Indian Railways inks pact with ICAI for Accrual-based Financial System

ICAI’s Accounting Research Foundation signs pact with Railways. Railways will seek to introduce accrual accounting at 17 Railway zones

NEW DELHI: Chartered accountants’ apex body ICAI today signed an agreement with the Indian Railways for moving its accounting system to the accrual format.

“Accrual based financial statement will support Indian Railways in better utilisation of available resources, estimation of future liabilities and prioritisation of spending.

“It will also pave way for best financial management practices to be introduced in Indian Railways,” ICAI said in a release.

The pact is for “introducing the accrual-based financial statement as an additional set of accounts to existing cash-based government accounts”.

It has been entered into between ICAI Accounting Research Foundation (ICAI ARF) and the Indian Railways. The foundation is the research arm of the Institute of Chartered Accountants of India (ICAI).

Accrual system of accounting would provide a better picture of the particular entity’s financial position.

A pilot project for introduction of accrual-based financial statement as an additional set of accounts at North Western Railway at Jaipur (Rajasthan) and Rail Coach Factory at Kapurthala (Punjab) was successfully implemented by ICAI ARF, the release said.

Now, the agreement signed by ARF with Railways will seek to introduce accrual accounting at 17 Railway zones and 8 production units across the country, sources said. The agreement will be valid for 18 months. The agreement was signed by V. Sagar, Director, ICAI ARF and Secretary, ICAI and Sanjeev Sharma, Deputy Chief Project Manager (Accounting Reforms), Northern Railway in the presence of Shahzad Shah, Financial Commissioner, Indian Railways and Nilesh Shivji Vikamsey, Chairman, ICAI ARF and President, ICAI.

The interesting aspect is that accrual based financial statements will serve as an additional set of accounts to existing cash based accounting.

Accrual based financial statement will support Indian Railways in better utilisation of available resources, estimation of future liabilities and prioritisation of spending. It will also pave way for best financial management practices to be introduced in Indian Railways.

This agreement follows implementation of the pilot project for introduction of the Accrual based Financial Statement as an additional set of Accounts at North Western Railway at Jaipur and Rail Coach Factory at Kapurthala by ICAI ARF.

The CA Institute’s ARF will not be implementing this on a pro-bono basis, sources said.

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