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Exposure Draft of the Accounting Standard for Local Bodies (ASLB) on 'Financial Reporting under the Cash Basis of Accounting' (Last date of comments: June 30, 2014)
May, 21st 2014
                EXPOSURE DRAFT
   Accounting Standard for Local Bodies (ASLB)



Financial Reporting under the Cash Basis of
                Accounting


     (Last date of comments: June 30, 2014)




                      Issued by
 The Committee on Accounting Standards for Local Bodies

         The Institute of Chartered Accountants of India
                    (Set up by an Act of Parliament)

                           New Delhi
                                   1
                                Exposure Draft
         Accounting Standard for Local Bodies (ASLB)
 `Financial Reporting under the Cash Basis of Accounting'

                      INVITATION TO COMMENTS

The Committee on Accounting Standards for Local Bodies of the Institute of
Chartered Accountants of India invites comments on any aspect of this Exposure
Draft of Accounting Standard for Local Bodies (ASLB) on `Financial Reporting under
the Cash Basis of Accounting'. Comments are most helpful if they indicate the
specific paragraph or group of paragraphs to which they relate, contain a clear
rationale and, where applicable, provide a suggestion for alternative wording.
Comments should be submitted in writing to the Secretary, Committee on
Accounting Standards for Local Bodies, The Institute of Chartered Accountants of
India, ICAI Bhawan, Post Box No. 7100, Indraprastha Marg, New Delhi ­ 110 002,
so as to be received not later than June 30, 2014. Comments can also be sent by e-
mail at caslb@icai.in .


                              EXPOSURE DRAFT

    ACCOUNTING STANDARD FOR LOCAL BODIES: FINANCIAL
     REPORTING UNDER THE CASH BASIS OF ACCOUNTING

(This Accounting Standard for Local Bodies is being issued as an interim measure till
all Local Bodies in India shift to accrual basis of accounting. Since this Standard
contains various disclosure requirements relating to assets and liabilities, it would
facilitate transitioning to accrual basis of accounting for the Local Bodies preparing
general purpose financial statements under the cash basis of accounting as per this
Accounting Standard for Local Bodies. The requirements given in this Standard
including presentation requirements relating to cash receipts and cash payments are
in addition to the requirements, if any, prescribed under the law relevant to local
bodies in the context of cash basis of accounting. Wherever the requirement
prescribed by this Standard are in conflict with the requirements prescribed under the
law, the law will prevail.

This Accounting Standard includes paragraphs set in bold italic type and plain type,
which have equal authority. Paragraphs in bold italic type indicate the main
principles. This Accounting Standard should be read in the context of its objectives
and the Preface to the Accounting Standards for Local Bodies to the extent relevant


                                          2
for cash basis of accounting1.)

Structure of the Standard

This Standard comprises two parts:

· Part 1 of the Accounting Standard for Local Bodies: Financial Reporting under the
Cash Basis of Accounting will be recommendatory in nature in the initial years for use
by the local bodies. This part will be mandatory for Local Bodies in a state from the
date specified in this regard by the State Government concerned2. It sets out the
requirements which are applicable to all entities preparing general purpose financial
statements under the cash basis of accounting. It defines the cash basis of
accounting, establishes requirements for the disclosure of information in the financial
statements and supporting notes, and deals with a number of specific reporting
issues. After becoming mandatory, the requirements in this part of the Standard must
be complied with by entities which claim to be reporting in accordance with the
Accounting Standard for Local Bodies: Financial Reporting under the Cash Basis of
Accounting.

· Part 2 of the Accounting Standard for Local Bodies: Financial Reporting under the
Cash Basis of Accounting identifies additional accounting policies and disclosures
that an entity is encouraged to adopt to enhance its financial accountability and the
transparency of its financial statements. It includes explanations of alternative
methods of presenting certain information.




1
 Attention is specifically drawn to paragraph 4.2 of the `Preface to the Accounting Standards for Local
Bodies', according to which Accounting Standards are intended to apply only to items which are
material.
2
 Reference may be made to the paragraph 7.1 of the `Preface to the Accounting Standards for Local
Bodies' providing the discussion on the compliance with the Accounting Standards for Local Bodies.



                                                  3
      FINANCIAL REPORTING UNDER THE CASH BASIS OF ACCOUNTING

                                           CONTENTS

Introduction

Structure of the Standard

Part 1: Requirements

Objective

                                                                                   Paragraphs

1.1   Scope of the Requirements.......................................... 1.1.1 ­ 1.1.5

1.2   The Cash Basis .......................................................... 1.2.1 ­ 1.2.9

       Definitions.................................................................. 1.2.1 ­ 1.2.9

               Cash Basis of Accounting ..................................... 1.2.2

               Cash Equivalents ................................................1.2.3 ­ 1.2.5

               Cash Controlled by the Reporting Entity ..................1.2.6 ­ 1.2.9

1.3   Presentation and Disclosure Requirements.................... 1.3.1 ­ 1.3.38

       Definitions ..................................................................1.3.1 ­ 1.3.3

       Financial Statements ................................................... 1.3.4 ­ 1.3.11

       Information to be Presented in the Statement of Cash

       Receipts and Payments ................................................1.3.12 ­ 1.3.29

               Classification ..................................................... 1.3.17 ­ 1.3.17A

               Line Items, Headings and Sub-Totals ..................... 1.3.18

               Reporting on a Net Basis ..................................... 1.3.19 ­ 1.3.23

               Payments by Third Parties on Behalf of the Entity ......1.3.24 ­ 1.3.29

       Accounting Policies and Explanatory Notes........................1.3.30 ­ 1.3.38

                Structure of the Notes .........................................1.3.30 ­ 1.3.31

                Selection and Disclosure of Accounting Policies .......1.3.32 ­ 1.3.38

                                                  4
1.4   General Considerations ...............................................1.4.1 ­ 1.4.25

      Reporting Period ..........................................................1.4.1 ­ 1.4.2

      Timeliness ..................................................................1.4.4

      Authorisation Date ........................................................1.4.5 ­ 1.4.6

      Information About the Entity ............................................1.4.7 ­ 1.4.8

      Restrictions on Cash Balances and Access to Borrowings..... 1.4.9 ­ 1.4.12

      Consistency of Presentation ........................................... 1.4.13 ­ 1.4.15

      Comparative Information ................................................ 1.4.16 ­ 1.4.20

      Identification of Financial Statements.................................1.4.21 ­ 1.4.25

1.5   Correction of Errors .................................................... 1.5.1 ­ 1.5.5

1.6   Consolidated Financial Statements .............................. 1.6.1 ­ 1.6.21

      Definitions .................................................................. 1.6.1 ­ 1.6.4

               Economic Entity .................................................. 1.6.2 ­ 1.6.4

      Scope of Consolidated Financial Statements...................... 1.6.5 ­ 1.6.15

      Consolidation Procedures .............................................. 1.6.16 ­ 1.6.19

      Consolidation Disclosures ..............................................1.6.20

      Transitional Provisions..... .............................................1.6.21 - 1.6.21B

1.7   Foreign Currency ....................................................... 1.7.1 ­ 1.7.8

      Definitions................................................................... 1.7.1

      Treatment of Foreign Currency Cash Receipts, Payments

      and Balances ............................................................. 1.7.2 ­ 1.7.8

1.9   Presentation of Budget Information in Financial

      Statement...............................................................................1.9.1 ­ 1.9.48

      Definitions ......................................................... .........1.9.1 ­ 1.9.7

               Approved Budgets ...............................................1.9.2 ­ 1.9.4

                                                      5
               Revised Budget................................................... 1.9.6

               Actual Amounts ...................................................1.9.7

       Presentation of a Comparison of Budget and Actual

       Amounts......................................................................1.9.8 ­ 1.9.28

       Scope ........................................................................1.9.9 ­ 1.9.10

       Comparison of Budget and Actual Amounts........................1.9.11 ­ 1.9.15

       Presentation ............................................................... 1.9.17 ­ 1.9.19

       Level of Aggregation...................................................... 1.9.20 ­ 1.9.22

       Changes from Original to Revised Budget.......................... 1.9.23 ­ 1.9.24

       Comparable Basis ........................................................ 1.9.25 ­ 1.9.28

       Note Disclosures of Budgetary Basis, Period and Scope....... 1.9.33 ­ 1.9.39

       Reconciliation of Actual Amounts on a Comparable Basis

       and Actual Amounts in the Financial Statements .................1.9.41 ­ 1.9.46

1.10   Recipients of External Assistance................................. 1.10.1­1.10.34

       Definitions ..................................................................1.10.1­1.10.7

               External Assistance..............................................1.10.3­1.10.4

               Official Resources................................................1.10.5

               External Assistance Agreements ...........................1.10.6­1.10.7

       External Assistance Received ......................................... 1.10.8­1.10.17

       Undrawn External Assistance.......................................... 1.10.18­1.10.20

       Receipt of Goods or Services.......................................... 1.10.21­1.10.22

       Disclosure of Debt Rescheduled or Cancelled .................... 1.10.23­1.10.24

       Disclosure of Non-Compliance with Significant

       Terms and Conditions....................................................1.10.25­1.10.27

       Transitional Provisions for Section 1.10..............................1.10.30­1.10.34

                                                  6
Appendix 1: Illustration of the Requirements of Part 1 of the Standard



      Part 2: Encouraged Additional Disclosures

2.1   Encouraged Additional Disclosures ..............................2.1.1 ­ 2.1.63

      Definitions .................................................................. 2.1.1 ­ 2.1.2

              Future Economic Benefits or Service Potential........... 2.1.2

      Going Concern ............................................................ 2.1.3 ­ 2.1.5

      Extraordinary Items ...................................................... 2.1.6 ­ 2.1.14

              Distinct from Ordinary Activities ..............................2.1.8

              Not Expected to Recur in the Foreseeable Future....... 2.1.9

              Outside the Control or Influence of the Entity............. 2.1.10

              Identifying Extraordinary Items................................ 2.1.11 ­ 2.1.14

       Administered Transactions ............................................ 2.1.15 ­ 2.1.22

              "Pass-through" Cash flows ....................................2.1.21

              Transfer Payments .............................................. 2.1.22

      Disclosure of Major Classes of Cash Flows ........................2.1.23 & 2.1.30

      Related Party Disclosures .............................................. 2.1.31 ­ 2.1.32

      Disclosures of Assets, Liabilities and Comparison with
      Budgets .....................................................................2.1.33 ­ 2.1.39

              Comparison with Budgets ..................................... 2.1.36 ­ 2.1.39

      Consolidated Financial Statements .................................. 2.1.41 ­ 2.1.48

              Acquisitions and Disposals of Controlled Entities and
              Other Operating Units .......................................... 2.1.44 ­ 2.1.48

      Joint Ventures.............................................................. 2.1.49 ­ 2.1.50

      Assistance Received from

                                                  7
      Non-Governmental Organisations (NGOs)..........................2.1.64­2.1.65

      Recipients of External Assistance..................................... 2.1.66­2.1.93



2.2   Governments and Other Public Sector Entities Intending

      to Migrate to the Accrual Basis of Accounting................ 2.2.1 ­ 2.2.6

      Presentation of the Statement of Cash Receipts
      and Payments..............................................................2.2.2

      Scope of Consolidated Statements ­ Exclusions from the
      Economic Entity .......................................................... 2.2.3 ­ 2.2.6



      Appendix 2: Illustration of Certain Disclosures Encouraged in
      Part 2 of the Standard

      Appendix 3: [Refer Appendix A]

      Appendix 4: Qualitative Characteristics of Financial Reporting

      Appendix 5: Establishing Control of Another Entity for Financial
      Reporting Purposes

      Appendix A: Comparison with IPSAS on `Financial Reporting under
      the Cash Basis of Accounting'




                                                8
                                Exposure Draft

               Accounting Standard for Local Bodies

   FINANCIAL REPORTING UNDER THE CASH BASIS OF
                   ACCOUNTING


PART 1: REQUIREMENTS
Part 1 of this Standard sets out the requirements for reporting under the cash basis of
accounting.

The standards, which have been set in bold italic type, should be read in the context
of the commentary paragraphs in this Standard, which are in plain type, and in the
context of the "Preface to the Accounting Standards for Local Bodies."

Objective
The purpose of this Standard is to prescribe the manner in which general purpose
financial statements should be presented under the cash basis of accounting.

Information about the cash receipts, cash payments and cash balances of an entity is
necessary for accountability purposes and provides input useful for assessments of
the ability of the entity to generate adequate cash in the future and the likely sources
and uses of cash. In making and evaluating decisions about the allocation of cash
resources and the sustainability of the entity's activities, users require an
understanding of the timing and certainty of cash receipts and cash payments.

Compliance with the requirements and encouragements of this Standard will enhance
comprehensive and transparent financial reporting of the cash receipts, cash
payments and cash balances of the entity. It will also enhance comparability with the
entity's own financial statements of previous periods and with the financial statements
of other entities which adopt the cash basis of accounting.

1.1 Scope of the Requirements
  1.1.1    An entity which prepares and presents financial statements under the
           cash basis of accounting, as defined in this Standard, should apply
           the requirements of Part 1 of this Standard in the presentation of its
           general purpose annual financial statements.

  1.1.2    General purpose financial statements are those intended to meet the
           needs of users who are not in a position to demand reports tailored to
           meet their specific information needs. Users of general purpose financial
           statements include taxpayers, members of the legislature, creditors,

                                           9
               suppliers, the media and employees. General purpose financial statements
               include those financial statements that are presented separately or within
               another public document such as an annual report.

     1.1.3     This Standard applies equally to the general purpose financial statements
               of an individual entity and to the consolidated general purpose financial
               statements of an economic entity, i.e., a group of entities comprising the
               controlling entity and controlled entities. It requires the preparation of a
               statement of cash receipts and payments which recognises the cash
               controlled by the reporting entity, and the disclosure of accounting policies
               and explanatory notes. It also requires that amounts settled on behalf of
               the reporting entity by third parties be disclosed on the face of the
               statement of cash receipts and payments.

     1.1.4     An entity whose financial statements comply with the requirements
               of Part 1 of this Standard should disclose that fact. Financial
               statements should not be described as complying with this Standard
               unless they comply with all the requirements in Part 1 of the
               Standard.

     1.1.5     This Standard applies to entities described as Local Bodies in the
               preface to the Accounting Standards for Local Bodies3.

     1.1.6     [Refer Appendix-A]

     1.1.7     [Refer Appendix-A]


1.2 The Cash Basis
Definitions
     1.2.1     The following terms are used in this Standard with the meaning
               specified:

               Cash comprises cash on hand, demand deposits and cash
               equivalents.

               Cash basis means a basis of accounting that recognises transactions
               and other events only when cash is received or paid.

               Cash equivalents are short-term, highly liquid investments that are
               readily convertible to known amounts of cash and which are subject
               to an insignificant risk of changes in value.

               Cash flows are inflows and outflows of cash.


3
    Refer paragraph 1.3 of the `Preface to the Accounting Standards for Local Bodies'.

                                                    10
        Cash payments are cash outflows.

        Cash receipts are cash inflows.

        Control of cash arises when the entity can use or otherwise benefit
        from the cash in pursuit of its objectives and can exclude or regulate
        the access of others to that benefit.

Cash Basis of Accounting

1.2.2   The cash basis of accounting recognises transactions and events only
        when cash (including cash equivalents) is received or paid by the entity.
        Financial statements prepared under the cash basis provide readers with
        information about the sources of cash raised during the period, the
        purposes for which cash was used and the cash balances at the reporting
        date. The measurement focus in the financial statements is balances of
        cash and changes therein. Notes to the financial statements may provide
        additional information about liabilities, such as payables and borrowings,
        and some non-cash assets, such as receivables, inventories, investments
        and property, plant and equipment

Cash Equivalents
1.2.3   Cash equivalents are held for the purpose of meeting short-term cash
        commitments rather than for investment or other purposes. For an
        investment to qualify as a cash equivalent it must be readily convertible to
        a known amount of cash and be subject to an insignificant risk of changes
        in value. Therefore, an investment normally qualifies as a cash equivalent
        only when it has a short maturity of, say, three months or less from the
        date of acquisition. Equity investments are excluded from cash equivalents
        unless they are, in substance, cash equivalents.

1.2.4   Bank borrowings are generally considered to give rise to cash inflows.
        However, where bank overdrafts which are repayable on demand form an
        integral part of an entity's cash management. In these circumstances, bank
        overdrafts are included as a component of cash. A characteristic of such
        banking arrangements is that the bank balance often fluctuates from being
        positive to overdrawn.

1.2.5   Cash flows exclude movements between items that constitute cash
        because these components are part of the cash management of an entity
        rather than increases or decreases in the cash it controls. Cash
        management includes the investment of excess cash on hand in cash
        equivalents.

Cash Controlled by the Reporting Entity
1.2.6   Cash is controlled by an entity when the entity can use the cash for the

                                       11
        achievement of its own objectives or otherwise benefit from the cash and
        exclude or regulate the access of others to that benefit. Cash collected by,
        or appropriated or granted to, an entity which the entity can use to fund its
        operating objectives, acquire capital assets or repay its debt is controlled
        by the entity.

1.2.7   Amounts deposited in the bank account of an entity are controlled by that
        entity. In some cases, cash which an entity:

        a) Collects on behalf of any government (or another entity) such as cesses
           collected on behalf of State Government or water charges collected on
           behalf of Water Board, is deposited in its own bank account before
           transfer to such other government or entity; and

        b) Is to transfer to third parties on behalf of any government (or another
           entity) is initially deposited in its own bank account prior to transfer to
           the authorised recipient.

        In these cases, the entity will control the cash for only the period during
        which the cash resides in its bank account prior to transfer to any
        government controlled bank account, or to third parties. Paragraph 1.4.9
        requires the disclosure of cash balances held by an entity at reporting date
        that are not available for use by the entity or are subject to external
        restrictions. Additional guidance on the treatment of cash flows that an
        entity administers on behalf of other entities is included in paragraphs
        2.1.15 to 2.1.22 of Part 2 of this Standard.

1.2.8   In some cases, a government will manage the expenditure of its individual
        departments and other entities through a centralised treasury function,
        often referred to as a "single account" basis. Under these arrangements,
        individual departments and entities do not control their own bank accounts.
        Rather, government monies are managed by a central entity through a
        "single" government account or series of accounts. The central entity will
        make payments on behalf of individual departments and entities after
        appropriate authorisation and documentation. Consequently, individual
        departments and entities do not control the cash that they have been
        appropriated or otherwise authorised to expend. In these cases, the
        expenditures made by individual departments and entities will be reported
        in a separate column headed "treasury account" (or a similarly described
        column) in the statement of cash receipts and payments in accordance
        with the requirements of paragraph 1.3.24(a).

1.2.9   In some cases, the centralised treasury function will be undertaken by an
        entity which controls the bank account(s) from which payments on behalf
        of the individual operating departments and other entities are made. In
        these cases, transfers to and payments from those bank accounts reflect
        cash receipts and payments which the central entity administers on behalf
                                        12
          of the individual operating departments and other entities. Paragraph
          1.3.13 specifies that cash receipts and payments which arise from
          transactions the entity administers on behalf of other entities and which are
          recognised in the primary financial statements may be reported on a net
          basis. Paragraph 1.4.9 requires the disclosure of cash balances held by an
          entity at reporting date that are not available for use by the entity or are
          subject to external restrictions.

1.3 Presentation and Disclosure Requirements
Definitions
  1.3.1   The following terms are used in this Standard with the meanings
          specified:

          Accounting policies are the specific principles, bases, conventions,
          rules and practices adopted by an entity in preparing and presenting
          financial statements.

          Materiality Information is material if its omission or misstatement
          could influence the decisions or assessments of users made on the
          basis of the financial statements. Materiality depends on the nature
          or size of the item or error judged in the particular circumstances of
          omission or misstatement.

          Reporting date means the date of the last day of the reporting period
          to which financial statements relate.

          Economic entity means a group of entities comprising a controlling
          entity and one or more controlled entities.

  1.3.2   Financial statements result from processing large quantities of transactions
          that are structured by being aggregated into groups according to their
          nature or function. The final stage in the process of aggregation and
          classification is the presentation of condensed and classified data that form
          line items either on the face of the financial statements or in the notes. If a
          line item is not individually material, it is aggregated with other items either
          on the face of the financial statements or in the notes. An item that is not
          sufficiently material to warrant separate presentation on the face of the
          financial statements may nevertheless be sufficiently material that it should
          be presented separately in the notes.

  1.3.3   The principle of materiality provides that the specific disclosure
          requirements of Accounting Standards for Local Bodies need not be met if
          the resulting information is not material.







                                           13
Financial Statements
1.3.4   An entity should prepare and present general purpose financial
        statements which include the following components:

        a) A statement of cash receipts and payments which:

         i. Recognises all cash receipts, cash payments and cash balances
           controlled by the entity; and

         ii. Separately identifies payments made by third parties on behalf of
            the entity in accordance with paragraph 1.3.24 of this Standard;

        b) Accounting policies and explanatory notes; and

        c) When the entity makes publicly available its approved budget, a
           comparison of budget and actual amounts either as a separate
           additional financial statement or as a budget column in the
           statement of cash receipts and payments in accordance with
           paragraph 1.9.8 of this Standard.

1.3.5   When an entity elects to disclose information prepared on a different
        basis from the cash basis of accounting as defined in this Standard
        or otherwise required by paragraphs 1.3.4(a) or 1.3.4(c), such
        information should be disclosed in the notes to the financial
        statements.

1.3.6   The general purpose financial statements comprises the statement of cash
        receipts and payments and other statements that disclose additional
        information about the cash receipts, payments and balances controlled by
        the entity and accounting policies and notes. In accordance with the
        requirements of paragraph 1.3.4(a)(i) above, only cash receipts, cash
        payments and cash balances controlled by the reporting entity will be
        recognised as such in the statement of cash receipts and payments or
        other statements that might be prepared. In accordance with the
        requirements of paragraph 1.3.4(c) above, the general purpose financial
        statements may include a comparison of budget and actual amounts as an
        additional financial statement.

1.3.7   Paragraph 1.3.24 of this Standard requires disclosure on the face of the
        statement of cash receipts and payments of certain payments made by
        third parties on behalf of the reporting entity. Payments made by third
        parties will not satisfy the definition of cash, cash payments and cash
        receipts as defined in paragraph 1.2.1 of this Standard and will not be
        presented as cash receipts and payments controlled by the reporting entity
        in the statement of cash receipts and payments or other statements that
        might be prepared by the reporting entity. Paragraph 1.9.17 of this
        Standard provides that an entity can present a comparison of budget and
                                      14
          actual amounts as additional budget columns in the statement of cash
          receipts and payments only where the financial statements and the budget
          are prepared on a comparable basis. When the budget and financial
          statements are not prepared on a comparable basis, a separate statement
          of comparison of budget and actual amounts is presented.

  1.3.8   Notes to the financial statements include narrative descriptions or more
          detailed schedules or analysis of amounts shown on the face of the
          financial statements, as well as additional information. They include
          information required and encouraged to be disclosed by this Standard, and
          can include other disclosures considered necessary to achieve a fair
          presentation and enhance accountability.

  1.3.9   This Standard does not preclude an entity from including in its general
          purpose financial statements, statements in addition to the statement of
          cash receipts and payments as specified in paragraph 1.3.4 above.
          Consequently, general purpose financial statements may also include
          additional statements which, for example:

          a) Report cash receipts, cash payments and cash balances for major fund
             categories;

          b) Provide additional information about the sources and deployment of
             borrowings and the nature and type of cash payments; or

          c) Provide a comparison of actual and budget amounts. In accordance
             with the requirements of paragraph 1.3.5 above, any additional
             statements will only report cash receipts, payments and balances which
             are controlled by the entity.

  1.3.10 Entities that report using the cash basis of accounting frequently collect
         information on items that are not recognised under cash accounting.
         Examples of the type of information that may be collected include details
         of:

          a) Receivables, payables, borrowings and other liabilities, non-cash assets
             and accruing revenues and expenses;

          b) Commitments and contingent liabilities; and

          c) Performance indicators and the achievement of service delivery
             objectives.

1.3.11    Entities preparing general purpose financial statements in accordance with
          this Standard may disclose such information in the notes to the financial
          statements where that information is likely to be useful to users. Where
          such disclosures are made they should be clearly described and readily
          understandable. If not disclosed in the financial statements themselves,
                                         15
         comparisons with budget may also be included in the notes. Part 2 of this
         Standard encourages inclusion of information about non-cash assets and
         liabilities and a comparison with budget in general purpose financial
         statements. For the purpose of making disclosures related to non-cash
         assets and liabilities, guidance in respect of recognition and measurement
         of such items may be drawn from the following in descending order (a) the
         accrual based Accounting Standards for Local Bodies issued by the ICAI
         (b) existing Accounting Standards issued by the ICAI for commercial
         entities and Guidance Notes on Accounting. Such pronouncements also
         include `Framework for the Preparation and Presentation of Financial
         Statements' (c) International Public Sector Accounting Standards issued
         by International Public Sector Accounting Standards Board.

Information to be Presented in the Statement of Cash Receipts and
Payments

  1.3.12 The statement of cash receipts and payments should present the
         following amounts for the reporting period:

         a) Total cash receipts of the entity showing separately a sub-
            classification of total cash receipts using a classification basis
            appropriate to the entity's operations;

         b) Total cash payments of the entity showing separately a sub-
            classification of total cash payments using a classification based
            on either the nature of the payments or their function appropriate
            to the entity's operations; and

         c) Beginning and closing cash balances of the entity.

  1.3.12A In accordance with paragraph 1.3.12 (b), whichever basis is adopted
         by the entity for sub-classification of total cash payments, the entity
         should disclose the total cash payments as per the other basis of
         classification either as a separate statement or by way of notes.

  1.3.13 Total cash receipts and total cash payments, and cash receipts and
         cash payments for each sub-classification of cash receipt and
         payment, should be reported on a gross basis, except that cash
         receipts and payments may be reported on a net basis when:

         a) They arise from transactions which the entity administers on
            behalf of other parties and which are recognised in the statement
            of cash receipts and payments; or

         b) They are for items in which the receipts and related payments are
            in quick succession, the amounts are large, and the maturities are
            short.
                                       16
1.3.14 Line items, headings and sub-totals should be presented in the
       statement of cash receipts and payments when such presentation is
       necessary to present fairly the entity's cash receipts, cash payments
       and cash balances.

1.3.15 This Standard requires all entities to present a statement of cash receipts
       and payments which discloses beginning and closing cash balances of the
       entity, total cash receipts and total cash payments over the reporting
       period, and major sub-classifications thereof. This will ensure that the
       financial statements provide comprehensive information about the cash
       balances of the entity and changes therein over the period in a format that
       is accessible and understandable to users.

1.3.16 Disclosure of information about such matters as the cash balances of the
       entity, whether cash is generated from taxes, fines, fees, and/or
       borrowings and whether it was expended to meet operating costs, for the
       acquisition of capital assets or for the retirement of debt will enhance
       transparency and accountability of financial reporting. These disclosures
       will also facilitate more informed analysis and assessments of the entity's
       current cash resources and the likely sources and sustainability of future
       cash inflows.

Classification
1.3.17 The sub-classifications (or classes) of total cash receipts and payments
       which will be disclosed in accordance with paragraphs 1.3.12, 1.3.12A and
       1.3.14 are a matter of professional judgment. That judgment will be applied
       in the context of the objective and qualitative characteristics of financial
       reporting under the cash basis of accounting. Appendix 4 of this Standard
       summarises the qualitative characteristics of financial reporting. Total cash
       receipts may be classified to, for example, separately identify cash receipts
       from: taxation or appropriation; grants and donations; borrowings; proceeds
       from the disposal of property, plant and equipment; and other ongoing
       service delivery and trading activities. Total cash payments may be
       classified to, for example, separately identify cash payments in respect of:
       ongoing service delivery activities including transfers to constituents or
       other entities; debt reduction programs; acquisitions of property, plant and
       equipment; and any trading activities. Alternative presentations are also
       possible, for example total cash receipts may be classified by reference to
       their source and cash payments may be sub-classified by reference to
       either the nature of the payments or their function or program within the
       entity, as appropriate.

1.3.17A As mentioned in paragraph 1.3.12 and 1.3.12A, cash payment items may
       be sub-classified using classification based on the nature of payments or
       their function. The two classification basis referred to above are illustrated
       below: The first method is referred to as the nature of payments method.
                                        17
       Payments are aggregated according to their nature (for example,
       purchases of materials, transport costs, wages and salaries), and are not
       reallocated amongst various functions within the entity. An example of a
       classification using the nature of payments method is as follows:

                                        Cash payments
       Wages and salaries                     (X)
       Transport costs                        (X)
       Capital expenditure                    (X)
       Borrowing costs                        (X)
       Other                                  (X)
       Total payments                         (X)


       The second method, referred to as the functional method of classification,
       classifies payments according to the program or purpose for which they
       were made. This presentation often provides more relevant information to
       users, although the allocation of payments to functions can be arbitrary and
       may involve considerable judgment. An example of a functional
       classification of cash payments is as follows:

                                        Cash payments
       Health services                        (X)
       Education services                     (X)
       Capital projects                       (X)
       Finance costs                          (X)
       Other                                  (X)
       Total payments                         (X)


Line Items, Headings and Sub-Totals
1.3.18 Factors to be taken into consideration in determining which line items,
       headings and sub-totals should be presented within each sub-classification
       in accordance with the requirements of paragraph 1.3.14 above include:
       the requirements of other sections of this Standard (for example,
       paragraph 1.10.8 requires that total external assistance received in cash
       during the period be disclosed separately on the face of the Statement of
       Cash Receipts and Payments); assessments of the likely materiality of the
       disclosures to users; and the extent to which necessary explanations and
       disclosures are made in the notes to the financial statements. Paragraphs
       2.1.23 and 2.1.30 of Part 2 of this Standard set out disclosures of
       additional major classes of cash flows that an entity is encouraged to make
       in the notes to the financial statements or in the financial statements
                                      18
        themselves. It is likely that in many, but not necessarily all, cases these
        disclosures will satisfy the requirements of paragraph 1.3.12 above.

Reporting on a Net Basis
1.3.19 This Standard requires the reporting of cash receipts, payments and
       balances on a gross basis except in the circumstances identified by
       paragraph 1.3.13 above. Paragraphs 1.3.20 to 1.3.21 below further
       elaborate on those circumstances in which reporting on a net basis may be
       justified.

1.3.20 Entities may administer transactions and otherwise act as agents on behalf
       of others. These administered and agency transactions may encompass
       the collection of revenues on behalf of another entity, the transfer of funds
       to eligible beneficiaries or the safekeeping of monies on behalf of
       constituents. Examples of such activities may include:

        a) The collection of taxes by the entity for another level of government or
           another entity, not including taxes collected by the entity for its own use
           as part of a tax sharing arrangement;

        b) [Refer Appendix A]

        c) [Refer Appendix A]

        d) Rents collected on behalf of, and paid over to, the owners of properties;

        e) Transfers by a local body to third parties consistent with legislation or
           other government authority; and

        f) [Refer Appendix A]

1.3.21 In many cases, the cash an entity receives in respect of transactions it
       administers as an agent for others will be deposited directly in the bank
       account of, the ultimate recipients of the cash. In these cases, the entity
       will not control the cash it receives in respect of the transactions it
       administers and these cash flows will not form part of the cash receipts,
       cash payments or cash balances of the entity. However, in other cases the
       cash received will be deposited in bank accounts controlled by the entity
       acting as an agent and the receipt and transfer of that cash will be reported
       in the statement of cash receipts and payments of the entity.

1.3.22 In some cases, the amounts of the cash flows arising from administered
       transactions which "pass-through" the bank account of the reporting entity
       may be large relative to the entity's own transactions, and control may
       occur for only a short time before the amounts are transferred to the
       ultimate recipients. This may also be true for other cash flows including for
       example, advances made for, and the repayment of:
                                        19
          a) The purchase and sale of investments; and

          b) Other short-term borrowings, for example, those which have a maturity
             period of three months or less.

  1.3.23 The recognition of these transactions on a gross basis may undermine the
         ability of the financial statements of some entities to communicate
         information about cash receipts and cash payments resulting from the
         entity's own activities. Accordingly, this Standard permits cash receipts and
         cash payments to be offset and reported on a net basis in the statement of
         cash receipts and payments in the circumstances identified in paragraph
         1.3.13 above.

Payments by Third Parties on Behalf of the Entity

  1.3.24 Where, during a reporting period, a third party directly settles the
         obligations of an entity or purchases goods and services for the
         benefit of the entity, the entity should disclose in separate columns
         on the face of the statement of cash receipts and payments:

          a) Total payments made by third parties which are part of the
             economic entity to which the reporting entity belongs, showing
             separately a sub-classification of the sources and uses of total
             payments using a classification basis appropriate to the entity's
             operations; and

          b) Total payments made by third parties which are not part of the
             economic entity to which the reporting entity belongs, showing
             separately a sub-classification of the sources and uses of total
             payments using a classification based on either the nature of the
             payments or their function appropriate to the entity's operation.

          Such disclosure should only be made when during the reporting
          period the entity has been formally advised by the third party or the
          recipient that such payment has been made or has otherwise verified
          the payment.

  1.3.25 Where a government manages the expenditure of its individual
         departments and other entities through a centralised treasury function or a
         "single account" arrangement, payments are made on behalf of those
         departments and entities by a central entity after appropriate authorisation
         and documentation from the department. In these cases, the department
         or other entity does not control cash inflows, cash outflows and cash
         balances. However, the department or other entity benefits from the
         payments being made on its behalf, and knowledge of the amount of these
         payments is relevant to users in identifying the cash resources the
         government has applied to the entity's activities during the period.
                                         20
        Consistent with paragraph 1.3.24(a) above, the department or other entity
        reports in a separate column on the face of the statement of cash receipts
        and payments, the amount of payments made by the central entity on its
        behalf, and the sources and uses of the amount expended sub-classified
        on a basis appropriate for the department or other entity. These
        disclosures will enable users to identify the total amount of payments
        made, the purposes for which they were made and whether, for example,
        the payments were made from amounts allocated or appropriated from
        general revenue or from special purpose funds or other sources.

1.3.26 In some cases, government or other entities may have their own bank
       accounts and will control certain cash inflows, cash outflows and cash
       balances. In these cases, government directions or instructions may also
       require government or an entity to settle certain obligations of another
       entity, or to purchase certain goods or services on behalf of another entity.
       Consistent with paragraph 1.3.24(a) above, the reporting entity reports in a
       separate column on the face of the statement of cash receipts and
       payments the amount, sources and uses of such expenditures made on its
       behalf during the reporting period. This will assist users in identifying the
       total cash resources of the government or other entity which have been
       applied to the entity's activities during the reporting period, and the sources
       and uses of those cash resources.

1.3.27 In some cases, third parties which are not part of the economic entity to
       which the reporting entity belongs purchase goods or services on behalf of
       the entity or settle obligations of the entity. For example, a government
       may fund the operation of a health or education program of a local body by
       directly paying service providers and acquiring and transferring to the local
       body the necessary supplies during the period. Similarly, a government or
       independent aid agency may pay a construction company directly for
       laying or constructing a road for a particular local body rather than
       providing the funds directly to the local body itself. These payments may
       be made by way of a grant or other aid, or as a loan which is to be repaid.
       In these cases, the local body does not receive cash (including cash
       equivalents) directly from, or gain control of a bank account or similar
       facility established for its benefit by, the other entity. Therefore, the amount
       settled or paid on its behalf does not constitute "cash" as defined in this
       Standard. However, the local body benefits from the cash payments being
       made on its behalf.

1.3.28 Paragraph 1.3.24(b) above requires that an entity report in a separate
       column on the face of its statement of cash receipts and payments, the
       amount, sources and uses of expenditures made by third parties which are
       not part of the economic entity to which it belongs. This will enable users to
       identify the total cash resources being applied to the entity's activities
       during the reporting period, and the extent to which those resources are
                                         21
       provided from parties which are, and which are not, part of the economic
       entity to which the reporting entity belongs. In some cases, as at reporting
       date an entity may not be aware that payments have been made on their
       behalf by third parties during the reporting period. This may occur where
       the entity has not been formally advised of the third party payment or
       cannot otherwise verify that an expected payment has occurred.
       Paragraph 1.3.24 above requires that third party payments only be
       disclosed on the face of the statement of cash receipts and payments
       when during the reporting period the entity has been formally advised that
       such payments have been made or otherwise verifies their occurrence.

1.3.29 The sub-classifications (or classes) of sources and uses of third party
       payments which will be disclosed in accordance with paragraphs 1.3.24
       are a matter of professional judgment. The factors that will be considered
       in exercising that judgment are outlined in paragraph 1.3.17.

Accounting Policies and Explanatory Notes
Structure of the Notes
1.3.30 The notes to the financial statements of an entity should:

       a) Present information about the basis of preparation of the financial
          statements and the specific accounting policies selected and
          applied for significant transactions and other events; and

       b) Provide additional information which is not presented on the face
          of the financial statements but is necessary for a fair presentation
          of the entity's cash receipts, cash payments and cash balances.

1.3.31 Notes to the financial statements should be presented in a systematic
       manner. Each item on the face of the statement of cash receipts and
       payments and other financial statements should be cross referenced
       to any related information in the notes.

Selection and Disclosure of Accounting Policies

1.3.32 General purpose financial statements should          present information
       that is:

       a) Understandable;

       b) Relevant to the decision-making and accountability needs of
          users; and

       c) Reliable in that it:

         i. Represents faithfully the cash receipts, cash payments and cash
           balances of the entity and the other information disclosed;
                                      22
         ii. Is neutral, that is, free from bias; and

        iii. Is complete in all material respects.

1.3.33 The quality of information provided in general purpose financial statements
       determines the usefulness of that statement to users. Paragraph 1.3.32
       requires the development of accounting policies to ensure that the financial
       statements provide information that meets a number of qualitative
       characteristics. Appendix 4 of this Standard summarises the qualitative
       characteristics of financial reporting. The appendix also notes that the
       timeliness of information may impact upon both the relevance and
       reliability of the financial information. The maintenance of complete and
       accurate accounting records during the reporting period is essential for
       timely production of the general purpose financial statement.

1.3.34 The accounting policies section of the notes to the financial
       statements should describe each specific accounting policy that is
       necessary for a proper understanding of the financial statements,
       including the extent to which the entity has applied any transitional
       provisions in this Standard.

1.3.35 Inappropriate accounting treatments are not rectified either by
       disclosure of the accounting policies used, or by notes or
       explanatory material.

1.3.36 In deciding whether a specific accounting policy should be disclosed,
       management considers whether disclosure would assist users in
       understanding the way in which transactions and events are reflected in
       the reported cash receipts, payments and balances. An accounting policy
       may be significant even if amounts shown for current and prior periods are
       not material. Paragraph 1.3.4 of this Standard specifies that general
       purpose financial statements include accounting policies and explanatory
       notes. Consequently, the requirements of paragraph 1.3.34 above also
       apply to notes to the financial statements.

1.3.37 Where an entity elects to include in its financial statements any
       disclosures encouraged in Part 2 of this Standard, those disclosures
       should comply with the requirements of paragraph 1.3.32 above.

1.3.38 Part 2 of this Standard encourages the disclosure of additional information
       in notes to the financial statements. Where such disclosures are made,
       they will need to be understandable and to satisfy the other qualitative
       characteristics of financial information.




                                        23
1.4 General Considerations
 Reporting Period

 1.4.1   The general purpose financial statements should be presented at
         least annually. When, in exceptional circumstances, an entity's
         reporting date changes and the annual financial statements are
         presented for a period longer or shorter than one year, an entity
         should disclose in addition to the period covered by the financial
         statements:

         a) the reason(s) for a period other than one year being used; and

         b) the fact that comparative amounts may not be comparable.

 1.4.2   The reporting date is the date of the last day of the reporting period to
         which the financial statements relate. In exceptional circumstances an
         entity may be required to, or decide to, change its reporting date to, for
         example, align the reporting cycle more closely with the budgeting cycle.
         When this is the case, it is important that the reason for the change in
         reporting date is disclosed and that users are aware that the amounts
         shown for the current period and the comparative amounts are not
         comparable.

 1.4.3   [Refer Appendix A]

 Timeliness
 1.4.4   The usefulness of the financial statements are impaired if they are not
         made available to users within a reasonable period after the reporting date.
         An entity should be in a position to issue its financial statements within six
         months of the reporting date, although a timeframe of no more than three
         months is strongly encouraged. Ongoing factors such as the complexity of
         an entity's operations are not sufficient reason for failing to report on a
         timely basis. More specific deadlines are dealt with by legislation and
         regulations.

 Authorisation Date
 1.4.5   An entity should disclose the date when the financial statements
         were authorised for issue and who gave that authorisation. If another
         authority has the power to amend the financial statements after
         issuance, the entity should disclose that fact.

 1.4.6   The authorisation date is the date on which the financial statements have
         received approval from the individual or body like the Council with the
         authority to finalise those statements for issue. It is important for users to
         know when the financial statements were authorised for issue, because
                                         24
        the financial statements do not reflect events after this date.

Information about the Entity
1.4.7   An entity should disclose the following if not disclosed elsewhere in
        information published with the financial statements:

        a) The domicile and legal form of the entity, and the jurisdiction
           within which it operates;

        b) A description of the nature of the entity's operations and principal
           activities;

        c) A reference to the relevant legislation governing the entity's
           operations, if any; and

        d) The name of the controlling entity and the ultimate controlling
           entity of the economic entity (where applicable, if any).

1.4.8   The disclosure of the information required by paragraph 1.4.7 will enable
        users to identify the nature of the entity's operations and gain an
        understanding of the legislative and institutional environment within which
        it operates. This is necessary for accountability purposes and will assist
        users in understanding and evaluating the financial statements of the
        entity.

Restrictions on Cash Balances and Access to Borrowings
1.4.9   An entity should disclose in the notes to the financial statements
        together with a commentary, the nature and amount of:

        a) Significant cash balances that are not available for use by the
           entity;

        b) Significant cash balances that are subject to external restrictions;
           and

        c) Undrawn borrowing facilities that may be available for future
           operating activities and to settle capital commitments, indicating
           any restrictions on the use of these facilities.

1.4.10 Cash balances held by an entity would not be available for use by the
       entity, for example, in the case of court attachments or when the balances
       are not available for general use by the entity.

1.4.11 Cash balances controlled by an entity may be subject to restrictions which
       limit the purpose or timing of their use. This situation often exists when an
       entity receives a grant or donation which must be used for a specific
       purpose. It may also exist where, at reporting date, an entity holds in its
                                        25
        own bank accounts cash it has collected for other parties in its capacity as
        an agent but not yet transferred to those parties. Although these balances
        are controlled by the entity and reported as a cash balance of the entity,
        separate disclosure of the amount of such items is helpful to readers.

1.4.12 Undrawn borrowing facilities represent a potential source of cash for an
       entity. Disclosure of the amount of these facilities by significant type allows
       readers to assess the availability of such cash, and the extent to which the
       entity has made use of them during the reporting period.

Consistency of Presentation
1.4.13 The presentation and classification of items in the financial
       statements should be retained from one period to the next unless:

        a) A significant change in the nature of the operations of the entity or
           a review of its financial statements presentation demonstrates that
           the change will result in a more appropriate presentation of events
           or transactions; or

        b) A change in presentation is required by an amendment to this
           Standard or a change in legislation.

1.4.14 A major restructuring of service delivery arrangements; the creation of a
       new, or termination of a major existing entity; a significant acquisition or
       disposal; or a review of the overall presentation of the entity's general
       purpose financial statements might suggest that the statement of cash
       receipts and payments or other individual financial statements should be
       presented differently. For example, an amalgamation of local bodies into
       one local body. In this case, the presentation of the financial statements
       would undergo changes.

1.4.15 Only if the revised structure is likely to continue, or if the benefit of an
       alternative presentation is clear, should an entity change the presentation
       of its financial statements. When such changes in presentation are made,
       an entity reclassifies its comparative information in accordance with
       paragraph 1.4.19. Where an entity complies with this Accounting Standard
       for Local Bodies, a change in presentation to comply with legislative or
       government requirements is permitted as long as the revised presentation
       is consistent with the requirements of this Standard.

Comparative Information
1.4.16 Unless a provision of this Standard permits or requires otherwise,
       comparative information should be disclosed in respect of the
       previous period for all numerical information required by this
       Standard to be disclosed in the financial statements, except in
       respect of the financial statements for the reporting period to which
                                        26
        this Standard is first applied. Comparative information should be
        included in narrative and descriptive information when it is relevant
        to an understanding of the current period's financial statements.

1.4.17 This Standard requires the presentation of a statement of cash receipts
       and payments and specifies certain disclosures that are required to be
       made in that statement and notes thereto. This Standard does not
       preclude the preparation of additional financial statements. Part 2 of this
       Standard encourages certain additional disclosures. Where financial
       statements in addition to the statement of cash receipts and payments are
       prepared or disclosures encouraged by Part 2 of this Standard are made,
       the disclosure of comparative information is also encouraged.

1.4.18 In some cases, narrative information provided in the financial statements
       for the previous period(s) continues to be relevant in the current period.
       For example, details of a legal dispute, the outcome of which was
       uncertain at the last reporting date and is yet to be resolved, may be
       disclosed in the current period. Users benefit from knowing that the
       uncertainty existed at the last reporting date, and the steps that have been
       taken during the period to resolve the uncertainty.

1.4.19 When the presentation or classification of items required to be
       disclosed in the financial statements is amended, comparative
       amounts should be reclassified, unless it is impracticable to do so, to
       ensure comparability with the current period, and the nature, amount
       of, and reason for any reclassification should be disclosed. When it is
       impracticable to reclassify comparative amounts, an entity should
       disclose the reason for not reclassifying and the nature of the
       changes that would have been made if amounts were reclassified.

1.4.20 Circumstances may exist when it is impracticable to reclassify comparative
       information to achieve comparability with the current period. For example,
       data may not have been collected in the previous period(s) in a way which
       allows reclassification, and it may not be practicable to recreate the
       information. In such circumstances, the nature of the adjustments to
       comparative amounts that would have been made is disclosed.

Identification of Financial Statements
1.4.21 The financial statements should be clearly identified and
       distinguished from other information in the same published
       document.

1.4.22 This Standard applies only to the financial statements, and not to other
       information presented in an annual report or other document. Therefore, it
       is important that users are able to distinguish information that is prepared
       using this Standard from other information that may be useful to users but
                                       27
         that is not the subject of this Standard.

 1.4.23 Each component of the financial statements should be clearly
        identified. In addition, the following information should be
        prominently displayed and repeated when it is necessary for a proper
        understanding of the information presented:

         a) The name of the reporting entity or other means of identification;

         b) Whether the financial statements cover the individual entity or the
            economic entity;

         c) The reporting date or the period covered by the financial
            statements, whichever is appropriate to the related component of
            the financial statements;

         d) The reporting currency; and

         e) The level of precision used in the presentation of figures in the
         financial statements.

 1.4.24 The requirements in paragraph 1.4.23 are normally met by presenting
        page headings and abbreviated column headings on each page of the
        financial statements. Judgment is required in determining the best way of
        presenting such information. For example, when the financial statements
        are read electronically, separate pages may not be used. In such cases,
        the items identified in paragraph 1.4.23 are presented frequently enough to
        ensure a proper understanding of the information given.

 1.4.25 Financial statements are often made more understandable by presenting
        information in thousands, lakhs, millions or crores of units of the reporting
        currency. This is acceptable as long as the level of precision in
        presentation is disclosed and relevant information is not lost.

1.5 Correction of Errors
 1.5.1   When an error arises in relation to a cash balance reported in the
         financial statements, the amount of the error that relates to prior
         periods should be reported by adjusting the cash at the beginning of
         the period.

 1.5.2   An entity should disclose in the notes to the financial statements the
         following:

         a) The nature of the error; and

         b) The amount of the correction.

         c) [Refer Appendix A]
                                          28
  1.5.3   Errors in the preparation of the financial statements of one or more prior
          periods may be discovered in the current period. Errors may occur as a
          result of mathematical mistakes, mistakes in applying accounting policies,
          misinterpretation of facts, fraud or oversights. When an error is identified in
          respect of a previous period, the opening balance of cash is adjusted to
          correct the error and the financial statements are presented as if the error
          had been corrected in the period in which it was made. An explanation of
          the error and its adjustment is included in the notes.

  1.5.4   [Refer Appendix A]

  1.5.5   This Standard requires the presentation of a statement of cash receipts
          and payments, and does not preclude the presentation of other financial
          statements. Where financial statements in addition to the statement of
          cash receipts and payments are presented, the requirements in
          paragraphs 1.5.1 and 1.5.2 for correction of errors will also apply to those
          statements.

1.6 Consolidated Financial Statements
Definitions
  1.6.1   The following terms are used in this Standard with the meanings
          specified:

          Consolidated financial statements are the financial statements of an
          economic entity presented as that of a single entity.

          Control of an entity is the power to govern the financial and operating
          policies of another entity so as to benefit from its activities.

          Controlled entity is an entity that is under the control of another
          entity (known as the controlling entity).

          Controlling entity is an entity that has one or more controlled entities.

Economic Entity
  1.6.2 The term "economic entity" is used in this Standard to define, for financial
        reporting purposes, a group of entities comprising the controlling entity and
        any controlled entities.

  1.6.3    Other terms sometimes used to refer to an economic entity include
          "administrative entity," "financial reporting entity," "consolidated entity" and
          "group."

  1.6.4   An economic entity may include entities with both social policy and
          commercial objectives. For example, a local body XYZ (controlling entity)
          may control by way of majority voting power in an entity ABC (controlled

                                           29
        entity) that provides services of health care for a nominal charge, as well
        as another entity PQR (controlled entity) that provides transport services
        on a commercial basis. The group of entities comprising local body XYZ
        and the controlled entities, viz., ABC and PQR, is the economic entity.

Scope of Consolidated Financial Statements
1.6.5   A controlling entity, other than a controlling entity identified in
        paragraph 1.6.7, should issue consolidated financial statements
        which consolidates all controlled entities, other than those referred to
        in paragraph 1.6.6.

1.6.6   A controlled entity should be excluded from consolidation when it
        operates under severe external long-term restrictions which prevent
        the controlling entity from benefiting from its activities. Examples of
        severe external long term restrictions could be when the resources of a
        controlled entity are assigned for natural calamity relief for a long period of
        time. During such period the controlling entity cannot benefit from the
        activities of the controlled entity.

1.6.7   A controlling entity that is a wholly owned controlled entity need not
        present consolidated financial statements provided users of such
        financial statements are unlikely to exist or their information needs
        are met by the controlling entity's consolidated financial statements.

1.6.8   [Refer Appendix A]

1.6.9   Users of the financial statements of a controlling entity are usually
        concerned with, and need to be informed about, the cash resources
        controlled by the economic entity as a whole. This need is served by
        consolidated financial statements which present financial information about
        the economic entity as a single entity without regard for the legal
        boundaries of the separate legal entities.

1.6.10 Paragraph 1.3.4 of this Standard requires that a reporting entity prepare a
       statement of cash receipts and payments. Consistent with the
       requirements of paragraph 1.6.5 above, the statement of cash receipts and
       payments prepared by a reporting entity which is a controlling entity, will
       consolidate the cash receipts, cash payments and cash balances of all the
       entities it controls. The note disclosures required by Part 1 of this Standard
       will also be presented on a consolidated basis. Appendix 5 of this Standard
       illustrates the application of the concept of control in determining the
       financial reporting entity.

1.6.11 This Standard does not preclude the preparation of financial statements
       additional to the statement of cash receipts and payments. Those
       additional statements may, for example, disclose additional information

                                        30
        about receipts and payments related to certain fund groups or provide
        additional details about certain types of cash flows. Part 2 of this Standard
        identifies additional disclosures that an entity is encouraged to make. The
        additional statements and disclosures will also report consolidated
        information where appropriate.

1.6.12 For financial reporting purposes, the reporting entity (financial reporting
       entity) may consist of a number of controlled entities including
       departments, agencies and special purpose vehicles. Determining the
       scope of the financial reporting entity can be difficult due to the large
       number of potential entities. For this reason, financial reporting entities are
       often determined by legislation. In some cases, the financial reporting
       entity required by this Standard may differ from the reporting entity
       specified by legislation and additional disclosures may be necessary to
       satisfy the legislative reporting requirements.

1.6.13 A controlling entity that is itself wholly owned by another entity (such as an
       agency which is wholly owned by a local body), is not required to present
       consolidated financial statements when such statements are not required
       by its controlling entity and the needs of other users may be best served by
       the consolidated financial statements of its controlling entity. However,
       many controlling entities that are either wholly owned or virtually wholly
       owned represent key sectors or activities of the local body. In these cases,
       the information needs of certain users may not be served by the
       presentation of a consolidated financial statements at the level of ultimate
       controlling entity alone, and the purpose of this Standard is not to exempt
       such entities from preparing consolidated financial statements.

1.6.14 [Refer Appendix A]

1.6.15 In some instances, an economic entity will include a number of
       intermediate controlling entities. For example, whilst a department of
       health may be the controlling entity, there may be intermediate controlling
       entities at the local or regional health authority level. Accountability and
       reporting requirements prescribed under the laws relevant to local bodies
       may specify which entities are required to (or exempted from the
       requirement to) prepare a consolidated financial statement. Where there is
       no requirement for an intermediate controlling entity to prepare
       consolidated financial statements but users of general purpose financial
       statements of the economic entity are likely to exist, intermediate
       controlling entities are encouraged to prepare and publish such a
       statement.




                                        31
Consolidation Procedures
1.6.16 The following consolidation procedures apply:

        a) Cash balances and cash transactions between entities within the
           economic entity should be eliminated in full;

        b) When the financial statements used in a consolidation are drawn
           up to different reporting dates, adjustments should be made for
           the effects of significant cash transactions that have occurred
           between those dates and the date of the controlling entity's
           financial statements. In any case, the difference between the
           reporting dates should be no more than six months; and




        c) Consolidated financial statements should be prepared using
           uniform accounting policies for like cash transactions. If it is not
           practicable to use uniform accounting policies in preparing the
           consolidated financial statements, that fact should be disclosed
           together with the proportions of the items in the consolidated
           financial statements to which the different accounting policies
           have been applied.

1.6.17 The consolidation procedures outlined in paragraph 1.6.16 provide the
       basis for preparing consolidated financial statements for all the entities
       within the economic entity as a single economic unit.

1.6.18 The consolidated financial statements should only reflect transactions
       between the economic entity and other entities external to it. Accordingly,
       transactions between entities within the economic entity are eliminated to
       avoid double-counting. For example, a local body may sell a physical asset
       to a joint venture which it controls. Because the net cash effect on the
       reporting entity is zero, this transaction needs to be eliminated to avoid
       overstating the cash receipts and cash payments of the reporting entity i.e.
       the local body. .

1.6.19 Individual entities within the economic entity may adopt different policies
       for the classification of cash receipts and cash payments and the
       presentation of their financial statements. Cash receipts or cash payments
       arising from like transactions are classified and presented in a uniform
       manner in the consolidated financial statements where practicable.

Consolidation Disclosures
1.6.20 The following disclosures should be made in consolidated financial
       statements:

        a) A listing of significant controlled entities including the name, the
           activity or purpose for which the controlled entity operates; and
                                       32
         b) The reasons for not consolidating a controlled entity.

 Transitional Provisions
 1.6.21 Controlling entities that adopt this Standard may have large numbers of
        controlled entities with significant volumes of transactions between those
        entities. Accordingly, it may be difficult to identify all the transactions and
        balances that need to be eliminated for the purpose of preparing the
        consolidated financial statements of the economic entity. For this reason,
        paragraph 1.6.21A provides relief, during the transitional period, from the
        requirement to eliminate all cash balances and transactions between
        entities within the economic entity. However, paragraph 1.6.21B requires
        that entities which apply the transitional provision should disclose the fact
        that not all balances and transactions between entities within the economic
        entity have been eliminated.

 1.6.21A Entities are not required to comply with the requirement in
        paragraph 1.6.16(a) concerning the elimination of cash balances and
        transactions between entities within the economic entity for reporting
        periods beginning on a date within three years following the date of
        first adoption of this Standard.

 1.6.21B Where entities apply the transitional provision in paragraph
        1.6.21A, they should disclose the fact that not all balances and
        transactions between entities within the economic entity have been
        eliminated.

Foreign Currency

 Definitions
 1.6.22 The following terms are used in this Standard with the meanings
        specified:

         Closing rate is the spot exchange rate at the reporting date.

         Exchange difference is the difference resulting from reporting the
         same number of units of a foreign currency in the reporting currency
         at different exchange rates.

         Exchange rate is the ratio for exchange of two currencies.

         Foreign currency is a currency other than the reporting currency of
         an entity.

         Reporting currency is the currency used in presenting the financial
         statements.

                                         33
Treatment of Foreign Currency Cash Receipts, Payments and
Balances

1.6.23 Cash receipts and payments arising from transactions in a foreign
       currency should be recorded in an entity's reporting currency by
       applying to the foreign currency amount the exchange rate between
       the reporting currency and the foreign currency at the date of the
       receipts and payments.

1.6.24 Cash balances held in a foreign currency should be reported using
       the closing rate.

1.7.4   [Refer Appendix A]

1.7.5   An entity should disclose the amount of exchange differences
        included as reconciling items between opening and closing cash
        balances for the period.

1.7.6   [Refer Appendix A]

1.7.7   Entities may have transactions in foreign currencies such as borrowing an
        amount of foreign currency or purchasing goods and services where the
        purchase price is designated as a foreign currency amount. In order to
        include foreign currency transactions in financial statements the entity must
        express cash receipts, payments and balances in reporting currency terms.

1.7.8   Unrealised gains and losses arising from changes in foreign currency
        exchange rates are not cash receipts and payments. However, the effect of
        exchange rate changes on cash held in a foreign currency is reported in the
        statement of cash receipts and payments in order to reconcile cash at the
        beginning and the end of the period. This amount is presented separately
        from cash receipts and payments and includes the differences, if any, had
        those cash receipts, payments and balances been reported at end-of-
        period exchange rates.

1.8.1   [Refer Appendix A]

1.8.2-1.8.3 [Shifted to Consolidated Financial Statements section as
          paragraphs 1.6.21A & 1.6.21B]




                                        34
1.9 Presentation of Budget Information in Financial
   Statements
  Definitions
  1.9.1 The following terms are used in this Standard with the meanings
        specified:

        Accounting basis means the accrual or cash basis of accounting as
        defined in the Accounting Standards for Local Bodies.

        Annual budget means an approved budget for one year. It does not
        include published forward estimates or projections for periods
        beyond the budget period.

        Appropriation is an authorisation granted by the appropriate
        authority or government to allocate funds for specific purposes.

        Approved budget means the expenditure authority derived from laws,
        government orders and other decisions related to the anticipated
        revenue or receipts for the budgetary period.

        Budgetary basis means the accrual, cash or other basis of
        accounting adopted in the budget that has been duly approved.

        Comparable basis means the actual amounts presented on the same
        accounting basis, same classification basis, for the same entities and
        for the same period as the approved budget.

        Revised budget is the original budget adjusted for all reserves, carry
        over amounts, transfers, allocations, supplemental appropriations,
        and other authorised legislative or similar authority, changes
        applicable to the budget period.

        Original budget is the initial approved budget for the budget period.

  Approved Budgets

  1.9.2 An approved budget as defined by this Standard reflects the anticipated
        revenues or receipts expected to arise in the annual period based on
        current plans and the anticipated economic conditions during that budget
        period, and expenses or expenditures approved by the appropriate
        authority. An approved budget is not a forward estimate or a projection
        based on assumptions about future events and possible management
        actions which are not necessarily expected to take place. Similarly, an
        approved budget differs from prospective financial information which may
        be in the form of a forecast, a projection or a combination of both ­ for
        example, a one year forecast plus a five year projection.
                                      35
 1.9.3 The critical feature of approved budgets is that the authority to withdraw
       funds from its own bank account or the government treasury for agreed and
       identified purposes is provided by the appropriate authority. The approved
       budget establishes the expenditure authority for the specified items. The
       expenditure authority is generally considered the legal limit within which an
       entity must operate.

 1.9.4 If a budget is not approved prior to the beginning of the budget period, the
       original budget is the budget that has been approved for a specified period
       within the year by the appropriate authority.

Revised Budget
 1.9.5 [Refer Appendix A]

 1.9.6 Supplemental appropriations may be necessary where the original budget
       did not adequately envisage expenditure requirements arising from, for
       example, natural disasters. In addition, there may be a shortfall in budgeted
       receipts during the period, and internal transfers between budget heads or
       line items may be necessary to accommodate changes in funding priorities
       during the fiscal period. Consequently, the funds allotted to an entity or
       activity may need to be cut back from the amount originally appropriated for
       the period in order to maintain fiscal discipline. The revised budget includes
       all such authorised changes or amendments.

Actual Amounts
1.9.7   This Standard uses the term actual or actual amounts to describe the
        amounts that result from execution of the budget.

Presentation of a Comparison of Budget and Actual Amounts
1.9.8   Subject to the requirements of paragraph 1.9.17, an entity that makes
        publicly available its approved budget(s) should present a
        comparison of the budget amounts for which it is held publicly
        accountable and actual amounts either as a separate additional
        financial statement or as additional budget columns in the statement
        of cash receipts and payments currently presented in accordance
        with this Standard. The comparison of budget and actual amounts
        should present separately:

        a) The original and revised budget amounts;

        b) The actual amounts on a comparable basis; and

        c)   By way of note disclosure, an explanation of material differences
             between the budget for which the entity is held publicly
             accountable and actual amounts, unless such explanation is

                                       36
             included in other public documents issued in conjunction with the
             financial statements, and a cross reference to those documents is
             made in the notes.

  Scope
  1.9.9   This Standard applies to all entities that are required to make publicly
          available their approved budget(s). This Standard does not require
          approved budgets to be made publicly available, nor does it require that
          the financial statements disclose information about, or include
          comparisons with, approved budgets which are not made publicly
          available.

  1.9.10 In some cases, approved budgets will be compiled to encompass all the
         activities controlled by an entity. In other cases, separate approved budgets
         may be required to be made publicly available for certain activities, groups
         of activities or entities included in the financial statements of the entity. This
         may occur where, for example, a local body's financial statements
         encompass agencies or programs that have operational autonomy and
         prepare their own budgets. This Standard applies to all entities which
         present financial statements when approved budgets for the entity, or
         components thereof, are made publicly available.
Comparison of Budget and Actual Amounts
  1.9.11 Presentation in the financial statements of the original and revised budget
         amounts and actual amounts on a comparable basis with the budget,
         which is made publicly available, will complete the accountability cycle by
         enabling users of the financial statements to identify whether resources
         were obtained and used in accordance with the approved budget.
         Differences between the actual amounts and the budget amounts, whether
         original or revised budget (often referred to as the "variance" in
         accounting), may also be presented in the financial statements for
         completeness.

  1.9.12 An explanation of the material differences between actual amounts and the
         budget amounts will assist users in understanding the reasons for material
         departures from the approved budget for which the entity is held publicly
         accountable.

  1.9.13 An entity may be required, to make publicly available its original budget, its
         revised budget or both its original and revised budget. In circumstances
         where both original and revised budget are required to be made publicly
         available, the legislation, regulation or other authority will often provide
         guidance on whether explanation of material differences between actual
         and the original budget amounts, or actual and the revised budget
         amounts, is required in accordance with paragraph 1.9.8(c). In the
         absence of any such guidance, material differences may be determined by
                                            37
        reference to, for example, differences between actual and original budget
        to focus on performance against original budget, or differences between
        actual and revised budget to focus on compliance with the revised budget.

1.9.14 In many cases, the revised budget amount and the actual amount will be
       the same. This is because budget execution is monitored over the
       reporting period and the original budget progressively revised to reflect
       changing conditions, changing circumstances and experiences during the
       reporting period. Paragraph 1.9.23 of this Standard requires the disclosure
       of an explanation of the reasons for changes between the original and
       revised budget. That disclosure, together with the disclosures required by
       paragraph 1.9.8 above, will ensure that entities which make publicly
       available their approved budget(s) are held publicly accountable for their
       performance against, and compliance with, the relevant approved budget.

1.9.15 Reports like city management reports, annual administrative reports,
       management discussion and analysis, or other public reports which
       provide commentary on the performance and achievements of the entity
       during the reporting period, including explanations of any material
       differences from budget amounts, are often issued in conjunction with the
       financial statements. In accordance with paragraph 1.9.8(c) of this
       Standard, explanation of material differences between actual and budget
       amounts will be included in notes to the financial statements unless
       included in other public reports or documents issued in conjunction with
       the financial statements, and the notes to the financial statements identify
       the reports or documents in which the explanation can be found.

1.9.16 [Refer Appendix A]

Presentation
1.9.17 An entity should present a comparison of budget and actual amounts
       as additional budget columns in the statement of cash receipts and
       payments only where the financial statements and the budget are
       prepared on a comparable basis.

1.9.18 Comparisons of budget and actual amounts may be presented in a
       separate financial statement ("statement of comparison of budget and
       actual amounts" or a similarly titled statement). Alternatively, where the
       financial statements and the budget are prepared on a comparable basis ­
       that is, on the same basis of accounting for the same entity and reporting
       period, and adopt the same classification structure ­ additional columns
       may be added to the statement of cash receipts and payments presented
       in accordance with this Standard. These additional columns will identify
       original and revised budget amounts and, if the entity so chooses,
       differences between the budget and actual amounts.

                                       38
1.9.19 When the budget and financial statements are not prepared on a
       comparable basis, a separate statement of comparison of budget and
       actual amounts is presented. In these cases, to ensure that readers do not
       misinterpret financial information which is prepared on different bases, the
       financial statements could usefully clarify that the budget and the
       accounting bases differ and the statement of comparison of budget and
       actual amounts is prepared on the budget basis.

Level of Aggregation
1.9.20 Budget documents may provide great detail about particular activities,
       programs or entities. These details are often aggregated into broad
       classes under common budget heads, budget classifications or budget
       headings for presentation to, and approval by, the appropriate authority.
       The disclosure of budget and actual information consistent with those
       broad classes and budget heads or headings will ensure that comparisons
       are made at the level of legislative or other authoritative body oversight.

1.9.21 In some cases, the detailed financial information included in approved
       budgets may need to be aggregated for presentation in financial
       statements in accordance with the requirements of this Standard. Such
       aggregation may be necessary to avoid information overload and to reflect
       relevant levels of legislative or other authoritative body oversight.
       Determining the level of aggregation will involve professional judgment.
       That judgment will be applied in the context of the objective of this
       Standard and the qualitative characteristics of financial reporting as
       identified in paragraph 1.3.32 of this Standard.

1.9.22 Additional budget information, including information about service
       achievements, may be presented in documents other than financial
       statements. Part 2 of this Standard encourages the inclusion in the financial
       statements of a cross reference to such documents.

Changes from Original to Revised Budget
1.9.23 An entity should present an explanation of whether changes between
       the original and revised budget are a consequence of reallocations
       within the budget, or of other factors, either:

        a) By way of note disclosure; or

        b) In a report issued before, at the same time as, or in conjunction
           with the financial statements, and should include a cross reference
           to the report in the notes to the financial statements.

1.9.24 The revised budget includes all changes approved by the appropriate
       authority to revise the original budget. Consistent with the requirements of
       this Standard, notes to the financial statements or a separate report issued
                                       39
             before, in conjunction with or at the same time as the financial statements,
             will include an explanation of changes between the original and revised
             budget. That explanation will include whether, for example, changes arise
             as a consequence of reallocations within the original budget parameters or
             as a consequence of other factors, such as changes in the overall budget
             parameters, including changes in government policy. Such disclosures are
             often made in a management report or similar report on operations issued
             in conjunction with, but not as part of, the financial statements. Such
             disclosures may also be included in budget outcome reports issued by
             governments to report on budget execution. Where such disclosures are
             made in a separate report rather than in the notes to the financial
             statements, the notes will include a cross reference to that report.

    Comparable Basis
    1.9.25   All comparisons of budget and actual amounts should be presented
             on a comparable basis to the budget.

    1.9.26 The comparison of budget and actual amounts will be presented on the
           same accounting basis, same classification basis and for the same entities
           and period as for the approved budget. This will ensure that the disclosure
           of information about compliance with the budget in the financial statements
           is on the same basis as the budget itself. In some cases, this may mean
           presenting a budget and actual comparison on a different basis of
           accounting, for a different group of activities, and with a different
           presentation or classification format than that adopted for the financial
           statements.

    1.9.27 Financial statements consolidate entities and activities controlled by the
           entity. As noted in paragraph 1.9.10, separate budgets may be approved
           and made publicly available for individual entities or particular activities
           that make up the consolidated financial statements. Where this occurs, the
           separate budgets may be recompiled for presentation in the financial
           statements in accordance with the requirements of this Standard. Where
           such recompilation occurs, it will not involve changes or revisions to
           approved budgets. This is because this Standard requires a comparison of
           actual amounts with the approved budget amounts.

    1.9.28 Entities may adopt different bases of accounting for the preparation of their
           financial statements and for their approved budgets. For example, in some,
           albeit rare, cases an entity may adopt the modified cash basis4 for its
4
  The modified cash basis of accounting recognises as disbursements and receipts in a reporting
period those amounts expended and received respectively, during the reporting period plus those
cash flows in a specified period following the reporting date (e.g., 60 days) that relate to events or
transactions occurring during the reporting period. In effect, under this basis the books are kept open
at the year end to identify payables and receivables that relate to events or transactions occurring
during the reporting period.
                                                  40
       financial statements and the cash basis for its budget. However, the budget
       entity and financial reporting entity will often be the same. Similarly, the
       period for which the budget is prepared and the classification basis adopted
       for the budget will often be reflected in financial statements. This will
       ensure that the accounting system records and reports financial information
       in a manner which facilitates the comparison of budget and actual data for
       management and for accountability purposes ­ for example, for monitoring
       progress of execution of the budget during the budget period and for
       reporting to the government, the public and other users on a relevant and
       timely basis.
1.9.29-1.9.32     [Refer Appendix A]


Note Disclosures of Budgetary Basis, Period and Scope
1.9.33 An entity should explain in notes to the financial statements the
       budgetary basis and classification basis adopted in the approved
       budget.

1.9.34 There may be differences between the accounting basis, for example,
       cash basis used in preparation and presentation of the budget and the
       modified cash basis used in the financial statements. These differences
       may occur when the accounting system and the budget system compile
       information from different perspectives ­ the budget may focus on cash
       flows, while the financial statements report cash receipts and cash
       payments plus certain accruals and commitments in notes to financial
       statements.

1.9.35 Formats and classification schemes adopted for presentation of the
       approved budget may also differ from the formats adopted for the financial
       statements. An approved budget may classify items on the same basis as
       is adopted in the financial statements, for example, expenditures by
       economic nature (compensation of employees, supplies and consumables,
       grants and transfers, etc) or function (health, education, etc). Alternatively,
       the budget may classify items by specific programs (for example, poverty
       reduction or control of contagious diseases) or program components linked
       to performance outcome objectives (for example, length of motorable
       roads, pass percentage of students), which differ from classifications
       adopted in the financial statements. Further, a revenue budget for ongoing
       operations (for example, education or health) may be approved separately
       from a capital budget (for example, infrastructure or buildings).

1.9.36 Disclosure of the budgetary basis and classification basis adopted for the
       preparation and presentation of approved budgets will assist users to
       better understand the relationship between the budget and accounting
       information disclosed in the financial statements.

                                        41
1.9.37 An entity should disclose in notes to the financial statements the
       period of the approved budget.

1.9.38 Financial statements are presented at least annually. Entities approve
       budgets for an annual period. Disclosure of the period covered by the
       approved budget where that period differs from the reporting period
       adopted for the financial statements will assist the user of those financial
       statements to better understand the relationship of the budget data and
       budget comparison to the financial statements. Disclosure of the period
       covered by the approved budget where that period is the same as the
       period covered by the financial statements will also serve a useful
       confirmation role, particularly where interim budgets and financial
       statements and reports are also prepared.

1.9.39 An entity should identify in notes to the financial statements the
       entities included in the approved budget.

1.9.40 [Refer Appendix A]


Reconciliation of Actual Amounts on a Comparable Basis and
Actual Amounts in the Financial Statements
1.9.41 The actual amounts presented on a comparable basis to the budget
       in accordance with paragraph 1.9.25 should, where the financial
       statements and the budget are not prepared on a comparable basis,
       be reconciled to total cash receipts and total cash payments,
       identifying separately any basis, timing and entity differences. The
       reconciliation should be disclosed on the face of the statement of
       comparison of budget and actual amounts or in the notes to the
       financial statements.

1.9.42 Differences between the actual amounts identified consistent with the
       comparable basis and the actual amounts recognised in the financial
       statements can be classified into the following:

        a) Budgetary basis differences, which occur when the approved budget is
           prepared on a basis other than the accounting basis. For example,
           where the budget is prepared on the cash basis and the financial
           statements are prepared on the modified cash basis;

        b) Timing differences, which occur when the budget period differs from the
           reporting period reflected in the financial statements; and

        c) Entity differences, which occur when the budget omits programs or
           entities that are part of the entity for which the financial statements are
           prepared.

                                        42
       There may also be differences in formats and classification schemes
       adopted for presentation of financial statements and the budget.

1.9.43 The reconciliation required by paragraph 1.9.41 of this Standard will
       enable the entity to better discharge its accountability obligations by
       identifying major sources of difference between the actual amounts on a
       budget basis and the total cash receipts and total cash payments
       recognised in the statement of cash receipts and payments. This Standard
       does not preclude reconciliation of each major total and subtotal, or each
       class of items, presented in a comparison of budget and actual amounts
       with the equivalent amounts in the financial statements.

1.9.44 For entities adopting the cash basis of accounting for preparation of both
       the budget documents and the financial statements, a reconciliation will not
       be required where the budget is prepared for the same period,
       encompasses the same entities and adopts the same presentation format
       as the financial statements. For other entities adopting the same basis of
       accounting for the budget and the financial statements, there may be a
       difference in presentation format, reporting entity or reporting period ­ for
       example, the approved budget may adopt a different classification or
       presentation format to the financial statements. A reconciliation would be
       necessary where there are presentation, timing or entity differences
       between the budget and the financial statements prepared on the same
       accounting basis.

1.9.45 The disclosure of comparative information in respect of the previous
       period in accordance with the requirements of this Standard is not
       required.

1.9.46 This Standard requires a comparison of budget and actual amounts to be
       included in the financial statements of entities which make publicly
       available their approved budget(s). It does not require the disclosure of a
       comparison of actual amounts of the previous period with the budget of
       that previous period, nor does it require that the related explanations of
       differences between the actuals and budget of that previous period be
       disclosed in the financial statements of the current period.

1.9.47 [Refer Appendix A]

1.9.48 [Refer Appendix A]




                                       43
1.10 Recipients of External Assistance
Definitions
1.10.1 The following terms are used in this Standard with the meaning
       specified:

       Assigned External Assistance means any external assistance,
       including external assistance grants, technical assistance,
       guarantees or other assistance, received by an entity that is assigned
       by the recipient to another entity.

       Bilateral External Assistance Agencies are agencies established
       under national law, regulation or other authority of a nation for the
       purpose of, or including the purpose of, providing some or all of that
       nation's external assistance.

       External Assistance means all official resources which the recipient
       can use or otherwise benefit from in pursuit of its objectives.

       Multilateral External Assistance Agencies are all agencies
       established under international agreement or treaty for the purpose
       of, or including the purpose of, providing external assistance.

       Non-Governmental Organisations (NGOs) are all foreign or national
       agencies established independent of control by any government for
       the purpose of providing assistance to government(s), government
       agencies, other organisations or to individuals.

       Official Resources means all loans, grants, technical assistance,
       guarantees or other assistance provided or committed under a
       binding agreement by multilateral or bilateral external assistance
       agencies or by a government, or agencies of a government, other
       than to a recipient of the same nation as the government or
       government agency providing, or committing to provide, the
       assistance.

       Re-Lent External Assistance Loans means external assistance loans
       received by an entity that are lent by the recipient to another entity.

1.10.2 Different organisations may use different terminology for external
       assistance or classes of external assistance. For example, some
       organisations may use the term external aid or aid, rather than external
       assistance. In these cases, the different terminology is unlikely to cause
       confusion. However, in other cases, the terminology may be substantially
       different. In these cases, preparers, auditors and users of general purpose
       financial statements will need to consider the substance of the definitions
       rather than just the terminology in determining whether the requirements of
                                      44
        this Standard apply.

External Assistance
1.10.3 External assistance is defined in paragraph 1.10.1 as all official resources
       which the recipient can use or otherwise benefit from in pursuit of its
       objectives. Official resources as defined in paragraph 1.10.1 does not
       encompass assistance provided by non-governmental organisations
       (NGOs), even if such assistance is provided under a binding agreement.
       Assistance received from NGOs, whether in the form of cash donations or
       third party settlements, will be presented in the financial statements and
       disclosed in explanatory notes in accordance with the requirements of
       Sections 1.1 to 1.9 of Part 1 of this Standard. Paragraph 2.1.64
       encourages, but does not require, application of the disclosures required
       by paragraphs 1.10.1 to 1.10.27 to assistance received from NGO's where
       practicable.

1.10.4 NGOs as defined in paragraph 1.10.1 are foreign or national agencies
       established independent of control by any government. In some rare
       cases, it may not be clear whether the donor organisation is a bilateral or
       multilateral external assistance agency or a NGO, and therefore
       independent of control by any government. Where such a donor
       organisation provides, or commits to provide, assistance under the terms
       of a binding agreement, the distinction between official resources as
       defined in this Standard and resources provided by a NGO may become
       blurred. In these cases, professional judgment will need to be exercised to
       determine whether the assistance received satisfies the definition of
       external assistance and, therefore, is subject to the disclosure
       requirements specified in this section.

Official Resources
1.10.5 Official resources are defined in paragraph 1.10.1 to be resources
       committed under a binding agreement by multilateral or bilateral external
       assistance agencies or governments or government agencies, other than
       to a recipient of the same nation as the provider of the assistance.
       Governments as referred to in the definition of official resources may
       include national, state, provincial or local governments in any nation.
       Therefore, assistance provided by, for example, a national government or
       state government agency of one nation to a state or local government of
       another nation is external assistance as defined in this Standard. However,
       assistance provided by a national or state government to another level of
       government within the same nation does not satisfy the definition of official
       resources, and therefore is not external assistance.

External Assistance Agreements
1.10.6 Governments seeking particular forms of external assistance may
                                       45
       participate in formal meetings or rounds of meetings with donor
       organisations. These may include meetings to discuss the government's
       macroeconomic plans and its development assistance needs, or bilateral
       discussions at governmental level regarding finance military assistance,
       balance of payments and other forms of assistance. They may also include
       separate meetings to consider the country's emergency assistance needs
       as those needs arise. Initial discussions may result in statements of intent
       or pledges which are not binding on the government or the external
       assistance agency. However, subsequently binding agreements may be
       set in place to make available assistance loans or grants provided
       restrictions on access to the funds, if any, are met and agreed conditions
       or covenants are adhered to by the recipient entity. External assistance
       agreements may also include the provision of goods or services in-kind to
       the recipient.

1.10.7 External assistance agreements may provide for the entity to:

       a) Draw down in cash the full proceeds of the loan or grant or a tranche of
          the loan or grant;

       b) Seek reimbursement(s) for qualifying payments made by the entity to a
          third party settling in cash an obligation(s) of the entity, as defined by
          the loan or grant agreement; or

       c)   Request the external assistance agency to make payments directly to a
            third party settling in cash an obligation(s) of the recipient entity as
            defined by the loan or grant agreement, including an obligation of the
            recipient entity for goods or services provided or to be provided by a
            NGO.

External Assistance Received
1.10.8 The entity should disclose separately on the face of the Statement of
       Cash Receipts and Payments, total external assistance received in
       cash during the period.

1.10.9 The entity should disclose separately, either on the face of the
       Statement of Cash Receipts and Payments or in the notes to the
       financial statements, total external assistance paid by third parties
       during the period to directly settle obligations of the entity or
       purchase goods and services on behalf of the entity, showing
       separately:

       a) Total payments made by third parties which are part of the
          economic entity to which the reporting entity belongs; and

       b) Total payments made by third parties which are not part of the
          economic entity to which the reporting entity belongs. These
                                        46
          disclosures should only be made when, during the reporting
          period, the entity has been formally advised by the third party or
          the recipient that such payment has been made, or has otherwise
          verified the payment.

1.10.10 Where external assistance is received from more than one provider,
        the significant classes of providers of assistance should be
        disclosed separately, either on the face of the Statement of Cash
        Receipts and Payments or in the notes to the financial statements.

1.10.11 Where external assistance is received in the form of loans and
        grants, the total amount received during the period as loans and the
        total amount received as grants should be shown separately, either
        on the face of the Statement of Cash Receipts and Payments or in the
        notes to the financial statements.

1.10.12 External assistance may be provided directly to the reporting entity in the
        form of cash. Alternatively, a third party may provide external assistance
        by settling an obligation of the reporting entity or purchasing goods and
        services for the benefit of the reporting entity. In some cases:

        a) The third party may be part of the economic entity to which the reporting
           entity belongs ­ this will occur where, for example, external assistance
           in the form of cash is provided for the benefit of a program run by a
           particular department of a local body where the local body manages the
           expenditure of its individual departments and other entities through a
           centralised treasury function or a "single account" arrangement. In these
           cases, the treasury or other central agency receives the external
           assistance and makes payments of amounts provided by way of
           external assistance on behalf of the department, after appropriate
           authorisation and documentation from the department; or

        b) The third party may not be part of the economic entity to which the
           reporting entity belongs ­ this will occur where, for example, an aid
           agency makes a debt repayment to a regional development bank on
           behalf of a local body, pays a construction company directly for building
           a road for a particular local body rather than providing the funds directly
           to the local body itself, or funds the operation of a health or education
           program of an independent local body by directly paying service
           providers and acquiring on behalf of the local body the necessary
           supplies during the period.

1.10.13 Disclosure of the amount of external assistance received in the form of
        cash and in the form of third party payments made on behalf of the entity
        will indicate the extent to which the operations of the reporting entity are
        funded from taxes and/or internal sources, or are dependent upon external
        assistance. Consistent with the requirements of paragraph 1.3.24 of this
                                        47
        Standard, external assistance paid by third parties should only be
        disclosed in the statement of Cash Receipts and Payments when the
        reporting entity has been formally advised that such payments have been
        made during the reporting period or otherwise verifies their occurrence.
        Disclosure of the significant classes of external assistance received is also
        encouraged, but not required (see paragraph 2.1.66).

1.10.14 Disclosure of the significant classes of providers of assistance such as, for
        example, multilateral donors, bilateral donors, international assistance
        organisations, national assistance organisations or other major classes as
        appropriate for the reporting entity will identify the extent of the entity's
        dependence on particular classes of providers and will be relevant to an
        assessment of the sustainability of the assistance. This Standard does not
        require the disclosure of the identity of each provider of assistance or the
        amount of assistance each provides. However, disclosure of the amount
        provided by each provider in the currency provided is encouraged (see
        paragraph 2.1.70).

1.10.15 External assistance is often denominated in a currency other than the
        reporting currency of the entity. Cash receipts, or payments made by third
        parties on behalf of the entity arising from transactions in a foreign
        currency, will be recorded or reported in the entity's reporting currency by
        applying to the foreign currency amount the exchange rate between the
        reporting currency and the foreign currency at the date of the receipts or
        payments in accordance with paragraph 1.7.2 of this Standard.

1.10.16 Governments usually retain the exclusive right to enter into external
        assistance agreements with multilateral or bilateral external assistance
        agencies. In many of these cases, the project or activity is implemented by
        another entity. The government may re-lend or assign the funds received
        to the other entity. The terms and conditions of the re-lent or assigned
        funds may be the same as received from the external assistance agency
        or may be different than initially received. In some cases, a small fee or
        interest spread is charged to cover the government's administrative costs.
        An entity which enters into an external assistance agreement and passes
        the benefits as well as the terms and conditions of the agreement through
        to another entity by way of a subsidiary agreement will recognise or report
        the external assistance as it is received. It will also record payments to the
        second entity in accordance with its normal classification of payments
        adopted in the financial statements.

1.10.17 Where the initial recipient of a loan or grant passes the proceeds and the
        terms and conditions of the loan or grant through to another entity, the
        initial entity may simply be administering the loan or grant on behalf of the
        end user. Netting of transactions where the terms and conditions are
        substantially the same may be appropriate in the financial statements of
                                        48
        the administrator, in accordance with the provisions of paragraph 1.3.13 of
        this Standard.

Undrawn External Assistance
1.10.18 The entity should disclose in the notes to the financial statements the
        balance of undrawn external assistance loans and grants available at
        reporting date to fund future operations when, and only when, the
        amount of the loans or grants available to the recipient is specified in
        a binding agreement and the satisfaction of any substantial terms
        and conditions that determine, or affect access to, that amount is
        highly likely, showing separately in the reporting currency:

        a) Total external assistance loans; and

        b) Total external assistance grants.

       Significant terms and conditions that determine, or affect access to,
       the amount of the undrawn assistance should also be disclosed.

1.10.19 The amount of external assistance currently committed under a binding
        agreement(s) but not yet drawn may be significant. In some cases, the
        amount of the assistance loan(s) or grant(s) is specified in a binding
        agreement and the satisfaction of any substantial conditions that need to
        be satisfied to access that amount is highly likely. This may occur in
        respect of undrawn balances of project funding for projects currently under
        development where conditions have been, and continue to be, satisfied
        and the project is anticipated to continue under the terms of the
        agreement. Where such undrawn balances are provided in a foreign
        currency, opening and closing balances will be determined by applying to
        the foreign currency amount the exchange rate on the reporting dates in
        accordance with the provisions of paragraph 1.7.3 of this Standard.

1.10.20 In some cases, a donor entity may express an intention to provide ongoing
        assistance to the reporting entity, but not specify in a binding agreement
        the amount of the assistance loan(s) or grant(s) to be provided in future
        periods ­ for example, this may occur where the amount of assistance to
        be provided is dependent on the annual budget of the donor or other
        sources of funding that may be secured by the recipient. In other cases,
        the amount of assistance may be specified but be subject to terms and
        conditions, the satisfaction of which cannot be assessed as being highly
        likely at the reporting date ­ for example, this may occur in respect of
        emergency assistance to be provided subject to the amount of assistance
        provided by other agencies. In these cases, disclosure of the undrawn
        amounts is not made. In some cases, professional judgment may need to
        be exercised in assessing whether the satisfaction of the substantial terms
        and conditions that determine, or effect access to, the external assistance
                                       49
        is highly likely.

Receipt of Goods or Services
1.10.21 Where an entity elects to disclose the value of external assistance
        received in the form of goods or services, it should also disclose in
        the notes to the financial statements the basis on which that value is
        determined.

1.10.22 Paragraph 2.1.90 of this Standard encourages an entity to disclose
        separately in the notes to the financial statements the value of external
        assistance received in the form of goods or services. Paragraph 1.3.38 of
        this Standard explains that where encouraged disclosures are included in
        notes to the financial statements, they will need to be understandable and
        to satisfy the other qualitative characteristics of financial information.
        Where an entity elects to make such disclosures, it is required to disclose
        in the notes to the financial statements the basis on which that value is
        determined. Such disclosure will enable users to assess whether, for
        example, the value is determined by reference to donor valuation, fair
        value determined by reference to prices in the world or domestic markets,
        by management assessment or on another basis.

Disclosure of Debt Rescheduled or Cancelled
1.10.23 An entity should disclose in the notes to the financial statements the
        amount of external assistance debt rescheduled or cancelled during
        the period, together with any related terms and conditions.

1.10.24 An entity experiencing difficulty in servicing its external assistance debt
        may seek renegotiation of the terms and conditions of the debt or
        cancellation of the debt. Disclosure of the amount of external assistance
        debt rescheduled or cancelled, together with any related terms and
        conditions will alert users of the financial statements that such
        renegotiation or cancellation has occurred. This will provide useful input to
        assessments of financial condition of the entity and changes therein.

Disclosure of Non Compliance with Significant Terms and
Conditions
1.10.25 An entity should disclose, in notes to the financial statements,
        significant terms and conditions of external assistance loan or grant
        agreements or guarantees that have not been complied with during
        the period when non compliance resulted in cancellation of the
        assistance or has given rise to an obligation to return assistance
        previously provided. The amount of external assistance cancelled or
        to be returned should also be disclosed.

1.10.26 External assistance agreements will usually include terms and conditions
                                        50
        that must be complied with for ongoing access to assistance funds, as well
        as some procedural terms and conditions.

1.10.27 The disclosures required by paragraph 1.10.25 will enable readers to
        identify the instances of non compliance that have adversely affected the
        funds that are available to support the entity's future operations. It will also
        provide input to assessments of whether re-establishment of compliance
        with the agreement may occur in the future. Disclosure of non-compliance
        with significant terms and conditions in other cases is also encouraged, but
        not required (see paragraph 2.1.83).



Transitional Provisions for Section 1.10
1.10.28 [Refer Appendix A]

1.10.29 [Refer Appendix A]

1.10.30 Entities are not required to disclose separately in the notes to the
        financial statements the balance of undrawn external assistance as
        specified in paragraph 1.10.18 for a period of two years from the
        date of first application of this Standard.

1.10.31 When an entity applies the transitional provisions in paragraph
        1.10.30, it should disclose that it has done so.

1.10.32 In the first year of application of the requirements of this Standard, an
        entity may not have the information necessary to enable it to disclose the
        closing balance of undrawn external assistance as required by paragraph
        1.10.18.

1.10.33 Paragraph 1.10.30 provides relief from the requirement to apply
        paragraph 1.10.18 for a period of two years from initial application of that
        paragraph.

1.10.34 To ensure users are informed of the extent to which the requirements of
        this Standard have been complied with, paragraph 1.10.31 requires that
        entities that make use of these transitional provisions disclose that they
        have done so.




                                         51
                                                                          Appendix 1


Illustration of the Requirements of Part 1 of the Standard
This Appendix is illustrative only and does not form part of the Standard. It illustrates
an extract of a Statement of Receipts and Payments and relevant note disclosures for
an entity that has received external assistance loans and grants during the current
and preceding periods. Its purpose is to assist in clarifying the meaning of the
standards by illustrating their application in the preparation and presentation of
general purpose financial statements under the cash basis of accounting. The
receipts and payments heads in these formats may be modified to make them
consistent with those given in the budget of the local body.

                 CONSOLIDATED FINANCIAL STATEMENTS FOR LOCAL BODY A

              CONSOLIDATED STATEMENT OF CASH RECEIPTS AND PAYMENTS

                                FOR YEAR ENDED MARCH 31, 20XX

                                         (RECEIPTS)


                 Note               20XX-XX                             20XX-XX­1

(in thousands            Receipts/ Treasury Payments Receipts/ Treasury Payments
of currency             (Payments) Account   by third (Payments) Account by third
units)                   controlled          parties   controlled        parties
                          by entity                     by entity
RECEIPTS
 Taxes &
 Cess


   Property                 x            -            -         x           -           -
   tax
   Other                                 -            -                     -           -
   taxes                    x                                   x
   Cesses                   x            -            -         x           -           -


   Assigned                 x            -            -         x           -           -
   revenue
                                x        -            -             x       -           -
 External         10
 Assistance
  Multilateral              x            x            x         x          x           x
  Agencies
  Bilateral                 x            x            x         x          x           x
  Agencies
                                x            x            x         x           x           x
 Other
 Grants and
                                                 52
 Aid
 Central                  x       x            x       x       x       x
 Government
 State                    x       x            x       x       x       x
 Government
                              x       x            x       x       x       x
 Other
 Borrowings
  Receipts        3
  from
  borrowing
  - From                  x                            x
 banks
  - From                  x                            x
 Government
  - From                  x                            x
 financial
 institutions
  - others
                          x                            x

                              x                            x
  Capital
  Receipts
    Proceeds          ¤       x                            x
    from
    disposal of
    property,
    plant and
    equipment
 Investments
   Proceeds                   x                            x
   from
   maturity of
   investments
  Trading
  Activities
    Receipts                  x                            x
    from
    trading
    activities
  Other           4           x                    x       x               x
  receipts
Total                         x       x            x       x       x       x
receipts




                                          53
                                                       (PAYMENTS)


                                   Note                20XX-XX                                        20XX-XX­1
(in thousands of                   Receipts/  Treasury Payments                       Receipts/  Treasury Payments
currency units)                    (Payments) Account by third                        (Payments) Account by third
                                   controlled          parties                        controlled          parties
                                   by entity                                          by entity
PAYMENTS
 Operations
  Wages, salaries and                     (x)            (x)          (x)                (x)             (x)          (x)
  employee benefits
  Supplies and                            (x)            (x)          (x)                (x)             (x)          (x)
  Consumables
  Operations &                            (x)            (x)          (x)                (x)             (x)          (x)
  Maintenance
  expenses
                                                (x)            (x)          (x)                (x)             (x)          (x)
 Transfers
  Grants                                  (x)            (x)           -                 (x)             (x)           -
  Other transfer                          (x)            (x)           -                 (x)             (x)           -
  payments
                                                (x)            (x)            -                (x)             (x)            -
 Capital Expenditures
  Purchase/construction                   (x)            (x)          (x)                (x)             (x)          (x)
  of property, plant and
  equipment
  Infrastructure assets                         (x)            (x)            -                (x)             (x)            -
                                                (x)            (x)          (x)                (x)             (x)          (x)

 Annuities                                      (x)            (x)            -                (x)             (x)            -

 Loan and Interest
 Repayments
  Repayment of                            (x)            (x)           -                 (x)             (x)           -
  borrowings
  Interest payments                       (x)            (x)           -                 (x)             (x)           -
                                                (x)            (x)            -                (x)             (x)            -
 Investments                                     (x)            (x)               -             (x)             (x)               -
  Other payments               5                (x)            (x)          (x)                (x)             (x)          (x)
Total payments                                  (x)            (x)          (x)                (x)             (x)          (x)
Increase/(Decrease) in                          (x)            (x)            -                (x)             (x)            -
Cash
Cash at beginning of           2                (x)            (x)         N/A*                (x)             (x)          N/A
year
Increase/(Decrease) in                          (x)            (x)          N/A                (x)             (x)          N/A
Cash
Cash at end of year            2                (x)            (x)          N/A                (x)             (x)          N/A
     * N/A = Not applicable.




                                                           54
STATEMENT OF COMPARISON OF BUDGET AND ACTUAL AMOUNT (BUDGET
                    VARIANCE STATEMENT)
               For Local Body X for the Year Ended March 31, 20XX
                          Budget Approved on the Cash Basis
                        (Classification of Payments by Functions)

(in thousands of            *Actual       Revised        Original    **Difference:
currency units)            Amounts        Budget         Budget        Revised
                                                                      Budget and
                                                                        Actual

CASH INFLOWS
Taxation                      x                 x           x             x
Government grants             x                 x           x             x
Scheme grants                 x                 x           x             x
International                 x                 x           x             x
agencies
Other grants and aid          x                 x           x             x
Borrowing                     x                 x           x             x
Disposal of plant and         x                 x           x             x
equipment
Trading activities            x                 x           x             x
Other receipts                x                 x           x             x
Total receipts                x                 x           x             x

CASH OUTFLOWS
Health                       (x)            (x)            (x)            (x)
Education                    (x)            (x)            (x)            (x)
Storm Water Drains           (x)            (x)            (x)            (x)
Welfare                      (x)            (x)            (x)            (x)
Horticulture                 (x)            (x)            (x)            (x)
Basic Services for           (x)            (x)            (x)            (x)
Urban Poor
Engineering                  (x)            (x)            (x)            (x)
Projects                     (x)            (x)            (x)            (x)
Other                        (x)            (x)            (x)            (x)
Total payments               (x)            (x)            (x)            (x)
NET CASH FLOWS                x              x              x              x
* Actual amounts encompass both cash and third party settlements.
** The "Difference..." column is not required. However, a comparison between actual
and the original or the revised budget, clearly identified as appropriate, may be
included.

                                           55
ADDITIONAL FINANCIAL STATEMENTS (OPTIONAL)

Additional financial statements may be prepared to provide details of amounts included in the
consolidated statement of cash receipts and payments: for example, to disclose information
by major funds or to disclose expenditures by major functions or programs, or to provide
details of sources of borrowings. Columns disclosing budgeted amounts may also be
included.

STATEMENT     OF CASH RECEIPTS BY FUND CLASSIFICATION

                                     20XX                      20XX­1


(in thousands of currency units)                 Treasury                      Treasury
                                    Receipts     Account       Receipts        Account
                                   controlled                controlled by
                                    by entity                   entity
RECEIPTS
  General Fund                         x             x            x                 x
  Water Supply Fund                    x             x            x                 x
  Special Funds                        x             x            x                 x
  Trading Funds                        x             x            x                 x
Total receipts                         x             x            x                 x



BORROWINGS


                      Note             20XX                                  20XX­1
(in thousands of           Cash       Treasury Resulting Receipts   Treasury Resulting
currency units)            Receipts   Account from       controlled Account from
                           controlled          Payments by entity            Payments
                           by entity           by third                      by third
                                               parties                       parties
BORROWINGS
 Domestic                      x            x            -         x            x         -
 Commercial
 Institution
 Offshore                      x            x            -         x            x         -
 Commercial
 Institution
 Development                   x            x            x         x            x         x
 Banks and Similar
 Lending Agencies
Total borrowings       3       x            x            x         x            x         x


                                                56
STATEMENT OF PAYMENTS BY PROGRAMS/ACTIVITIES/FUNCTION OF LOCAL BODY

                            Note         20XX                     20XX­1
(in thousands of currency   Payments Treasury Payments Payments Treasury Payments
units)                      controlled Account by third controlled Account by third
                             by entity         parties   by entity         parties
PAYMENTS/EXPENDITURE
Operating Account
 Education Services                x     x        x        x         x        x
 Health Services                   x     x        x        x         x        x
 Welfare                           x     x        x        x         x        x
 Engineering                       x     x        x        x         x        x
 Horticulture                      x     x        x        x         x        x
 Basic Services for Urban          x     x        x        x         x        x
 Poor
 General Administration            x    x         x        x         x        x
 Other                             x    x         x        x         x        x
Total                              x    x         x        x         x        x
payments/expenditure

PAYMENTS/EXPENDITURE
Capital Account
 Education Services                x    x         x        x         x        x
 Health Services                   x    x         x        x         x        x
 Welfare                           x    x         x        x         x        x
 Projects                          x    x         x        x         x        x
 Storm Water Drains                x    x         x        x         x        x
 General Administration            x    x         x        x         x        x
 Other                             x    x         x        x         x        x
Total                              x    x         x        x         x        x
payments/expenditure
Total Operating and                x    x         x        x         x        x
Capital
Accounts




                                         57
Notes to the Financial Statements
1. Accounting Policies

Basis of preparation
The financial statements have been prepared in accordance with ASLB on Financial
Reporting under the Cash Basis of Accounting.

The accounting policies have been applied consistently throughout the period.

Reporting entity
The financial statements are for the ______ local body. The financial statements encompass
the reporting entity as specified in the relevant legislation (______________). This comprises:

i.    Departments of the local body; and

ii.   Joint ventures that are under the control of the local body.

The consolidated financial statements include all entities controlled during the year. A list of
significant controlled entities is shown in Note 7 to the financial statements.

Certain receipts and payments of the local body are made by the State Treasury. Payments
made on this account in respect of the local body are disclosed in the Treasury Account
column in the Statement of Cash Receipts and Payments and other financial statements.

Payments by Third Parties
The local body also benefits from goods and services purchased on its behalf as a result of
cash payments made by third parties during the period by way of loans and contributions. The
payments made by the third parties do not constitute cash receipts or payments by the local
body but do benefit the local body. They are disclosed in the Payments by third parties
column in the Consolidated Statement of Cash Receipts and Payments and other financial
statements.

Reporting currency
The reporting currency is Indian Rupees.

2. Cash
Cash comprises cash on hand, demand deposits and cash equivalents. Demand deposits and
cash equivalents consist of balances with banks and short term investments. Cash included in
the statement of cash receipts and payments comprise the following amounts:




                                                 58
                                              (Rs. in thousands)    20XX       20XX­1
Cash on hand and balances with banks                                     x              x
Short-term investments                                                   x              x
                                                                         x              x


Included in the amount stated above is Rs. XX have been provided by the International
Agency XX that is restricted to the construction of road infrastructure.

3. Borrowings
Borrowings comprise cash inflows from banks, similar lending agencies and commercial
institutions and amounts owing in respect of non-cash assistance provided by third parties.

4. Other Receipts
Included in other receipts are fees, fines, penalties and miscellaneous receipts.

5. Other Payments/Expenditure
Included in other payments are miscellaneous payments which cannot be classified under
specific heads.

6. Undrawn Borrowing Facilities Other than Undrawn External Assistance
(See note 10 for undrawn external assistance)

                                             (Rs. in thousands)    20XX       20XX­1
Movement in Undrawn Borrowing Facilities
Undrawn borrowing facilities at 1.4.XX                               x              x
Additional loan facility                                             x              x
Total available                                                      x              x
Amount drawn                                                         (x)            (x)
Facility closure/cancellations                                       (x)            (x)
Undrawn borrowing facilities at 31.3.XX.                             x              x


                                             (Rs. in thousands)    20XX       20XX­1
Undrawn Borrowing Facilities
Commercial Financial Institutions                                    x              x
Banks                                                                x              x
Total undrawn borrowing facilities                                   x              x



                                               59
7. Significant Controlled Entities
Entity           Activity or
                  Purpose
Entity A              x
Entity B              x
Entity C              x
Entity D              x


8. Authorisation Date
The financial statement was authorised for publication on XX Month 20XX by a resolution
passed by the Council.

9. Original and Revised Approved Budget and Comparison of Actual and Budget
   Amounts
The budget is approved on a cash basis by functional classification. The approved budget
covers the fiscal period from April 1, 20XX to March 31, 20XX and includes all local body
departments ­ these are identified in Note 7 above.

The original budget was approved by a council resolution dated ______ and a supplemental
appropriation of XXX for disaster relief support was approved by a council resolution dated
______ due to the earthquake in the town on (date). The original budget objectives and
policies, and subsequent revisions are explained more fully in the City Management Report
issued in conjunction with the financial statements.

The excess of actual expenditure over the revised budget of 15% (25% over original budget)
for the health function was due to expenditures above the level approved by a council
resolution dated ______ in response to the earthquake. There were no other material
differences between the revised approved budget and the actual amounts.

The budget and the accounting bases differ. The financial statements for the local body are
prepared on the modified cash basis using a classification based on the nature of expenses in
the statement of financial performance. The financial statements are consolidated statements
which include all controlled entities, including joint ventures for the fiscal period from April 1,
20XX to March 31 20XX. The budget is approved on the cash basis by functional
classification and deals only with the local body which excludes joint ventures and certain
other non-market government entities and activities.

The amounts in the statement of cash receipts and payments were adjusted to be consistent
with the cash basis and reclassified by functional classification to be on the same basis as the
revised approved budget. In addition, adjustments to amounts in the statement of cash
receipts and payments for timing differences associated with the continuing appropriation and
                                                60
differences in the entities covered (joint ventures and other entities) were made to express the
actual amounts on a comparable basis to the revised approved budget.

A reconciliation between the actual inflows and outflows as presented in the statement of
comparison of budget and actual amounts and the amounts of total cash receipts and total
cash payments reported in the statement of cash receipts and payments for the year ended
March 31, 20XX is presented below.

                                                           Total inflows    Total
                                                                           outflows
Actual Amount on Comparable Basis as Presented in the            x             x
Budget and Actual Comparative Statement
Basis Differences                                                x              x
Timing Differences                                               -              -
Entity Differences                                               x              x
Total Cash receipts                                              x
Total Cash Payments                                                             x


The financial statements and budget documents are prepared for the same period. There is
an entity difference: the budget is prepared for the local body only and the financial
statements consolidate all entities controlled by the local body. There is also a basis
difference: the budget is prepared on a cash basis and the financial statements on the
modified cash basis. This reconciliation could be included on the face of the Statement of
Comparison of Budget and Actual Amounts or as a note disclosure.

10. External Assistance
Payments by Third Parties

All payments made by third parties are made by third parties which are not part of the
economic entity.

External Assistance

External assistance was received in the form of loans and grants from multilateral and
bilateral donor agencies under agreements specifying the purposes for which the assistance
will be utilised. The following amounts are presented in the reporting currency of the entity.



                                                               20XX         20XX­1
                                                               Total         Total
Loan Funds
 Multilateral Agencies                                           x              x

                                               61
 Bilateral Agencies                                                x              x
 Total                                                             x              x
Grant Funds
 Multilateral Agencies                                             x              x
 Bilateral Agencies                                                x              x
 Total                                                             x              x
Total External Assistance                                          x              x




Non Compliance with significant terms and conditions and rescheduled and cancelled
debt

There have been no instances of non compliance with terms and conditions which have
resulted in cancellation of external assistance loans.

External assistance grants of X domestic currency units were cancelled during the reporting
period. The cancellation resulted from over estimation of the cost of specified development
projects and consequentially expenditure of an amount less than that committed for the period
by the donor entity.

Undrawn External Assistance

Undrawn external assistance loans and grants at reporting date are amounts specified in a
binding agreement which relate to funding for projects currently under development, where
conditions have been satisfied, and their ongoing satisfaction is highly likely, and the project is
anticipated to continue to completion.

                                           Loans         Grants         Loans Grants
                                           20XX          20XX          20XX­1 20XX­1
Closing balance in reporting currency         x             x             x           x


The significant terms and conditions that determine or affect access to the amount of undrawn
assistance relate to the achievement of the following specified construction targets for
development of health and education infrastructure: (Entity to identify significant construction
targets).




                                                  62
PART 2: FINANCIAL REPORTING UNDER THE CASH BASIS OF ACCOUNTING
ENCOURAGED ADDITIONAL DISCLOSURES

This part of the Standard is not mandatory. It sets out encouraged additional disclosures for
reporting under the cash basis. It should be read together with Part 1 of this Standard, which
sets out the requirements for reporting under the cash basis of accounting. The encouraged
disclosures, which have been set in italic, should be read in the context of the commentary
paragraphs in this part of the Standard, which are in plain type.




                                              63
     FINANCIAL REPORTING UNDER THE CASH BASIS OF ACCOUNTING PART 2:
                  ENCOURAGED ADDITIONAL DISCLOSURES

2.1 Encouraged Additional Disclosures

Definitions

2.1.1 The following terms are used in this part of the Standard with the meanings specified:

      Accrual basis means a basis of accounting under which transactions and other events
      are recognised when they occur (and not only when cash or its equivalent is received
      or paid). Therefore, the transactions and events are recorded in the accounting records
      and recognised in the financial statements of the periods to which they relate. The
      elements recognised under accrual accounting are assets, liabilities, net assets/equity,
      revenue and expenses.

      Assets are resources controlled by an entity as a result of past events and from which
      future economic benefits or service potential are expected to flow to the entity.

      Borrowing costs are interest and other expenses incurred by an entity in connection
      with the borrowing of funds.

      Closing rate is the spot exchange rate at the reporting date.

      Expenses are decreases in economic benefits or service potential during the reporting
      period in the form of outflows or consumption of assets or incurrences of liabilities that
      result in decreases in net assets/equity, other than those relating to distributions to
      owners.

      Extraordinary items are (for the purposes of this Standard) cash flows that arise from
      events or transactions that are clearly distinct from the ordinary activities of the entity,
      are not expected to recur frequently or regularly and are outside the control or influence
      of the entity.

      A financial asset is any asset that is:

      a) Cash;

      b) A contractual right to receive cash or another financial asset from another entity;

      c) A contractual right to exchange financial instruments with another entity under
         conditions that are potentially favourable; or

      d) An equity instrument of another entity.

      Liabilities are present obligations of the entity arising from past events, the settlement
      of which is expected to result in an outflow from the entity of resources embodying
                                                64
      economic benefits or service potential.

      Ordinary activities are any activities which are undertaken by an entity as part of its
      service delivery or trading activities. Ordinary activities include such related activities in
      which the entity engages in furtherance of, incidental to, or arising from these activities.

      Revenue is the gross inflow of economic benefits or service potential during the
      reporting period when those inflows result in an increase in net assets/equity, other
      than increases relating to contributions from owners.

      Terms defined in Part 1 of this Standard are used in this part of the Standard with their
      defined meaning.

Future Economic Benefits or Service Potential
2.1.2 Assets, including cash and other resources, provide a means for entities to achieve
      their objectives. Assets that are used to deliver goods and services in accordance with
      an entity's objectives but which do not directly generate net cash inflows are often
      described as embodying "service potential." Assets that are used to generate net cash
      inflows are often described as embodying future economic benefits. To encompass all
      the purposes to which assets may be put, this Standard uses the term "future
      economic benefits or service potential" to describe the essential characteristic of
      assets.

Going Concern
2.1.3 When preparing the financial statements of an entity, those responsible for the
      preparation of the financial statements are encouraged to make an assessment of the
      entity's ability to continue as a going concern. When those responsible for the
      preparation of the financial statements are aware, in making their assessment, of
      material uncertainties related to events or conditions which may cast significant doubt
      upon the entity's ability to continue as a going concern, the disclosure of those
      uncertainties is encouraged.

2.1.4 In assessing whether the entity is a going concern, those responsible for the
      preparation of the financial statements:

      a) Will need to take into account all available information for the foreseeable future
         which will include, but will not necessarily be limited to, twelve months from the
         approval of the financial statements; and

      b) May need to consider a wide range of factors surrounding current and expected
         performance, potential and announced restructurings of organisational units,
         estimates of receipts or the likelihood of continued government funding, and
         potential sources of financing before it is appropriate to conclude that the entity is a
         going concern.
                                                65
2.1.5 There may be circumstances where the usual going concern tests of liquidity and
      solvency as applied to business enterprises appear unfavorable, but other factors
      suggest that the entity is nonetheless a going concern. For example:

       a) In assessing whether the entity is a going concern, the power to levy rates or taxes
          may enable some entities to be considered as a going concern even though their
          cash payments may exceed their cash receipts for extended periods; and

       b)   For an individual entity, an assessment of its cash flows for a reporting period may
            suggest that the entity is not a going concern. However, there may be multi-year
            funding agreements in place with the government that will ensure the continued
            operation of the entity.

Extraordinary Items
2.1.6 An entity is encouraged to separately disclose the nature and amount of each
      extraordinary item. The disclosure may be made on the face of the statement of cash
      receipts and payments, or in other financial statements or in the notes to the financial
      statements.

2.1.7 Extraordinary items are characterised by the fact that they arise from events or
      transactions that are distinct from an entity's ordinary activities, are not expected to
      recur frequently or regularly and are outside the control or influence of the entity.
      Accordingly, extraordinary items are rare, unusual and material.

Distinct from Ordinary Activities
2.1.8 Whether an event or transaction is clearly distinct from the ordinary activities of the
      entity is determined by the nature of the event or transaction in relation to the activities
      ordinarily carried on by the entity rather than by the frequency with which such events
      are expected to occur. An event or transaction may be extraordinary for one entity, but
      not extraordinary for another entity, because of the differences between their
      respective ordinary activities.

Not Expected to Recur in the Foreseeable Future
2.1.9 The event or transaction will be of a type that would not reasonably be expected to
      recur in the foreseeable future, taking into account the environment in which the entity
      operates. The nature of extraordinary items is such that they would not normally be
      anticipated at the beginning of a reporting period and therefore would not be included
      in a budget. Inclusion of an item in a budget suggests that the occurrence of the
      specific item is foreseen and therefore not extraordinary.

Outside the Control or Influence of the Entity
2.1.10 The event or transaction will be outside the control or influence of the entity. A
       transaction or event is presumed to be outside the control or influence of an entity if the
                                                66
       decisions of the entity do not normally influence the occurrence of that transaction or
       event.

Identifying Extraordinary Items
2.1.11 Whether or not an item is extraordinary will be considered in the context of the entity's
       operating environment. Judgment will be exercised in each case.

2.1.12 Examples of cash flows associated with events or transactions that may, although not
       necessarily, give rise to extraordinary items for some entities are:

       a) Short-term cash flows associated with the provision of services to refugees where
          the need for such services was unforeseen at the beginning of the period, outside
          the ordinary scope of activities for the entity and outside the control of the entity. If
          such services were predictable or occurring in more than one reporting period they
          would not generally be classified as extraordinary; and

       b) The cash flows associated with the provision of services following a natural or man-
          made disaster, for example, the provision of shelter to homeless people following
          an earthquake. In order for a particular earthquake to qualify as an extraordinary
          event it would need to be of a magnitude that would not normally be expected in
          either the geographic area in which it occurred or the geographic area associated
          with the entity, and the provision of emergency services or the restoration of
          essential services would need to be outside the scope of ordinary activities of the
          entity concerned. Where an entity has responsibility for providing assistance to
          those affected by natural disasters, the costs associated with this activity would not
          generally meet the definition of an extraordinary item.

2.1.13 The restructuring of activities is an example of an event which would normally not be
       extraordinary for the entity. All three criteria within the definition of an extraordinary item
       must be satisfied before an item can be classified as extraordinary. A restructuring may
       clearly be distinct from the ordinary activities of the entity. It is only in circumstances
       where the restructuring is imposed by government or by an external regulator or other
       external authority that it could be classified as outside the control or influence of the
       entity.

2.1.14 The disclosure of the nature and amount of each extraordinary item may be made on
       the face of the statement of cash receipts and payments or other financial statements
       that might be prepared or in the notes to those financial statements. An entity may also
       decide to disclose only the total amount of extraordinary items on the face of the
       statement of cash receipts and payments and the details in the notes.

Administered Transactions
2.1.15 An entity is encouraged to disclose in the notes to the financial statements, the amount
       and nature of cash flows and cash balances resulting from transactions administered
                                                 67
      by the entity as an agent on behalf of others where those amounts are outside the
      control of the entity.

2.1.16 The cash flows associated with transactions administered by an entity acting as an
       agent on behalf of others may not pass through a bank account controlled by the
       reporting entity. In these cases, the entity cannot use, or otherwise benefit from, the
       cash it administers in the pursuit of its own objectives. These cash flows are not
       controlled by the entity and therefore are not included in the totals shown on the face of
       the statement of cash receipts and payments or other financial statements that might
       be prepared. However, disclosure of the amount and nature of these transactions by
       major type is encouraged because it provides useful information on the scope of the
       entity's activities and it is relevant for an assessment of an entity's performance.

2.1.17 Where such cash receipts and payments pass through a bank account controlled by
       the entity, they are treated as cash flows and balances of the entity itself and included
       in the totals shown on the face of the statement of cash receipts and payments.
       Paragraph 1.3.13(a) of Part 1 of this Standard permits such cash receipts and
       payments to be reported on a net basis. Paragraphs 2.1.21 to 2.1.22 below provide
       guidance on the cash receipts, payments and balances that:

      a) May be controlled by a entity and will be reported in the statement of cash receipts
         and payments in accordance with Part 1 of this Standard; and

      b) Are administered transactions which will not be included on the face of the
         statement of cash receipts and payments or other financial statements that might
         be prepared but for which disclosure is encouraged.

2.1.18 ­ 2.1.20 [Refer Appendix A]

"Pass-through" Cash Flows
2.1.21 In some cases, the administrative arrangements in place in respect of the revenue
       collection activities a government or government entity undertakes as an agent of
       another party may provide for the cash collected to be initially deposited in the entity's
       own bank account before it is transferred to the ultimate recipient. Cash flows arising
       as a consequence of these transactions are sometimes termed "pass-through" cash
       flows. In these cases, the entity will:

      a) Control the cash it collects in its capacity as an agent for the, usually short, period
         the cash is deposited in the entity's bank account prior to transfer to third parties;

      b) Usually benefit from any interest arising from amounts deposited in interest bearing
         accounts prior to its transfer to the other entity; and

      c) Have an obligation to transfer the cash collected to third parties in accordance with
         legislative requirements or administrative arrangements.
                                               68
       When cash inflows from administered transactions pass through a bank account
       controlled by the reporting entity, the cash receipts, cash transfers and cash balances
       arising from the collection activity will be included in the entity's statement of cash
       receipts and payments in accordance with paragraph 1.3.4(a)(i) of Part 1 of this
       Standard. Paragraph 1.3.13(a) of Part 1 of this Standard specifies that cash receipts
       and payments which arise from transactions the entity administers on behalf of other
       parties and which are recognised in the financial statements may be reported on a net
       basis.

Transfer Payments
2.1.22 Consistent with a government's objectives and with legislation or other authority,
       amounts appropriated to an entity may include amounts to be transferred to third
       parties in respect of, for example, pensions. In some cases, these amounts will pass
       through a bank account controlled by the entity. Where this occurs, the entity will
       recognise the cash appropriated for transfer during the reporting period as a cash
       receipt, the amounts transferred during that reporting period as a cash payment and
       any amounts held at the end of the reporting period for transfer in the future as part of
       closing balance of cash.

Disclosure of Major Classes of Cash Flows
2.1.23 An entity is encouraged to disclose, either on the face of the statement of cash receipts
       and payments or other financial statements or in the notes to those statements:

       a) [Refer Appendix A]

       b) proceeds from borrowings. In addition, the amount of borrowings may be further
       classified into type and source.

2.1.24 -2.1.29 [Refer Appendix A]

2.1.30 Paragraph 1.3.12 of Part 1 of this Standard requires the disclosure of total cash
       receipts of the entity showing separately a sub-classification of total cash receipts using
       a classification basis appropriate to the entity's operations. The sub-classification of
       cash receipts into appropriate classes will depend upon the size, nature and function of
       the amounts involved. In addition to disclosure of the amount of receipts from external
       assistance and borrowings, the following sub-classifications may be appropriate:

       a) Receipts from taxation (these may be further sub-classified into types of taxes);

       b) Receipts from fees, fines, penalties and licenses;

       c) Receipts from exchange transactions including receipts from the sale of goods and
          services and user charges (where these are classified as exchange transactions);


                                               69
          d) The purposes for which external assistance grants and loans are provided, the
             providers of that assistance and the amount provided;

          e) Receipts from other grants, transfers, or budget appropriations (possibly classified
             by source and purpose);

          f)   Receipts from interest and dividends; and

          g)   Receipts from gifts and donations.

Related Party Disclosures
2.1.31 An entity is encouraged to disclose in the notes to the financial statements information
       required by Accounting Standard for Local Bodies on "Related Party Disclosures."5

2.1.32 ASLB 20, in the accrual based series of ASLBs,                     defines related parties and other
       relevant terms, requires the disclosure of related                 party relationships where control
       exists and requires the disclosure of certain                      information about related party
       transactions, including information about aggregate                remuneration of key management
       personnel.

Disclosure of Assets, Liabilities and Comparison with Budgets
2.1.33 An entity is encouraged to disclose in the notes to the financial statements:

          a) Information about the assets and liabilities of the entity; and

          b) A comparison with budgets

2.1.34 Entities control significant resources in addition to cash and deploy those resources in
       the achievement of service delivery objectives. They also borrow to fund their activities,
       incur other debts and liabilities in the course of their operations and make commitments
       to expend money in the future on the acquisition of capital assets. Non-cash assets
       and liabilities will not be reported on the face of the statement of cash receipts and
       payments or other financial statements that might be prepared under the cash basis of
       accounting. However, entities maintain records of, and monitor and manage, their debt
       and other liabilities and their non-cash assets. The disclosure of information about
       assets and liabilities and the costs of particular programs and activities will enhance
       accountability and is encouraged by this Standard.

2.1.35 Entities that make such disclosures are encouraged to identify assets and liabilities by
       type, for example, by classifying:

          a) Assets as receivables, investments or property plant and equipment; and

5
    Formulation of this Accounting Standard for Local Bodies is yet to be taken up.

                                                          70
          b) Liabilities as payables, borrowings by type or source and other liabilities.

          While such disclosures may not be comprehensive in the first instance, entities are
          encouraged to progressively develop and build on them. In order to comply with the
          requirements of paragraphs 1.3.5 and 1.3.37 of Part 1 of this Standard, these
          disclosures will need to comply with qualitative characteristics of financial information
          and should be clearly described and readily understood. Accrual based ASLBs
          including ASLB on, "Leases" 6, ASLB 17 on, "Property, Plant and Equipment" and
          ASLB on "Provisions, Contingent Liabilities and Contingent Assets"7 can provide useful
          guidance to entities disclosing additional information about assets and liabilities.

Comparison with Budgets
2.1.36 Entities are typically subject to budgetary limits in the form of appropriations or other
       budgetary authority which may be given effect through authorising legislation. One of
       the objectives of financial reporting by these entities is to report on whether cash was
       obtained and used in accordance with the legally adopted budget. In some
       jurisdictions, this requirement is reflected in legislation. Entities which make publicly
       available their approved budgets are required to comply with the requirements of
       paragraphs 1.9.1 to 1.9.46 of Part 1 of this Standard. This Standard encourages other
       entities (that is, entities which do not make publicly available their approved budgets) to
       include in their financial statements the disclosure of a comparison of actual with the
       budgeted amounts for the reporting period where the financial statements and the
       budget are on the same basis of accounting. Reporting against budgets for these other
       entities may be presented in different ways, including:

          a) The preparation of a note with separate columns for budgeted amounts and actual
             amounts. A column showing any variances from the budget or appropriation may
             also be presented for completeness; and

          b) Disclosure that the budgeted amounts have not been exceeded. If any budgeted
             amounts or appropriations have been exceeded, or payments made without
             appropriation or other form of authority, then details may be disclosed by way of
             note to the relevant item in the financial statements.

2.1.37 Entities which disclose in their financial statements a comparison of actual with
       budgeted amounts are encouraged to include in the financial statements a cross
       reference to reports which include information about service achievements.

2.1.38 [Refer Appendix A]


6
    This Accounting Standard for Local Bodies is under preparation.
7
    This Accounting Standard for Local Bodies is under preparation.


                                                        71
2.1.39 Additional budget information, including information about service achievements, may
       be presented in documents other than financial statements. Entities which disclose in
       their financial statements a comparison of actual with budgeted amounts are
       encouraged to include in their financial statements a cross reference to such
       documents, particularly to link budget and actual data to non-financial budget data and
       service achievements.

2.1.40 [Refer Appendix A]

Consolidated Financial Statements
2.1.41 An entity is encouraged to disclose in the notes to the financial statements:

       a) The proportion of ownership interest in controlled entities and, where that interest is
          in the form of shares, the proportion of voting power held (only where this is
          different from the proportionate ownership interest);

       b) Where applicable:

          i. The name of any controlled entity in which the controlling entity holds an
             ownership interest and/or voting rights of 50% or less, together with an
             explanation of how control exists; and

         ii. The name of any entity in which an ownership interest of more than 50% is held
             but which is not a controlled entity, together with an explanation of why control
             does not exist; and

       c) In the controlling entity's separate financial statements, a description of the method
          used to account for controlled entities.

2.1.42 A controlling entity which does not present a consolidated statement of cash receipts
       and payments is encouraged to disclose the reasons why the consolidated financial
       statements have not been presented together with the basis on which controlled
       entities are accounted for in its separate financial statements. It is also encouraged to
       disclose the name and the principal address of its controlling entity that publishes
       consolidated financial statements.

2.1.43 Paragraph 1.6.20(b) of Part 1 of this Standard requires that the reasons for non-
       consolidation of a controlled entity should be disclosed. Paragraph 1.6.7 of Part 1 of
       the Standard also provide that a controlling entity that is itself a wholly owned entity or
       a controlling entity that is virtually wholly owned, need not present a consolidated
       financial statement. When this occurs, the disclosure of the information in paragraph
       2.1.42 above is encouraged.



                                               72
Acquisitions and Disposals of Controlled Entities and Other Operating Units

2.1.44 An entity is encouraged to disclose and present separately the aggregate cash flows
       arising from acquisitions and from disposals of controlled entities or other operating
       units.

2.1.45 An entity is encouraged to disclose in the notes to the financial statements, in
       aggregate in respect of both acquisitions and disposals of controlled entities or other
       operating units during the period, each of the following:

       a) The total purchase or disposal consideration (including cash or other assets);

       b) The portion of the purchase or disposal consideration discharged by means of
          cash; and

       c) The amount of cash in the controlled entity or operating unit acquired or disposed
          of.

2.1.46 The separate presentation of the cash flow effects of acquisitions and disposals of
       controlled entities and other operations, together with the separate disclosure of the
       amounts of assets and liabilities acquired or disposed of, helps to distinguish those
       cash flows from cash receipts and payments arising from the other activities of the
       entity. To enable users to identify the effects of both acquisitions and disposals, the
       cash flow effects of disposals should not be deducted from those acquisitions.

2.1.47 The aggregate amount of the cash paid or received as purchase or sale consideration
       is reported in the statement of cash receipts and payments net of cash acquired or
       disposed of.

2.1.48 Paragraph 2.1.33 encourages the disclosure of assets and liabilities of the entity.
       Assets and liabilities other than cash of a controlled entity or operating unit acquired or
       disposed of may also be separately disclosed, summarised by each major category.
       Consistent with the requirement of paragraph 1.3.37 of Part 1 of this Standard, where
       such disclosure is made, the assets and liabilities should be clearly identified and the
       basis on which they are recognised and measured explained.

Joint Ventures
2.1.49 An entity is encouraged to make disclosures about joint ventures which are necessary
       for a fair presentation of the cash receipts and payments of the entity during the period
       and the balances of cash as at reporting date.

2.1.50 Many entities establish joint ventures to undertake a variety of activities. The nature of
       these activities range from commercial undertakings to provision of community services
       at no charge. The terms of a joint venture are set out in a contract or other binding
       arrangement and usually specify the initial contribution from each joint venturer and the
                                                73
          share of revenues or other benefits (if any) and expenses of each of the joint venturers.
          Entities which report on a cash basis will generally report:

          a) As cash payments, the cash expended in the acquisition of an interest in a joint
             venture and in the ongoing operations of the joint venture; and

          b) As cash receipts, the cash received from the joint venture.

          Disclosures about joint ventures may include a listing and description of interests in
          significant joint ventures. Accounting Standard for Local Bodies on "Interests in Joint
          Ventures" 8 in the accrual based series of ASLBs provides guidance on the different
          forms and structures that joint ventures may take and potential additional disclosures
          that might be made.

2.1.51-2.1.63 [Refer Appendix A]

Assistance Received From Non-Governmental Organisations (NGOs)


2.1.64 Where practicable, an entity is encouraged to apply to assistance received from non-
       governmental organisations (NGOs), the required disclosures identified in paragraphs
       1.10.1 to 1.10.27 of Part 1 of this Standard and the encouraged disclosures identified in
       paragraphs 2.1.66 to 2.1.93 below.

2.1.65 Reporting entities are not required to make the disclosures identified in paragraphs
       1.10.1 to 1.10.27 of Part 1 in respect of assistance received from non-governmental
       organisations (NGOs). This is because the costs of collecting and aggregating the
       information necessary to comply with those requirements may be greater than its
       benefits. However, making the disclosures about assistance received from NGOs
       which are identified in paragraphs 1.10.1 to 1.10.27, together with the disclosures
       encouraged in paragraphs 2.1.66 to 2.1.93 below can provide additional input to
       assessments of the extent to which the reporting entity is dependent on assistance
       from these organisations to support its activities. Accordingly, reporting entities are
       encouraged to apply the disclosures identified in this Standard to assistance received
       from NGOs, where it is practicable to do so.

Recipients of External Assistance

2.1.66 An entity is encouraged to disclose in notes to the financial statements:


8
    This Accounting Standard for Local Bodies is under preparation.




                                                         74
       a) The purposes for which external assistance was received during the reporting
          period, showing separately amounts provided by way of loans and grants; and

       b) The purposes for which external assistance payments were made during the
          reporting period.

2.1.67 An entity may receive external assistance for many purposes including assistance to
       support its:

       a) Economic development or welfare objectives, often termed development
          assistance;

       b) Emergency relief objectives, often termed emergency assistance; and

       c)   [Refer Appendix A]

       d) [Refer Appendix A]

       e) Trading activities, including export credits or loans offered by export/import banks
          or other government agencies, often termed trade finance.

2.1.68 Part 1 of this Standard requires disclosure of the total amount of external assistance
       received during the reporting period showing separately the total amount received by
       way of grants and loans. Disclosure of external assistance received by way of loan or
       grant will enable users to determine the purposes for which assistance was provided
       during the period, the amounts thereof and whether the entity has an obligation to
       repay the assistance provided at some time in the future.

2.1.69 Disclosure of the purposes for which external assistance payments were made during
       the reporting period will further enhance the entity's accountability for its use of external
       assistance received.

2.1.70 An entity is encouraged to identify in notes to the financial statements each provider of
       external assistance during the reporting period and the amount provided, excluding any
       undrawn amounts, showing separately amounts provided by way of loans and grants in
       the currency provided.

2.1.71 Disclosure of each provider of external assistance and the amount provided by way of
       loan and grant will indicate the extent of diversification of sources of assistance. This
       will assist readers of the financial statements to determine, for example, whether the
       entity is dependent on particular agencies for assistance, the extent of that dependency
       and the currency in which it was provided, and whether the assistance is provided by
       way of a grant or a loan which will need to be repaid in the future. The disclosure
       encouraged by this paragraph excludes amounts that have not been drawn down
       during the period. Paragraph 2.1.72 encourages disclosure of information about
       undrawn amounts of external assistance in certain circumstances.
                                                75
2.1.72 In respect of external assistance that is undrawn at reporting date and is disclosed in
       accordance with paragraph 1.10.18 of Part 1 of this Standard, an entity is encouraged
       to disclose in notes to the financial statements:

      a) Each provider of loan assistance and grant assistance and the amount provided by
         each;

      b) The purposes for which the undrawn loan assistance and undrawn grant
         assistance may be used;

      c) The currency in which the undrawn assistance is held or will be made available;
         and

      d) Changes in the amount of undrawn loan assistance and undrawn grant assistance
         during the period.

2.1.73 Undrawn external assistance balances are required to be disclosed in certain
       circumstances by paragraph 1.10.18 of Part 1 of this Standard. The disclosures
       encouraged by paragraph 2.1.72 will enable readers of the financial statements to
       determine the purposes for which such undrawn assistance may be used in the future,
       the currency in which that undrawn assistance is held or will be made available, and
       whether the amount of undrawn loan and grant assistance declined or increased during
       the period.

2.1.74 As is appropriate for the reporting entity, the disclosures could usefully identify such
       matters as the opening balance of undrawn loans and grants, the amount of new loans
       and new grants approved or otherwise made available during the period, the total
       amount of loans and grants drawn or utilised during the period, the total amounts of
       loans and grants cancelled or expired during the period, and the closing balance of
       undrawn loans and grants. Such disclosures will assist users in identifying not only the
       amount of the change in undrawn balances, but also the components of that change.

2.1.75 Where disclosures of changes in the amount of undrawn assistance are made in the
       entity's reporting currency, external assistance denominated in a foreign currency will
       be reported in the entity's reporting currency by applying to the foreign currency
       amount the exchange rate on the date of each applicable transaction, consistent with
       the requirements of Part 1 of this Standard.

2.1.76 An entity is encouraged to disclose in notes to the financial statements the terms and
       conditions of external assistance agreements that determine or affect access to, or limit
       the use of, external assistance.

2.1.77 Some external assistance agreements limit or specifically define the use or purpose
      for which the external assistance may be used, or limit the sources from which goods
      or services may be purchased. This type of external assistance term or condition may
                                               76
       specify that the funds are available only to purchase specific inputs for the construction
       of specified facilities at a specified location, or that the goods or services purchased
       under the external assistance agreement must originate from a specified country or
       countries.

2.1.78 Some external assistance may be released on specific dates, or may be released upon
       the entity:

      a) Undertaking actions specified in an external assistance agreement, such as
         implementing specific policy changes; or

      b) Achieving ongoing performance targets, such as budget deficit targets or other
         broad economic objectives.

2.1.79 Disclosure of terms and conditions that determine or affect access to external
       assistance will indicate the extent to which external assistance is time bound and/or is
       dependent upon the entity taking certain actions and achieving certain performance
       objectives, and what those actions and performance objectives are.

2.1.80 An entity is encouraged to disclose in notes to the financial statements:

      a) The outstanding balance of any external assistance loans for which principal and/or
         interest payments have been guaranteed by third parties, any terms and conditions
         related to those loans, and any additional terms and conditions arising from the
         guarantee; and

      b) The amount and terms and conditions of external assistance loans and grants for
         which performance of related terms and conditions have been guaranteed by third
         parties, and any additional terms and conditions arising from the guarantee.

2.1.81 The balance of external assistance loans borrowed by an entity and payment of
       interest thereon may be guaranteed, in total or up to a specified amount. Terms and
       conditions associated with the loans may also require the recipient to take certain
       actions, or achieve agreed outcomes such as setting tariffs according to an agreed
       formula, the performance of which are guaranteed by third parties. External assistance
       grants may also be subject to similar terms and conditions, the performance of which
       are guaranteed by third parties.

2.1.82 Disclosure of the amounts of external assistance loans and grants guaranteed by
       third parties will indicate the extent of support from another entity to obtain the
       benefits of the external assistance agreement. Disclosure of the terms and conditions
       of external assistance loans and grants that have been guaranteed, and any
       additional terms and conditions imposed to effect that guarantee, will indicate the
       additional performance requirements or conditions that arise as a consequence of
       securing the guarantee.
                                               77
2.1.83 An entity is encouraged to disclose in notes to the financial statements other
       significant terms and conditions associated with external assistance loans, grants or
       guarantees that have not been complied with, together with the consequence of the
       non compliance.

2.1.84 Paragraph 1.10.25 of Part 1 of this Standard requires the disclosure of significant
       terms and conditions that have not been complied with when non compliance has
       resulted in cancellation of the assistance or given rise to an obligation to return
       assistance previously provided. External assistance agreements may also include
       other significant terms and conditions that are to be complied with, as well as some
       procedural terms and conditions. Consequences of non compliance with these other
       significant terms and conditions may include a reduction in the amount, or variation in
       the timing, of funds that may be drawn or made available in the future until the default
       is corrected. They may also include an increase in the interest rate charged on loan
       funds.

2.1.85 Identifying these other significant terms and conditions which have not been complied
       with is likely to require professional judgment. That judgment will be exercised in the
       context of the entity's particular circumstances and by reference to the qualitative
       characteristics of financial statements. These terms and conditions are likely to be
       those where non compliance is likely to affect the amount or timing of funds that will
       be available to support the entity's future operations.

2.1.86 An entity is encouraged to disclose in the notes to the financial statements, a
       summary of the repayment terms and conditions of outstanding external assistance
       debt. Where disclosures of future debt service payments denominated in a foreign
       currency are made, the entity is encouraged to report them in the entity's reporting
       currency by applying to the foreign currency amount of those payments the closing
       rate.

2.1.87 External assistance debt agreements will include terms and conditions relating to
       such matters as the grace period, interest rate, current debt service payments, future
       debt service payments, remaining term of the loan, currency of debt service
       payments, principal repayment requirements (where repayment of the principal is
       deferred until the end of the loan term, or some other future date), and other
       significant repayment terms.

2.1.88 Debt service payments may be a significant cash outlay for the entity and will impact
       on cash available to fund current and additional operations. Disclosure of repayment
       terms and conditions of outstanding external assistance debt will enable readers of
       the financial statements to determine when debt service payments (principal and
       interest or service charges) will commence, and the amount of principal and interest
       or service charge payable.


                                              78
2.1.89 Disclosure of information about repayment terms and conditions may require the
       estimation of, for example, the interest rate to be applied to variable rate debt. The
       estimated interest rate will usually be determined by reference to applicable interest
       rates at the closing date. In accordance with the requirements of paragraphs 1.3.30 to
       1.3.37 of Part 1 of this Standard, when an entity elects to make disclosures which
       involve estimates, the accounting policies selected and applied in developing such
       estimates will be disclosed where necessary for a proper understanding of the
       financial statements.

2.1.90 An entity is encouraged to disclose separately in the notes to the financial statements
       the value of external assistance received in the form of goods or services.

2.1.91 Significant resources may be received under external assistance agreements in the
       form of goods or services. This will occur when new or used goods such as vehicles,
       computers or other equipment are transferred to the entity under an external
       assistance agreement. It will also occur when food aid is provided to a local body for
       distribution to its citizens under an external assistance agreement. For some
       recipients, goods or services may be the major form in which external assistance is
       received.

2.1.92 Disclosure of the value of external assistance received as goods and services will
       assist readers of the financial statements to better understand the full extent of
       external assistance received during the reporting period. However, in some cases
       and for some recipients, determining the value of such goods and services can be a
       difficult, time consuming and costly process. This is particularly so where a domestic
       market price for those goods and services cannot be readily determined, where the
       goods and services provided are not widely traded in international markets or where
       they are of an unique nature, such as often occurs in respect of emergency
       assistance.

2.1.93   This Standard does not specify the basis on which the value of the goods or services
         is to be determined. Therefore, their value may be determined as the depreciated
         historical cost of physical assets at the time the assets are transferred to the recipient
         or the price paid for the food by the external assistance agency. It may also be
         determined on the basis of an assessment of the value by management of the
         transferor, or the recipient, or by a third party. Where the value of external assistance
         in the form of goods or services is disclosed, paragraph 1.10.21 of Part 1 of this
         Standard requires the disclosure of the basis on which that value is determined.
         Where such is described as fair value it will conform with the definition of fair value
         that is, the amount for which an asset could be exchanged, or a liability settled,
         between knowledgeable and willing parties in an arm's length transaction.




                                                79
2.2         Governments and Other Public Sector Entities Intending to
            Migrate to the Accrual Basis of Accounting
Presentation of the Statement of Cash Receipts and Payments
2.2.1       An entity which intends to migrate to the accrual basis of accounting is encouraged to
            present a statement of cash receipts and payments in the same format as that
            required by Accounting Standard for Local Bodies (ASLB) on, "Cash Flow
            Statements." 9

2.2.2       Part 2 of this Standard encourages disclosure of information additional to that
            required by ASLB 2. Entities which adopt the format of ASLB 2 for the presentation of
            the statement of cash receipts and payments are encouraged to also make the
            additional disclosures identified in Part 2 of this Standard.

Scope of Consolidated Statements - Exclusions from the Economic Entity
2.2.3       When an entity adopts the accrual basis of accounting in accordance with the accrual
            ASLBs, it will not consolidate entities in which control is intended to be temporary
            because the controlled entity is acquired and held exclusively with a view to its
            subsequent disposal in the near future. Temporary control may occur where, for
            example, a local body intends to transfer its interest in a controlled entity to a
            government or another entity.

2.2.4       Part 1 of this Standard does not provide for such entities to be excluded from the
            consolidated financial statements prepared under the cash basis. This is because:

            a) The cash of an entity which is controlled on only a temporary basis can be used
               for the benefit of the economic entity during the period of temporary control; and

            b) The potentially complex consolidation adjustments that may be necessary under
               the accrual basis will not arise under the cash basis.

2.2.5       For this exemption from consolidation to apply under the accrual ASLBs, the
            controlling entity must be demonstrably committed to a formal plan to dispose of, or
            no longer control, the entity that is subject to temporary control. For the exemption to
            apply at more than one successive reporting date, the controlling entity must
            demonstrate an ongoing intent to dispose of, or no longer control, the entity that is
            subject to temporary control. An entity is demonstrably committed to dispose of, or no
            longer control, another entity when it has a formal plan to do so and there is no
            realistic possibility of withdrawal from that plan.

2.2.6       Entities preparing to migrate to the accrual basis will need to be aware of this
9
    This Accounting Standard for Local Bodies is under preparation.

                                                        80
difference in consolidation requirements of the accrual and cash basis ASLBs, and to
determine whether, for any controlled entities included in the consolidated statement
of receipts and payments, control is temporary.




                                     81
                                                                                        Appendix 2



 Illustration of Certain Disclosures Encouraged in Part 2 of the Standard

 This appendix is illustrative only. The purpose of the appendix is to illustrate the application of
 the encouragements and to assist in clarifying their meaning.

 Extract from notes to financial statements of Entity ABC
 Administered Transactions (paragraph 2.1.15)
 Administered transactions comprise cash flows resulting from transactions administered by
 the Entity as an agent on behalf of the government and specific government bodies. All cash
 collected in the capacity of an agent is deposited in a separate bank account. These accounts
 are not controlled by the Entity and the cash deposited in them cannot be used by the Entity
 without specific authorisation by the relevant government body.

                                                                 (Rupees in lakhs)

                              Nature of Transaction             20XX-XX       20XX-XX-
                                                                                 1
Cash collected on behalf of Library cess                           X               X
State Government
Election Commission           Enrolment fees                       X               X
                                                                   X               X

Cash transferred to                                                (X)             (X)
respective entities
                                                                    -               -



 Extract from notes to financial statements of Local Body X

 Assets and Liabilities (paragraph 2.1.33(a))
 Property, plant and equipment
 The local body commenced the process of identifying and valuing major classes of its
 property, plant and equipment. The assets are stated at historical cost, wherever available, or
 valuation. The valuations were performed by an independent professional valuer.

(rupees in lakhs)                                        200X               200X-1
Plant and equipment                                        X                   X

                                                 82
Land and buildings
  Land                                                  X                  X
  Buildings                                             X                  X
                                                        X                  X



 (Extract from notes to financial statements of Local Body X: Assets and Liabilities (paragraph
 2.1.33(a) continued)

 Borrowings

 The borrowings of the Government are listed below:

(rupees in lakhs)                                           20XX-XX      20XX-XX-1
Balance at beginning of year                                   X               X
BORROWINGS
  From banks                                                   X               X
  From financial institutions                                  X               X
  From Development Banks and Similar Lending                   X               X
  Agencies
Total borrowings                                               X               X



REPAYMENTS
  To banks                                                    (X)            (X)
  To financial institutions                                   (X)            (X)
  To Development Banks and Similar Lending                    (X)            (X)
  Agencies
Total repayments                                              (X)            (X)
Balance at end of year                                         X               X




                                               83
 Extract from notes to financial statements of local Body X continued)

 Comparison with budget (paragraph 2.1.33(b)

(rupees in lakhs)                                       Actual       Budgeted Variance
RECEIPTS
 Tax receipts
  Property tax                                      X                X         X
  Advertisement tax
  Other taxes                                       X                X         (X)
                                                                 X         X          X
 Non tax receipts
  Fees and fines                                                 X         X          X
  Receipts from trading activities                               X         X          X
 Others                                                          X         X          X
                                                                 X         X          X

 Grants in aid
  Government
  International agencies                            X                X         -
  Other Grants and Aid                              X                X         -
                                                                 X         X           -
 Borrowings
  Government                                                     X         X         (X)
  Banks                                                          X         X         (X)
  Other agencies                                                 X         X         (X)
                                                                 X         X         (X)




 Capital Receipts
  Proceeds from disposal of assets                               X         X          X
 Other receipts                                                  X         X          X
Total receipts                                                   X         X          X




                                               84
(rupees in lakhs)                               Actual       Budgeted Variance



PAYMENTS
 Operations
  Wages, salaries and employee benefits        (X)           (X)         (X)
  Other operational expenses                   (X)           (X)         (X)
                                                     (X)           (X)         (X)
 Grants and contributions
  Grants                                       (X)           (X)         -
  Other transfers                              (X)           (X)         -
                                                     (X)           (X)           -
 Capital Expenditures
  Purchase/construction of fixed assets        (X)           (X)         (X)
                                                     (X)           (X)         (X)
 Loan and Interest Repayments
  Repayment of borrowings                      (X)           (X)         -
  Interest payments                            (X)           (X)         -
                                                     (X)           (X)           -
 Other payments                                      (X)           (X)         (X)
Total payments                                       (X)           (X)         (X)
NET RECEIPTS/(PAYMENTS)                                  X          X           X




                                          85
Extract from notes to financial statements of Entity XYZ

Controlled Entities (paragraphs 2.1.41, 2.1.44 and 2.1.45)
Entity XYZ has the power to govern the financial and operating policies so as to benefit from
the activities of other entities. These are controlled entities. All controlled entities are included
in the consolidated financial statements. (Paragraph 1.6.20(a) in Part 1 of this Standard
requires that a list of significant controlled entities be disclosed.)

     Enterprise             Nature of        Ownership Interest         Voting Power
                           controlling             (%)                       (%)
                             interest
Enterprise A                                            XX                    XX
Enterprise B                                            XX                    XX
Enterprise C                                            XX                    XX
Enterprise D                                            XX                    XX
Enterprise E                                            XX                    XX

Significant Joint Ventures (paragraph 2.1.49)

  Name of Joint         Principal Activity                      Interest
    Venture                                           20XX-XX              20XX-XX-1
                                                         %                    %
                                                        XX                    XX

                                                        XX                    XX




                                                 86
Extract From Notes to the Financial Statements of Local body C

Assistance Provided by Non-Governmental Organisations (NGOs) (Paragraph
2.1.64)

Assistance from NGOs is included in the amount of "Other Grants and Aid" in the
Statement of Cash Receipts and Payments. The amount of assistance from NGOs
received during the reporting period in the reporting currency is:

                                 20XX                             20XX-XX-1
                       Cash         Payments by        Cash             Payments by
                      Receipts      third parties     Receipts          third parties
Grant Funds              X               X                  X                   -
Loan Funds               -                -                 -                   -
Total                    X               X                  X                   -


Assistance was received from NGOs under agreements specifying that the
assistance would be utilised for the following purposes:

              Development          Emergency              Other               Total
               Assistance          Assistance
             20XX      20XX-      20XX    20XX-     20XX        20XX-   20XX        20XX-
                        XX-1               XX-1                  XX-1                XX-1
NGO 1          X         X          -          -      -           X      X            X
NGO 2          -          -        X           -      -           -      X            -
NGO 3          X         X         X           -      -           -      X            X
Total          X         X         X           -      -           X      X            X
USD            X         X         X          X       -           X      X            X
Euro           X         X         X           -      -           -      X            X
Yen            -          -        X          X       -           -      X            X


The currency in which external assistance was provided was as follows:

        ·   NGO 1 ­ US Dollars to the amount of YYY and other currency being
            (specify currency) to the amount of X

        ·   NGO 2 ­ Euros to the amount of YYY

        ·   NGO 3 ­ Yen to the amount of YYY

The assistance was fully used for the purposes specified.
                                         87
While NGO 1, 2 and 3 have indicated their intention to provide ongoing emergency
assistance as the need arises and their resources allow, the extent of the assistance
is not subject to binding written agreements. It will be determined on the basis of an
assessment of needs and the capacity of each NGO to provide ongoing assistance.

During 200X, NGO 1 provided medical teams and medical equipment in support of
earthquake victims in the ZZZ region. Temporary shelter, food and clothing were also
supplied by NGO 2. The value of the goods and services received has been
estimated at XX rupees. The value of the specialised emergency assistance provided
has been determined based on cost estimates provided by the NGOs involved.

There have been no instances of non-compliance with terms and conditions which
have resulted in cancellation of assistance grants.

There were no amounts of undrawn assistance from NGOs in 20XX or 20XX-XX-1.




                                          88
Extract From Notes to the Financial Statements of Local body C

Classes of External Assistance (Paragraph 2.1.66 and 2.1.70)

During the reporting period external assistance was received from multilateral and bilateral external assistance agencies under
agreements specifying that the assistance would be utilised for the following purposes:

                        Development Assistance       Emergency Assistance                 Other                   Total
                            20XX       20XX-XX-1        20XX        20XX-XX-1      20XX      20XX-XX-1     20XX      20XX-XX-
                                                                                                                        1
Loan Funds                   X              X             -              -           X              -        X              X
Grant Funds                  X              -             X              X           -              -        X              X
Total                        X              X             X              X           X              -        X              X
Amount utilised              X              X             X              X           X              -        X              X
% utilised                   X              X             X              X           X              -        X              X




                                 Agency 1                     Agency 2                   Agency 3                Agency 4
                            20XX       20XX-XX-1        20XX        20XX-XX-1      20XX      20XX-XX-1     20XX      20XX-XX-
                                                                                                                        1
Loan Funds                   X              X             -              -           X              -        X              X
Grant Funds                  X              -             X              X           -              X        X              X
Total                        X              X             X              X           X              X        X              X
Currency: US Dollar          X              X             -              -           -              -        -              -
                                                               89
Euro                            -                -             X             X             -                 -       -                -
Yen                             -                -             -             -            X                  X       -                -
Other                           -                -             -             -             -                 -       X                X


Undrawn External Assistance (Paragraph 2.1.72)

Undrawn external assistance loans and grants consist of amounts which have been specified in a binding agreement with external
assistance agencies but have not been utilised at reporting date, and are subject to terms and conditions that have been satisfied in
the past and it is anticipated will be satisfied in the future. External assistance loans cancelled or expired due to non-incurrence of
budgeted expenditure on development projects. Changes in the amount of undrawn assistance loans and grants are presented in
rupees.

                                             Development                Emergency                    Other                   Total
                                              Assistance                Assistance
                                           20XX      20XX-XX-1      20XX     20XX-XX-     20XX         20XX-XX-1     20XX            20XX-
                                                                                1                                                     XX-1
Opening balance
Loans                                        X            X             -        -             X                 X       X            X
Grants                                       X            X             -        X              -                -       X            X
Approved during the period
Loans                                        X            X             -        -             X                 -       X            X
Grants                                       X            X             X        X             X                 X       X            X
Total available                              X            X             X        X             X                 X       X            X
Loans drawn                                 (X)          (X)            -        -             (X)           (X)     (X)               -

                                                                   90
Grants drawn                 (X)        (X)        (X)     (X)    -           -     (X)            (X)
Loans cancelled/expired      (X)        (X)         -       -     -           -     (X)            (X)
Grants cancelled/expired      -          -          -       -     -           -      -              -
Exchange difference          X          X           -       -     X           X     X              X
Closing balance ­ Loans      X          X           -       -     X           X     X              X
Closing balance - Grants     X          X           -       -     X           X     X              X




Closing balance              Development           Emergency          Other               Total
By currency held              Assistance           Assistance
                           20XX-XX   20XX-XX-1 20XX-XX 20XX-XX- 20XX-XX 20XX-XX-1 20XX-XX         20XX-
                                                          1                                        XX-1
US Dollar                    X          X           -      X      X           X     X              X
Euro                         X          X           -      X      X           X     X              X
Yen                          X          X           -       -     X           X     X              X
Other                        X          X           -       -     -           -     X               -



in rupees
Loans
Agency 1                     X          X           -       -     X           X     X              X
Agency 4                     X          X           -       -     X           X     X              X

                                              91
Grants
Agency 2   X   X        -   X   X   X   X   X
Agency     X   X        -   X   X   X   X   X
Total      X   X        -   X   X   X   X   X




                   92
Significant terms and conditions (Paragraph 2.1.76)

General Restrictions
The balance of commitments for and undrawn balances of, external assistance is
subject to, or restricted by, performance of agreed actions or the maintenance of
agreed economic or financial performance levels.

The Local body has prepared an economic development plan for receipt of
development assistance. The plan includes a poverty reduction strategy which is
supported by the donor community. The Local body and the donors have agreed the
following major targets within the poverty reduction strategy: (Entity to identify major
targets).

The Local body and the donor community have agreed on methods to monitor
progress to achieve the agreed targets and will meet annually to review progress.

Loans and grants to support specific projects include financial performance targets for
all electricity and water utilities to ensure adequate revenue to cover the cost of
providing services, to properly maintain existing utility assets and to contribute to a
program of asset replacement and renewal.

Procurement Restrictions
Certain development assistance received is subject to restrictions in regards to the
nature of goods or services that may be purchased or the country in which the goods
or services may be purchased. All multilateral development bank loans or grants are
restricted in that (a) they prohibit the use of their funds for the purchase of military
goods or services, luxury goods or environmentally damaging goods; and (b) the
purchase of goods or services must be from their respective member countries.
External assistance from bilateral agencies is either unrestricted or limited to
purchases of goods or services from the country providing the funds.

Non Compliance with other significant terms and conditions (Paragraph 2.1.83)

The Local Body's expenditures on primary education did not meet the target level
primarily due to construction delays caused by an earthquake. Expenditures were X
percent below the target. Steps have been taken to correct the under investment and
the relevant donors support the corrective actions planned. The Local Body has
complied with all procurement regulations applicable under all outstanding external
assistance loans and grants.

Guarantees of external assistance loans and grants (Paragraph 2.1.80)

The State Government has guaranteed an infrastructure loan from XXX Bank of
rupees X lakhs. (20XX-XX-1: Nil). The principal is to be repaid in XX years. The

                                          93
interest rate applicable to the outstanding balance is Y percent. Interest payments are
to be made annually. No additional terms or conditions arise from the guarantee. No
other external assistance loans or grants are subject to guarantees by third parties.

Repayment Terms and Conditions-Debt Service Obligations (Paragraph 2.1.86)

The terms of development assistance loans include grace periods which range from 0
to a maximum of 7 years. Interest rates include both fixed rates and variable rates. All
development assistance loans are denominated in US Dollars or Euros. Interest rates
on fixed rate loans as at fiscal year ending 20XX-XX, range from X percent to Y
percent with a weighted average of Z percent. For the fiscal year ending 20XX-XX-1,
they range from A percent to B percent with a weighted average of C percent. Interest
rates on variable rate loans range from LIBOR plus P percent to LIBOR plus Q
percent with a weighted average at the end of fiscal year 20XX-XX of R percent and
at the end of fiscal year 20XX-XX-1 of S percent.

Other external assistance loans do not include a grace period, and are denominated
in a range of currencies including US Dollars, Euros and Yen.

                                                         20XX-XX
                                           Outstanding Debt by Remaining Grace
                                                       Period Years
                                           Expired       0­4        5­7        Total

Development Assistance                         X           X          X          X
Other                                          X            -          -         X
Total                                          X           X          X          X


                                                        20XX-XX-1
                                           Outstanding Debt by Remaining Grace
                                                       Period Years
                                           Expired       0­4        5­7        Total

Development Assistance                         X           X          X          X
Other                                          X            -          -         X
Total                                          X           X          X          X




                                          94
                                                        20XX-XX
                                         Debt Service Payments Including Interest
                                          US         Euro       Yen      Other      Total
                                         Dollar
Development Assistance                     X           X          X         X         X
Other                                      X           X          -         -         X
Total                                      X           X          X         X         X


                                                        20XX-XX-1
                                         Debt Service Payments Including Interest
                                          US         Euro       Yen      Other      Total
                                         Dollar
Development Assistance                     X           X          X         X         X
Other                                      X           X          -         -         X
Total                                      X           X          X         X         X


All debt service payments for subsequent years are based on payment of a fixed
amount comprising principal plus accrued interest. The interest payment or service
charge component is based on the outstanding principal of each loan at the end of
the current year, and for variable interest rate loans, at interest rates prevailing at that
date. Debt service payments denominated in foreign currency have been determined
by applying the closing rate of exchange on the reporting date of the financial
statements.

                                           20XX-XX + 1 and N Subsequent Years
                                         Debt Service Payments Including Interest
                                          US         Euro       Yen      Other      Total
                                         Dollar
Development Assistance                     X           X          X         X         X
Other                                      X           X          -         -         X
Total                                      X           X          X         X         X


Receipt of Goods and Services (Paragraph 2.1.90 and 1.10.21 of part 1)

During 20XX-XX, a severe earthquake occurred in the ZZZ region inflicting serious
damage to property of a local body and private property, and significant loss of life.
Multilateral agencies and bilateral agencies of several nations donated personnel and
equipment to assist in locating and rescuing individuals trapped in the rubble. In
addition, specialised medical teams trained in trauma treatment together with medical
                                            95
equipment, were flown into the region. Temporary shelter and food were also
supplied. The value of goods and services received has been estimated at XX
rupees. The value of the emergency assistance provided has been determined based
on cost estimates provided by the bilateral aid agencies involved because local prices
for equivalent goods or services were not available.

Fifty thousand tons of rice was received as food aid during the year. It has been
valued at XX rupees which represents the wholesale price of similar rice in domestic
wholesale markets.

Goods and services received during the year have not been recorded in the
Statement of Cash Receipts and Payments, which reflects only cash received
(directly or indirectly) or paid by the Government. Goods and services-in-kind were
received as part of the emergency assistance and are reflected in this note.




                                          96
            Appendix 3



     [Refer Appendix A]




97
                                                                            Appendix 4



Qualitative Characteristics of Financial Reporting

Paragraph 1.3.32 of Part 1 of this Standard requires that the financial statements
provide information that meets a number of qualitative characteristics. This appendix
summarises the qualitative characteristics of financial reporting.

Qualitative characteristics are the attributes that make the information provided in
financial statements useful to users. They are applicable to financial statements,
regardless of the basis of accounting used to prepare the financial statements. The
four principal qualitative characteristics are understandability, relevance, reliability
and comparability.

Understandability
Information is understandable when users might reasonably be expected to
comprehend its meaning. For this purpose, users are assumed to have a reasonable
knowledge of the entity's activities and the environment in which it operates, and to
be willing to study the information.

Information about complex matters should not be excluded from the financial
statements merely on the grounds that it may be too difficult for certain users to
understand.

Relevance
Information is relevant to users if it can be used to assist in evaluating past, present
or future events or in confirming, or correcting, past evaluations. In order to be
relevant, information must also be timely.

Materiality
The relevance of information is affected by its nature and materiality.

Information is material if its omission or misstatement could influence the decisions of
users or assessments made on the basis of the financial statement. Materiality
depends on the nature or size of the item or error judged in the particular
circumstances of its omission or misstatement. Thus, materiality provides a threshold
or cut-off point rather than being a primary qualitative characteristic which information
must have if it is to be useful.

Reliability
Reliable information is free from material error and bias, and can be depended on by
users to represent faithfully that which it purports to represent or could reasonably be
                                           98
expected to represent.

Faithful Representation
For information to represent faithfully transactions and other events, it should be
presented in accordance with the substance of the transactions and other events, and
not merely their legal form.

Substance Over Form
If information is to represent faithfully the transactions and other events that it
purports to represent, it is necessary that they are accounted for and presented in
accordance with their substance and economic reality and not merely their legal form.
The substance of transactions or other events is not always consistent with their legal
form.

Neutrality
Information is neutral if it is free from bias. Financial statements are not neutral if the
information they contain has been selected or presented in a manner designed to
influence the making of a decision or judgment in order to achieve a predetermined
result or outcome.

Prudence

Prudence is the inclusion of a degree of caution in the exercise of the judgments
needed in making the estimates required under conditions of uncertainty, such that
assets or revenue are not overstated and liabilities or expenses are not understated.

Completeness
The information in financial statements should be complete within the bounds of
materiality and cost.

Comparability
Information in financial statements is comparable when users are able to identify
similarities and differences between that information and information in other reports.

Comparability applies to the:

    ·          Comparison of financial statements of different entities; and

    ·          Comparison of the financial statements of the same entity over periods
               of time.

An important implication of the characteristic of comparability is that users need to be
informed of the policies employed in the preparation of financial statements, changes
to those policies and the effects of those changes.
                                            99
Because users wish to compare the performance of an entity over time, it is important
that the financial statements show corresponding information for preceding periods.

Constraints on Relevant and Reliable Information
Timeliness
If there is an undue delay in the reporting of information it may lose its relevance. To
provide information on a timely basis it may often be necessary to report before all
aspects of a transaction are known, thus impairing reliability. Conversely, if reporting
is delayed until all aspects are known, the information may be highly reliable but of
little use to users who have had to make decisions in the interim. In achieving a
balance between relevance and reliability, the overriding consideration is how best to
satisfy the decision-making needs of users.

Balance between Benefit and Cost
The balance between benefit and cost is a pervasive constraint. The benefits derived
from information should exceed the cost of providing it. The evaluation of benefits and
costs is, however, substantially a matter of judgment. Furthermore, the costs do not
always fall on those users who enjoy the benefits. Benefits may also be enjoyed by
users other than those for whom the information was prepared. For these reasons, it
is difficult to apply a benefit-cost test in any particular case. Nevertheless, standard
setters, as well as those responsible for the preparation of financial statements and
users of financial statements, should be aware of this constraint.

Balance between Qualitative Characteristics
In practice a balancing, or trade-off, between qualitative characteristics is often
necessary. Generally the aim is to achieve an appropriate balance among the
characteristics in order to meet the objectives of financial statements. The relative
importance of the characteristics in different cases is a matter of professional
judgment.




                                          100
                                                                                Appendix 5

Establishing Control of Another Entity for Financial Reporting Purposes

1.   Whether an entity controls another entity for financial reporting purposes is a
     matter of judgment based on the definition of control in this Standard and the
     particular circumstances of each case. That is, consideration needs to be given
     to the nature of the relationship between the two entities. In particular, the two
     elements of the definition of control in this Standard need to be considered.
     These are the power element (the power to govern the financial and operating
     policies of another entity) and the benefit element (which represents the ability
     of the controlling entity to benefit from the activities of the other entity).

2.   For the purposes of establishing control, the controlling entity needs to benefit
     from the activities of the other entity. For example, an entity may benefit from
     the activities of another entity in terms of a distribution of its surpluses (such as
     a dividend) and is exposed to the risk of a potential loss. In other cases, an
     entity may not obtain any financial benefits from the other entity but may benefit
     from its ability to direct the other entity to work with it to achieve its objectives. It
     may also be possible for an entity to derive both financial and non-financial
     benefits from the activities of another entity.

Control for Financial Reporting Purposes
3.   For the purposes of financial reporting, control stems from an entity's power to
     govern the financial and operating policies of another entity and does not
     necessarily require an entity to hold a majority shareholding or other equity
     interest in the other entity. The power to control must be presently exercisable.
     That is, the entity must already have had this power conferred upon it by
     legislation or some formal agreement. The power to control is not presently
     exercisable if it requires changing legislation or renegotiating agreements in
     order to be effective. This should be distinguished from the fact that the
     existence of the power to control another entity is not dependent upon the
     probability or likelihood of that power being exercised.

4.   Similarly, the existence of control does not require an entity to have
     responsibility for the management of (or involvement in) the day-to-day
     operations of the other entity. In many cases, an entity may only exercise its
     power to control another entity where there is a breach or revocation of an
     agreement between a controlled entity and its controlling entity.

5.   [Refer Appendix A]

6.   The existence of separate legislative powers does not, of itself, preclude an
     entity from being controlled by another entity. The existence of control does not
                                            101
     require an entity to have responsibility over the day-to -day operations of another
     entity or the manner in which professional functions are performed by the entity.

7.   The power of one entity to govern decision-making in relation to the financial and
     operating policies of another entity is insufficient, in itself, to ensure the
     existence of control as defined in this Standard. The controlling entity needs to
     be able to govern decision-making so as to be able to benefit from its activities,
     for example by enabling the other entity to operate with it as part of an economic
     entity in pursuing its objectives. This will have the effect of excluding from the
     definitions of a "controlling entity" and "controlled entity" relationships which do
     not extend beyond, for instance, that of a liquidator and the entity being
     liquidated, and would normally exclude a lender and borrower relationship.
     Similarly, a trustee whose relationship with a trust does not extend beyond the
     normal responsibilities of a trustee would not be considered to control the trust
     for the purposes of this Standard.

Regulatory and Purchase Power
8.   Governments and government entities have the power to regulate the behavior
     of many entities by use of their sovereign or legislative powers. Regulatory and
     purchase powers do not constitute control for the purposes of financial reporting.
     To ensure that the financial statements of a entity include only those resources
     (cash, including cash equivalents) that it controls and can benefit from, the
     meaning of control for the purposes of this Standard does not extend to:

     a)   The power of the legislature to establish the regulatory framework within
          which entities operate and to impose conditions or sanctions on their
          operations. For example, a pollution control authority may have the power
          to close down the operations of entities that are not complying with
          environmental regulations. However, this power does not constitute control
          because the pollution control authority only has the power to regulate; or

     b)    [Refer Appendix A]

Determining Whether Control Exists for Financial Reporting Purposes
9.   Public sector entities may create other entities to achieve some of their
     objectives. In some cases, it may be clear that an entity is controlled, and hence
     should be consolidated. In other cases it may not be clear. Paragraphs 10 and
     11 below provide guidance to help determine whether or not control exists for
     financial reporting purposes.

10. In examining the relationship between two entities, control is presumed to exist
    when at least one of the following power conditions and one of the following
    benefit conditions exists, unless there is clear evidence of control being held by
    another entity.
                                          102
     Power conditions
          a) [Refer Appendix A]

          b) The entity has the power, either granted by or exercised within existing
             legislation, to appoint or remove a majority of the members of the
             governing body of the other entity.

          c) The entity has the power to cast, or regulate the casting of, a majority of
             the votes that are likely to be cast at a meeting of the other entity.

          d) The entity has the power to cast the majority of votes at meetings of the
             board of directors or equivalent governing body.

     Benefit conditions
     a)    The entity has the power to dissolve the other entity and obtain a
           significant level of the residual economic benefits or bear significant
           obligations. For example, the benefit condition may be met if an entity had
           responsibility for the residual liabilities of another entity.

     b)    The entity has the power to extract distributions of assets from the other
           entity, and/or may be liable for certain obligations of the other entity.

11. When one or more of the conditions listed in paragraph 10 do not exist, the
    following factors are likely, either individually or collectively, to be indicative of
    the existence of control.

     Power indicators
     a)    The entity has the ability to veto operating and capital budgets of the other
           entity.

     b)    The entity has the ability to veto, overrule, or modify governing body
           decisions of the other entity.

     c)    The entity has the ability to approve the hiring, reassignment and removal
           of key personnel of the other entity.

     d)    The mandate of the other entity is established and limited by legislation.

     e)    [Refer Appendix A]

     Benefit indicators
     a)    The entity holds direct or indirect title to the net assets/equity of the other
           entity with an ongoing right to access these.

     b)    The entity has a right to a significant level of the net assets/equity of the
                                           103
          other entity in the event of a liquidation or in a distribution other than a
          liquidation.

     c)   The entity is able to direct the other entity to co-operate with it in achieving
          its objectives.

     d)   The entity is exposed to the residual liabilities of the other entity.

12. The following diagram indicates the basic steps involved in establishing control
    of another entity. It should be read in conjunction with paragraphs 1 to 11 of this
    appendix.




                                           104
    Establishing Control of another Entity for Financial Reporting Purposes


       Does the entity benefit from
         the activities of the other       No
                   entity?
       (Paragraphs 2, 10 and 11)

           Yes
        Does the entity have the
           power to govern the             No
         financial and operating
           policies of the other
                  entity?
       (Paragraphs 3, 10 and 11)

           Yes

      Is the power to govern the
        financial and operating            No
           policies presently
             exercisable?
           (Paragraphs 3-5)

          Yes
                                                  Control does not
      Entity controls other entity.               appear to exist.




13. Sometimes a controlled entity is excluded from consolidation when its activities
    are dissimilar to those of other entities within the economic entity, Exclusion on
    these grounds is not justified because better information would be provided by
    consolidating such controlled entities and disclosing additional information in the
    consolidated financial statements about the different activities of controlled
    entities.




                                          105
                                                                        Appendix - A

Note: This Appendix is not a part of the Accounting Standard for Local Bodies. The
purpose of this Appendix is only to bring out the major differences, if any, between
Accounting Standard for Local Bodies (ASLB) and the corresponding International
Public Sector Accounting Standard (IPSAS) on `Financial Reporting under Cash
Basis of Accounting'



Comparison with IPSAS on `Financial Reporting under the Cash Basis of
Accounting'

1. Paragraphs 1.1.6 and 1.1.7 of IPSAS on Financial Reporting under Cash Basis of
   Accounting which provide information on definition of Government Business
   Enterprises (GBEs) and use of IFRSs by these enterprises have been deleted as
   these are not relevant for ALSB on Financial Reporting under Cash Basis of
   Accounting, which is applicable to Local Bodies. However, these paragraph
   numbers have been retained in the ASLB, in order to maintain consistency with
   IPSAS.

2. Examples have been added in paragraph 1.2.7(a) to clarify the situation where
   cash is collected by a local body on behalf of government or another entity.

3. IPSAS on Financial Reporting under Cash Basis of Accounting requires that the
   statement of cash receipts and payments should present total cash payments of
   the entity showing separately a sub-classification of total cash payments using a
   classification basis appropriate to the entity's operations. IPSAS in its Part 2
   encourages an entity to disclose, either on the face of the statement of cash
   receipts and payments or in other financial statements or in the notes to those
   statements, an analysis of total cash payments and payments by third parties
   using a classification based on either their nature or their function. IPSAS further
   provides that if an entity follows function-wise classification, it is encouraged to
   disclose additional information on the basis of nature of payments. ALSB on
   Financial Reporting under Cash Basis of Accounting in its Part 1 requires that the
   statement of cash receipts and payments should present total cash payments of
   the entity showing separately a sub-classification of total cash payments using a
   classification based on either the nature of the payments or their function
   appropriate to the entity's operations. It further provides that whichever basis is
   adopted, the entity should disclose the total cash payments as per the other basis
   of classification either as a separate statement or by way of notes. To give effect
   to the above change, paragraphs 1.3.12, 1.3.25 and 2.1.23 have been amended,
   paragraphs 1.3.12A and 1.3.17A have been added and paragraphs 2.1.23(a),
   2.1.24-2.1.29 have been deleted.

4. The IPSAS permits the periodicity, for example, of 52 weeks for preparation of
   financial statements. ASLB does not permit so, therefore, paragraph 1.4.3 has
   been deleted.

                                          106
5. ASLB on Financial Reporting under Cash Basis of Accounting includes an
   exception to the principle of consistency of presentation and classification of
   items in the financial statements i.e. when there is a change in legislation. The
   IPSAS on Financial Reporting under Cash Basis of Accounting, however, does
   not contain any such exception. Necessary amendments have been made in
   paragraph 1.4.13.


6. Paragraph 1.5 of the IPSAS requires an entity to restate its comparative
   information, in case an error arises in relation to a cash balance reported in the
   financial statements which relates to prior periods. ASLB does not require
   restatement of comparative information in such a case.

7. Examples of severe external long term restrictions where a controlled entity
   should be excluded from consolidation have been added in paragraph 1.6.6.

8. Paragraphs 1.6.8 and 1.6.14 of the IPSAS require that a controlling entity that is
   virtually wholly owned controlled entity need not present consolidated financial
   statements provided it obtains the approval of minority share holders. ASLB does
   not contain such provisions since these provisions are not relevant for local
   bodies in India.


9. The IPSAS requires that the difference between the reporting dates of controlling
   as well as the controlled entities should be no more than three months whereas
   ASLB requires that the difference between the reporting dates should be not
   more than six months.

10. Paragraph 1.7.4 of the IPSAS provides provisions related to translation of foreign
    controlled entities. Further, paragraph 1.7.5 deals with a situation where reporting
    currency is different from the currency of the country in which the entity is
    domiciled. This ASLB does not contain such provisions since these provisions are
    not relevant for local bodies in India.

11. Paragraphs 1.9.31, 1.9.32, 2.1.38 and 2.1.40 of the IPSAS which deal with
    Multiyear Budgets have not been included in ASLB keeping in view that these are
    not relevant for local bodies in India. However, paragraph numbers have been
    retained in order to maintain consistency with IPSAS.

12. Paragraphs 2.1.51-2.1.63 of the IPSAS provides encouraged disclosures in the
    context of hyperinflationary economies. These disclosures have not been
    included in this ASLB since the Indian economy is not hyperinflationary.
    However, paragraph numbers have been retained in the ASLB, in order to
    maintain consistency with the IPSAS.

13. Appendix 3 to the IPSAS provides a summary of key aspects of IPSAS 2, Cash
    Flow Statements, and guidance on its application for financial reporting under this
    Standard relating to `Presentation of Statement of Cash Receipts and Payments'.
    This Appendix has been deleted in this ASLB and it has been mentioned that

                                          107
   ASLB 2 on `Cash Flow Statements' may be referred for the format of the
   Statement of Cash Receipts and Payments and guidance. However, the
   Appendix number has been retained in the ASLB in order to maintain consistency
   with the IPSAS.

14. Paragraph 1.10.29 providing relief from the requirement to disclose comparative
    information for the previous period on initial application of paragraphs 1.10.1 to
    1.10.34 of this Standard has been deleted since paragraph 1.4.16 of the
    Standard already provides relief in this regard for all the sections of the Standard.
    Necessary changes have been made in other paragraphs in this regard.


15. Paragraphs 1.8.1, 1.9.47-1.9.48, 1.10.28, related to `Effective Date' have been
   removed as Part 1 of ASLB would become mandatory for Local Bodies in a state
   from the date specified by the State Government concerned. Paragraph numbers
   have been retained in order to maintain consistency with the relevant IPSAS.

16. Certain paragraphs such as paragraph numbers 1.3.20(b),(c) & (f), 1.9.5, 1.9.16,
    1.9.29-1.9.30, 1.9.40, 2.1.18-2.1.20, 2.1.67(c) & (d) and paragraph 5, 8(b), 10(a),
    11(e) of Appendix 5 have been removed from the ASLB, as these are not
    considered to be relevant for Local Bodies. However, paragraph numbers have
    been retained in order to maintain consistency with the IPSAS. To address the
    conditions prevailing in local bodies in India, various amendments in certain
    paragraphs and Appendices have been made.




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