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TO THE PRE-EXAMINATION ONLINE TRAINING SESSION

TOPIC: C-2 (Accounting and auditing principles and standards)

Prepared and Presented By:
Sri Ajaya Kumar Sahoo, AAO (Commercial)
GOVERNMENT ACCOUNTING STANDARDS ADVISORY BOARD
 The Government Accounting Standards Advisory Board (GASAB) prescribes the
scope and authority of the Indian Government Accounting Standards (IGASs) for
cash system of accounting and Indian Government Financial Reporting Standards
(IGFRSs) for accrual system of accounting.
 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.”
 Accordingly, with the support of the Government of India, the Government
Accounting Standards Advisory Board (GASAB) was constituted by the
Comptroller & Auditor General of India on August 12, 2002 for the Union and
States.
 The GASAB Secretariat is located in the Office of the Comptroller & Auditor
General of India.
 The Secretariat normally consists of officers from the Indian Audit & Accounts
Service, Indian Civil Accounts Service, Indian Defence Accounts Service, Indian
Railway Accounts Service, Indian Posts & Telecommunications Accounts and
Finance Service.
The following is the composition of the GASAB:
i. Deputy Comptroller and Auditor General as Chairperson
ii. Controller General of Accounts, Ministry of Finance, Government of India
iii. Financial Commissioner, Railways, Ministry of Railways, Government of India
iv. Controller General of Defence Accounts, Ministry of Defence, Government of India
v. Secretary (Posts), Department of Posts
vi. Member (Finance), Department of Telecommunications
vii. Additional Secretary (Budget), Ministry of Finance, Government of India
viii. Deputy Governor, Reserve Bank of India or his/ her nominee.
ix. Director General, National Council of Applied Economic Research (NCAER), New
Delhi
x. President, The Institute of Chartered Accountants of India (ICAI), or his/her
nominee
xi. President, The Institute of Cost and Works Accountants of India (ICWAI)
(xii-xv) Principal Secretary (Finance)/ Secretary (Finance) of four States by annual
rotation and
xvi. Director General (Accounts)/ Principal Director, Office of the Comptroller and
Auditor General of India, as Member Secretary.
 IGAS Notified by Government of India
IGAS-1 : Guarantees Given by the Government: Disclosure Requirement
 This Indian Government Accounting Standard specifies the disclosure requirements in the
financial statements of the Union and State Governments of Guarantees given by
Governments.
 This accounting Standard became effective for the financial statements covering periods
beginning on or after 1 April 2010 for class-wise disclosures in the financial statements of
the Union Government and sector-wise details of disclosures in the financial statements
of the State Governments and Union Territory Governments (with legislature).
 The Union Government and State Governments give guarantees for repayment of
borrowings within such limits, if any, as may be fixed upon the security of the
Consolidated Fund of India or of the State, as the case may be, in terms of articles 292
and 293 of the Constitution.
 Guarantees given by the Union Government for payment of interest on borrowings,
repayment of share capital and payment of minimum annual dividend, payment against
agreements for supply of materials and equipment on credit basis on behalf of the State
Governments, Union Territories, Local Bodies, railways, Government Companies or
Corporations, Joint Stock Companies, Financial Institutions, port trusts, electricity
boards and co-operative institutions.
 Guarantees are given by the Union Government to railways and electricity
boards for due and punctual payment of dues and freight charges by the
companies and corporations.
 Similarly, Guarantees are also by the State Governments and Union Territory
Governments (with legislature).
 In consideration of the Guarantees given by the Governments, the
beneficiary entities are required to pay guarantee commission or fee to the
Governments.
 The Guarantees have an important economic influence and result in
transactions or other economic flows when the relevant events or conditions
actually occur. Thus, Guarantees normally constitute contingent liability of
the Governments.
 This standard applies to presentation of the Statement of Guarantees for
inclusion and presentation in the Financial Statements of the Government.
 The Authority in the Government which prepares the Statement of
Guarantees for inclusion and presentation in the Financial Statements shall
apply this Standard.
 The Financial Statements of the Union Government, the State Government
and the Union Territory Government (with legislature) shall disclose the
following details concerning class or sector of Guarantees in the prescribed
format:
a) Maximum amount for which Guarantees have been given during the year,
additions and deletions (other than invoked during the year) as well as
Guarantees outstanding at the beginning and end of the year;
b) Amount of Guarantees invoked and discharged or not discharged during the
year;
c) Details of Guarantees commission or fee and its realization; and
d) Other material details

The Financial Statements disclose whether details of Guarantees are published

in the annual budget presented to the parliament and State legislature, as the
case may be.
 The Financial Statements of the Union Government, the State Government
and the Union Territory Government (with legislature) shall disclose in the
notes the following details concerning class or sector of Guarantees:
a) Limit, if any, fixed within which the Government may give guarantee;
b) Whether guarantee redemption or reserve fund exists and its details including
disclosure of balance available in the fund at the beginning of the year, any
payments made and balance at the end of the year;
c) Details of the subsisting foreign currency guarantees in terms of Indian rupees
on the date of Financial Statements;
d) Details concerning Automatic Debit Mechanism and Structured Payment
Arrangement, if any;
e) Whether the budget documents of government contain details of Guarantees;
f) Details of the tracking unit or designated authority for Guarantee in the
Government; and
g) Other material details.
IGAS-2 : Accounting and Classification of Grants-in-Aid
 This Indian Government Accounting Standard prescribes the principles of
following accounting and classification of Grants-in-Aid in the Financial
Statements of Government both as Grantor as well as Grantee.
 This accounting Standard became effective for the financial statements covering
periods beginning w.e.f. 1 April 2011.
 Grants-in-Aid are payments in the nature of assistance, donations or
contributions made by one government to another government, body, institution
or individual.
 Grants-in-Aid are given for specified purpose of supporting an institution
including construction of assets.
 The general principle of Grants-in-Aid is that it can be given to a person or a
public body or an institution having a legal status of its own.
 Grants-in-Aid could be given in cash or in kind used by the recipient agencies
towards meeting their operating as well as capital expenditure requirement.
 Grants-in-Aid in three tier pattern of governance system in India disbursed by
Union Government at apex, the States in the middle and the local bodies (LBs)
consisting of Panchayat Raj Institutions (PRIs) and the Urban Local Bodies (ULBs)
at the grass root level.
 Accounts these three levels of Governments are separate and consequently the
assets and liabilities of each level of government are recorded separately.
 Grants-in-Aid released by the Union Government to the State Governments are
paid out of the Consolidated Fund of India as per Articles 275 and 282 of the
Constitution.
 The Union Government releases grants-in-aid to the State/ Union Territory
Government under central plan schemes and centrally sponsored schemes.
 Sometimes, the Union Government disburse funds to the state governments in
the nature of pass through grants that are to be passed to the Local Bodies.
 Funds are also released directly by the Union Government to District Rural
Development Agencies (DRDAs) and other Special Purpose Vehicles (SPVs) for
carrying out rural development, rural employment, rural housing, other welfare
works and other capital work schemes like construction of roads, etc.
 Similarly, State Government also disburse Grants-in-Aid to agencies, bodies and
institutions such as universities, hospitals, co-operative institutions and others.
 The Article 243 of the Constitution endows the Panchayats and the
Muncipalities with such powers and authorities to enable them to function as
institution of self-government in relating to matters listed in the eleventh and
twelfth schedule respectively.
 Grants-in-Aid in cash shall be recognized in the books of the grantor at the
time cash disbursements take place.
 Grants-in-Aid in cash shall be recognized in the books of the grantee at the
time of cash receipt take place.
 Grants-in-Aid in kind where value is available shall be recognized in the books
of both grantor and grantee at the time of their receipt by the grantee.
 Grants-in-Aid disbursed by a grantor to a grantee shall be classified and
accounted for as revenue expenditure in the Financial Statements of the
grantor irrespective of the purpose for which the funds disbursed.
 Grants-in-Aid, that are in the nature of Pass-Through grants, from the Union
Government to State Governments to be disbursed to the ultimate grantee
shall be classified and accounted for as revenue expenditure in the Financial
Statements of both Union Government and State Governments irrespective of
the purpose for which such grants are to be spent by the grantee.
 Grants-in-Aid received by a Government shall be classified and accounted for
as revenue receipts in its Financial Statements irrespective of the purpose for
which such grants were received.
Grants-in-Aid in kind shall be valued and disclosed as per the following:
a) Grants-in-Aid in kind in the nature of consumables, or of value as given by
the grantor of less than Rupees one crore must be disclosed in appropriate
quantitative terms;
b) Grants-in-Aid in kind in relating to natural calamities or emergency purpose
must be disclosed in appropriate quantitative terms. This disclosure is in
addition to the monetary value thereof;
c) In other cases, grants-in-aid in kind would be valued as per the cost given by
the grantor. In case where grantor is unable to indicate the cost, the market
value of grants-in-aid would be used;
d) Market value would be the value prevailing in the market and in the absence
thereof the replacement cost of the same in the similar asset of the same
age, condition and purpose.
 Grants-in-aid are also received in kind by various grantees in the form of
permanent assets like land. Normally, such grants-in-kind should be valued at
current market prices. However, in case of non-availability of market prices,
cost incurred by the grantor may be used as the basis of valuation.
IGAS-3 : Loans and Advances made by the Governments
 This standard applies to loans and advances given by the government for
incorporation and presentation in the financial statements of the
Government.
 This accounting Standard became effective for the financial statements
covering periods beginning w.e.f. 1 April 2012.
 This standard shall apply only to government accounts being maintained on a
cash basis.
 A loan shall be recognized by the disbursing entity as an asset from the date
the money is actually disbursed and not from the date of sanction and if a
loan is disbursed in installments then each installment shall be treated as a
separate loan for the purpose of repayment of principal and payment of
interest, except where the competent authority specially allows consolidation
of the installments into a single loan at the end of the concerned financial
year.
 The loans converted as equity shall be treated as conversion and shall lead to
reduction in the outstanding loan amount.
 The debt assumption due to invocation of guarantees shall be treated as
disbursement of loan, unless otherwise so specified.
 Historical cost measurement shall be the basis for accounting and reporting on loans
and advances made by the Governments.
 As of the last date of accounting period of Financial Statements, the carrying
amount of loans shall undergo revision on account of additional disbursement and
repayments or write-offs during the accounting period.
 The Financial Statements of the Union and State Governments shall disclose the
carrying amount of loans and advances at the beginning and end of the accounting
period showing additional disbursements and repayments or write-offs.
 An additional column in relevant financial statements shall also reflect the amount
of interest in arrears and this amount shall not be added to the closing balance of
the loan which shall be in nature of an additional disclosure.
 The financial statements of Union Government shall disclose the following details
under ‘Loans And Advances made by the Union Government’ in the Annual Finance
Accounts of the Union Government:-
a) The summary of Loans and Advances showing loanee group-wise details;
b) The summary of Loans and Advances showing sector-wise details;
c) The summary of repayment in arrears from Governments and other loanee entities.
 The financial statements of Union Government shall disclose the following
details under ‘Detailed Statement of Loans And Advances made by the Union
Government’ in the Annual Finance Accounts of the Union Government:-
a) A detailed statement of Loans and Advances showing the Major Head and Minor
Head-wise details;
b) The detailed statement of repayment in arrears from State or Union Territory
Governments;
c) The detailed statement of repayment in arrears from other loanee entities.
 The financial statements of Union Government shall disclose the fresh loans and
advances made during the year under additional disclosures in the Annual
Finance Accounts of the Union Government.
 The financial statements of State Governments shall disclose the following
details under ‘Statement of Loans And Advances made by the State
Governments’ in the Annual Finance Accounts of the State Government:-
a) The summary of Loans and Advances showing loanee group-wise details;
b) The summary of Loans and Advances showing sector-wise details;
c) The summary of repayment in arrears from loanee entities.
 The financial statements of State Governments shall disclose the following
details under ‘Detailed Statement of Loans And Advances made by the State
Governments’ in the Annual Finance Accounts of the State Government:-
a) A detailed statement of Loans and Advances showing the Major Head and
Minor Head-wise details;
b) The detailed statement of repayment in arrears from loanee entities.
 The financial statements of State Governments shall disclose the details
relating to fresh loans and advances made during the year under additional
disclosures in the Annual Finance Accounts of the State Government.
IGAS-4 : Prior Period Adjustments
 The objective of this standard is to prescribe the manner in which the Prior Period
Adjustments including errors one identified shall be presented and disclosed in the
current period (the financial year) under the cash basis of accounting.
 This Indian Government Accounting Standard (IGAS) 4 - Prior Period Adjustments shall
be effective for the financial statement for the periods commencing from the 1st day
of April, 2023.
 This Standard will apply to Union Government, State Government and Union territory
with Legislature which prepares and presents financial statements under the cash
basis of accounting; which are laid before the Parliament, State Legislature and
Union territory with Legislature, respectively.
 This Standard while taking cognizance of Prior Period Adjustments does not include
transactions such as payment of arrears arising due to increase in salaries or revision
of pension or increase in dearness allowance, etc. in the current period though they
belong to prior periods as these transactions cannot be attributed to any type of
errors or any adjustment in Government Policies.
 This Standard shall not include in its ambit, defaults of loans and grants-in-aid dealt
in IGAS-2 and IGAS-3 exclusively as it is only a process for rectification or adjustment
of financial statements of prior periods.
 Prior Period Adjustments shall be presented and disclosed in accordance with
Annexures 1 to 3 containing the following information, namely:-
a) the nature of the Prior Period Adjustment or error;
b) for each prior period presented, to the extent practicable, the amount of the
adjustment or correction of error for each financial statement line item affected;
c) to the extent practicable, the amount of the error correction or adjustment at the
beginning of the earliest prior period presented; and
d) an explanation if it is not practicable to determine with reasonable efforts the
amounts to be disclosed in clause (b) or clause (c) above.
 With regard to the Union Finance Accounts and State Finance Accounts, these
disclosures as shown in Annexures 1 to 3 of the Standard will be attached.
 The "Summary of Balances" at Annexure 1 is from Statement-5 of the Union
Finance Accounts which reflects total Prior Period Adjustments in Government
Accounts and is derived from Annexure 2 of this Standard.
 The consolidated debit or credit impact on the Heads closed to Balances has to be
taken as credit or debit in Government Accounts of the Summary of Balances
prepared as at the end of each financial year in the Finance Accounts of the Union
or the State Government
 Annexure 2 discloses information related to Government decisions which may
require adjustments and errors in prior period involving all Heads of Accounts
including their Major or Minor head wise details of both the affected heads of
account involved except heads Closed to Government Accounts which may
include cases such as:
(i) conversion of Loans to equity and vice versa, conversion of loans to grants-in-
aid and vice versa etc., arising due to Government decisions which may
impact Head closed to Balances entries thereon;
(ii) even after sanction for conversion of loans to equity and vice versa,
conversion of loans to grants-inaid and vice versa etc., issued (as referred in
clause (i) above) and any entity continues to book expenditure under
previous heads then such cases will be considered as 'Error’;
(iii) cases involving Prior Period Adjustment to transfer balance of discharged
loans from Market Loans bearing Interest to Market Loans not bearing Interest
due to Government decision or sanction;
(iv) cases involving misclassification among two loan heads in the prior period
which after correction may impact their opening balances in the current
period.
 Annexure 3 relates to Impact of Prior Period Adjustments involving Capital Expenditure Heads, if any,
on Capital Expenditure.
 If the Heads closed to Government involves Capital Expenditure Heads, then these cases affect the
Capital Expenditure Heads which needs to be indicated in Annexure 3 and its impact be taken in
appropriate statements of General Purpose Financial Statements of Government
 Prior Period Adjustments shall be considered material if its value can be expressed in clear terms
equal to or greater than rupees one thousand.
Prior Period Adjustments
Annexure 1: Summary of Balances (Government Accounts)
Debit Details Credit
zz* A. Opening Balance zz*
B. Net effect of Prior Period Adjustments
C. Receipt Heads (Revenue Account)
D. Receipt Heads (Capital Account)
E. Expenditure Heads (Revenue Account)
F. Expenditure Heads (Capital Account)
G. Inter –State Settlement
H. Miscellaneous (Net)
I. Transfer to Contingency Fund
J. Closing Balance
xxxx GRAND TOTAL xxxx

*Net effect (Dr. or Cr.) of Prior Period Adjustments in Government Accounts of ‘Statement of Summary of Balance’ (Annexure 1) will be zz (i.e.
difference of xx and yy) given in Annexure 2.
 Details of Prior Period Adjustments
Annexure 2
(₹ in thousands)

Sl T3ype of Heads of Carry Year-wise prior corrections Opening Remar

No Correctio Accounts (Major / Forward Balance as on ks, if
ns Minor Heads wise 'Opening Year of Amount of Reaso 1.4.20.. after any
(Adjustm details of both Balance' as prior Correction n of
ents the affected on period correction
Correc (Current FY)
/Errors) heads of account 1.4.20.. tion
involved are to be (Current
shown, separately FY)
except heads
closed to Govt.
Accounts) Dr. Cr. Dr. Cr. Dr. Cr.

1
2 : Column (2) "Type of Corrections (Adjustments/Errors)" will also include frauds of any value, if any,
Note
which will be mandatorily recorded in Column (9) as ‘fraud’.
 Annexure 3
Adjustment in Prior Period involving all Heads Closed to Balance vis-à-vis Heads Closed to
Government Accounts
Impact of Prior Period Adjustments involving Capital expenditure Heads, if any, on Capital Expenditure
(₹ in thousands)
Sl Major / Minor Descripti Expenditur Year-wise prior corrections Expenditur Remarks,
No Head (Capital on of e as on e incurred if any
Year’s of Amount of Reason of
Expenditure Accounti 31.3.20… prior Correction till end of
Correction
Heads) ng Head before period, if the FY….
Adjustment available After
s adjustmen
ts

Dr. Cr.

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