Roadmap for Cost Records preparation under new regime

Sub: Roadmap for Cost Record Maintenance / issue of Compliance Certificate under

Companies (Cost Accounting Record Rules) 2011

After the issue of new notifications on 02/05/2011, 03/05/2011, 03/06/2011& 30/06/2011 the companies are required to maintain cost records on regular basis and comply with the various Cost Accounting Standards and some industries have to undergo compulsory Cost Audit/Cost Compliance

Some relevant rules of Companies (Cost Accounting Records) Rules, 2011.

Rule 4(7) of CCARR state that It shall be the duty of every person, referred to in sub-section (6) and (7) of section 209 of the Companies Act, 1956 (1 of 1956, to take all reasonable steps to secure compliance by the company with the provisions of these rules in the same manner as he is liable to maintain accounts required under sub-section (1) of section 209 of the said Act.

Rule 5 of CCARR state that every company to which these rules apply shall submit a compliance report, in respect of each of its financial year commencing on or after the 1st day of April, 2011, duly certified by a cost accountant, along with the Annexure to the Central Government, in the prescribed form.

Rule 7 of CCARR state  Authentication of Annexure to the Compliance Report – 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.

The record maintenance can be segregated into various phases :

1. Designing of Costing Methodology afresh
2. Preparation of Cost Records for Apr-June 2011
3. Review and Finalisation of Cost records for Apr-June 2011
4. Preparation of Quarterly Cost Records upto 31/03/2011
5. Finalisation of cost Cost Records and and COP for Inventory Valuation
6. Preparation of Statutory Forms and Submission of Form A on MCA’s Website

Steps in each Phase

I. Designing of Costing Methodology afresh

a.   Establishment of Cost centres (These have been freezed in SAP)

b.    Establishment of Cost drivers (Routing Parameters need to be taken)

c.   Methodology of allocation/apportionment of Expense to various Cost Objects/Cost Centres (This will be decided for each  relevant item of chart of Accounts in consultation with company Management)

II. Preparation of Cost Records for Apr-June 2011

After freezing of Costing Methodology, the collection of various data/documents or other activities will start like:

a)      BOM generation

b)      Generation of Routing parameters

c)       Summarised/itemised backup of ER-1 details

Etc.::::::::::

III. Review and Finalisation of Cost records for Apr-June 2011

a. The cost records will be prepared and modified after review

IV. Preparation of Quarterly Cost Records upto 31/03/2011

a. After the first set of Cost records are finalized, the cost records will be prepared on regular basis (quarterly on “cumulative” basis)

V. Finalisation of cost Cost Records and and COP for Inventory Valuation

a. The records for the year end will be prepared and audited financial records will be reconciled

VI. Preparation of Statutory Forms and Submission of Form A on MCA’s Website

After finalization the statutory forms will be prepared :

a.  Preparation of  “Form-B” (the form of the compliance report and includes Annexure to the compliance report;)

b.   “Form B” Approval by Board of Directors will be required

c.  Preparation of “Form-A” (the form prescribed in these rules for filing compliance report and other documents with the Central Government in the electronic mode)

d.   Authentication of Form A by Managing Director or director or manager or secretary (in case of an Indian company) and one Director of the Company.

Submission of Form A on MCA’s Website.

ICWAI has issued Cost Accounting standards and now Draft Generally Accepted Cost Accounting Principles to be complied with for preparation of Cost Records.

In case of any clarification, please feel free to contact us at 9810175020 (Navneet) or at navneetic@yahoo.com

Regards,

Navneet Kumar Jain

FICWA, MBA., LL.B., M.COM., PGDTL, LIII,AIIISLA

For N.K. Jain And Associates

Cost Accountants