Provisions 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 Records.
To ensure companies keep proper records To inculcate a culture of cost consciousness among industries For better resource management To make the efficiency audit possible; and To make cost data available with the Government.
To give Regulatory push to the Indian Companies to attain highest level of cost management and cost competitiveness To strengthen the corporate governance mechanism; To fulfil demands of industry with regard to *simplification of rules, procedures, structure & formats * removal of discrimination, * addressing confidentiality and cost data, and * reducing cost compliance
To recognise cost accounting standards issued by the ICWAI to bring uniformity and standardization in cost statements; and To fulfil 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.
Separate Rules for each Industry / Product Too much emphasis on Government mandated Form leaving no room for flexibility with the Company management. More than one Rule for multi-product companies A compliance view rather than converting it into a management tool No mechanism in MCA to know all companies presently covered under CARR
Selective and ad hoc approach led to a sense of discrimination No cost audit orders in many industries / companies Companies were required to submit multiple cost audit reports for each unit & each product separately. Existing Report Rules / Formats – needed simplification Multiple Appointment of cost auditors for a Company having multiple products under audit
Notification No.G.S.R.429(E) dated 3rd June, 2011 Applicable 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, or
The aggregate value of the turnover made the company from all products or activities during the immediately preceding financial year exceeds Rs.20 crores, or The company’s equity or debt securities are listed or are in the process of listing on any stock exchange
“Manufacturing Activity” includes any act, process or method employed in relation to – i) transformation of raw materials, components, sub-assemblies, or parts into semi-finished or finished products; or ii) making, altering, repairing, fabricating, generatin g, 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; or
iii) 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 earth’s crust, including sea bed or river bed.
“Processing Activity” includes any act, process, procedure, function, operation, tech nique, treatment or method employed in relation to- i) altering the condition or properties of inputs for their use, consumption, sale, transport, delivery or disposal; or ii) accessioning, arranging, describing, or storing products; or Iii) developing, fixing and washing exposed photographic or cinematographic film or paper to produce either negative image or a positive image;
iv) Printing, publishing, finishing, perforation,trimming, cutting, or packaging; orv) Pumping oil, gas, water, sewage or any otherproduct; orvi) Transforming or transmitting, distributingpower or electricity; orvii) harbouring, berthing, docking, elevating,lading, stripping, stuffing, towing, handling orwarehousing products; or
Every 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.
The 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.
“COST 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.
Compliance Report under CARR Every Company to which either Companies (Cost Accounting Records) Rules 2011 or any of the 6 Industry specific Rules apply shall submit Compliance Report From 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)
Form 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.
To 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 year Annexures to be authenticated by a “Cost Accountant” Report to be approved by the Board of Directors
Not applicable to a body corporate governed by a Special Act Supersedes 36 Cost Accounting Records out of 44 issued till date Does not apply to activities or products covered under Cost Accounting Records Rules for: Pharmaceuticals Fertilizers Sugar Electricity Industry Petroleum Industry Telecommunications
CARR 2011 not applicable to companies engaged in Whole sale Trading Insurance Recreation Retain Trading Education Transport Service Banking Healthcare Professional Consultancy Financial Tourism IT & IT Enabled serv. Leasing Travel Research & Dev. Investment Hospitality Postal/Courier