Thaindian News

New Delhi, June 21 (IANS) India will soon introduce a new accounting system to bring better transparency and accountability in financial reporting of government institutions, Finance Minister Pranab Mukherjee said Tuesday.

“The government has already accepted the recommendation of the twelfth Finance Commission for introduction of the accrual accounting in principle,” Mukherjee said after inaugurating a conference of state finance ministers here.

He said the Government Accounting Standards Advisory Board, a part of the Comptroller and Auditor General of India has prepared an operational framework and a detailed road map for implementation of the new accounting standards.

Under the accrual system, transactions are recorded at the time when economic value is created, exchanged, transferred or impaired, irrespective of whether cash is actually exchanged or not.

The present cash-based accounting system lacks an adequate framework for accounting of assets and liabilities, depicting consumption of resources and presenting the full picture of the government’s financial position at any point of time.

“At the heart of the any fiscal management system is the accounting system, which maintains the basic records of government transactions. A robust, comprehensive and transparent accounting system is a must for any government,” the finance minister said.

He said the relevance of accrual accounting has to be looked at from the overall perspective of public financial management.

“It covers a broad spectrum of activities including budget preparation and execution, internal controls, accounting and financial reporting, internal audit, audit by the Comptroller and Auditor General of India, monitoring and reporting arrangements,” Mukherjee said.

“Moreover, accrual accounting has to be assessed against the prevalent accounting practices, for improving the effectiveness of planning, policy making and budgeting process of public resources,” he added.