ICAI comes out with accounting standards for cash flow statements of local bodies

Chartered accountants' apex body ICAI today said it has issued accounting standards for local bodies with respect to cash flow statements.

The Accounting Standards for Local Bodies (ASLBs) are aimed at ensuring that the financial reporting by local bodies reflects how efficiently and effectively local bodies have discharged their responsibilities in using public funds, according to ICAI.

The Institute of Chartered Accountants of India (ICAI) has issued ASLB 2 'Cash Flow Statements'.

"Application of ASLB 2 will be useful for the local bodies to identify their sources of cash inflows, cash outflows, and the cash balance as at the reporting date which will provide users of financial statements with information for both accountability and decision-making purposes," the institute said in a release.

A cash flow statement, when used in conjunction with the other financial statements, provides information that enables users to evaluate the historical changes in cash and cash equivalents and changes in net assets/equity of an entity, among others, it added.

"ASLB 2 covers all aspects with respect to preparation and presentation of statement of cash flow in more detail than the existing municipal accrual accounting framework available for use by local bodies.

"... the enhanced disclosures as prescribed in ASLB 2 would lead to improved and better transparency in the financial operations of local bodies in the larger public interest," the release said.