Indian Government Accounting Standard (IGAS) 10

The Indian Government Accounting Standard (IGAS) 10, titled “Public Debt and Other Liabilities of Governments: Disclosure Requirements“. This standard has been set by the Government Accounting Standards Advisory Board (GASAB). It is noted that Indian Government Accounting Standards are not intended to apply to immaterial items.

Introduction and Context

The introduction provides the constitutional and legal basis for governments in India to borrow. Article 292 of the Constitution grants the executive power to the Union Government to borrow upon the security of the Consolidated Fund of India, within limits fixed by Parliament by Law. Similarly, Article 293(1) provides for borrowing powers of State Governments upon the security of the Consolidated Fund of a State, also within limits fixed by law. Furthermore, Section 48A(1) of the Government of Union Territory Act 1963 and Section 47A(1) of Government of NCT of Delhi Act 1991 provide similar borrowing authority for Union Territories with legislatures, secured by their respective Consolidated Funds, within limits set by Parliament.

Objective

The primary objective of IGAS 10 is to establish the principles for the identification, measurement, and disclosure of public debt and other obligations of the Union Government, State Governments, and Union Territories with legislatures in their financial statements. A key goal of this standard is to ensure consistency with international practices for the accounting of public debt. This consistency and disclosure aim to enhance transparency in the financial statements of the Government for the benefit of various stakeholders.

Scope

The proposed IGAS 10 is designed to apply to the financial statements prepared by the Union Government, State Governments, and Union Territories that have a legislature. In addition to public debt, the standard also explicitly covers “other obligations” as defined within the standard. However, the standard does not include guarantees, other contingent liabilities, and non-binding assurances within its ambit.

Definitions

The standard provides specific meanings for several terms used within it. These definitions are crucial for understanding the scope and requirements of IGAS 10. Key terms defined include:

  • Accounting Authority: This is defined as the authority responsible for preparing the Financial Statements of the Governments.
  • Accounting Period: This refers to the period covered by the Financial Statements.
  • Cash Basis of accounting: This is the basis on which accounting transactions of the Union Government, State Government, and Government of Union Territory with legislature represent actual cash receipts and disbursements during a financial year. This is distinct from amounts due to or by the government. Exceptions may be authorized under the Government Accounting Rules 1990 or by specific orders from the Central Government on the advice of the Comptroller & Auditor General of India.
  • Consolidated Fund of India: This is the fund referenced in Article 266(1) of the Constitution of India.
  • Consolidated Fund of a State: This is the fund referenced in Article 266(1) of the Constitution of India.
  • Consolidated Fund of Union Territories with Legislature: These are the funds referenced in Section 47(1) of the Union Territories Act, 1963 and Section 46(1) of the Government of National Capital Territory of Delhi Act, 1991.
  • Public Account of India: This is the fund referenced in Article 266(2) of the Constitution of India.
  • Public Account of a State: This is the fund referenced in Article 266(2) of the Constitution of India.
  • Public Account of Union Territory: This refers to the Public Account mentioned in Section 47A(1) and Section 46A(1) of the Government of Union Territories Act, 1963 and the Government of National Capital Territory of Delhi Act, 1991, respectively.
  • Financial Statements: These are defined as the Annual Finance Accounts of the Union Government, State Governments, and Union Territories with legislature. Financial statements would also include appropriate statements, schedules, and notes to these accounts.
  • Government: This term refers collectively to the Union Government, any State Government, or the Government of any Union Territory with a Legislature.
  • Face Value: This is defined as the contract value of the Public Debt or other obligations.
  • Public Debt: This includes internal and external debts of the Central Government, State Governments, and the Government of the Union Territory with legislature, as applicable.
  • “Other obligations”: This term specifically refers to the net outcome of the receipt and payment transactions arising in the public account. Notably, it explicitly does not include transactions categorized as Remittances, Suspense and Miscellaneous, and Cash Balance.

Measurement and Valuation

IGAS 10 specifies the basis for accounting and reporting public debt and other obligations incurred by governments. These shall be accounted for and reported on the basis of Face Value. For external debt reporting, the standard requires that changes in the balance at the end of the Accounting Period arising from variations in the rate of exchange shall also be reported. This indicates a requirement to show the impact of currency fluctuations on external debt balances, in addition to the face value measurement.

Disclosure Requirements

Section 6 of the standard details the specific information that the financial statements of the Union Government, State Governments, and Union Territories with legislature shall disclose concerning Public Debt and other obligations. These mandatory disclosures include:

  • For internal debt: Disclosure of the opening balance, additions during the year, discharges during the year, closing balance, and the net change. This information must be presented in rupee terms.
  • For external debt: Disclosure of the opening balance, additions during the year, discharges during the year, closing balance, and the net change. This is required wherever applicable and must also be presented in rupee terms.
  • For other obligations: Disclosure of the opening balance, receipts during the year, disbursements during the year, closing balance, and the net change. This information must also be presented in rupee terms.

Section 7 outlines further disclosure requirements regarding the servicing of debt and related parameters for the current year, the preceding year, and the net change in rupee terms. This section is applicable to the Financial Statements of the Union Government and the State governments. The required disclosures include:

  • Interest paid by the governments: This includes interest on public debt, small savings, provident funds, reserve funds, and on other obligations.
  • Interest received on loans: This covers interest received on loans extended to State and Union Territory Governments, departmental Commercial Undertakings, PSUs and other Undertakings (including Railways, Post & Telegraph).
  • Interest received on other items: This includes interest received on other loans, from investments of cash balances, and other unspecified items.

Section 8 specifically addresses the disclosure of external debt of the Central Government. This debt is required to be classified according to source, and the currency of transaction must be indicated. The measurement of face value is required to be shown in terms of both the currency of agreement and in Indian rupees. Furthermore, the outstanding balance should be disclosed in terms of the exchange rate prevailing at the end of the accounting period.

Effective Date

IGAS 10 becomes effective for the Financial Statements covering periods beginning on 1st April of the year after the notification of the Standard by the Government.

Format for Disclosure (Illustrative)

Section 10 introduces the formats for disclosures, which are provided in the form of Tabular Statements in Annexure 1. These formats are explicitly stated to be illustrative in nature. Their purpose is to illustrate the application of the standard and assist in clarifying its meaning. It is noted that the use of these formats in the same exact form in Finance Accounts is not envisaged.

Annexure 1 contains several illustrative statements:

  • STATEMENT NO. 1 SUMMARY OF DEBT POSITION
    • (a) Statement of Public Debt and Other Liabilities: This statement is designed to provide a summary of the government’s debt position. It lists Public Debt categories, broken down into Internal Debt and External Debt. Internal Debt examples include Market Loans, Treasury Bills, Securities issued to International Financial Institutions, Bonds, Ways and Means Advances, Special Central Government Securities against Small Savings, and others. External Debt examples include Loans from Foreign countries, Loans from Multilateral Agencies and other Institutions, and others. It also lists Other Liabilities arising from Public Accounts, including Small Savings, Provident Funds, etc., Reserve Funds bearing interest, Reserve Funds not bearing interest, Deposits bearing interest, and Deposits not bearing interest. For each category, the statement shows the Balance on 1st April (opening balance), Receipts during the year, Repayments during the year, Balance on 31st March (closing balance), and the Net Increase/Decrease in rupee terms. A note specifies that External Debt marked with an asterisk (*) is Computed at historical exchange rates.
    • (b) Statement showing Servicing of Debt and related parameters: This statement provides details about the cost and earnings related to debt and liabilities. It lists (i) Interest paid by Governments on Public Debt and Small Savings, Provident Funds, Interest on Reserve Funds, and On other Obligations, totaling GROSS INTEREST. It then lists (ii) Deduct items, which are various types of interest received, including Interest received on Loans to State and Union Territory Governments, Interest from Departmental Commercial Undertakings, Public Sector Undertakings and other undertakings, and Interest received on other loans, from investment of cash balances and other items. The result after deduction is the NET INTEREST. The statement also provides space to show key ratios: Percentage of gross interest to total revenue receipts and Percentage of net interest to total revenue receipts. These details are shown for the current year (20×1-20×2), the preceding year (20xx-20×1), and the Net increase/decrease in rupees.
  • STATEMENT NO. 2 Statement showing details of Foreign Loans
    • This statement provides more granular details specifically on External Debt. It lists loans by the Name of Country/Institutions, indicating the foreign currency in brackets. For each loan, it shows the Outstanding balance on 1.4.20×1, Additions during 20×1-20×2, Repayments during 20×1-20×2, Outstanding balance as on 31.3.20×2 (in crores of rupees – expressed in terms of Historical Value), and Outstanding balances as on 31.3.20×2 (in crores of rupees – Converted at Current Exchange Rate). It also indicates the Exchange Rates adopted on 31.3.20×2. A column is included to show Outstanding balances as on 31.3.20×2 (Donor Currency in thousands at Historical Value). The example lists ‘Austria (Euro)’.
  • STATEMENT NO. 3 STATEMENT OF RECEIPTS, DISBURSEMENTS AND BALANCES UNDER HEADS OF ACCOUNT RELATING TO DEBT, DEPOSITS, REMITTANCES AND CONTINGENCY FUND
    • This comprehensive statement provides a summary of financial flows and balances across different parts of government accounts related to debt and liabilities. It is structured by Parts: PART I – CONSOLIDATED FUND, PART II – CONTINGENCY FUND, and PART III – PUBLIC ACCOUNT.
    • Within the Consolidated Fund, it lists various receipt and expenditure heads (Revenue Account and Capital Account), and then specific major heads related to E – Public Debt, F – Loans and Advances, and G – Inter-State Settlement. A specific head ‘7810 – Inter-State Settlement’ is mentioned.
    • The Contingency Fund lists head ‘8000 – Contingency Fund’.
    • The Public Account section is broken down into several sections: I – Small Savings, Provident Funds etc.; J – RESERVE FUNDS, further divided into (a) Reserve funds bearing Interest (e.g., ‘8115 – Depreciation/Renewal Reserve Funds’) and (b) Reserve Funds not Bearing Interest (e.g., ‘8223 – Famine Relief Fund’); K – DEPOSITS AND ADVANCES, divided into (a) Deposits bearing Interest (e.g., ‘8336 – Civil Deposits’), (b) Deposits not bearing interest (e.g., ‘8443 – Civil Deposits’), and (c) Advances (e.g., ‘8550 – Civil Advances’); L – SUSPENSE AND MISCELLANEOUS, divided into (a) Coinage Accounts (e.g., ‘8656 – Coinage Accounts’), (b) Suspense (e.g., ‘8658 – Suspense Accounts’), (c) Other Accounts (e.g., ‘8670 – Cheques and Bills’), (d) Accounts with Governments (e.g., ‘8679 – Accounts with Governments of other Countries’), and (e) Miscellaneous (e.g., ‘8680 – Miscellaneous Government Account’); and M – REMITTANCES, divided into (a) Money Orders and other remittances (e.g., ‘8781 – Money Orders’), (b) Inter-Government Adjustment Account (e.g., ‘8786 – Adjusting Account between Central and State Government’), and (c) Exchange Accounts (e.g., ‘8797 – Exchange Accounts’).
    • Finally, the statement includes N – CASH BALANCE (e.g., ‘8999 – Cash Balance’). For each major/minor head listed, the statement provides columns for the Opening balance as on 1.4.20×1, Receipt, Disbursement, and Closing balance as on 31.3.20×2. It includes subtotals for various sections and a GRAND TOTAL.
  • STATEMENT NO. 4 STATEMENT OF DEBTS AND OTHER INTEREST BEARING OBLIGATIONS OF GOVERNMENT
    • This statement specifically focuses on debts and other interest-bearing obligations. It lists categories under E – PUBLIC DEBT, showing Major Head ‘6001– Internal Debt of the Union Government’ and sub-heads like ‘101 – Market Loans’ (further categorized into interest-bearing, non-interest-bearing, and suspense) and ‘103 – Treasury Bills and connected Securities issued to R.B.I., etc.’. It also includes Major Head ‘6002- External Debt’ and provides an example of a specific loan source like ‘202 – Loans from the Federal Austrian Government, etc.’. For each Description of Loans, the statement shows the Amount on 1st April, Additions during the year, Discharges during the year, and Amount on 31st March. It also has a column titled “Interest paid on Public debt”.
  • STATEMENT NO. 5 DETAILS OF MARKET LOANS RAISED IN INDIA AND SECURITIES ISSUED TO INTERNATIONAL FINANCIAL INSTITUTIONS
    • This statement provides more detailed information on specific types of internal debt. It falls under E – PUBLIC DEBT and A – Internal Debt of the Union Government. It lists (i) Market Loans, specifying (a) Market loans bearing interest, etc.. It also details (ii) Treasury Bills and Connected Securities issued to RBI, listing examples like (iii) 364 days Treasury Bills, (iv) 182 days Treasury Bills, (v) Securities issued to the International Financial Institutions, and (vi) Special Securities issued to RBI, among others. For each Detail of Loans and Securities, the statement indicates When raised, and provides columns for Amount on 1st April, Additions during the year, Discharges during the year, and Amount on 31st March.

These statements, while illustrative, demonstrate the level of detail and categorization expected in the disclosure of public debt and other obligations according to IGAS 10. The standard aims to standardize how governments report these significant financial elements, thereby improving clarity and comparability for stakeholders.

In summary, IGAS 10 establishes the principles for accounting and disclosing public debt and certain other government obligations based primarily on face value measurement. It mandates specific disclosures regarding debt movements, balances, and servicing costs for various categories of internal debt, external debt, and ‘other obligations’ from the public account. It also requires detailed reporting for central government external debt, including source, currency, and balances at historical and current exchange rates. The provided illustrative formats demonstrate the potential structure and content of these disclosures. The standard’s overall objective is to enhance transparency and ensure consistency in reporting government debt and liabilities.

The provided excerpts do not contain information that would allow for a significantly longer response while adhering strictly to the source material and avoiding external information. The details have been expanded upon as much as possible based on the content of each section and the specific line items listed in the illustrative annexures.