Recent_changes_in_Cost_accounting_record_rules_2011_PSV

recent changes in Cost Accounting Record Rules ~~AN Introduction~~: 

recent changes in Cost Accounting Record Rules ~~ AN Introduction ~~ Ptd by: PSV & Associates, Cost Accountants PH: 96203 00691 (Mob) 2665 0880 (Off)

Table of Content: 

Table of Content 2 Profile and Services offered. The Companies Act - Recent Changes Application of the Rules Compliance Procedure Time Limit and Authentication Maintenance of records Form of the report Penalties Presentation by PSV & Associates

Contents: 

Contents Presentation by PSV & Associates 3 Firm’s Profile and Services offered. The Companies (Cost Audit report) Rules - Recent Changes Application of the Rules Cost Auditor Time Limit and Authentication Maintenance of records Form of the report Procedure of submission of the report Penalties

Profile of the firm and associates:: 

Profile of the firm and associates: Presentation by PSV & Associates 4 The firm, presently a proprietorship firm, is rendering service since 2006. It has the facility to draw upon the services of experts (who are the Associates of the firm) from the relevant field, as and when required. The works carried out/ being carried out by the firm are : Audit of Stocks & Receivables for Working Capital financing.(Rs.2Crores to Rs.120 Crores ) on behalf of large Banks like Canara Bank, Syndicate Bank, Corporation Bank, UCO Bank etc, Cost Auditors for an MNC & an Indian Company, in Pharma Industry and also for an Engineering manufacturing company with a Turnover of Rs.300 Crores p.a. Successfully devised Costing System for a Company in the field of Fabrication & erection of Industrial sheds (Rs.100 Crore turnover p.a.) Carried out an exercise to validate the level of compliance achieved by the newly introduced ERP system by one of the units of a PSU w.r.t . applicable Cost Accounting Rules. Verification & Certification regarding maintenance of Cost Records as required under Sec.209(1) (d) of Companies Act. Installation of Costing System in an Engineering/ manufacturing company( Rs.200 Crores Turnover) and in an Advertising Company (Rs.50Crores)

Profile of the firm and its associates:: 

Profile of the firm and its associates: Profile of CMA B R PRABHAKAR , presently managing the firm. His brief profile is as follows: He started his career in the Indian Audit and Accounts Department and served in IA&AD, in different capacities for 9 years, (i.e., till 1978) . He is exposed fully to all Govt. procedures, Govt. Audit etc., He served thereafter for 28 years (1978 to 2006) PSUs of repute in various capacities out of which: 6 years as Chief of Finance at Project site of power generation plant (Capital Outlay: Rs.1300 Crores ) of NPCIL, starting from ground breaking stage till commissioning of the plant and finalization of tariff for sale of power to Electricity Board. 10 years as General Manager (Finance) in HAL, a Defence PSU, where major Russian projects were managed (capital outlay of more than Rs. 50,000 Crores ) right from the inception stage till product delivery. Successfully designed MIS for reporting of actual costs incurred to the Board of Directors of HAL periodically. While he was with KEC & NGEF(for12years in all), he was fully responsible for maintenance of cost records and furnishing of data for the entire company, in coordination with all the units, in the prescribed pro- formae for Electric Motors for which COST AUDIT and maintenance of cost records was mandatory. 5 Presentation by PSV & Associates

Profile of the firm and its associates:: 

Profile of the firm and its associates: CMA H V VISHWANATHA is a Senior Partner of the firm. He started his career and served the Indian Audit and Accounts Department (IA&AD), in various capacities for 18 years. He is exposed fully to all Govt. procedures, Govt. Audit etc., During this tenure has audited both the Central and State Government Departments such as Income Tax, Provident Fund Commissioner, Sales tax department, Forest Department, etc., and also Government Companies such as NGEF, Karnataka Power Corporation, GEF, etc. Worked on deputation as Accounts Officer in Karnataka Seeds Corporation Ltd. Thereafter, he has worked in HAL and retired as DGM(Finance) in 2004. The major assignments handled were: Headed the finance function of the division involved in Repair, Overhaul and Maintenance of various types of aircraft (of UK, USA, and French origin) involving procurements and agreement for transfer of technologies. Was totally involved for financial evaluations related to all the activities for indigenous development and manufacture of Advanced Light Helicopter (ALH) from its inception stage till the delivery of the first batch of ALH to GOI. He was an integral part of the team that finalized the pricing structure for supplies to GOI. His exposure includes handling of assignments in a major private sector player in the Aero Space Industry. 6 Presentation by PSV & Associates

Profile of the firm and its associates:: 

Profile of the firm and its associates: Profile of CMA M V SUDARSHAN also a Partner in the Firm. Started his career in Infosys Technologies Ltd., and served the company in various capacities for 14 years, as Controller – Finance. Has handled responsibilities such as - Business Planning, International Finance Operation, Treasury, Running large scale IT Development Product SBU, Designing Costing and Revenue Recognition model as per US-GAAP norms, Direct taxes, Hard core Accounting, Management Assurance, STPI compliances , M&A Due diligences, MIS Designing, etc., Review of commercial aspects of customer contracts. Indirect taxation – Service and VAT taxes. Three years with Aricent Technologies (Holdings) Ltd., KKR (Kohlberg Kravis Roberts &Co.) holding company. Senior Manager – Finance, in-charge for Bangalore Finance Operations, Business Finance and Management assurance. With a team of 20 people managed all the areas of core finance AR, AP, Payroll, Taxation, Internal Audit, Travel Accounts etc., and secretarial matters. My team and myself has fully involved in SAP migration. He has been a visiting faculty in Bangalore Chapter of ICWA and other Business Schools in Bangalore. We also have some more qualified Cost Accountants as Associates of the Firm, in addition to 1 graduate Trainees ( Students of ICWAI) working with the firm. 7 Presentation by PSV & Associates

PowerPoint Presentation: 

Cost Audit Concurrent Audits Investigations Due Diligence Stock audits Cost Accounting record compliance reporting. Compliance KVAT Audit Representation Services Advisory- including on Service Tax and VAT STP & EHTP Issues Service Tax Issues Central Excise and customs Project Finance Corporate Law PE Funding Accounting & Audit Business Advisory & Assurance Corporate Consulting Taxation Internal Audit Risk Assessment SOP Development Operations Audit IS Audit Management Audit Valuations Areas of specialization 8 Presentation by PSV & Associates

Our services wrt Cost Audit: 

Our services wrt Cost Audit Installation of system of Cost Recording where needed Conducting Audit and issuance of Certificate. As a separate activity Review your costing system Provide necessary suggestion in collection and reporting. Bringing costing records in line with GACAP and CAS. Providing any services from time to time. Certifications for captive consumption under CAS4. Authentication of costing records. Issuance of Cost Audit Report to Audit committee and to the Govt. of India 9 Presentation by PSV & Associates

The Companies (Cost Accounting Records) Rules, 2011 : 

The Companies (Cost Accounting Records) Rules, 2011 The said rules was prescribed by MCA (Ministry of Corporate Affairs) New notification published in the official Gazette of India, dated 03.06.2011 on the Cost Audit Records and Cost Accounting Records. 10 Presentation by PSV & Associates

Application of the Rules : 

Application of the Rules Every company including a foreign company, engaged in manufacturing, mining, processing and production activities. As of the last date of the immediately preceding year (31.03.2011) Net worth exceeds Rs. 5 Crores , OR Aggregate value of the turnover from sale or supply of all products or activities exceeds Rs. 20 Crores , OR The Company’s equity or debts are listed in any stock exchanges. Exception : a company which is a body corporate governed by any special act; Bulk Drugs, Formulations, Fertilizers, Industrial Alcohol, Electricity Industry, Petroleum Industry, Telecommunications Supersedes all earlier 36 Record Rules except for 8 regulated groups of industries mentioned above in C(ii). 11 Presentation by PSV & Associates

Compliance Procedure: 

Compliance Procedure Every company to submit compliance report In respect of each of its financial year Commencing from and after 01.04.2011 Duly certified by a Cost Accountant (either in practice or in permanent employment in the company) To be electronically filed with annexure to Central Government in the prescribed form. 12 Presentation by PSV & Associates

Time Limit & Authentication: 

Time Limit & Authentication Time limit for submission of the compliance report – with in 180 days from the close of the company financial year. Authentication of Annexure to the Compliance Report – The annexure as certified by the Cost Accountant should be approved by the BOD before submitting to the Central Government. 13 Presentation by PSV & Associates

Maintenance of records: 

Maintenance of records Every company including all units and branches. To be kept on regular basis to calculate per unit cost of production or cost of operation, cost of sales and margin. For each of its product s and activities On monthly / quarterly / half-yearly / annual basis In accordance with the Generally Accepted Cost Accounting Principles and Cost accounting Standards issued by ICWAI. Variations are to be clearly indicated and explained. To achieve optimum economies in utilizations of resources. To be reconciled with the annual financial audited statements To be kept in good order for eight years. 14 Presentation by PSV & Associates

CAS 1 - 3: 

CAS 1 - 3 Presentation by PSV & Associates 15 CAS No Title Objective Useful for CAS1 Classification for Cost For preparation of Cost Statements Assessment of excise duty and other taxes, anti-dumping measures, transfer pricing etc. CAS2 Capacity Determination For determination of capacity Proper allocation, apportionment and absorption of cost. CAS3 Overheads For Collection, Allocation, Apportionment and Absorption of overheads Determining Cost of products, services or activities CAS3 (revised) Overheads To bring uniformity and consistency in the principles and methods of determining the Overheads with reasonable accuracy . Determining the Overheads with reasonable accuracy.

CAS 4 & 5 : 

CAS 4 & 5 16 CAS No Title Objective Useful for CAS4 Cost of Production for Captive Consumption To determine the assessable value of excisable goods used for captive consumption. Determining Cost of products, services or activities CAS5 Average (equalized) Cost of Transportation To determine averaged/equalized transportation cost Calculating the amount of deduction from assessable value of excisable goods, freight subsidy, Insurance claim valuation, etc Presentation by PSV & Associates

CAS 6 & 7 : 

CAS 6 & 7 Presentation by PSV & Associates 17 CAS No Title Objective Useful for CAS6 Material Cost To bring uniformity and consistency in the principles and methods of determining the material cost with reasonable accuracy in an economically feasible manner. Applicable to all cost statements which require measurement, assignment,   classification   and presentation of material costs. To be followed in all cost statements requiring assurance including attestation. CAS7 Employee Cost To bring uniformity and consistency in the principles and methods of determining the Employee cost with reasonable accuracy. Applicable to cost statements which require classification, measurement, assignment, presentation and disclosure of Employee cost including those requiring attestation

CAS 8 & 9 : 

CAS 8 & 9 18 CAS No Title Objective Useful for CAS8 Cost of Utilities To bring uniformity and consistency in the principles and methods of determining the Cost of Utilities with reasonable accuracy. Applicable to cost statements which require classification, measurement, assignment, presentation and disclosure of Cost of Utilities including those requiring attestation CAS9 Packing Material Cost To bring uniformity and consistency in the principles and methods of determining the Packing Material Cost with reasonable accuracy. Applicable to cost statements which require classification, measurement, assignment, presentation and disclosure of Packing Material Cost including those requiring attestation Presentation by PSV & Associates

CAS 10 & 11 : 

CAS 10 & 11 19 CAS No Title Objective Useful for CAS10 Direct Expenses To bring uniformity and consistency in the principles and methods of determining the Direct Expenses with reasonable accuracy. Applicable to cost statements which require classification, measurement, assignment, presentation and disclosure of Direct Expenses including those requiring attestation CAS11 Administrative Overheads To bring uniformity and consistency in the principles and methods of determining the Administrative Overheads with reasonable accuracy. Applicable to cost statements which require classification, measurement, assignment, presentation and disclosure of Administrative Overheads including those requiring attestation Presentation by PSV & Associates

CAS 12 & 13 : 

CAS 12 & 13 20 CAS No Title Objective Useful for CAS12 Repairs And Maintenance Cost To bring uniformity and consistency in the principles and methods of determining the Repairs and Maintenance Cost with reasonable accuracy. Applicable to cost statements which require classification, measurement, assignment, presentation and disclosure of Repairs and Maintenance Cost including those requiring attestation CAS13 Cost of Service Cost Centre To bring uniformity and consistency in the principles and methods of determining the Cost of Service Cost Centre with reasonable accuracy. Applicable to the preparation and presentation of cost statements, which require classification, measurement and assignment of Cost of Service Cost Centre, including those requiring attestation Presentation by PSV & Associates

GACAP – Generally Accepted Cost Accounting Principles - Objective: 

GACAP – Generally Accepted Cost Accounting Principles - Objective 21 to narrow down diversities in cost accounting practices facilitating the process of development of cost accounting standards; to provide a reference source to industry and practitioners in preparation and attestation of Cost Statements, where specific cost accounting standards are yet to be issued; to provide a reference source to all the stakeholders in the understanding and interpreting the cost statement; to provide a base for monitoring the evolution of new concepts and practices in cost accounting and to codify them as and when they become generally accepted; Presentation by PSV & Associates

GACAP – Conceptual Framework: 

GACAP – Conceptual Framework 22 Focus on drivers of cost, revenue, profit and value. Cost for a purpose. Reality driven Materiality and cost effectiveness. Comparability and consistency Presentation by PSV & Associates

GACAP – Elements of cost: 

GACAP – Elements of cost Presentation by PSV & Associates 23 Material Cost Administration Overhead Employee Cost Selling and Distribution Overhead Direct Expenses Interest and Finance Charges Utilities Sales Repairs and Maintenance Joint Costs Production Overhead Common costs Depreciation Presentation and disclosure

Form of the report: 

Form of the report FORM – A General Information covering: - Details of the company including date of BOD meeting approving the compliance report. - Details of the Cost Accountant Quantitative information To be verified and digitally signed by MD or Director or Manager or Secretary in Indian Company or Authorized representative in foreign company. FORM – B Format of Compliance Report and Annexure are duly signed by the Cost Accountant. 24 Presentation by PSV & Associates

Need for Cost Auditor: 

Need for Cost Auditor 25 Cost Auditor will conduct detailed exercise and covers wider areas like review and comment of the Cost Accounting Policy of the company with respect to – a) Identification of cost centers/cost objects and cost drivers. b) Accounting for material cost including packing materials, stores and spares etc., employee cost, utilities and other relevant cost components. c) Accounting, allocation and absorption of overheads d) Accounting for Depreciation/Amortization e) Accounting for by-products/joint-products, scarps, wastage etc. f) Basis for Inventory Valuation, Methodology for valuation of Inter-Unit/Inter Company and Related Party transactions. h) Treatment of abnormal, non-recurring and other non-cost items. ( i ) In case the Company has adopted IFRS, variations (if any) in treatment of cost accounting arising out of adoption of IFRS in Financial Accounting. j) Other relevant cost accounting policy adopted by the Company Presentation by PSV & Associates

Penalties: 

Penalties Company and officers – In case of default (i.e., non maintenance of Cost Records) imprisonment up to six months or fine up to Rs. 10,000/- or with both. Cost Accountant – If default is made in complying with the procedure, punishable with fine up to Rs. 5000/- 26 Presentation by PSV & Associates

PowerPoint Presentation: 

Substantial reduction in time taken in various report generation eg . Product vise cost and profitability Alternative utilization of various resources to the more profitable products. Timely action and response on various activities Helps very much in pricing. Helps in measuring inter unit performance measure. Benefits of the exercise – some practical examples Improved efficiency and response time Revenue Maximization Cost Control Allocation of resources based on the profitability would result in not only increase in revenue but also profit. Adequate segregation of cost viz – fixed and variable will enable to management to control cost effectively. Savings in operating costs with effective process of planning and monitoring (trend analysis and budget monitoring)

Thank you: 

Thank you 28 Ptd by: PSV & Associates , PH: 99862 60910 (Mob) 2665 0880 (Off) Presentation by PSV & Associates