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Advisory on the Treatment of various items of Cost in light of Covid-19 pandemic & their Presentation / Disclosures in form CRA 3 of The Companies (Cost Records & Audit) Rules 2014 relating to the Accounting Period ending March 31, 2021

The Covid-19 pandemic war against humanity began in December 2019. Since then, it has ravaged the global economy, worse than the first two world wars. It forced entire world to lockdown; brought economic activity to standstill and resulted in majority of businesses to close down. Still there is no firm solution or visible end; the only thin hope lies in mass vaccination which is underway.

In India, with the nationwide lockdown from March 25, 2020, there was major loss of production as majority of businesses were closed; and movement of goods & workers was restricted. It caused simultaneous disruptions to both supply and demand in an interconnected global economy. On the supply side, labour migrations, infections, lockdowns, business closures, and social distancing caused disruptions. On the demand side, layoffs and the loss of income (from morbidity, quarantines, and unemployment) reduced household consumption and firms’ investment.

Owing to the nationwide lockdown, the Indian economy shrank 24.4% year-on-year in the first quarter of 2020, i.e. from April to June. With the phase-wise lifting of lockdowns, the contraction narrowed to 7.3% in Q2 and in the third quarter, the economy came out of contraction and recorded a growth of 0.4%. Hence technically, it exited the recession phase.

This change has reflected a continued V-shaped recovery. The recently released Economic Survey has projected Indian Economy to contract 7.7% in current fiscal and growth to rebound to 11% next fiscal.


In the post Covid-19 situation, it is significant to study the role of cost accounting principles & practices while undertaking the reconstruction & restart of industries & businesses. On April 13, 2020, the Institute issued an advisory to guide the  stakeholders on treatment of various elements of costs in compilation of Cost Records, Cost Statements & Annexures to Cost Audit Report for the year 2019-20. The said Advisory was applicable for the Accounting Period ended 31st March 2020.

Now the time has come to take stock of the impact in Financial Year 2020-21 and issue requisite advisory for the treatment of various elements of costs in compilation of Cost Records, Cost Statements & Annexures to Cost Audit Report for the year 2020-21. Hence this Advisory is applicable for the Accounting Period ended 31st March 2021.

Generally, the businesses have witnessed following nature of impacts:

Change in Production, Sales, & Capacity Utilization - Majority of industries and businesses faced close down of production facilities resulting in under utilization of installed capacities. These industries/ businesses also witnessed fall in sales owing to multiple reasons. Besides lockdown, other reasons that caused loss of production capacity and sales are indicated below. Further, the loss of production, sales & capacity may be temporary for short or medium term; or it may be of permanent and nonrecoverable nature seen in industries like tourism; air travel; passenger rail & road transport; recreation, culture & entertainment; hotels & restaurants, etc.

To read more in details, find the enclosed file

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