Public Sector, Government Accounting and Not-for-Profit Reporting
Public sector, government accounting and not-for-profit reporting differ from commercial Ind AS because accountability and fund restrictions drive recognition.
Core rules
- Government accounting in India is primarily cash-based; IGAS and the Finance Accounts and Appropriation Accounts present receipts and expenditure against budgets. Accrual-based financial statements are used by some public sector entities.
- Public sector entities applying Ind AS follow the same recognition and measurement, with disclosures on appropriations and budget comparisons.
- Not-for-profits use fund accounting: unrestricted funds, restricted funds and endowment funds. Donations in kind are recognised at fair value where reliably measurable; volunteers' services are generally not recognised.
- Section 8 companies and trusts must apply the applicable legal framework; income-tax exemptions under Sections 12A and 80G impose conditions on application of income.
- Key disclosures: related-party transactions, restrictions on funds and programme expenses.
Worked example
An NPO receives ₹10 lakh restricted for a building and spends ₹8 lakh. The balance sheet shows the restricted fund balance at ₹2 lakh; the ₹8 lakh is not transferred to unrestricted funds merely because it was spent.
Traps
- Treating restricted donations as unrestricted income.
- Recognising volunteer time without reliable measurement.
- Mixing government grants with contributions without conditions analysis.
- Ignoring budget-to-actual disclosures in public sector reports.