ICAI issues Accounting Standard for Local Bodies

Friday, March 30, 2018

The Committee on Accounting Standards for Local Bodies (CASLB) is formulating Accounting Standards for Local Bodies (ASLBs) since March, 2005 to improve financial reporting for local bodies. So far, the Committee has issued 13 ASLBs including one cash based ASLB that will facilitate transitioning from cash to accrual basis of accounting. The purpose of ASLBs is to ensure that the financial reporting by local bodies reflects how efficiently and effectively Local Bodies have discharged their responsibilities in using public funds.

Moving forward in this direction, the Institute of Chartered Accountants of India has issued Accounting Standard for Local Bodies (ASLB) 2, ‘Cash Flow Statements’.

Application of ASLB 2 will be useful for the Local Bodies to identify their sources of cash inflows, cash outflows, and the cash balance as at the reporting date which will provide users of financial statements with information for both accountability and decision-making purposes. ASLB 2 covers all aspects with respect to preparation and presentation of Statement of Cash Flow in more detail than the existing municipal accrual accounting framework available for use by Local Bodies.

ASLBs are based on the internationally accepted Accounting Standards for Government, i.e., International Public Sector Accounting Standards (IPSASs) and also take into account the India’s unique governance and demographic features. The implementation of the ASLBs which are being issued in dynamic environment, will help in improving the financial reporting of local bodies which will help in augmenting more financial resources to local bodies enabling smooth implementation of smart cities mission of Government of India.