carr 2014 navi mumbai 200714
DESCRIPTION
Cost Accounting Rules as per Cos Act, 2013TRANSCRIPT
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Cost Records & Cost Audit RulesCost Records & Cost Audit Rules
A Comparison between
2011 & 2014
Strictly Confidential. For private circulation only
www.kishorebhatia.com
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Breaking News
MCA has formed Expert Committee which will submit
Report within three months
Strictly Confidential. For private circulation only
expert committee
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Snapshot
Preamble
Applicability
Maintenance of Records
Cost Audit
EXCLUSIONS from DISCUSSION
Strictly Confidential. For private circulation only
EXCLUSIONS from DISCUSSION
Why the change
Who is responsible
What will happen to members and students
How to oppose/fight back
How do I get refund of 23C Filing Fee
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Preamble
Strictly Confidential. For private circulation only
Preamble
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As we are all aware, Cost Records & Cost Audit were
introduced in mid 60s
Over the years, 44 industries were in ambit
In 2008, an Expert Group constituted recommended
widespread applicability of Cost Records & Cost Audit
In 2011, these recommendations were implemented &
Strictly Confidential. For private circulation only
In 2011, these recommendations were implemented &
Cost Accounting & Cost Audit Rules were revised covering
most industries in purview of Cost Compliance
Progressively Cost Audit was ordered for many of these
Most importantly, these also addressed industries
concern of confidentiality
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Draft Rules were issued in November, 2013
These combined Cost Accounting & Cost Audit Rules
into one
New Cost Accounting & Cost Audit Rules issued by
MCA on 30th June, 2014 now gazzetted
2014
Strictly Confidential. For private circulation only
MCA on 30th June, 2014 now gazzetted
Applicable from FY commencing on or after 1st
April, 2014
Cost Compliance Report abolished
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Applicability
Strictly Confidential. For private circulation only
Applicability
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Cost Records -2011
All companies including foreign companies (u/s 591 ofCompanies Act) from FY 2011-12 which are engaged in:
- Production or
- Processing or
- Manufacturing or
- Mining activities
AND
Strictly Confidential. For private circulation only
AND
- Net worth for preceding year exceeds INR 5 crore or
- Turnover for preceding year exceeds INR 20 crore or
- Debt or equity is listed or in process of listing on any stockexchange
Unless excluded, CCARR compliance is mandatory even if costaudit is applicable, i.e. Need to maintain records as per newCCARR & also file Compliance Report with MCA
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Exclusions - 2011
Company which is a body corporate covered under any special Act(e.g. Banking & Insurance not covered)
As per clarification by MCA:
- Wholesale or Retail trading activities
- Banking, Financial, Leasing, Investment, Insurance
- Education, Healthcare, Tourism, Travel, Hospitality, Recreation
- Transport services, Business/Professional Consultancy
Strictly Confidential. For private circulation only
- Transport services, Business/Professional Consultancy
- IT & IT Enabled Schemes, R & D, postal/courier services, etc
Companies engaged solely in job work operations or contracting/sub-contracting activities
Ancillary products/activities where total turnover from the sale ofeach such ancillary products/activities does not exceed lower of
- 2% of total turnover, or
- Rs. 20 crores
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Cost Audit - 2011
MCA issued 3 Cost Audit Orders: 2nd May3rd May as amended on 30th June24th January, 2012
These were superseded by order of 6th November, 2012. This Order was well structured and clearly spelt out which product /activity were covered
Strictly Confidential. For private circulation only
The threshold limits were Rs 100 cr turnover, except for:
- Bulk Drugs & Formulations since replaced by Pharmaceutical Rules
- Fertilizers
- Sugar & Industrial Alcohol since replaced by Sugar Rules
- Electricity Industry
- Petroleum Industry
- Telecommunications
These had Rs 20 cr threshold
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Applicability - 2014
All companies including foreign companies (u/s 42 of
Section 2 of Companies Act, 2013) will be required to
include Cost Records in their books of accounts if they are
covered under these rules
Category Description
Strictly Confidential. For private circulation only
A Strategic Sectors
B Industry Regulated by a Sectoral Regulator or a Ministry or
Department of Central Government
C Areas involving Public Interest
D Engaged in Production, import and supply or trading of
certain medical devices
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Applicability
Strictly Confidential. For private circulation only
Applicability
A - Companies Engaged in the Production
of following goods in Strategic Sectors
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Applicability
A Companies Engaged in the Production of following
goods in Strategic Sectors
machinery and mechanical appliances used in defence, space
and atomic energy sectors excluding any ancillary item or items;
Explanation: - For the purposes of this sub-clause, any company
which is engaged in any item or items supplied exclusively for
Strictly Confidential. For private circulation only
which is engaged in any item or items supplied exclusively for
use under this clause, shall be deemed to be covered under
these rules
turbo jets and turbo propellers;
arms and ammunitions;
propellant powders; prepared explosives, (other than propellant
powders); safety fuses; detonating fuses; percussion or
detonating caps; igniters; electric detonators;
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Applicability
radar apparatus, radio navigational aid apparatus and radio
remote control apparatus;
tanks and other armoured fighting vehicles, motorised, whether
or not fitted with weapons and parts of such vehicles, that are
funded (investment made in the company) to the extent of 90%
or more by the Government or Government Agencies;
Strictly Confidential. For private circulation only
or more by the Government or Government Agencies;
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Applicability
Net worth or Turnover Criteria
Particulars (Any one) Cost Records Cost Audit
Net worth of the
Company or INR 500 crores or more
Turnover
Strictly Confidential. For private circulation only
Note Turnover and net worth for which year to be
considered has not been defined
Turnover
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Applicability
B - Companies Engaged in an Industry
Strictly Confidential. For private circulation only
B - Companies Engaged in an Industry
regulated by a Sectoral Regulator or a
Ministry or Department of Central
Government
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Applicability
B Companies Engaged in an Industry regulated by a
Sectoral Regulator or a Ministry or Department of
Central Government
Note Here the Rules only specify Companies engaged in the
Industry and dont mention Manufacturing/Production
Port services of stevedoring, pilotage, hauling, mooring, re-
Strictly Confidential. For private circulation only
Port services of stevedoring, pilotage, hauling, mooring, re-
mooring, hooking, measuring, loading and unloading services
rendered by a Port in relation to a vessel or goods regulated by
the Tariff Authority for Major Ports under section 111 of the
Major Port Trusts Act, 1963(38 of 1963);
Aeronautical services of air traffic management, aircraft
operations, ground safety services, ground handling, cargo
facilities and supplying fuel rendered by airports and regulated
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Applicability
by the Airports Economic Regulatory Authority under the
Airports Economic Regulatory Authority of India Act, 2008 (27
of 2008);
Telecommunication services made available to users by means
of any transmission or reception of signs, signals, writing,
images and sounds or intelligence of any nature (other than
broadcasting services) and regulated by the Telecom Regulatory
Strictly Confidential. For private circulation only
broadcasting services) and regulated by the Telecom Regulatory
Authority of India under the Telecom Regulatory Authority of
India Act, 1997 (24 of 1997);
Generation, transmission, distribution and supply of electricity
regulated by the relevant regulatory body or authority under the
Electricity Act, 2003 (36 of 2003), other than for captive
generation (as defined under the Electricity Rules 2005);
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Applicability
Roads and other infrastructure projects;
Drugs and Pharmaceuticals;
Fertilisers;
Sugar and industrial alcohol;
Petroleum products regulated by the Petroleum and Natural Gas
Regulatory Board under the Petroleum and Natural Gas
Strictly Confidential. For private circulation only
Regulatory Board under the Petroleum and Natural Gas
Regulatory Board Act, 2006(19 of 2006);
Rubber and allied products being regulated by the Rubber
Board.
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Applicability
Net worth or Turnover Criteria
Particulars (Any one) Cost Records Cost Audit
Multi Product /
Multi Service
Company
Turnover (from such
specific product or such
specific service)
INR 50 crores
or more
INR 100
crores or
more
Net worth of the INR 150 INR 500
Strictly Confidential. For private circulation only
Note Turnover and net worth for which year to be
considered has not been defined
One Specific
Product / Service
(Net worth or
Turnover)
Net worth of the
Company or
INR 150
crores or
more
INR 500
crores or
more
TurnoverINR 25 crores
or more
INR 100
crores or
more
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Applicability
C - Companies operating in areas involving
Strictly Confidential. For private circulation only
C - Companies operating in areas involving
public interest
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Applicability
C Companies operating in areas involving public
interest
Note Public interest has not been defined
Note Here the Rules only specify Companies engaged in the
Industry and dont give mention to Manufacturing activity
Railway or tramway locomotives, rolling stock, railway or
Strictly Confidential. For private circulation only
Railway or tramway locomotives, rolling stock, railway or
tramway fixtures and fittings, mechanical (including electro
mechanical) traffic signalling equipments of all kind;
Mineral products including cement;
Ores;
Mineral fuels (other than Petroleum), mineral oils etc.;
Base metals;
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Applicability
Inorganic chemicals, organic or inorganic compounds of
precious metals, rare-earth metals of radioactive elements or
isotopes, and Organic Chemicals;
Jute and Jute Products;
Edible Oil under Administrative Price Mechanism;
Construction Industry;
Strictly Confidential. For private circulation only
Construction Industry;
Companies engaged in health services viz. functioning as or
running hospitals, diagnostic centres, clinical centres or test
laboratories;
Companies engaged in education services, other than such
similar services falling under philanthropy or as part of social
spend which do not form part of any business.
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Applicability
Net worth or Turnover Criteria
Particulars (Any one) Cost Records Cost Audit
Multi Product /
Multi Service
Company
Turnover (from such
specific product or such
specific service)
INR 50 crores
or more
INR 100
crores or
more
Net worth of the INR 150 INR 500
Strictly Confidential. For private circulation only
Note Turnover and net worth for which year to be
considered has not been defined
One Specific
Product / Service
(Net worth or
Turnover)
Net worth of the
Company or
INR 150
crores or
more
INR 500
crores or
more
TurnoverINR 25 crores
or more
INR 100
crores or
more
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Applicability
D - Companies (including foreign
companies other than those having only
Strictly Confidential. For private circulation only
companies other than those having only
liaison offices) engaged in the production,
import and supply or trading of following
medical devices
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Applicability
D Companies (including foreign companies other
than those having only liaison offices) engaged in the
production, import and supply or TRADING of
following medical devices:
Cardiac Stents, Drug Eluting Stents, Catheters, Intra Ocular
Lenses, Bone Cements, Heart Valves, Orthopaedic Implants,
Strictly Confidential. For private circulation only
Lenses, Bone Cements, Heart Valves, Orthopaedic Implants,
Internal Prosthetic Replacements, Scalp Vein Set, Deep Brain
Stimulator, Ventricular peripheral Shud, Spinal Implants,
Automatic Impalpable Cardiac Deflobillator, Pacemaker
(temporary and permanent), patent ductus arteriosus, atrial
septal defect and ventricular septal defect closure device,
Cardiac Re-synchronize Therapy, Urethra Spinicture Devices
Sling male or female, Prostate occlusion device, Urethral Stents
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Applicability
Net worth or Turnover Criteria
Particulars (Any one) Cost Records Cost Audit
Multi Product ,
any product or
device
Turnover (from such
specific product or such
specific service)
INR 10 crores or more or one
third of turnover whichever is
less
Strictly Confidential. For private circulation only
Note Turnover and net worth for which year to be
considered has not been defined
One Specific
Product / Service
(Net worth or
Turnover)
Net worth of the
Company orINR 150 crores or more
Turnover INR 25 crores or more
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Applicability
Should we go by Heading of each chapter and consider theindustries specified therein as illustrative? Or,
Is Industries list exhaustive and Headings do not carrysignificance? In some categories ENGAGED / OPERATING areused & in some PRODUCTION. Do the former includeTRADING?
How to interprete industry names? Would Steel Industry meanonly Primary Steel, or Secondary Steel from EAF route, Rolling
Strictly Confidential. For private circulation only
only Primary Steel, or Secondary Steel from EAF route, RollingMills, Products made from Steel?
The applicability is linked with Networth (for the Company) orTurnover from Product or Service
What is Product or Service is not defined. As per pptsubmitted to FM, in case of Pharmaceuticals, variousdosage forms, such as Tablets, Capsules, Syrups, etc havebeen defined as products.
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Applicability
If this were the case, the scope and applicability would to a
handful of companies.
- Construction company may define each apartment as a
product
- Pharma company may define each formulation (corcin,
digene) and each pack size as also variant as a product
Strictly Confidential. For private circulation only
digene) and each pack size as also variant as a product
- School may define std. 1, 2, 3 etc as products
- Hospital may define each type of surgery as products
MCA has not linked Products to Excise/ST codes as in the
past
Utmost care needs to be taken while defining PRODUCT
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Applicability
2011 Rules had a list of Products & Activities excluded
from Cost Records/Audit
2014 Rules have named Products & Industries covered for
Cost Records/Audit.
However, it is not clear what is meant by these
Strictly Confidential. For private circulation only
Also , how to calculate threshold Turnover is not defined
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Maintenance of Records
Strictly Confidential. For private circulation only
Maintenance of Records
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Maintenance
Maintenance of Records
Every Company covered including units and branches shall
maintain cost records in Form CRA 1
This is not a form, it is a narration about Cost Records
There is no mention of compliance with Cost Accounting
Standards or GACAP. However, as per Institute guidelines, these
Strictly Confidential. For private circulation only
Standards or GACAP. However, as per Institute guidelines, these
need to be adhered to
Company needs to prepare cost statements quarterly and
annually
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Maintenance
Cost Records:
To be maintained on regular basis
To facilitate calculation of per unit cost of production /
operation, cost of sales and margin
For each products and activities
For every Financial Year on monthly or quarterly or half-
Strictly Confidential. For private circulation only
For every Financial Year on monthly or quarterly or half-
yearly or annual basis
Cost Records to enable:
Control over operations and costs
Economies in utilization of resources
Provide necessary data required to be furnished under these
rules
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Cost Audit
Strictly Confidential. For private circulation only
Cost Audit
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Cost Audit -2011
BoD needed to appoint Cost Auditor & file Form 23C withMCA within 90 days of commencement of Accounting Year
MCA would approve the appointment within 30daysthereafter
Cost Auditor needed to file Form 23D within 30 daysaccepting the appointment
Strictly Confidential. For private circulation only
Cost Audit Report & Annexure thereto were to be filed withMCA within 180 from y/e in XBRL format
The Annexure to CAR needed to be approved by BoD
Cost Auditor was to give Performance Appraisal Report toBoD
Confidential data as also suggestions and PerformanceReview were not uploaded with MCA
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PARA PARTICULARS DATA TO BE GIVEN FOR
1 General Information 1 yr2 Cost Accounting Policy 1 yr3 Product Group Details 1 yr4 Quantitative Information 2 yr5 Abridged Cost Statement 2 yr
Annexure to CAR-2011
Strictly Confidential. For private circulation only
5 Abridged Cost Statement 2 yr6 Operating Ratio Analysis 2 yr7 Profit Reconciliation 2 yr8 Value Addition 2 yr
9 Financial Position & Ratio Analysis 2 yr10 Related Party Transactions 1 yr11 Reconciliation of Indirect Taxes 1 yr
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Cost Audit
Appointment
File Form CRA - 2 with Central Government along with fee as
specified in Companies (Registration Offices and Fees) Rules,
2014 within:
30 days of Board Meeting in which such appointment is made or
Within 180 days from commencement of Financial Year
whichever is earlier
Strictly Confidential. For private circulation only
whichever is earlier
Audit Report
Cost Auditor to submit report in Form CRA 3
Cost Auditor to forward Report to Board within 180 days from
closure of Financial Year
Board to consider and examine the report for any qualification
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Cost Audit
Company to upload Cost Audit Report within thirty days from
date of receipt of the same in Form CRA 4
CAR to be attached in PDF format and XBRL not specified
Filing fees for CRA - 4 will be as specified in Companies
(Registration Office and Fees) Rules, 2014
Company to provide full information and explanation on every
Strictly Confidential. For private circulation only
Company to provide full information and explanation on every
reservation / qualification as mentioned in the Report along
with such cost audit report while uploading in Form CRA 4
Exclusions
Exclusion from Cost Audit if:
Revenue from exports, in foreign exchange, exceeds 75% of total
revenue or
Operating from SEZ
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Cost Audit Report
Report to adhere to Cost Audit Standards
No mention of Cost Accounting Standards or GACAP as
compared to 2011 Rules
As per Institute guidelines, any deviation from these needs to
be disclosed
No need to give Performance Appraisal Report (PAR) to
Strictly Confidential. For private circulation only
No need to give Performance Appraisal Report (PAR) to
Company. This will be part of Cost Audit Report and be filed
with MCA
With detailed cost sheets and PAR being filed with MCA, there
will be sharing of confidential information with MCA
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Annx To CAR
a. Background, including collaboration details
b. Cost Accounting Policy
c. Process of Manufacture
d. Turnover break-up
e. Production, Capacity & Stocks & Sales qty
Strictly Confidential. For private circulation only
e. Production, Capacity & Stocks & Sales qty
f. Major Inputs
g. Standard/Actual Consumption of Major Inputs
h. Cost Break-up of Imported Inputs
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Annx To CAR
i. Qty & Cost of Major Utilities & their apportionmentj. Employee Details Costs, Headcount, attendance,
etck. Repairs & Maintenancel. Net Fixed Assets & Depreciationm. Overheads Break-up & Apportionment
Strictly Confidential. For private circulation only
m. Overheads Break-up & Apportionmentn. R & D Expenseso. Royalty & Technical Knowhow Chargesp. Abnormal/Non Recurring Costsq. Non-Moving Stockr. Written off Stocks/Forfeited Servicess. Inventory Valuation
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Annx To CAR
t. Sales/revenue Break-upu. Margin per unit of Outputv. Related Party Transactionsw. Excise/Service Tax Reconciliationx. Profit Reconciliationy. Cost Statements to be given for each type/variety/
Strictly Confidential. For private circulation only
y. Cost Statements to be given for each type/variety/ description of good(s)/service(s), separately for domestic/ exports/ related parties & captive consumption
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Strictly Confidential. For private circulation only
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