Mains Paper 3: Economy | Mobilization of resources
From the UPSC perspective, the following things are important:
Prelims level: Ind AS
Mains level: Accounting Standards of RBI
- The Reserve Bank of India (RBI) has deferred the implementation of the new accounting norms, Ind AS, indefinitely, as necessary amendments to the relevant law are yet to be made.
- The move will bring huge relief to the banks which are yet to recognise stressed assets and make necessary provisions as that would require higher capital.
- Indian Accounting Standard is the Accounting standard adopted by companies in India and issued under the supervision of Accounting Standards Board (ASB) which was constituted as a body in the year 1977.
- ASB is a committee under Institute of Chartered Accountants of India (ICAI) which consists of representatives from government department, academicians, other professional bodies viz. ICAI, representatives from ASSOCHAM, CII, FICCI, etc.
- Ind AS governs the accounting and recording of financial transactions as well as the presentation of statements such as profit and loss account and balance sheet of a company.
- For long, there has been a heated debate about Indian companies moving to the globally accepted International Financial Reporting Standards (IFRS) for their accounts.
- But firms have resisted this shift, stating that this will lead too many changes in the capture and reporting of their numbers.
- Ind AS has been evolved as a compromise formula that tries to harmonize Indian accounting rules with the IFRS.
Causes for delay
- The implementation of IndAS for public sector banks requires an amendment to the Banking Regulation Act, 1949.
- The schedule in Banking Regulation Act relating to financial statement disclosures needs to be changed to the IndAS format.
- The other thing is the balance sheet format, for which some changes in the Act are required.