recognition of all expenses on accrual basis Recognition of all expenses on accrual basis would lead to recognition of payables, which would lead to recognition of payables, which will be shown as a liability.will be shown as a liability.

(c)(c) The following table shows the accounting The following table shows the accounting treatment and measurement to be followed in case of treatment and measurement to be followed in case of

common expenses.common expenses.Item of Item of ExpenditureExpenditure

RealizatioRealization Criterian Criteria

MeasurMeasurementement

Recommended basis of Recommended basis of Accounting (Accrual)Accounting (Accrual)

Salaries, Wages, Salaries, Wages, Dearness Dearness Allowance, Allowance, Traveling Traveling Allowance, office Allowance, office expenses, etc expenses, etc

Obligation Obligation established established in the period in the period of utilization of utilization of serviceof service

Agreed Agreed amount amount

Full cost should be charged to the Full cost should be charged to the accounts of the relevant period accounts of the relevant period e.g.' within the period in which the e.g.' within the period in which the employees work. Material amounts employees work. Material amounts earned but unpaid at the end of earned but unpaid at the end of the period should be accrued and the period should be accrued and placed under the head payables placed under the head payables

Interest Interest Obligation Obligation established established at the time at the time of entering of entering into the loan into the loan agreement. agreement.

Multiple Multiple of loan of loan value, value, period, period, and rate and rate of interest of interest

Liability to be recognized Liability to be recognized periodically on the due date for periodically on the due date for payment. Expense recognition to payment. Expense recognition to be in the period for which it is be in the period for which it is charged under the head payable, charged under the head payable, regardless of when the payment is regardless of when the payment is made. made.

Item of Item of ExpenditureExpenditure

RealizatioRealization Criterian Criteria

MeasurMeasurementement


Contribution to PF Contribution to PF and defined and defined contribution to contribution to Superanuation Superanuation Funds Funds

Obligation Obligation established established when an when an employee employee enters enters service service

Agreed Agreed amountamount

To be accounted on accrual basis. To be accounted on accrual basis.

Gratuity and Gratuity and Superanuation Superanuation liabilities liabilities


To be To be determindetermined on the ed on the basis of basis of actuarial actuarial valuation valuation

To be accounted to the extent of To be accounted to the extent of contribution made to recognized contribution made to recognized funds – accrual basis funds – accrual basis

Leave Leave encashment encashment benefit benefit


To be To be determindetermined based ed based on service on service rules rules

To be accounted when it is due- To be accounted when it is due- accrual basis (except when leave accrual basis (except when leave encashment is permitted within encashment is permitted within the reporting period) the reporting period)

The following table shows the accounting treatment and The following table shows the accounting treatment and measurement to be followed in case of common expenses.measurement to be followed in case of common expenses.

Item of Item of ExpendiExpenditureture

Realization Realization CriteriaCriteria

MeasureMeasurementment


Rents Rents Right to charge Right to charge rent established rent established at the time of at the time of entering into entering into agreement, agreement, realizable on due realizable on due date for payment date for payment of rent. of rent.


To be accounted for in the To be accounted for in the accounting period to which it is accounting period to which it is realizable – Accrual basis. If rent realizable – Accrual basis. If rent becomes overdue, income should be becomes overdue, income should be recognized and a provision should be recognized and a provision should be made. made.

Hire Hire charges charges of of machinemachinery ry

Right established Right established at the time of at the time of entering the entering the contract contract


To be accrued and accounted for in To be accrued and accounted for in the accounting period to which it the accounting period to which it relates – accrual basisrelates – accrual basis

Interest Interest Realizable on the Realizable on the due dates for the due dates for the interest payment interest payment

Function of Function of loan value, loan value, period and period and rate of rate of interest interest

Interest income to be accounted on Interest income to be accounted on accrual basis on the due dates. If accrual basis on the due dates. If interest becomes overdue, income interest becomes overdue, income should be recognized & provided for. should be recognized & provided for.

Note: revenue from taxes, Stamps and registration, at this satge , is Note: revenue from taxes, Stamps and registration, at this satge , is recommended on cash basis for conservative approach so as not to recommended on cash basis for conservative approach so as not to inflate revenue.inflate revenue.

(e) The Way Forward:(e) The Way Forward:(i) 1st Phase: (2011-12 to 2012-13)(i) 1st Phase: (2011-12 to 2012-13)• Formation of an apex body at Ministry of Finance level with Formation of an apex body at Ministry of Finance level with

representation from key stakeholders at Union and State level for representation from key stakeholders at Union and State level for coordination, monitoring, decision making and overseeing implementation coordination, monitoring, decision making and overseeing implementation issuesissues

• Formation of task based groups in each entity to initiate the transition Formation of task based groups in each entity to initiate the transition process in a time bound mannerprocess in a time bound manner

• Revision of Chart of Accounts to integrate accrual accounting needsRevision of Chart of Accounts to integrate accrual accounting needs• Development of an IT enabled Integrated Financial Management SystemDevelopment of an IT enabled Integrated Financial Management System• Centrally Sponsored Scheme for Treasury Modernization issued by MoF Centrally Sponsored Scheme for Treasury Modernization issued by MoF

mention developing of an Accounts Module and budget module. The mention developing of an Accounts Module and budget module. The benefits of these modules can be greatly enhanced to include revision in benefits of these modules can be greatly enhanced to include revision in account code classification/ chart of accounts, building into it features of account code classification/ chart of accounts, building into it features of asset management, liabilities and other key features of accrual asset management, liabilities and other key features of accrual accounting.accounting.

• Capacity building in terms of human resourcesCapacity building in terms of human resources• Identification and consolidation of assets category wise at DDO levelIdentification and consolidation of assets category wise at DDO level• Valuation of all assets except historical assetsValuation of all assets except historical assets• Valuation of asset with historical cost after determination of a cut off date Valuation of asset with historical cost after determination of a cut off date

to ensure no backlog accumulatesto ensure no backlog accumulates• Identification of liability and their valuationIdentification of liability and their valuation

(ii) 2nd Phase (2013-14 to 2014-15)(ii) 2nd Phase (2013-14 to 2014-15)Valuation of historical assetsValuation of historical assetsProvision of depreciationProvision of depreciationRecognition of all expenses and payablesRecognition of all expenses and payablesRecognition of revenues and receivablesRecognition of revenues and receivables(iii) 3rd Phase- Preparation of Statements of (iii) 3rd Phase- Preparation of Statements of

General Purpose Financial Reporting (GPFS) General Purpose Financial Reporting (GPFS) including the following (2015 onwards)including the following (2015 onwards)

Statement of Financial PositionStatement of Financial PositionStatement of Financial PerformanceStatement of Financial PerformanceStatement of Changes in assets/liabilitiesStatement of Changes in assets/liabilitiesCash flow StatementsCash flow StatementsAppropriation AccountsAppropriation AccountsAccounting policies and Notes to the Financial Accounting policies and Notes to the Financial

StatementsStatementsManagement and Discussion AnalysisManagement and Discussion Analysis

(iv) (iv) Indian Government Accounting Standards (IGASs) and Indian Indian Government Accounting Standards (IGASs) and Indian Government Financial Reporting Standard (IGFRS) so far Government Financial Reporting Standard (IGFRS) so far

notified/under consideration of GOI/approved/proposed by notified/under consideration of GOI/approved/proposed by

GASAB :GASAB : StandaStanda

rdsrds Standard on:Standard on: Notified/Notified/

prepared/prepared/draft stagedraft stage

Objective of the standardsObjective of the standards

IGAS 1IGAS 1 ““Guarantees given Guarantees given by Governments: by Governments: Disclosure Disclosure Requirements” Requirements” relating to the form relating to the form of accounts of the of accounts of the Union, States and Union, States and Union Territory Union Territory Governments (with Governments (with legislatures) legislatures)

Notified on Notified on 20th 20th December December 2010 2010

The objective of this standard is The objective of this standard is to set out disclosure norms in to set out disclosure norms in respect of Guarantees given by respect of Guarantees given by the Union, the State Governments the Union, the State Governments and Union Territory Governments and Union Territory Governments (with legislature) in their (with legislature) in their respective Financial Statements respective Financial Statements to ensure uniform and complete to ensure uniform and complete disclosure of such Guarantees. disclosure of such Guarantees.

IGAS 2IGAS 2 Accounting and Accounting and classification of classification of Grants-in -Aid Grants-in -Aid

Prepared & Prepared & notified by notified by GOI GOI

To prescribe the principles for To prescribe the principles for accounting and classification of accounting and classification of Grants-in-aid in the Financial Grants-in-aid in the Financial Statements of the Government Statements of the Government both as a grantor as well as both as a grantor as well as grantee. And their appropriate grantee. And their appropriate disclosure. disclosure.

StandaStandardsrds

Standard Standard on:on:

Notified/Notified/prepared/draft prepared/draft

stagestage


IGAS 3IGAS 3 Cash Flow Cash Flow Statements Statements

Under Under consideration of consideration of Government of Government of India for India for notification notification

To provide information about the To provide information about the historical changes in cash and cash historical changes in cash and cash equivalents of the Government by equivalents of the Government by means of a cash flow statement, means of a cash flow statement, which classifies cash flows during the which classifies cash flows during the period into operating, investing and period into operating, investing and financing activities. financing activities.

IGAS 4IGAS 4 General General Purpose Purpose Financial Financial Statements of Statements of Governments Governments

Under Under consideration of consideration of Government of Government of India for India for notification notification

•To lay down the principles to be To lay down the principles to be followed in presentation of general followed in presentation of general purpose financial reports of purpose financial reports of Governments and to prescribe the Governments and to prescribe the minimum requirements relating to minimum requirements relating to structure and contents of financial structure and contents of financial statements of government prepared statements of government prepared under cash basis of accounting. under cash basis of accounting. •General Purpose Financial General Purpose Financial Statements (GPFS) essentially Statements (GPFS) essentially consists of Finance Accounts and consists of Finance Accounts and Appropriation Accounts. The Appropriation Accounts. The Financial Statements referred to in Financial Statements referred to in this standard are the General this standard are the General Purpose Financial Reports (GPFR). Purpose Financial Reports (GPFR).

StandaStandardsrds



stagestage


IGAS 5IGAS 5 Loans and Loans and Advances Advances Made by Made by GovernmentsGovernments

Under Under consideration of consideration of Government of Government of India for India for notificationnotification

To lay down the norms for To lay down the norms for Recognition, Measurement, Valuation Recognition, Measurement, Valuation and Reporting in respect of Loans and Reporting in respect of Loans and Advances made by the Union and Advances made by the Union and the State Governments in their and the State Governments in their respective Financial Statements to respective Financial Statements to ensure complete, accurate, realistic ensure complete, accurate, realistic and uniform accounting practices, and uniform accounting practices, and to ensure adequate disclosure and to ensure adequate disclosure on Loans and Advances made by the on Loans and Advances made by the Governments consistent with best Governments consistent with best international practices.international practices.

IGAS 6IGAS 6 Under preparation by GASABUnder preparation by GASAB

IGAS 7IGAS 7 Foreign Foreign Currency Currency transactions transactions and Loss or and Loss or Gain by Gain by Exchange Exchange Rate VariationRate Variation


The objective of this standard is to The objective of this standard is to provide accounting and disclosure provide accounting and disclosure requirements of foreign currency requirements of foreign currency transactions and financial effects of transactions and financial effects of exchange rate variations in terms of exchange rate variations in terms of loss or gain in the financial loss or gain in the financial statements. It also deals with the statements. It also deals with the requirements of disclosure of foreign requirements of disclosure of foreign currency external debts and the rate currency external debts and the rate applied for disclosureapplied for disclosure

StandaStandardsrds



stagestage


IGAS 8IGAS 8 Contingent Contingent Liabilities Liabilities (other than (other than Guarantees) Guarantees) and and Contingent Contingent Assets: Assets: Disclosure Disclosure Requirements Requirements

ProposedProposed The objective of the proposed IGAS on The objective of the proposed IGAS on the subject is to lay down the principles the subject is to lay down the principles for disclosure requirements of for disclosure requirements of Contingent Liabilities (other than Contingent Liabilities (other than guarantees) and Continent Assets of guarantees) and Continent Assets of both the Union and the State both the Union and the State Governments including Union Governments including Union Territories with Legislatures, in their Territories with Legislatures, in their respective Financial Statements in respective Financial Statements in order to ensure uniform and order to ensure uniform and appropriate disclosure of such liabilities appropriate disclosure of such liabilities and assets.and assets.

IGAS 9IGAS 9 ‘‘Government Government Investment in Investment in Equity’Equity’

ProposedProposed The objective of the Standard is to lay The objective of the Standard is to lay down the norms for Recognition, down the norms for Recognition, Measurement and Reporting in respect Measurement and Reporting in respect of Investments made by the Union of Investments made by the Union Government, the State Governments Government, the State Governments and Governments of Union Territories and Governments of Union Territories with Legislatures in their respectivewith Legislatures in their respective

IGAS 10IGAS 10 Public Debt Public Debt and other and other Liabilities of Liabilities of Governments: Governments: Disclosure Disclosure RequirementsRequirements


To lay down the principles for To lay down the principles for identification, measurement and identification, measurement and disclosure of public debt and other disclosure of public debt and other obligation of Union and the State obligation of Union and the State Governments including Union Governments including Union Territories with legislatures in their Territories with legislatures in their respective financial statements. respective financial statements.

StandaStandardsrds

StandarStandard on:d on:

Notified/Notified/preparedprepared

/draft /draft stagestage


IGFRSIGFRS InventoriInventorieses

ProposedProposed To prescribe the accounting treatment for To prescribe the accounting treatment for inventories. This standard aims at using inventories. This standard aims at using accrual principles of accounting for Inventories accrual principles of accounting for Inventories – both at the stage of charging as expenditure – both at the stage of charging as expenditure and depicting the closing stocks in the financial and depicting the closing stocks in the financial statements at the end of reporting period.statements at the end of reporting period.

IGFRS 2IGFRS 2 Property, Property, Plant and Plant and EquipmenEquipmentt

PreparedPrepared To prescribe the accounting treatment for To prescribe the accounting treatment for property, plant and equipment (PPE) so that property, plant and equipment (PPE) so that users of financial statements can obtain users of financial statements can obtain information regarding an entity’s investment in information regarding an entity’s investment in its property, plant and equipment and any its property, plant and equipment and any changes in such investment. changes in such investment.

IGFRSIGFRS Revenue Revenue from from Exchange Exchange TransactiTransactionsons

ProposedProposed This standard lays down the principles to be This standard lays down the principles to be followed for recognition of revenue by followed for recognition of revenue by Governments under accrual basis accounting. Governments under accrual basis accounting. This standard excludes from its scope revenue This standard excludes from its scope revenue recognition principles relating to specific items recognition principles relating to specific items (eg: Income from sale of Plant, Property and (eg: Income from sale of Plant, Property and equipment) which are covered in other equipment) which are covered in other standards. standards.

Indian Government Financial Reporting Standards (IGFRS)Indian Government Financial Reporting Standards (IGFRS)

AS17

Documents

government accounting

basis of accounting

accounting methods

accrual accounting

accounting treatment

icai accounting standards

accounting period

accounting aspects