Urban News

Source : The Business Line Date : 07.05.2009

Govt may migrate to accrual accounting in 5 yrs

Our Bureau

New Delhi, May 6 Accrual accounting may become a reality in Government within a five-year time frame. This emerged at a national round table conference on accrual accounting held in the Capital on Tuesday.

This conference, which was convened by the Government Accounting Standards Advisory Board (GASAB), deliberated the issue of migration from cash to accrual basis accounting and laid down the roadmap for such process. Currently, the Government adopts cash basis of accounting.

It is contended that the accrual based financial statements would provide more appropriate presentation of financial performance and position of the Government.

The Union and States would have a common format of financial statements that would include a Balance Sheet, a Statement of financial performance and a Cash flow statement. The framework for the accrual accounting would be Indian Government Financial Reporting Standards (IGFRS) issued by GASAB.

IGFRS are harmonised with International Public Sector Accounting Standards (IPSAS), the international standards for governments.

Principal Secretaries from State Governments, officials from Department of Posts, Accountant General of various states, and World Bank officials participated in the National Round Table Conference.

A Government-RBI appointed committee on financial sector assessment (CFSA) had in its recent report noted that there should not be any hasty move towards accrual-based accounting.

The CFSA report said that accrual based accounting should be attempted only in phases after ascertaining the benefits and costs of doing so and preparing a strong ground in terms of skills and awareness at all levels.

However, this should not preclude Governments from removing serious distortions caused by cash-based fiscal reporting on account of factors such as deferment of payment of subsidies through issue of bonds, the CFSA report said.

Source : The Hindu Date : 29.03.2009

Govt may defer implementation of accounting standard-11

Richa Mishra
K.R. Srivats

New Delhi, March 27 The Ministry for Corporate Affairs (MCA) may defer the implementation of the accounting standard (AS-11) that deals with foreign exchange differences. This would come as a respite for corporate India, which has been hit by the recent rapid depreciation of the rupee against the US dollar.

Simply put, companies may not be required to take their losses arising from exchange differences to their profit and loss account for the accounting period ended March 31, 2009.

The likely deferment on the application of the AS-11 by the Government follows a recommendation made by National Advisory Committee on Accounting Standard (NACAS) at its meeting on Wednesday.

NACAS, which was constituted to advise the Government on formulation of accounting standards to be followed by corporate entities, has suggested deferring the implementation of AS-11 to 2011.

Amendments suggested

Official sources told Business Line that “historically, the Ministry has not gone against NACAS recommendations. However, the Ministry was yet to take a final view.”

“While proposing a postponement NACAS has also suggested certain amendments in AS 11,” official sources said, while declining to disclose the exact changes proposed.

Cos don’t comply

AS-11 deals with mark-to-market provisioning in corporate profit and loss accounts for foreign exchange-related gains and losses. However, despite the Institute of Chartered Accountants of India (ICAI) notifying the norm, several big companies were not following it and instead were complying with Schedule VI of the Companies Act.

Placing of losses

The Companies Act stipulates that as a result of exchange rate fluctuation, any change in the repayment liability needed to be added or deducted from the cost of fixed assets and allows such losses to be capitalised.

In order to put to rest the controversy, the Ministry had referred the matter to NACAS. “While deferring the implementation of AS-11, NACAS has suggested some transitional arrangement should be made for the shift from Schedule VI to AS-11,” sources said.

ICAI, on the other hand, has been opposing any deferment. Members of the Institute argued that “companies were taking the forex fluctuations to the profit and loss account when they were making profits, but now that they are making losses, they don’t want to take it to profit and loss account.” Further, the Institute’s council was also yet to take a view on AS-11, even as it claimed that the majority of its council members were not in favour of deferment.