PowerPoint Presentation

KRJ AssociatesCost AccountantsWELCOMES

krj & Associates, Cost AccountantsNew Cost Accounting Record Rules

krj & Associates, Cost AccountantsProvisions of Cost Accounting and Cost Audit introduced in 1965 in the Companies Act, 1956.>Section 209(1)(d) Maintenance of Cost Records.>Section 233 B Audit of Cost Recrds.Historical Background

krj & Associates, Cost AccountantsTo ensure companies keep proper recordsTo inculcate a culture of cost consciousness among industriesFor better resource managementTo make the efficiency audit possible; andTo make cost data available with the Government.Objects and Reasons

krj & Associates, Cost AccountantsTo give Regulatory push to the Indian Companies to attain highest level of cost management and cost competitivenessTo strengthen the corporate governance mechanism;To fulfill demands of industry with regard to*simplification of rules, procedures, structure & formats* removal of discrimination,* addressing confidentiality and cost data, and * reducing cost compliance

Objectives of Central Governmnent

krj & Associates, Cost AccountantsTo recognise cost accounting standards issued by the ICWAI to bring uniformity and standardization in cost statements; andTo fulfill requirement of various Government Authorities and regulatory bodies for availability of cost data of all companies for better decision making to help the industry and the economy.Objectives of CG (contd.)

krj & Associates, Cost AccountantsSeparate Rules for each Industry / ProductToo much emphasis on Government mandated Form leaving no room for flexibility with the Company management.More than one Rule for multi-product companiesA compliance view rather than converting it into a management toolNo mechanism in MCA to know all companies presently covered under CARRShortcomings of earlier mechanism

krj & Associates, Cost AccountantsSelective and ad hoc approach led to a sense of discriminationNo cost audit orders in many industries / companiesCompanies were required to submit multiple cost audit reports for each unit & each product separately.Existing Report Rules / Formats needed simplificationMultiple Appointment of cost auditors for a Company having multiple products under auditShortcomings of earlier mechanism

krj & Associates, Cost AccountantsNotification No.G.S.R.429(E) dated 3rd June, 2011Applicable to every Company including a foreign Company engaged in production, processing, manufacturing or mining wherein:The aggregate value of net worth as on the last date of the immediately preceding financial year exceeds Rs.5 crores, orFeatures of Cost Accounting Record Rules 2011

krj & Associates, Cost AccountantsThe aggregate value of the turnover made the company from all products or activities during the immediately preceding financial year exceeds Rs.20 crores, orThe companys equity or debt securities are listed or are in the process of listing on any stock exchange

Features of Cost Accounting Record Rules 2011 (contd.)

krj & Associates, Cost AccountantsManufacturing Activity includes any act, process or method employed in relation to i) transformation of raw mterials, components, sub-assemblies, or parts into semi-finished or finished products; orii) making, altering, repairing, fabricating, generating, composing, ornamenting, furnishing, finishing, packing, re-packing,oiling, washing, cleaning, breaking-up, demolishing, or otherwise treating or adapting any product with a view to its use, sale, transport, delivery or disposal; orDefinitions of certain terms

krj & Associates, Cost Accountantsiii) constructing, reconstructing, reconditioning, servicing, refitting, repairing, finishing or breaking up of any products.Mining Activity includes any act, process or method employed in relation to the extraction of ores,minerals,oils, gases or other geological materials from the earths crust, including sea bed or river bed. Definitions of certain terms

krj & Associates, Cost AccountantsProcessing Activity includes any act, process, procedure, function, operation, technique, treatment or method employed in relation to-i) altering the condition or properties of inputs for their use, consumption, sale, transport, delivery or disposal; orii) accessioning, arranging, describing, or storing products; orIii) developing, fixing and washing exposed photographic or cinematographic film or paper to produce either negative image or a positive image;Definitions of certain terms

krj & Associates, Cost Accountantsiv) Printing, publishing, finishing, perforation, trimming, cutting, or packaging; orv) Pumping oil, gas, water, sewage or any other product; orvi) Transforming or transmitting, distributing power or electricity; orvii) horboring, berthing, docking, elevating, lading,stripping, stuffing, towing, handling or warehousing products; or(others given in the handout)Definitions of certain terms

krj & Associates, Cost AccountantsEvery Company including all units and branches thereof shall, in respect of each of its financial year commencing on or after 1st day of April, 2011 keep cost records.Such records shall be kept on a regular basis in a manner so as to make it possible to calculate per unit cost of production or cost of operations, cost of sales and margin for each of its products and activities for every financial year on monthly/quarterly/half-yearly/annual basis. Maintenance of Records

krj & Associates, Cost AccountantsThe records shall be maintained in accordance with generally accepted cost accounting principles and cost accounting standards issued by ICWAI, to the extent these are found to be relevant and applicable.These records shall also provide necessary data which is required to be furnished under these rules. Maintenance of Records

krj & Associates, Cost AccountantsCOST RECORDS means books of accounts relating to utilisation of materials, labour and other items of cost as applicable to the production, processing, manufacturing or mining activities of the company.The records, cost statements and reconciliation statements, maintained under these rules shall kept in good order for a period of 8 years.

Maintenance of Records

krj & Associates, Cost AccountantsCompliance Report under CARREvery Company to which either Companies (Cost Accounting Records) Rules 2011 or any of the 6 Industry specific Rules apply shall submit Compliance ReportFrom 2011-12 by every company for every financial year commencing on or after 01/04/2011(for 6 regulated industries from financial year commencing on or after 07/12/2011)Features of Cost Accounting Record Rules 2011 (contd.)

krj & Associates, Cost AccountantsForm B prescribed by Government under these rules duly certified by a Cost Accountant, along with the Annexure to be submitted to Central Government.The Annexure prescribed with the compliance report, as certified by the Cost Accountant, shall be approved by the Board of Directors before submitting the same to the Central Government by the Company.Form of Compliance Report

krj & Associates, Cost AccountantsTo be filed by every Company provided all the products / activities of the company, excluding the exempted categories, are not covered under cost audit.Within 180 days from close of financial yearAnnexures to be authenticated by a Cost AccountantReport to be approved by the Board of DirectorsFeatures of Cost Accounting Record Rules 2011 (contd.)

krj & Associates, Cost AccountantsNot applicable to a body corporate governed by a Special ActSupersedes 36 Cost Accounting Records out of 44 issued till dateDoes not apply to activities or products covered under Cost Accounting Records Rules for:

Features of Cost Accounting Record Rules 2011 (contd.)PharmaceuticalsFertilizersSugarElectricity IndustryPetroleum IndustryTelecommunications

krj & Associates, Cost AccountantsCARR 2011 not applicable to companies engaged inWhole sale TradingInsuranceRecreationRetain TradingEducationTransport ServiceBankingHealthcareProfessional Consultancy FinancialTourismIT & IT Enabled serv.LeasingTravelResearch & Dev.InvestmentHospitalityPostal/Courier

CARR NOT APPLICABLE GENERAL CIRCULAR 67/2011krj & Associates, Cost Accountants

KRJ & ASSOCIATES Cost Accountants

THANK YOU

krj & Associates, Cost Accountants