TMI BlogCompanies (cost records and audit) Rules,2014X X X X Extracts X X X X X X X X Extracts X X X X ..... (1) These rules may be called the Companies (cost records and audit) Rules, 2014. (2) They shall come into force on the date of publication in the Official Gazette. 2. Definitions: In these rules, unless the context otherwise requires - (a) Act means the Companies Act, 2013 (18 of 2013); (b) Cost Accountant in practice means a cost accountant as defined in clause (b) of subsection (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959), who holds a valid certificate of practice under sub-section (1) of section 6 of that Act and who is deemed to be in practice under sub-section (2) of section 2 thereof, and includes a firm or limited liability partnership of cost accountants; (c) cost auditor means a Cost Accountant in practice, as defined in clause (b), who is appointed by the Board; (d) cost audit report means the report duly audited and signed by the cost auditor including attachment, annexure, qualifications or observations etc. to cost audit report; (e) cost records means books of account relating to utilisation of materials, labour and other items of cost as applicable to the production of goods or provision of services as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort Trusts Act, 1963(38 of 1963); (ii) Aeronautical services of air traffic management, aircraft operations, ground safety services, ground handling, cargo facilities and supplying fuel rendered by airports and regulated by the Airports Economic Regulatory Authority under the Airports Economic Regulatory Authority of India Act, 2008 (27 of 2008); (iii) 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 Authority of India under the Telecom Regulatory Authority of India Act, 1997 (24 of 1997); (iv) 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); (v) Steel; (vi) Roads and other infrastructure projects; (vii) Drugs and Pharmaceuticals; (viii) Fertilisers; (ix) Sugar and industrial alcohol; (x) Petroleum products regulated by the Petroleum and Natural Gas Regulatory Board und ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e or the turnover is rupees twenty five crore or more. (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, namely:- (a) (i) Cardiac Stents; (ii) Drug Eluting Stents; (iii) Catheters; (iv) Intra Ocular Lenses; (v) Bone Cements; (vi) Heart Valves; (vii) Orthopaedic Implants; (viii) Internal Prosthetic Replacements; (ix) Scalp Vein Set; (x) Deep Brain Stimulator; (xi) Ventricular peripheral Shud; (xii) Spinal Implants; (xiii) Automatic Impalpable Cardiac Deflobillator; (xiv)Pacemaker (temporary and permanent); (xv) patent ductus arteriosus, atrial septal defect and ventricular septal defect closure device; (xvi) Cardiac Re-synchronize Therapy ; (xvii) Urethra Spinicture Devices; (xviii) Sling male or female; (xix) Prostate occlusion device; and (xx) Urethral Stents. (b) For the purposes of clause (D), the thresholds limit shall be as under, - (i) in the case of a company engaged in multiple products, any product or device for which the individual turnover (from such specific product or device) is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tate calculation of 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 or quarterly or half-yearly or annual basis. (3) The cost records shall be maintained in such manner so as to enable the company to exercise, as far as possible, control over the various operations and costs to achieve optimum economies in utilisation of resources and these records shall also provide necessary data which is required to be furnished under these rules. 6. Cost audit.- (1) The category of companies specified in rule 3 and the thresholds limits laid down in rule 4, shall within one hundred and eighty days of the commencement of every financial year, appoint a cost auditor. (2) Every company referred to in sub-rule (1) shall inform the cost auditor concerned of his or its appointment as such and file a notice of such appointment with the Central Government within a period of thirty days of the Board meeting in which such appointment is made or within a period of one hundred and eighty days of the commencement of the financial year, whichever is earlier, through electronic mode, in form ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rks) required for the production of goods or rendering of services under reference. The basis, on which quantities, cost of issue and consumption are calculated, shall be indicated in the cost records and followed consistently. In the case of imported raw materials/input services, proper records shall be maintained showing quantity of imported material/service, Free On Board value, overseas freight, insurance, customs duty and inland freight charges along with license-wise quantities allowed, actual quantities imported, actual quantities consumed, quantities in stock and quantities yet to be imported out of total licensed quantities. If both indigenous and imported materials/services are consumed, the records showing details of percentage mix of the same have to be maintained for each item. (2) Proper records shall be maintained separately showing the receipts, issues and balances both in quantities and cost of each item of intermediate material/service, process material, additives, bought out components, sub-assemblies, accessories, semi-finished go ods, consumable stores, spares, other indirect materials/services etc. used in the production of the goods/rendering of services u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined on equitable and reasonable basis and applied consistently. The records indicating the actual sales realization of recoveries shall also be maintained. (6) Proper records shall be maintained to show the receipts, issues and balances, both in quantities and cost of each item of consumable stores, other process materials/services not covered above, small tools and machinery spares, indirect materials/services etc. The cost shall include all direct charges upto works/services delivered. (7) The cost of consumable stores, small tools and machinery spares shall be charged to the relevant cost center/service centre or department or production process of goods or rendering of services on the basis of actual issues. In the case of consumable stores and small tools, indirect services, the cost of which are insignificant (less than 5% of the cost of material consumed), the company may, if it so desires, maintain such records for the group of such consumable stores, tools and indirect services. (8) Proper records shall be maintained showing the quantity and value of wastage, spoilage, rejections and losses of raw materials/input services, intermediates, process materials/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es stock option; (h) leave travel concession; (i) paid holidays; (j) leave with pay; (k) Training, workshop, seminar expenses; (l) Medical/health, safety, education expenses; (m) any other statutory provision for labour welfare; (n) any other free or subsidized facility. (2) The records shall be maintained in such a manner as to enable the company to book these expenses cost centre wise or department wise with reference to goods/services under reference and to furnish necessary particulars. Where the employees work in such a manner that it is not possible to identify them with any specific cost centre/service centre or department, the employees cost shall be apportioned to the cost centre/service centres or departments on equitable and reasonable basis and applied consistently. (3) The idle labour cost shall be separately recorded under classified headings indicating the reasons therefor. The method followed for accounting of idle time payments shall be disclosed in the cost records. (4) Any wages and salaries allocable to capital works, such as, additions to plant and machinery, buildings or other fixed assets shall be accounted for under the relevant ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... its corresponding impact on per unit cost of goods/services. 4. SERVICE DEPARTMENT EXPENSES: Proper records shall be maintained to indicate expenses incurred in respect of each service cost centre like engineering, work shop, designing, laboratory, safety, transport, computer cell, welfare etc. These expenses shall be apportioned to other services and production departments on equitable and reasonable basis and applied consistently. Where these services are utilized for other goods/services of the company also, the basis of apportionment of such expenses to goods/services under reference and to the other goods/services shall be on equitable and reasonable basis and applied consistently. The said basis shall be disclosed in the cost records also. Proper records shall be maintained to indicate cost of purchase, production, distribution, marketing and price of services with reference to sales to outside parties. Proper records shall also be maintained regarding cost of services received from/rendered to related parties and cost of service cost centre incurred in foreign exchange besides proper maintenance of records in respect of any subsidy, grants, incentives, credits/recove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed consistently. In case of revaluation of assets, the same shall be indicated separately and depreciation on revaluation shall also be indicated separately. (3) The basis on which depreciation is calculated and allocated or apportioned to various cost centre/service centres or departments and absorbed on all goods/services shall be clearly indicated in the cost records. If depreciation charged or chargeable to the cost centres or departments is in excess or lower than the depreciation calculated by applying the rates of depreciation prescribed under the Companies Act, 2013 , such amount of excess or lower depreciation shall be indicated clearly in the cost records. The cost records shall also show the effect of such excess or lower depreciation, as the case may be, on per unit cost of each good/service. The cumulative depreciation charged in the cost records, against any individual item of asset shall not, however, exceed the original cost of the respective asset. (4) Proper records shall be maintained giving details of assets taken or given on lease. The breakup of lease rental in terms of financial charges, depreciation etc. paid or received shall be maintained separately. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... : (1) Proper records showing the details of expenses, if any, incurred by the company for research and development work on the goods/services covered under these rules, according to the nature of development of goods/services - existing and new, design and development of new facilities and market research for the existing and new goods/services, shall be maintained separately. The records shall also indicate the payments made to outside parties for the research and development work. The basis of charging such amount, including lump sum payment and its treatment shall be indicated in the cost records. (2) The basis of charging these expenses to the cost of production of goods/services under reference and to other goods/services shall be indicated in the cost records. Where the utility of research and development work extends to over more than one financial year, such expenses shall be charged to the cost of goods/services under reference and to all other goods/services on equitable and reasonable basis and applied consistently indicating the criteria on the basis of which it has been decided to extend the utility period of these expenses to more than one financial year. (3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be maintained for each item of by-product, if any, produced showing the receipt, issues and balances, both in quantity and value. The basis adopted for valuation of by-product for giving credit to the respective process shall be equitable and consistent and should be indicated in cost records. Records showing the expenses incurred on further processing, if any, as well as actual sales realization of by-product shall be maintained. The proper records shall be maintained in respect of credits/recoveries from the disposal of by-products. 14. JOINT PRODUCTS/SERVICES: Where more than one product/service which is of equal economic importance arises from a process, the cost up to the point of separation of products/services shall be apportioned to joint products/services on reasonable and equitable basis and shall be applied consistently. The basis on which such joint costs are apportioned to different products/services arising from the process shall be indicated in the cost records. Proper records shall be maintained in respect credits/recoveries from the disposal of joint products/services. 15. PACKING EXPENSES: Proper records shall be maintained separately for dom ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ents giving the reasons for non-compliance, if any. In case, duty free imports are made, the cost statements should reflect this fact. If the duty free imports have been made after actual production, the statement should reflect this fact also. 18. POLLUTION CONTROL: (1) Expenditure incurred by the company on various measures to protect the environment like effluent treatment, control of pollution of air, water, etc., should be properly recorded. Records relating to basis of distribution of pollution control expenses, such costs of jobs done in-house and outsourced separately, pollution control costs paid/payable to related parties, incurred in foreign exchange and any subsidy, grant, incentive, credits/recoveries, any abnormal portion of such costs, penalty and damages paid and any amount received/receivable from pollution control agency. 19. PRODUCTION RECORDS: Quantitative records of all finished goods (packed or unpacked)/services rendered showing production, issues for sales and balances of different type of the goods/services under reference, shall be maintained. The quantitative details of production of goods/services rendered shall be maintained separately f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... goods/services, cost of sales of goods/services and margin in total as well as per unit of the goods/services. The goods/services emerging from a process, which forms raw material or an input material/service for a subsequent process, shall be valued at the cost of production/cost of service up to the previous stage. (3) Cost Statements (quarterly and annually)in respect of reconciliation of indirect taxes showing details of total clearances of goods/services, assessable value, duties/taxes paid, CENVAT/VAT/Service Tax credit utilized, duties/taxes recovered and interest/penalty paid. (4) If the company is operating more than one plant, factory or service centre, separate cost statements as specified above shall be prepared in respect of each plant, factory or service centre. (5) Any other statement/information considered necessary for suitable presentation of Costs and Profitability of goods/services produced by the Company shall also be prepared. 24. RECONCILIATION OF COST AND FINANCIAL ACCOUNTS: (1) The cost statements shall be reconciled with the financial statements for the financial year specifically indicating the expenses or incomes not considered in the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nding reached in respect of - (a) purchase and sale of raw materials, finished good(s), rendering of service(s), process materials and rejected goods including scraps, etc; (b) utilisation of plant facilities and technical know-how; (c) supply of utilities and any other services; (d) administrative, technical, managerial or any other consultancy services; (e) purchase and sale of capital goods including plant and machinery; and (f) any other payment related to the production of goods/rendering of services under reference. (2) These records shall also indicate the basis followed for arriving at the rates charged or paid for such goods or services so as to enable determination of the reasonableness of such rates in so far as they are in any way related to goods/services under reference. FORM CRA-2 This e-form has been taken on file maintained by the Central Government through electronic mode and on the basis of statement of correctness given by the filing company and the cost auditor F. No. 1/40/2013/CL-V [Amardeep Singh Bhatia] Joint Secretary - Notification Tax Management India - taxmanagementindia - taxmanagement - taxmanagement ..... X X X X Extracts X X X X X X X X Extracts X X X X
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