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Showing posts with label Institute of Chartered Accountants of India (ICAI). Show all posts
Showing posts with label Institute of Chartered Accountants of India (ICAI). Show all posts

Sunday, 12 July 2015

18:46

ICAI to help Indian Railways move to accrual accounting system

ICAI to help Indian Railways move to accrual accounting system

Apex body of chartered accountants ICAI is closely working with Indian Railways to help migrate its accounting system to the more transparent "accrual" format.

Under the accrual basis, revenues and expenses are reported in an income statement during the period when that particular transaction happens. This would provide a better indication of the particular entity's financial position.

At present, Indian Railways follow the cash system of accounting.

With regard to migrating to the accrual accounting system, the Institute of Chartered Accountants of India (ICAI) has already submitted a detailed proposal to the Indian Railways.

"Discussions with the Indian Railways are at an advanced stage with respect to a pilot project on the implementation of accrual system of accounting addressing the costing aspects at its production unit," ICAI President Manoj Fadnis has said.

The apex body had taken up the agenda of accounting reforms in the Indian Railways in the beginning of this year.

In his July letter to members, Fadnis said that Indian Railways had undertaken a pilot project at its Ajmer Division and Workshop, helping them in migration from cash to accrual system of accounting, which is underway.

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Thursday, 26 February 2015

10:15

Railways Accounting System to switch

New Delhi: : Railway minister Suresh Prabhu is bringing his experience as a chartered accountant to bear on an effort to spruce up the national transporter’s account books in order to make them transparent enough to attract more private investment. As part of the exercise, the cash-strapped railways is looking to move toward an accrual-based system of accounting from the current cash-flow mechanism.

The railways is tying up with the Institute of Chartered Accountants of India (ICAI) to implement the project in some smaller divisions as a pilot project. The new system will throw greater light on the organisation’s finances as it will also cover assets and liabilities. Currently, the railways hardly gets any private investment.

Certainly, it would improve the investor sentiment towards railways as you are aligning your books to the globally accepted norms which would also lead to more transparency and accuracy,” former railway finance commissioner AV Poulose said.

The cash accounting system captures collective income and expenditure but not assets and liabilities.

Accrual-based accounting revenue is reported in the fiscal in which it is earned, irrespective of when it is actually received, and expenses are deducted when they are incurred, regardless of when they are paid.

“We’ll soon be signing a memorandum of understanding with the railways,” ICAI president Manoj Fadnis said. “We expect that the railways would start accrualbased accounting with some smaller divisions and will then gradually do it all zones. The transition at divisional level could take nine months.”

The railways will need to move gradually when it comes to adopting the new system, said a former finance commissioner who did not want to be named. “There has been a cautious and incremental approach even in countries such as the UK and Canada,” the person said.

A study commissioned by the Comptroller and Auditor General of India some years ago had concluded that the railway ministry could easily migrate to accrual accounting with minimal adjustments.

However, this could mean that the railways’ operating ratio, currently at an unhealthy 95%, could deteriorate further as the numbers better reflect reality. But Poulose said such a shift will be beneficial in the long run. “It will improve the financial statements of the railways,” he said.

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