Institute of Chartered Accountants of India (ICAI) has again set new guidelines to inform of twelve Accounting Standards for local bodies. The Institute has been formulating ASLBs since March 2005. This has been done to improve the financial reporting of the Government.
It has now been established that the third tier of Governance i.e. local bodies are moving towards accrual accounting. In order to improve their financial accounting functions and reports, ASLBs have been devised with a set of Accounting Standards.
ASLBs were already having 15 Accounting Standards and now twelve more have been devised in order to form a complete set of Accounting Standards for improving the financial procedures of the local bodies. These ASLBs that have been set for the local bodies are in accordance with the International Public Sector Accounting Standards (IPSASs).
Accounting Standards are a common set of principles, procedures and norms that are to be followed to define the basis of financial accounting policies and practices.
There are many sets of Accounting Standards in use in the world. It ranges from full accrual-based accounting to cash and tax-based accounting. All these are known as Generally Accepted Accountancy Principles or GAAP.
Indian GAAP consists of the Standards that are developed in India keeping in mind the geopolitical and demographic specificity of the Indian terrain. Indian Accounting Standards are developed by the Accounting Standards Board. These are then issued by the ICAI to be notified and implemented further.