Theme accounting challenges title_accounting challenges due to the implementation of Corporate Social Responsibility together with the impact of IPSAS

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“Accounting Challenges due to implementation of Corporate Social Responsibility
under Section 135 of Companies Act together with the impact of International Public
Sector Accounting Standards (IPSAS)”
Dr. T. Joseph M.Com., M.Phil. MBA.,Ph.D.,
Associate Profession – Dept. of Commerce, Loyola College (Autonomous), Chennai – 34. Email: joethomos@gmail.com
&
Sundar A. Rodriguez M.Com., FCA. DISA., CFSA(USA).,
Research Scholar, Dept. of Commerce, Loyola College (Autonomous), Chennai – 34. Email: rodriguezco@gmail.com
The Introduction:
The Indian Companies are mandated to take up activities which are not their core business
activities, and not only that it has rather been forced to take up the “social activities” to fulfi l
the legal requirement as imposed at them by Section 135 of the new Companies Act, 2013. The
core business activities accounting aspects are government in India by the Indian Accounting
Standard including Generally Accepted Accounting Principles (GAAP), and for the “social
activities” in India there are no proper guidelines in place, especially under the Companies Act,
under whose rules and regulations the accounts of the Indian Companies are to be prepared and
finalized. This problem is again compounded by the fact that the Companies Act, 2013
mandates the company to take up the social activities either by itself or by its Foundations or
by non-governmental organization.
Taking this up globally, for the business activities the accounting is governed by International
Financial Reporting Standards (IFRS), and the social or not for profit activities are governed
by the International Public Sector Accounting Standards (IPSAS).
The accounting issue of such activities comes to effect both when it is taken in house or out
sourced. If it is taken in house, the problem of how to account for social activities which has
its own unique nature which has not been adequately addressed by the present Indian
Accounting Standards under which the accounts are to be drawn up. If it is out sourced, the
company cannot just write off the entire amount handed over to the out sourced agency, as it
has been mandated not only to monitor it but also stated to have fiduciary relationship to the
program carried out. This again brings out the challenge of how to go about accounting. This
marriage of “Core Business Activities” and “Social Activities” (under the guise of Corporate
Social Responsibilities) brings about lot of problems associated with the accounting.
Accounting for “Not for Profit” activities:
Due to the unique nature of the activities whose fulcrum is “not for profit” requires separate
accounting principles and standards, which cannot be easily be followed by following the
principles and standards of the “for profit” organizations.
The not for profit organizations standards and accounting principles are also generally followed
by Governments, including all till the local governance, in normal scenario. Since there are no
“Accounting Challenges due to implementation of Section 135 of Companies Act together with the impact of IPS AS ”.

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specific accounting standards to be followed by Non-Governmental Organizations involved in
the developmental sector, globally they have adopted the IPSAS. Hence IPSAS has become
the standard to be followed for accounting and reporting of the not for profit transactions
globally, hence this could be applied to the accounting and reporting for the CSR activities of
the Indian Companies, insofar as it is applicable in India, or such other guidelines that are in
force for the government activities.
Both the international and Indian scenario of standards for the not for profit activities are
detailed below.
Accounting Standards – Public Sector (not for profit) – International:
The International Public Sector Accounting Standards Board (IPSASB) – formerly the Public
Sector Committee of the International Federation of Accountants focuses on the accounting,
auditing and financial reporting needs of the national regional and local governments, related
governmental agencies, and the constituencies they serve. It addresses these needs by issuing
and promoting benchmark guidance, conducting educational and research programs and
facilitating the exchange of information among accountants and those that work in the public
sector or rely on its work.
The IPSASB consists of 18 members, of which 15 are drawn from International Federation of
Accountants (IFAC) member bodies and the remaining three are public members with expertise
in public sector financial reporting.
The IPSASB develops accrual-based International Public Sector Accounting Standards to
address public sector financial reporting issues in two different ways:
By addressing public sector financial reporting issues (a) that have not been comprehensively
or appropriately dealt with in existing International Financial Reporting Standards (IFRS)
issued by the International Accounting Standards Board or (b) for which there is no related
IFRS; and (c) by developing IPSAS that are converged with IFRS by adapting them to public
sector context.
As of now there are about 32 standards issued by IPSASB.
As most countries in the world still follow cash-basis accounting or reporting the core
governmental activities, IPSASB issued standards on both cash and accrual basis distinctly. It
has issued one comprehensive cash-basis IPSAS to cover all the requirements of countries
following the cash basis accounting. Alongside, it has also issued accrual-basis IPSAS for
countries that have moved or are in the transition path to accrual-basis accounting.
Need for assessing the difference between IFRS and IPSAS:
The companies are equipped well with their understanding of IFRS, which they can easily
comprehend and apply as it address all the facets of their core activity i.e., for profit
transactions. However, with the onset of mandatory requirement of CSR, they are bound to
have an understanding of IPSAS which is necessary to understand its applicability for the “not-

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for profit” transactions, under which the CSR falls. Thus the companies are required to have
an understanding of IPSAS, though it differs with IFRS.
Accounting Standards – Public Sector (not for profit) – Indian scenario:
For the accounting of the “for the profit” organizations, the Ministry of Corporate Affairs had
come up with Indian Standards which is converged with the International Financial Reporting
Standard.
However, since the MCA has not come clearly about the standards that exclusively apply for
the CSR activities, we have to fall back on the Government Financial Reporting Standards of
India.
Government accounting in India follows cash basis of accounting. Government Accounting
Standards Advisory Board (GASAB) constituted by the Comptroller and Auditor General of
India with support of Government of India has been working on migration to accrual basis of
accounting in Union and States. Any decision to change the basis of accounting from cash to
accrual would essentially be based on a decision of the President of India on the advice of
Comptroller and Auditor General of India under Constitutional provisions. However, there is
a much felt need for accounting framework and accounting standards on accrual basis to
facilitate pilot studies and research efforts on migration to accrual accounting at Union and
State level. To facilitate pilot studies and for scale up of activities, GASAB has taken a decision
to develop accrual basis accounting standards alongside cash basis standards. The accrual basis
standards are issued under the title “Indian Government Financial Reporting Standards
(IGFRS)”
The accrual basis standards are issued initially as recommendatory for pilot studies on accrual
accounting and will be mandatory with effect from the date of notification by Government of
India.
So far five IGFRS had been issued.
IFAC in the meantime continuing its efforts for harmonization of international standards with
that of those being followed in India.
Mr. Goran Tidstrom, President, IFAC along with Mr. Russell Guthrie, Executive Director,
IFAC visited India on October 29-30, 2012 to have interaction with accounting fraternity in
India. The delegation met with Shri Sachin Pilot, Hon’ble Minister of Corporate Affairs and
Shri Naved Masood, Secretary, Ministry of Corporate Affairs to discuss issues on convergence
of national and international auditing and assurance standards; adoption of high standards of
ethics for members and promotion of good ethical practices globally; ways of develop ing
access of Accountants to various markets. The meeting also dwelled upon how Indian resources
can be utilized in IFAC activities and how can Accounting Profession in India contribute more
efficiently to the financial reporting system.

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The delegation also met with Shri A K Patnaik, Dy. Comptroller and Auditor General of India
and Shri Jawahar Thakur, Controller General of Accounts to discuss the promotion of IPSAS
in India; accrual form of Government accounting; how India is preparing for adoption of high
standards of ethics for members and promotion of good ethical practices globally. Discussions
were also held on convergence to IFRS and International Auditing Standards and how the
presence of Indian regulators be enhanced on global accounting profession platform.
Accounting for CSR – Indian perspective:
The MCA has not so far come up with the standards exclusively for the accounting and
reporting of the CSR activities.
The Companies registered under Indian Companies Act, when they reach the threshold limit
specified in Section 135, are mandated to undertake the CSR. The problem would be two fold
based on the company.
If it is a full- fledged Indian company, then the applicability of the standards mandated by MCA
is to be followed, and the confusion as to how the CSR is to be accounted and reported will
continue to be there till a clear statement is made.
In case of companies, which is a subsidiary of an International Company, has to face additional
dilemma other than the above; that is, they have to redraft their “for profit” activities in line
with IFRS and to redraft their “not-for-profit” activities in line with IPSAS to facilitate easy
consolidation and for effective segmental reporting as required under IFRS.
Present Status:
The convergence of two activities, namely the core activity (the carrying on the business
activity) and the supplementary or imposed activity (the social responsibility program activity);
each of which are separately governed by distinct standards and guidelines, as for as the
accounting goes, due to the necessities of the time, and imposed upon by a new law in India,
which does not really goes into details of such “marriage of convenience” with special
reference to the accounting practices give rises to a problem that is to be addressed.
Further due to globalization the companies in India, either has foreign presence or it is a
subsidiary of a foreign company. This necessitates that accounts are presented in accordance
with IFRS (for core activities) and IPSAS (for the social responsibility activity); as most of the
advanced countries had accepted for example IFRS (for business companies) and International
Public Sector Accounting Standards (IPSAS) for non-trading sector.
The pictorial representation of the reporting process of a company involved in CSR is given
below:

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Gap between the International and National Standards:
As for as the accounting standards for the business activities are concerned, there are two sets
of accounting standards in India and one in International level – IFRS. The major differences
between these are given below:
Effectively in India, the following group of standards are available and applicable.
 Standards Notified under the Companies Accounting Standards Rules 2006, as amended, which
is called as GAAP
 The Indian Accounting Standards, which are converged with IFRS issued by the Ministry of
Corporate Affairs.
The Major differences between these and IFRS are listed below:
Topic Indian GAAP IFRS Indian Account
Standards
Presentation
of Financial
Statements –
primary
literature
AS 1 – Disclosure of
Accounting
Policies/Schedule VI to the
Companies Act, 1956.
AS 5 – Net Profit or Loss
for the period, prior period
items and changes in
Accounting Policies.
IAS 1 – Presentation of
Financial Statements
Ind AS – 1 –
Presentation of
Financial Statements
Presentation
of Financial
Statements –
The components of
financial statements are (a)
balance sheet; (b)
A complete set of financial
statements under IFRS
comprises:
The components of
financial statements
are (a) balance sheet;

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Components
of Financial
Statements
statement of profit and
loss; (c) cash flow
statement; (d) explanatory
notes including summary
of accounting policies.
Comparative figures are
presented for one year as
per the requirements of
Schedule VI
Single entity financial
statements are required to
be presented by all entities.
Public listed companies
are required to present
consolidated financial
statements in addition to
separate financial
statements of the parent in
terms of the listing
agreement with the Stock
Exchanges and the SEBI
Guidelines
(a) Statement of financial
position
(b) Statement of
comprehensive
income / a statement
displaying
components of profit
or loss (separate
income statement)
and a second
statement beginning
with profit or loss and
displaying
components of other
comprehensive
income
(c) A statement of
changes in equity and
(d) Notes including
summary of
accounting policies
and explanatory
notes.
Comparative figures are
presented for one year. When
a change in accounting policy
has been applied
retrospectively or items of
financial statements have
been restated/reclassified, a
statement of financial position
is required as at the beginning
of the earliest period
presented.
(b) statement of profit
and loss; (c) cash flow
statement; (d)
explanatory notes
including summary of
accounting policies.
Comparative figures
are presented for one
year. When a change
in accounting policy
has been applied
retrospectively or
items of financial
statements have been
restated/reclassified,
a statement of
financial position is
required as at the
beginning of the
earliest period
presented.
Unlike IFRD, the Ind
Ass do not mandate
which entities are
required to prepare
statements as the
requirements to
present consolidated
or separate financial
statements is
regulated by
governing statutes in
India.
Presentation
of Financial
Statements –
estimation of
uncertainty
AS 1 does not specifically
require an entity to
disclose information about
the assumptions that it
makes about the future and
other major sources of
estimation of uncertainty
at the end of the reporting
period though other
standards may require
certain disclosures of the
same.
Requires disclosure of key
sources of estimation
uncertainty at the end of the
reporting period, that have a
significant risk of causing a
material adjustment to the
carrying amounts of assets
and liabilities within the next
financial year.
The nature of the uncertainty
and the carrying amounts of
such assets and liabilities at
the end of the reporting period
are required to be disclosed.
Similar to IFRS
Inventories –
Classification
As per the requirements of
Schedule VI, inventories
need to be classified as:
No specific classification
requirements – classification
Similar to IFRS

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 Raw Materials
 Work in progress
 Finished Goods
 Stock in trade
 Stores and spares
 Loose tools
 Others
should be appropriate to the
entity
Statement of
Cash Flows –
Cash flows
from
extraordinary
items
Cash flows from items
disclosed as extraordinary
are classified as arising
from operating, investing
or financing activities and
separately disclosed
As presentation of items of
items as extraordinary is not
permitted, the cash flow
statement does not reflect any
items of cash flow as
extraordinary
Similar to IFRS
Property,
Plant and
Equipment –
depreciation
Fixed assets are not
required to be
componentized and
depreciated separately,
although AS 10 states that
such an approach may
improve the account for an
item of fixed asset.
Schedule XIV specifies the
minimum depreciation
rates to be used for
different categories of
assets.
PPE are componentized and
are depreciated separately.
There is no concept of
minimum statutory
depreciation under IFRS
Similar to IFRS
Revenue –
Definition
Revenue is the gross
inflow of cash, receivables
or other consideration
arising in the course of the
ordinary activities from the
sale of goods, from the
rendering of services, and
from the use by others of
enterprise resources
yielding interest, royalties
and dividends. Revenue is
measured by the charges
made to customers for
goods supplied and
services rendered to them
and by the charges and
rewards arising from the
use of resources by them.
As per Schedule VI, in
case of a company other
than a finance company,
revenue from operations
should disclose separately
Revenue is the gross inflow of
economic benefits during the
period arising in the course of
the ordinary activities of an
entity when those inflows
result in increases in equity,
other than increase relating to
contributions from equity
participants.
Amounts collected on behalf
of third parties, such as sales
and service taxes and value
added taxes are excluded from
revenues
Similar to IFRS

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in the notes to the accounts
the following:
Sale of products
Sale of services
Other Operating revenues
Less:
Excise duty
However as per AS 9 (the
provision of which will
prevail over those of
schedule VI), revenue
needs to be presented on
the face of the statement of
profit and loss as under:
Turnover (Gross)
Less: Excise Duty
Turnover (Net)
Related Party
– Definition
of close
member of
the family
No definition of close
member of the family.
Instead the term “relative”
has been defined.
Close members of the family
of a person are those family
members who may be
expected to influence or be
influenced by, that person in
their dealings with the entity
and include:
A0 that person’s children and
spouse or domestic partner; b)
children of that person’s
spouse or domestic partner;
and c) dependants of that
person or that person’s spouse
or domestic partner.
Close members of the
family of a person are
the persons specified
within meaning of
“relative” under the
companies Act 1956
and that person’s
domestic partner,
children of that
person’s domestic
partner and
dependents of that
person’s domestic
partner.
Consolidated
and separate
financial
statements –
Scope
Indian GAAP does not
specify entities that are
required to present
statements. The
accounting standard is
required to be followed if
statements are presented.
The SEBI requires entities
listed and to be listed to
A parent is required to prepare
statements in which they
consolidate their investments
in subsidiaries in accordance
with IAS 27.
A subsidiary is an entity that
is controlled by another entity
(known as the parent).
A parent need not prepare
statements only. If all the
following conditions are met:
Ind AS does not
mandate presentation
of consolidated
as requirements to
or separate financial
statements is
regulated by
governing statutes in
India.

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 the entity is itself a
wholly owned
subsidiary or a
partially owned
subsidiary and its
other owners have not
objected to the entity
not presenting
statements;
 the entity’s debt or
equity instruments
are not traded in a
public market
 the entity is not in a
process of filing its
for the purposes of
issuing any class of
instruments in a
public market and
 the ultimate or any
intermediate parent of
the entity produces
statements available
for public use that
comply with IFRS.
In case of not for profit organization, there are no specific standards, and the ones followed by
the Government which has the IGFRS issued by the GASAB, which is formed by the
Comptroller and Auditor General of India.
IPSAS vs. IFRS: How they differ:
The differences between IPSAS and IFRS has to be understood by the Companies, especia lly
those who are subsidiary of a foreign company, as the “for profit” transactions has to be
reported as per IFRS and their “not-for-profit” activities are to be reported as per IPSAS. Thus
they have to have two segment within their accounting framework, under which the CSR
activities fall under the “not-for-profit” activities and they are to be dealt with accordingly by
following the IPSAS principles.
Some of the major differences are listed below:
IPSAS-24 requires a public sector entity to present the comparison between budgeted
amounts and the actual amounts that arise from executing the said budget, in the
disclosures are also required to explain the reasons behind the significant differences
between these two amounts. In showing such a comparison and making the required
disclosures, the public entity can demonstrate how well it manages public funds and

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provides services for which it is publicly accountable. There is no equivalent standard
under IFRS.
Non-exchange transactions are those transactions where an entity either receives value
from another entity without directly giving approximately equal value in exchange, or
gives value to another entity without directly receiving approximately equal value in
exchange. Within the public sector non-exchange transactions are prevalent. IPSAS
provides principles to guide the measurement and recognition of non-exchange
transactions, whereas IFRS is generally silent on the matter.
Public sector entities are assumed to be generally exempt from income taxes; thus,
International Accounting Standard (IAS) 12 on Income Taxes, has no equivalent in
IPSAS. However, the latter provides that if the public sector entity is liable for tax
(which is considered an unlikely event), the entity can refer to the guidance in IAS 12
in accounting for the tax.
IPSAS focuses on whether there is entitlement to the revenue from government grants
event though there may be restrictions on how the funds are spent, or an obligation to
meet certain conditions, which is recorded as liability. The distinction between
restrictions and conditions is crucial in determining whether or not to recognize revenue
from a non-exchange transaction. As a result, government grants are generally fully
released to income earlier under IPSAS than under IFRS.
IFRS 10 – Consolidated Financial Statements, IFRS 11 – Joint arrangements; and IFRS
12 – Disclosures of Interests in other entities, took effect in 2013. However, IPSAS is
still based on the previous standards of IAS 27 – Consolidated and Separate Financia l
Statements; IAS 28 – Investments in Associates; and IAS 31 – Interest in Joint
Ventures. The definition of control under IFRS 10 is very different from the one in IAS
27; thus the manner of determining control may be different for a profit-oriented entity
applying IFRS from that of a public sector entity applying IPSAS. It is worth noting
that such a difference has been recognized and, as a result, the IPSAS board issued four
Exposure Drafts in October 2013 with the aim of eliminating this significant difference.
The IPSAS is in the process of developing its own conceptual framework, proposing
concepts that may be more suitable in the public sector context. We may see further
differences in the outlook and focus of the IPSASB and IASB in the future.
The concept of “service potential” as a recognition criterion is another point of
difference between IFRS and IPSAS. This concept is not referred to in IFRS, which
considers “economic benefit” as a major recognition criterion. The service potential
concept is incorporated in the definition of the public sector entity’s assets, liabilit ies,
income and expenses and is an indicator of an asset’s capacity to provide goods and
services to the public in accordance with the entity’s mandate. With this concept a
public sector entity may recognize assets, liabilities, income and expenses different ly
from that of a private entity.
IPSAS had eliminated the concepts that are considered peculiar in the private sector,
such as accounting for share-based payments and the requirements to disclose earnings
per share. In cases that such concepts are applicable to the public sector entities, these
entities should refer to the relevant IFRS.

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Review of Literature:
The following literatures were reviewed:
 A Study on Gap Analysis of Indian Government Accounting with International
Standards (2008) – A research study by GASAB Secretariat, Office of the Comptroller
and Auditor General of India.
 Gaps in “GAAP”: Issues in Non Profit Accounting and reporting in India – Shailesh
Gandhi (2005)
 Accounting Guide for Non Profits (2006) – Asia Pacific Philanthropy Consortium,
Philippines
 IPSAS: Harmonising Government accounting with commercial Accounting – CA G.
Srinivas, published in the journal of The Chartered Accountants of India, May 2010.
 Accounting and auditing in not for profit organization – some critical issues – AS Alva
CA – BCA Journal July 2004.
The literatures which are available deals exclusively either about the Gaps within Indian
Accounting Standards with International ones, or about the issues in non-governmenta l
organizations.
There are no reference to the impact of the CSR activities (which is basically non-profit one)
on the overall accounting and reporting of the company implementing such activities due to
the merger of the two types of transactions – “for profit” transactions and “not-for-profit ”
transactions. This necessitated the need for this study.
Objectives of the paper:
The major objectives of the study are: (1) To study the factors affecting the implementing the
Corporate Social Responsibility (CSR) from accounting perspective, (2) To ascertain ways and
means to properly account for it as it does not fall under the regular business activity, (3) To
find ways to integrate the gaps between the GAAP, Indian Accounting Standards with IFRS &
IPSAS, and (4) To give suggestions to the policy makers like Government and other
stakeholders like implementing agencies, oversight agencies like auditors including the C &
A. G.
Methodology:
This is based on the Conceptual Research concept, mainly because the impact of the CSR on
accounting would only be known at the end of this financial year and there is no primary data
as of now, and this is done relying on the secondary data and review of the literature including
the appropriate standards and policies on accounting issued both at national and international
level.
Factors affecting the implementing the CSR from Accounting Perspective:
As already stated the factors that affect the implementing the CSR from the accounting
perspective are as follows:

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The basic framework for the accounting for the “for-profit” transactions and that of
“not-for-profit” transactions are different.
There are different standards internationally to govern both. For example for the core
activities of the company, there is IFRS, whereas for the not for profit transactions there
is IPSAS. The differences between the IFRS and IPSAS has already been detailed
above.
In India, the company for its core activities, the standards which are mandated under
the Companies Act are to be followed, and if required the standards that are converged
with IFRS as promulgated by MCA is to be followed. Whereas the act is silent about
the applicability of separate standards for “not for profit” transactions which fall within
the ambit of CSR.
From the international perspective, if the Indian Company is a subsidiary of a foreign
company, then its core activities are to be redrafted to be in line with the IFRS
completely, and the non-core activities namely CSR has to be redrafted to be in line
with IPSAS, as then only it would be possible to amalgamate the accounts and also to
do segmental reporting as required under the IFRS. However, in this case suitable
disclosures has to be made to differentiate the accounting principles that are different ly
followed for the not-for-profit transactions and also the appropriate disclosures for the
“for-profit” transactions.
Ascertain the ways and means to properly account for CSR as it does not fall under the
regular business activity:
There are certain unique accounting issues concerning CSR, some are dealt with hereunder.
The first one being the construction of buildings which is intended to be handed over
to the community-based-organization (CBOs), like the local panchayats or Self-Help
Groups etc. The issue here would be how to account for the cost incurred while
constructing and also till the control is handed over to the CBO. Though till that time
the control is with the company, it holds it in fiduciary relationship. The fiduc iar y
relationship exists, where one person places complete confidence in another in regard
to a particular transaction or one’s general affairs or business. The relationship is not
necessarily formally or legally established as in a declaration of trust, but can be one of
moral or personal responsibility, due to the superior knowledge and training of the
fiduciary as compared to the one whose affairs the fiduciary is handling.
The second issue would be the accounting of the people’s contribution in kind. The
contribution if material, has to be properly valued and accounted for both as receipt as
well as expenditure and appropriate supportive documents are to be obtained for audit
purposes.
The third issue is that the CSR is initiated with a clearly laid down budget with clearly
defined success criteria within each of its core operations. This budget together with
the actual amount spent on each of the budget line had to be given, together with the
reasons for the variance if any, and its impact in achieving the originally envisaged
objective. It would be prudent to annex a detailed activity report for CSR and that shall
be linked with each of the budget line and the actual expenditure against it.

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Ways to integrate gaps between GAAP, Indian Accounting Standards with IFRS and
IPSAS for CSR:
The Ministry of Corporate Affairs (MCA) had clearly stated that the standards that are
declared to be mandatory are to be followed by the Companies. It also gives an option
to follow the accounting standards that are converged with the IFRS. Thus in India,
there are two sets of accounting standards that are focusing on the “for profit”
transactions.
In case of the not for profit transactions it is silent. However, the GASAB constituted
by the Comptroller and Auditor General of India, with the support of Government of
India, has come up with five IGFRS. This could be applied for the CSR transactions.
However, MCA has to come up with a notification to this effect. However, if the
company wish to follow it then they have to make additional disclosures to that effect.
The appropriate governmental authorities have to come up with a clearly laid down
process of complete convergence of the Indian Accounting Standards with IFRS and
the complete convergence of the IGFRS with IPSAS, to be in line with the International
requirement. This would eliminate the multiple reporting process of the company.
Suggestions to the policy makers like Government and other stakeholders like
implementing agencies, oversight agencies like auditors including the Comptroller and
Auditor General:
The MCA has to come up with clear guidelines for the accounting policies to be pursued
for the accounting of the CSR activities and also specify the appropriate standards for
to be followed for it. It would be better if the same is in line with the International
standards like IPSAS. However, if it is not practicable, it could fall back on the IGFRS
which is drafted by Indian Government Accounting Stands Advisory Board.
The implementing agency if it is a NGO, it has to follow the rules and laws governing
it. However for the reporting purposes, it could as it does for the foreign funding
agencies, prepare a comparative statement of budget and actual expenditure together
with the analysis of variance. The activity report concerning the implementation of the
CSR of a particular company together with appropriate disclosures are to be given.
The Institute of Chartered Accountants of India (ICAI) could come up with suggested
practices for the accounting and reporting of the CSR activities and also ask the
members to follow the same and to note the discrepancies in the report if the same is
not covered under the appropriate disclosures.
The auditors can use the techniques of the Operational Audit and Social Audit to better
audit the CSR activities, as the regular statutory audits does not divulge deep into the
activities of the CSR.
The Comptroller and Auditor General of India, has already understood the importance
of convergence of the standards in India – IGFRS with that of IPSAS. It would be better
if the harmonisation of the government accounts with accrual basis. However, for this
government approval is required. Once that is in place then the government accounts
which has become of late a subject matter of many a judicial pronouncements and
judgement would be more transparent.

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Then the Non-Governmental organizations which are the implementing agencies of the
CSR and the Companies which are directly involved in the implementation of CSR can
look upon the C&AG for guidance provided that powers are given by the MCA either
through amendments in the Companies Act, or through issuance of guidelines for CSR
accounting and reporting.
Major Findings:
Since CSR is to be implemented this year, there is lack of clarity amongst the corporates who
are hit by this provisions. The corporates have initiated the process of the formation of the
committee, as required by law, however, the terms of reference of the same is more of oversight
and not on the accounting side and adherence to the appropriate standards like IPSAS and
IFRS.
The Ministry of Corporate Affairs is yet to come up with notification which specifies the
appropriate standards whether those which is part of GAAP or the standards that are converged
with IFRS, or a new set of standards promulgated by it or the standards that are converged with
IPSAS.
Recommendation:
The Ministry of Corporate Affairs have to come up with another set of standards which are
converged with IPSAS (as they now have as a converged one with IFRS) exclusively for
applicability of the same for the CSR activities.
The segmental accounting for the consolidation of the Indian operation with that of the other
countries operations, should take appropriate measures to incorporate the CSR activities carried
out in India by following the concepts of IPSAS, insofar as it relates to it.
The oversight mechanism should be given appropriate guidelines, based on the approved and/or
suggested standards and guidelines for the accounting and reporting of the CSR activities, to
enable them to discharge their function more efficiently and effectively. If that is not done the
very spirit of the law which spurred the formulation of CSR would be defeated.
Conclusion:
Any new requirement throws up challenges, it has to be addressed appropriately by the
concerned corporate houses.
Already there are confusion due to two sets of the accounting standards for business in India,
and then there is the international IFRS. The earlier the convergence of all these takes place
there would be confusion, hence the appropriate authorities like the MCA, should take initia t ive
to streamline this. Unless this is done confusion would continue. This confusion would get
more due to the merger of two non-compatible transactions – “for profit” and “not for profit”.
The oversight mechanism should also be guided by relevant guidelines and standards that
would ensure the proper implementation of the spirit of law.

Theme accounting challenges title_accounting challenges due to the implementation of Corporate Social Responsibility together with the impact of IPSAS

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Theme accounting challenges title_accounting challenges due to the implementation of Corporate Social Responsibility together with the impact of IPSAS