Government Accounting Standards

Advisory Board (GASAB)

http://gasab.gov.in/gasab/
 Why GASAB?
• Article 150 of the Constitution of India stipulates that “The
accounts of the Union and of the States shall be kept in such
form as the President may, on the advice of the Comptroller
and Auditor General of India, prescribe.”
• The Comptroller and Auditor General of India (C&AG)
constituted Government Accounting Standards Advisory
Board (GASAB) under the aegis of the Office of Comptroller
& Auditor General with the support of the Government of
India through a notification dated 12th August, 2002
• The decision to set-up GASAB was taken in the backdrop of
the new priorities emerging in the Public Finance Management
and to keep pace with International trends
 Mission
• The mission of the Government Accounting
Standards Advisory Board (GASAB) is to
formulate and recommend Indian
Government Accounting Standards
(IGASs) for cash system of accounting.
 Functions
• to formulate Government Accounting Standards for
government entities, so that such Standards are implemented
by them after notification by the Ministry of Finance.
• GASAB also formulates Indian Government Financial
Reporting Standards (IGFRS) under accrual system of
accounting, with a view to eventually improve standard of
Government accounting and financial reporting wherever
accrual accounting is being implemented.
• advocating the government entities to adopt them in
preparation and presentation of financial statements
• The Indian Government Accounting Standards (IGASs) are
Government Accounting Standards as notified by Union government
and are applicable to Union Government, State Governments and
Union Territories with Legislature for preparation and presentation
of General Purpose Financial Statements under the existing cash-
based system of accounting.
• General Purpose Financial Statements (GPFS) of the Union and the
State Government includes Finance Accounts, Appropriation
Accounts and Statements and Schedules with Notes to Accounts
which form part thereof, issued for the use of various stakeholders,
Governments and their agencies and the public
• These are submitted by the Comptroller and Auditor General of
India to the President or the Governor of a State or the Administrator
of a Union Territory having a Legislative Assembly, as the case may
be, who shall cause them to be laid before the Houses of Parliament,
Legislatures of the States and of Union Territories respectively.
 GASAB Secretariat
• The GASAB Secretariat is constituted of five officers at Senior
Administrative Grade level from the accounting departments of
government of India, viz., Indian Audit & Accounts Service, Indian Civil
Accounts Service, Indian Posts & Telecommunications Accounts and
Finance Service, Indian Defence Accounts Service and Indian Railway
Accounts Service
• Director General (Accounts) from the IA&AS is the Member Secretary of
GASAB
• The GASAB Secretariat shall be headed by Deputy Comptroller and
Auditor General (DAI) who may be assisted by Additional Deputy
Comptroller and Auditor General (ADAI).
 Process shall be adopted for formulating
IGAS
Strategic Development Plan (SDP)
• SDP is a plan for the period of next three years identifying
subjects for formulation of Government Accounting
Standards, keeping in view the priorities areas, with a view to
improve government accounting and financial reporting.
Discussion Paper
• Once an accounting and financial reporting issue has been
identified and included in SDP, a Member of the GASAB
Secretariat shall be assigned the subject by the competent
authority within GASAB Secretariat, who will prepare a draft
‘Discussion Paper’ of the Government Accounting Standard,
on time bound basis, which will contain a project description,
key issues, possible
Exposure Draft:
• The Preliminary Draft of the Accounting Standard is presented by
the concerned officer in the GASAB Secretariat for detailed
discussion at a meeting of the GASAB. The GASAB deliberates
and approves it by a majority vote, to be issued as an Exposure
Draft (ED) uploading it for a minimum period of 90 days on the
GASAB website. The ED would also be widely circulated, in
order to get an opinion from all stakeholders, their comments or
suggestions, to be considered by the GASAB.
Approval of the proposed Government Accounting Standard
• The Exposure Draft shall be modified by the concerned Member
in the GASAB Secretariat to ensure due incorporation of the
responses and suggestions received from stakeholders including
the suggestions proposed by the Ministry of Finance (MoF).
Notification of the Government Accounting Standard
• The Government Accounting Standard as approved by the
GASAB, shall be submitted to the MoF under intimation to the
C&AG for notification in the Gazette of India for enforcement
and implementation by all government accounting entities. The
MoF shall notify the Government Accounting Standard within
three months of its receipt from the GASAB unless it conveys its
reservations to the GASAB through a written communication.
Post-implementation review of a Government Accounting
Standard.
• Ordinarily, a mandatory review of each Government Accounting
Standard shall be undertaken every 3 years, post-notification,
unless it is desirable to do so earlier. The GASAB shall then
decide by a majority vote whether a Standard is to be revised or
withdrawn, after recording the justification for the same.
 IGAS 1 GUARANTEES GIVEN BY THE GOVERNMENTS:
DISCLOSURE REQUIREMENT

Union/State govt. gives guarantees u/s 292 and 293 of COI for
repayment of borrowings within such limit as may be fixed.
• Union Gonvernment gives Guarantees for payment of interest,
repayment of share capital, payment of minimum dividend,
supply of materials/equipment on behalf of State
Government /Local Bodies/ Joint Stock Companies/ Financial
Institution.
• Guarantees given in pursuance of agreement entered into by the
Union Government with international Financial Institution,
foreign lending agencies, foreign governments, contractors and
consultant towards repayment of principal/interest/commitment
charges on loans
• Performance guarantees for fulfilment of contracts/projects
awarded to Indian companies in foreign countries, counter
guarantees to banks for having issued LOC to foreign suppliers
for services rendered on credit basis in favour of
Companies/Corporations.
• Railways, electricity board for due and punctual payment of dues
and freight charges.
• State Government and Union Territories Governments also
gives guarantees.
• Guarantees are normally given to Power, Cooperative, Irrigation,
Road and Transport, UDD and other Infrastructure projects.
 Purpose of Guarantees
• Statutory Corp/ Govt. Companies/ Co-op institution /Financial
Institution /Autonomous Bodies are responsible for their debt
• Financial obligation may be guaranteed by the Government
and Govt has commitment to see these are fulfilled
• It reduces Government budgetary support and borrowings
• But adds to contingent liability of the State, if invoked
• The beneficiary entity has to pay guarantee fees/commission
 This IGAS requires
• Preparation of Statement of Guarantees in the
Finance Accounts
• The Authority in the Govt. responsible for
preparation of the consolidated Guarantee
statement for inclusion in Finance Accounts.
 Disclosure requirement
• Maximum amount of Guarantees given by the Govt, additions
deletion during the year o/s balances at the beginning and end
of the year
• Amount invoked discharged during the year
• Details of guarantee fees and its realisation
• Limits, if any fixed
• Guarantee redemption /Reserve fund exist, if so details of O/B
and C/B and payment into the fund
• Details of external foreign currency guarantees in terms of
INR on the date of financial statement.
• Budget document containing details of guarantee
• The FS discloses the details of guarantees in the AFS
 When guarantees are invoked
• Payment treated as loan to beneficiaries, recoveries
there against are monitored.
• Loan recoveries distinctly classified in Finance
Accounts.
• When whole/part of loan is finally held irrecoverable,
the same adjusted
– Against Guarantee redemption Fund
– ‘irrecoverable loan written off’ under the function
under which the loans were guaranteed
– If cannot be identified then under MH 2070 Misc
General Services’
 IGAS 1 effective from beginning on or after 01
April 2010 for class wise disclosures in Financial
Statment of Union/State/union Territories
IGAS 2 Accounting and Classification of
Grant in Aid (GIA)
• Prescribes the principles for accounting and
classification of GIA in the Financial Statement of
Govt both as a grantor and grantee.
• Removes difficulties in adherance to the appropriate
principles of accounting and classification of GIA
by way of appropriate disclosures in Financial
Statement
• This Standard applies to Union and State Govt for
accounting and classification of GIA given and
received by them.
 Nature of GIA

• assistance /donations /contribution made by one

govt. to another govt/body/inst/individual
• Given for specified purpose of supporting an
institution incld construction of assets.
• It can be given to a person/public body /inst
having legal status of its own
• GIA could be in cash/kind used by the recipient
agencies for meeting their operating as well as
capex requirement
 Governance system in India
• GIA is given by Union Government(UG) to State
Government(SG) and State Government to Local Bodies (LB).
• Three tier pattern with UG at apex, SG in the middle and
Local Bodies consisting of Panchayat Raj Institutions and
Urban Local Bodies at the grass roots.
• Accounts and Assets & Liabilities of three tier kept separately
and distinct.
• GIA from UG to SG paid out of the CFI as per Art 275 and
282 of the COI respectively.
• UG releases GIA under Central Schemes /Centrally Sponsored
Schemes and also as Pass through grants to ULBs/PRIs
• GIA also released directly by UG to DRDAs/specialised
agencies/Special Purpose Vehicle for carrying out rural
dev/rural emp/rural hsng/etc
• SG disburses GIA to agencies/bodies/institutions such as
universities, hospitals, coop inst and others.
• Article 243 of COI bestows ULBs and PRIs powers to enable
them to function as institutions of self govt in matters listed in
the eleventh and twelfth schedule
• Accordingly, SG provides GIA to PRIs and ULBs as specified
in the Law
• SG disburses GIA to agencies/bodies/inst having distinct legal
entity
 Recognition
• GIA in cash recognsied in the books of grantor at the time of cash
disbursement and grantee at time of cash receipt
• GIA in kind
– Nature of consumables, value given by grantor is less than Rs. One
crore disclosed in appropriate quantative terms
– Relating to natural calamities/emergency purpose disclosed in
appropriate quantative terms, in addition to monetary value
– All other cases as per cost given by grantor. If unable to indicate cost,
market value.
– Market value is value prevailing , in the absence thereof, replacement
cost of same, similar asset of same age, condition and purpose.
– The value shall be recognised in the books of grantor and grantee at time
of receipt
 Accounting Classification
• GIA disbursed by a grantor to a grantee shall be classified and
accounted for as revenue expenditure in the FS of the grantor
irrespective of the purpose for which the fund is disbursed as
GIA are to be spent by the Grantee
• Pass through grant are also to be treated as Revenue
expenditure
• GIA received by a Govt shall be classified and accounted for as
revenue receipt
• GIA received in kind by various grantee in the form of
permanent assets like land are valued at current market price
• In case of non availablity of current market price, cost incurred
by the grantor may be used as the basis of valuation
• Expenditure on GIA for the purpose of creating assets shall not
except in cases specially authorised by the President on the
advice of the CAG be debited to a capital head of account in
the FS of the Govt.
• GIA are classified and accounted for as Revenue Expenditure
in the Financial Statement of the grantor irrespective of its
ultimate application by the grantee.
• This position holds true even in those cases where GIA are
utilised by the grantee for the purpose of creation of assets.
• Receipts of GIA are also required to be treated as Revenue
Receipt in the FS of the grantee Government.
 Disclosure in FS
GIA classified and accounted for as Revenue Expenditure by the
grantor, the FS shall disclose
• Quantum of total funds released to the grantee
• Fund allocated for creation of capital asset out of the GIA
• GIA in kind shall be disclosed in quantative term
• IGAS 2 effective for the FS covering periods beginning from
1.4.2011
 IGAS 3 Loans and Advances made by
Government
As per Article 293(2) of COI , the GoI is empowered to make
loans to the State, subject to such condition as may be laid down.
• Union Govt can give loans to State Govt
• Union Govt can give Loans to Foreign Govt, Govt Companies,
Corporation, Non Govt institutions and LB
• Union Govt can give Loans to Govt Servants
• Loans in perpetuity needs only to be serviced by way of
payment of interest wherever so enjoined
• Advances has been restricted in its meaning to denot loans
made to GS only
 Recognition
• As an asset from the date the money is actually disbursed and
not from the date of sanction
• If disbursed in instalments then each instalment shall be
treated as a separate loan for the purpose of repayment of
principal and interest, except where the competant authority
specifically allows consolidation of the instalments into a
single loan
• Loan converted into equity shall be treated as conversion and
shall lead to reduction in the o/s loan amt.
• Debt assumption due to invocation of guarantee shall be
treated as disbursement of loan
 Measurement and Valuation
• Historical cost measurement shall be the basis for
accounting
• As of the last date of accounting period of Financial
Statement, the carrying amount of loans shall undergo
revision on account of additional disbursement and
repayments or write-offs
 Disclosure
• Carrying amount of L&A at the beginning and end of the
accounting period showing additional disbursements and
repayments or write –offs
• Reflect interest in arrears separately with a footnote
• Summary of L&A showing loanee group wise details
• L&A showing Sector wise details
• Financial Statement of the Union Govt/SG/UT shall disclose
the following details under ‘Detailed statement of Loans and
Advances made by Union Government
• Showing Major Head and Minor Head wise
• Repayment of arrears from state/Union
• Repayment of arrears from other loanee entities
 Additional disclosures
• Fresh loans and advances made during the year
• Carrying amount along with additions, repayment, write offs
• Interest in arrears
FS should show details in three parts
• LA made by Union Govt/SG/UT
• Detailed Statement of LA made by UG/SG/UT
• Additional Disclosures.
 IGAS approved by GASAB and under
consideration of GoI
• Government Investments in Equity (IGAS 9)
• Foreign Currency transactions and loss or gain by
exchange Rate variation (IGAS 7)
• Public Debt and other liabilities of Government :
Disclosure Requirement (IGAS 10)
Government Investments in Equity (IGAS 9)

• The UG, SG and UT with Legislature make investments in

entities like Govt Companies, Statutory Corporation,
Cooperative Banks Societies etc
• UG also invests in international bodies and authorities like the
IMF, Asian development Fund and International Finance
Corporation.
• Investment include direct investment in share capital,
conversion of outstanding loans (principal and interest) against
the entity to equity, conversion of dividends declare by the
entity, but not received , into equity.
• Obj: norms for recognition, measurement, reporting of
investment of the Govt in FS consistent with best international
practices.
 Foreign Currency transactions and loss or gain
by exchange Rate variation (IGAS 7)

• Government may have foreign currency transactions and loss

or gain arising due to exchange rate variations.
• The objective of this standard is to provide accounting and
disclosure requirements of foreign currency transactions and
financial effects of exchange rate variations in terms of loss or
gain in the financial statements.
• It also deals with the requirements of disclosure of foreign
currency external debts and the rate applied for disclosure.
Public Debt and other liabilities of Government :
Disclosure Requirement (IGAS 10)
• The objective of the IGAS is to lay down the principles for
identification, measurement and disclosure of public debt and
other obligation of Union and the State Governments
including Union Territories with legislatures in their respective
financial statements.
• The Public Debt and Other Obligations incurred by
Governments shall be accounted and reported on the basis of
Face Value.
• For the purpose of reporting external debt, changes in the
Balance at the end of the Accounting Period arising from
variations in the rate of exchange shall also be reported.
 Indian Government Financial Reporting Standards (IGFRS)

• To facilitate pilot studies and for scale up of

activities, GASAB has taken a decision to develop
accrual basis accounting standards alongside cash
basis standards.
• The accrual basis standards are issued under the title
'Indian Government Financial Reporting Standards
(IGFRSs)'
• The accrual basis standards are issued initially as
recommendatory for pilot studies on accrual
accounting and will be mandatory with effect from
the date of notification by Government of India.
IGFRS approved by GASAB and under
consideration of GoI
• IGFRS 1 Presentation of Financial Statements
• IGFR 2 Property Plant and equipment
• IGFRS 3 Revenue from Government Exchange
Transaction
• IGFRS 4 Inventories
• IGFRS 5 Contingent Liablities (other than
guarantees) and ontingnt Assets: Disclosure
requirement.
NATURAL RESOURCES
ACCOUNTING
 What is NRA…
• Natural resource accounting is the compilation of data relating to
natural resources within an accounting framework.
• NRA is an accounting system that deals with stocks and stock changes
of natural assets, comprising biota (produced or wild), subsoil assets
(proved reserves), water and land with their aquatic and terrestrial
ecosystems.
• Natural resources accounts may involve both physical units and
monetary values. The resources in question may include both those
which contribute to marketable forms of production as well as non-
commercial or environmental resources such as air, water and
biological life.
• Natural resource accounts are regarded as a means of creating linkages
between the environment and the economy.
 Need of NRA
• Environmental accounting or NRA aims to provide a framework for
organizing information on the status, use, and value of natural
resources and environmental assets as well as expenditures on
environmental protection and resource management
• The need for NRA can be broadly classified in the following
categories:
(i) Resource management;
(ii) Policy planning;
(iii) Identification and accounting the natural resources within the
economy;
(iv) Monitoring sustainable development goals;
(v) Combating climate change: and
(vi) Aid to Environment Impact Assessments.
 Natural Resource Accounting in India
• Natural resources play a vital role in the sustainable economic
development of any country
• . The rampant over–exploitation of these resources in recent
times has resulted in harmful impact on the environment.
• The concept of National Resource Accounting (NRA is based
on the concept ‘measurement of a resource leads to its better
management’.
• the UN also adopted the System of Economic and
Environmental Accounting – Central Framework (SEEA – CF)
in March 2012 – which is the latest internationally accepted
and adopted framework for resource accounting
• has taken the initiative (2019) by developing a framework for
implementing NRA on priority as a nationally important project.
GASAB came out with a Concept Paper on implementation of NRA
in India in July 2020.
• the Concept Paper has identified and suggested commencing with
five major resources, namely Mineral & Non-Renewable Energy
Resources, Water Resources, Forestry & Wildlife Resources and
Land Resources, of which, Mineral & Non-Renewable Energy
Resources
• the Concept Paper suggested the templates for preparation of Asset
Accounts on Mineral & Non-Renewable Energy Resources and for
other resources namely water resources, forestry & wildlife
resources and land resources.
• NRA has deep inter-linkage to sustainable development; and
10 of the 17 goals (Sustainable Development Goals or
commonly known as the SDGs, 2030) directly or indirectly
relate to management of natural resources and their
accounting. Government of India is a signatory (25 September
2016) to the UN General Assembly resolution on adoption of
SDGs titled, “transforming our world; the 2030 agenda for
sustainable development”.
• Three term goals envisaged by the Concept Paper of GASAB
Short term goals • Preparation of Asset Accounts on mineral and
energy resources in States • Initiation and preparation of disclosure
statement on revenues and expenditure related to NRA (2019-20 to
2021-22) •
• Mid-term goals Preparation of National Asset Accounts on
mineral and energy resources • Preparation of Asset Accounts in
respect of other three resources namely water, land and forest
resources in the States • Preparation of supply and use tables in
physical and monetary terms showing flow of natural resource
inputs, products and residuals (2022-23 to 2024-25)
• Long term goals • Preparation of the economic accounts
highlighting depletion adjusted economic aggregates; and •
Preparation of functional accounts recording transactions and other
information about economic activities undertaken for
environmental purposes. (2025 - 26 onwards)
 Asset Accounts, will provide the policy
makers.
• A one pager document on State-wise resources
• Compilation of physical and monetary values to enable
cross verification of revenues vis-à-vis actual extractions
• Consolidation of information over the years to provide
pace of exploitation
• Analysis of revenue vis-à-vis market value/export value
will make it easier to assess and review the royalty rates –
arrest windfall gains and protect State’s revenue interest
• • To bring out sustainability of resources – in years
• Enable assessment of revenue streams for the future
 Valuation of assets
• The System of Environmental and Economic
Accounting - Central Framework (SEEA-CF)
prescribes three methodologies to value the resources.
• One – the market price,
• second is the basic, producers' and purchaser's price
and
• third -the net present value for environmental assets
Preparation of Asset Accounts on
Mineral and Non-Renewable
Energy Resources
In order to make gradual progression towards the compilation of
accounts, the presentation of aggregate environment accounts for
India with the asset accounts in physical terms of the four
natural- mineral, water, land and Forest.
Mineral and energy resources
• Oil resources
• Natural gas resources
• Coal and peat resources
• Non-metallic mineral resources (excluding
coal and peat resources)
• Metallic mineral resources
 Process
Exploration of resources: The ministries in the Government of
India with the help of their agencies and the State Governments
carries out exploration of mineral and non-renewable energy
resources and categorises them in three distinct categories,
• namely proved, probable and possible reserves.
• Reserves which are proved to be 90 per cent or above
likelihood of commercial extraction are categorized as proved
reserves.
• Reserves having 50 per cent likelihood of extraction are
classified as probable reserves while those having 10 per
cent or less likelihood as possible resources.
 Auction system and permit system
• Depending upon the feasibility and other factors,
resources are placed for exploitation through auction
or permit system. I
• In auction, a reserve price is set up based on the
historic value and other ancillary and inter-related
factors. Generally, the highest bid equal or more than
the reserve price is accepted or settlement of the
mines.
• In permit system, State Governments are empowered
to allow extraction of resources on permit basis on
prior collection of royalties, rents and other revenues
• Production of resources: The raw or crude resources exploited are
processed by the lease holders themselves or through outsourced agencies
and dispatched from the mine area as finished products for own
consumption or sale
• Revenue realisations: The Mines and Minerals (Development and
Regulation) Act, 1957 as amended from time to time prescribes that no
mineral shall be transported except prior payment of royalty and other
dues of the Government.
• Accordingly, royalties, ad-valorem prices and other Government dues are
prepaid based on the resources permitted/auctioned for extraction.
• As per the systems in place, lease holders are required to prepay the dues
before permits for exploitation and dispatch are issued. Each such permit
should be accompanied by a proof of payment of advance revenue.
 Responsibility Centres
• Ministries in GoI/State Government Departments
• District mining and other departmental offices ensure control and
monitoring of the mining activities, production of finished products,
proper remittances of Government dues, movement of resources
• Accountants General Offices in States: The Accountants General
Offices compiles the revenues of the State under mining and allied
activities under various pre-defined heads of account like mining and
metallurgical industries, coal and lignite, petroleum etc and the
Finance Accounts of the States are generated. Revenues received under
mining and allied activities are non-tax receipts of the State
Governments