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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 ..... st 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 provided in section 148 of the Act and these rules; (f) "form" me ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ions, 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 under the Petroleum and Natural Gas Regulatory Board Act, 2006(19 of 2006); (xi) Rubber and allied products being r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fices) 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 rupees ten crore or more, or one third of the turnover, whichever is less. (ii) in the case of a company engaged in one specific product or device, if it has ne ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r 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 CRA-2, alongwith the fee as specified in Companies (Registration Offices and Fees) Rules, 2014. (3) Every cost auditor appointed as such shall continue in such capacity till the expiry of one hund ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 under reference. The cost shall include all direct charges upto works/services delivered. In case of additives, bought out components/bought out services, sub-assemblies, accessories, semi-finished goods, consumable stores, spares and other indirect mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities 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/services, consumable stores, small tools and machinery spares, whether in transit, storage, manufacture or at any other stage. The method followed for adjusting the above losses as well as the income derived from the disposal of rejected and waste materials/services ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (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 capital heads. The method followed for accounting of such payments in determining the cost of the goods/services under reference shall be on equitable and reasonable basis and applied consistently. The said method shall be disclosed in the cost records also. (5) The cost of normal retirement ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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/recoveries, any abnormal cost, penalty and damages. 5. REPAIRS AND MAINTENANCE: (1) Proper records showing the expenditure incurred by the workshop, tool room and on repairs and maintenance in the various cost centres or departments shall be maintained under different heads. The records shall also indicate the basis of charging ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. The details shall be maintained separately for assets taken from or given to related party. 7. OVERHEADS: (1) Proper records shall be maintained for various items of indirect expenses comprising overheads pertaining to goods/services under reference. These expenses shall be analyzed, classified and grouped according to functions, namely, works ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 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) Proper records shall be maintained in respect of such expenses incurred in foreign exchange and any subsidy, grant, incentive, credits/recoveries, penalty or damages paid and any abnormal portion and also for resources received from or supplied to any related party. (4) The expenses incurred by the research and development department for providing technical know-how to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 domestic and export packing showing the quantity and cost of various packing materials and other expenses incurred on primary and/or secondary packing indicating the basis of valuation. Where such expenses are incurred in common for other goods also, the basis of apportioning the expenses between the relevant goods shall be on equitable and reasonable basis and applied consistently. Proper records shall be maint ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 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 for self-produced, third party on job work, loan license basis etc. 20. SALES RECORDS: Separate details of sales shall be maintained for domestic sales at control price, domestic sales at market price, export sales under advance license, export sales under other obligations, export sales at market price, and sales to related party/inter unit transfer. In case of services details of domestic delivery/sales at control price, domestic deliver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essable 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 cost records or statements so as to ensure accuracy and to adjust the profit of the goods/services under reference with the overall profit of the company. The variations, if any, shall be clearly indicated and explained. (2) A statement showing the total expenses incurred and income received by the company under different heads of accounts and the share applicable to other goods/services and the goods/services under reference shall be prepared and reconciled with the financial ..... X X X X Extracts X X X X X X X X Extracts X X X X
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