The Companies (Cost Accounting Records) Rules , 2011
Applicability :
1. The aggregate value of net worth as
on the last date of the immediately preceding financial year exceeds five crores of rupees
OR
2.The
aggregate value of the turnover made
by the company from sale or supply of all products or activities during the
immediately preceding financial year exceeds
twenty crores of rupees
OR
3. The company’s equity or debt securities
are listed or are in the process of listing on any stock exchange, whether in
India or outside India
Provided that these rules are not applicable to the activities or products covered in any of the following Rules :
a) Cost Accounting Records ( Bulk Drugs) Rules , 2011
b) Cost Accounting Records ( Fertilisers) Rules , 2011
c) Cost Accounting Records ( Telecommunications) Rules , 2011
d) Cost Accounting Records ( Electricity Industry) Rules , 2011
e) Cost Accounting Records ( Petroleum Industry) Rules , 2011
f) Cost Accounting Records ( Formulation) Rules , 2011
g) Cost Accounting Records ( Sugar) Rules , 2011
h)Cost Accounting Records ( Industrial Alcohol ) Rules , 2011
Provided further that these rules are not applicable to a company which is a body corporate governed by any special act.
Maintanance of Cost Records :
Every company to which these rules apply , are required to maintain their cost records in accordance with Generally Accepted Cost Accounting Principles and Cost Accounting Standards issued by the Institute of Cost Accountants of India .
Every company to which these rules apply, are required to maintain their cost records , cost statements and reconciliation statement upto 8 years in respect of each financial year commencing on or after 01-04-2011.
Compliance Report:
Every Company to which these rules apply shall submit a compliance report in respect of each financial year on or after 1st day of April 2011 , duly certified by a Cost Accountant along with the Annexure to the Central Government in the Prescribed Form .
Time Limit for submission of Compliance Report :
Within 180 days from the close of the company's financial year to which the compliance report relates.
The last date for submission of compliance report in XBRL Mode for the Financial Year 2011-12 without any penalty has been extended to 31st January 2013.
Authentication and Certification of Compliance Report:
The Annexure to the compliance report is required to
be approved by the Board of Directors and certified by a Cost Accountant before
submitting the same to the Central Government by a company.
As per the respective Cost Accounting Records Rules,
2011 only Cost Accountant or Firm of Cost Accountants is eligible
to authenticate and issue the Compliance Report. The term "cost
accountant" as defined in the Rules means a cost accountants defined in
clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants
Act, 1959 (23 of 1959) and who is either a permanent employee of the company or
holds a valid certificate of practice under subsection (1) of section 6 and who
is deemed to be in practice under subsection (2) of section 2 of that Act and includes
a firm of cost accountants.
As
clarified by the Institute of the Cost Accountants of India through Frequently
Asked Questions that employee-cost accountant shall be eligible to authenticate
the Compliance Report of that Company only where he is working as permanent
employee and shall not be eligible to authenticate Compliance Report of any
other company even under the same group.
Mode and Period of Appointment of Cost Accountant
The Rules have not prescribed the
procedure for appointment of cost accountant in practice to authenticate the
Compliance Report. In case a company desires to have its Compliance Report
certified by a Practicing Cost Accountant, it is advisable to appoint the cost
accountant in practice by the Board of Directors since the Board has been made
responsible to approve the Annexure to Compliance Report before the same is
submitted to the Central Government. In case a company decides to get it
certified by a permanent employee of the organisation, nominating/authorizing
the employee cost accountant would be an internal matter of the company.
Maintenance of Cost Accounting Records
The Compliance Report should be prepared based on Cost
Accounting Records maintained by the Company including its units and branches,
in respect of each of its financial year. These cost records are required to be
kept on regular basis in such 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 carried out at individual production units or
locations for every financial year on monthly/quarterly/half-yearly/annual
basis.
Rule 4(3) of the respective cost accounting records
rules stipulates that the cost accounting records should be maintained in
accordance with the Generally Accepted Cost Accounting Principles (GACAP) and
Cost Accounting Standards (CAS) issued by the Institute of Cost Accountants of
India to the extent these are found relevant and applicable.
The cost records including statistical, quantitative
and other records which enable the company to exercise, as far as possible,
control over the various operations and costs with a view to achieve optimum
economies in utilization of resources are required to be maintained. Cost
records are required to be maintained on continuous basis from the basic stage
of inputs to the final output. These rules also require that the records should
be maintained in such a manner so that they are able to provide necessary data
which is required to be furnished under these rules.
The rules also require that all
such cost records and cost statements, maintained under these rules shall be
reconciled with the audited financial statements for the relevant financial
year specifically indicating expenses or incomes not considered in the cost
records or statements so as to ensure accuracy and to reconcile the costing profit
of all its products/activities with the overall profit of the company. The cost accountant is required to
clearly indicate and explain any variation, if any, in his compliance report or
cost audit report as the case may be.
Frequently Asked Questions
Some of the FAQ on companies (Cost
Accounting Records) Rules ,2011 and the answer given by the institute of Cost
Accountants of India is reproduced here for your information:
1. What is the legal authority of the Companies (Cost
Accounting Records) Rules 2011?
Central
Government, in exercise of the powers conferred by clause (b) of sub-section (1)
of section 642 read with clause (d) of section 209 of the Companies Act, 1956
(1 of 1956), has notified Companies (Cost Accounting Records) Rules 2011.
2.
Under
which authority the Companies (Cost Audit Report) Rules are issued?
Central Government, in exercise of the
powers conferred by clause (b) of sub-section (1) of section 642 read with
sub-section (4) of section 233B, and sub-section (1) of section 227 of the
Companies Act, 1956 (1 of 1956), and in supersession of the Cost Audit Report
Rules, 2001 has issued these rules.
3.
What does turnover mean under these Rules? Is gross turnover Inclusive of
excise
duty?
As
per Rule 2(p), “Turnover” means gross turnover made by the company from the
sale or supply of all products or services during the financial year. It
includes any turnover from job work or loan license operations but does not include any non-operational income.
The term “Turnover” defined in the Companies (Cost Accounting Records) Rules,
2011 shall exclude taxes & duties. It shall have the same meaning, wherever
it appears, in all other orders/rules issued in connection with the cost
accounting records and cost audit.
4.
What constitutes the cost records under Rule 2(e)? Whether the format of
“Abridged
Cost statement” prescribed in the Companies (Cost Audit Report) Rules,
2011
can be considered as a sample cost statement?
Books of account and other records relating
to utilization of materials, labour and other items of cost that provides
data/information to compute the cost of production, cost of sales and margin of
each of the products/activities of the company on
monthly/quarterly/half-yearly/annual basis are considered part of the cost
records. It includes statistical, quantitative and other records which enable
the company to exercise, as far as possible, control over the various
operations and costs with a view to achieve optimum economies in utilization of
resources. Cost records are required to be maintained on continuous basis from
the basic stage of inputs to the final output.
There cannot be any exhaustive list of cost
records. This would depend on the materiality of cost components in the cost of
the product/activity.
The abridged cost statement can be used as
a sample cost statement. This may be modified according to the need of the
company.
5.
What are circumstances under which a company can apply for exemption from
application of the Companies (Cost Accounting Records) Rules 2011 or Companies
(Cost Audit Report) Rules 2011?
There is no exemption available to a company
from the provisions of Companies (Cost Accounting Records) Rules 2011 or
Companies (Cost Audit Report) Rules 2011.
PENAL PROVISIONS FOR NON-COMPLIANCE:
NON-COMPLIANCE BY COMPANY
If a Company contravenes any provision
of this circular, the company and every officer thereof who is in default,
including the persons referred to in sub-section (6) of Section 209 of the Act
shall be punishable as provided under sub-section (2) of Section642 read with
sub-section (5) and (7) of Section 209 and sub-section (11) of Section 233B of
Companies Act, 1956.
Relevant provisions of Section 209 of the Companies Act,
1956 are as follows:
Sub-section (5) of Section 209
provides that if any of the persons referred to in sub-section (6) fails to
take all reasonable steps to secure compliance by the company with the
requirements of this section, or has by his own wilful act been the cause of
any default by the company there under, he shall, in respect of each offence,
be punishable with imprisonment for a term which may extend to six months, or
with fine which may extend to ten thousand rupees, or with both:
Provided that in any proceedings
against a person in respect of an offence under this section consisting of a
failure to take reasonable steps to secure compliance by the company with the
requirements of this section, it shall be a defence to prove that a competent
and reliable person was charged with the duty of seeking that those
requirements were complied with and was in a position to discharge that duty:
Provided further that no
person shall be sentenced to imprisonment for any such offence unless it was
committed wilfully.
Sub-section (6) of
Section 209 provides that the persons referred to in sub-section (5) are the
following, namely:—
(a) where the company has a managing director or
manager, such managing director or manager and all officers and other employees
of the company; and
(d)
where the company has neither a managing director nor manager, every director
of the company;
Sub-section
(7) of Section 209 provides that if any
person, not being a person referred to in sub-section (6), having been charged
by the managing director, manager or Board of directors, as the case may be,
with the duty of seeing that the requirements of this section are complied with
makes default in doing so, he shall, in respect of each offence, be punishable
with imprisonment for a term which my extend to six months, or with fine which
may extend to ten thousand rupees, or with both.
Relevant provision
of Section 642 of the Companies Act 1956
is as under:
Sub-section
(2) of Section 642 provides that any rule made under sub-section (1) may
provide that a contravention thereof shall be punishable with fine which may
extend to five thousand rupees and where the contravention is a continuing one,
with a further fine which may extend to five hundred rupees for every day after
the first during which such contravention continues.
Non
compliance by Cost Auditor:
If default ismade by the cost
auditor in complying with the aforesaid provisions, he shall be punishable with
fine, which may extend to five thousand rupees.
Forms Prescribed :
Form A means the form prescribed in these rules for filing compliance report and other documents with the central government in the electronic mode.
Form B means the form of the compliance report and includes Annexure to the compliance report
Pl feel free to contact for any clarification or comments
Krishna Dasan.A
ACMA
Mob: 98711-28831
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