Cost Accounting Records Rules (CARR-2011), Compliance Report and Its Applicability On New Industries From FY 2011-12 | |||||||||||
Cost Accounting Records Rules (CARR-2011) and Applicability On New Industries From FY 2011-12 | |||||||||||
*Compliance
Report: Every company to which
The Companies (Cost Accounting Records) Rules, 2011 apply shall submit the
compliance report to the Central
Government within 180 days from the close of the company’s financial year to
which the compliance report relates.
There have been significant changes in the applicability clause from
the year 2011-12 and the Financial Auditors of various companies must
check beforehand the applicability and then comment on the applicability
of Section 209(1)(d) with regard to the maintenance of Cost Records in
point no 4(VIII) of the Annexure to CARO.
The statutory Financial Auditor is required to comment:
“Where maintenance of cost records has been prescribed by the Central
Government under clause (d) of sub-section (1) of Section 209 of the
Act, whether such accounts and records have been made and maintained”
Earlier, the Financial Auditors used to write like:
1.Abstract from the Auditor's Report of Videocon Industries Limited as at December 31, 2010.
The Central Government has prescribed maintenance of the cost records under section 209(1)(d) of the Companies Act, 1956, in respect of the Company's products. As per the information and explanation provided to us, we are of the opinion that prima facie, the prescribed records have been made and maintained. We have however not made a detailed examination of the records with a view to determine whether they are accurate or complete. 2. Abstract from the Auditor’s Report of Mahindra And Mahindra Limited as at March 31, 2010.
We have broadly reviewed the books of account maintained by the company
relating to the manufacture of motor vehicles and tractors pursuant to
the rules made by the Central Government for the maintenance of cost
records under section 209 (1) (d) of the Companies Act, 1956 and we are
of the opinion that prima facie the prescribed accounts and records have
been maintained and are being made up. We have not, however, made a
detailed examination of the records with a view to determining whether
they are accurate or complete. To the best of our knowledge and
according to the information given to us, the Central Government has not
prescribed the maintenance of cost records under section 209 (1) (d) of
the Companies Act, 1956, for any other products of the Company.
3. Abstract from the Audited Balance Sheet as at March 31, 2010 – UltraTech Cement Limited.
We have broadly reviewed the books of account maintained by the Company
pursuant to the rules made by the Central Government for the
maintenance of cost records under Section 209(1)(d) of the Companies
Act, 1956 in respect of the manufacture of cement and are of the opinion
that prima facie the prescribed accounts and records have been made and
maintained. We have, however, not made a detailed examination of the
records with a view to determining whether they are accurate or
complete. To the best of our knowledge and according to the information
and explanations given to us, the Central Government has not prescribed
the maintenance of cost records for any other product of the Company.
4. Abstract of Auditor’s Report of Hindustan Construction Ltd. year ending Mar 31,2011 (xv) The Central Government has not prescribed the maintenance of cost records under section 209(1) (d) of the Companies Act, 1956. The comments given above are correct for the year 2010-11 but if the same comments are given in the auditor’s report for the year 2011-12, the same will be considered as incorrect as from the year 2011-12. The applicability clause has changed from the year 2011-12 and now maximum companies have come under Cost Records Compliance.
There are lot of queries with regard to the applicability of cost
records compliance in various industries/sectors. Many queries keep
coming to us on regular basis. Through this article an attempt is made
to clarify the applicability provisions with regard to applicability of
Common Cost Accounting Record Rules.(CARR 2011)
Ministry of Corporate Affairs has issued different notifications with
regard to Common Cost Accounting Record Rules, 2011 on June 3, 2011 and
six other Specific Cost Accounting Record Rules on 7Dec, 2011. Earlier
there were 44 Cost Accounting Record Rules for different Industries and
Cost Records were required to be prepared as per specific formats
mentioned under those rules i.e. different formats for different
Industries. Now as all the old notifications with regard to cost
records have been abolished, the companies are required to maintain the
cost records in any formats provided the records are capable of filling
in the information in formats as are required under Cost Audit Report
Rules.
Presently there are Seven Cost Accounting Record Rules covering all the
companies fulfilling certain criteria like Rs 5 crore networth or Rs 20
crores turnover or listed company.
The Seven Cost Accounting record Rules are:
This is the high time all the Directors/CFOs/CS take a note of the new
Cost Accounting Record Rules wherein now the responsibility of
preparation and maintenance of Cost Records has been shifted to Board of
Directors. The company is supposed to file a Compliance certificate
with the Ministry of Corporate Affairs after approval by the Board of
Directors and with signatures of Directors/CS etc.. The Compliance
Certificate in the prescribed format must be signed by a Cost
Accountant.
The applicability clause mentions that these rules shall apply to every
company, including a foreign company as defined under section 591 of
the Act, which is engaged in the production, processing, manufacturing,
or mining activities and wherein, the aggregate value of net worth as on
the last date of the immediately preceding financial year exceeds five
crores of rupees; or wherein 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 wherein 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.
The applicability of CARR 2011 depends on the two criterion:
a. Activities being carried on By the Company.b. Financial Characteristics of the Company.
The cost Records compliance Report has to be submitted when
anyone condition of the (a) and anyone condition of the (b) is fulfilled
a. Activities being carried on By the Company:
The first step is to check whether the company is involved in any of the following activities:
1. Production,2. Processing, 3. Manufacturing, or 4. Mining.
Before taking any decision just going by the activities mentioned
above, the definitions of the above activities must be looked into;
As per the definitions given under the rules:
(1) “Production Activity” includes any act, process, or method employed in relation to -
i. Transformation of tangible inputs (raw materials, semi-finished goods, or sub-assemblies) and intangible inputs (ideas, information, know how) into goods or services; or The companies in software sector etc. will be covered including the companies where the software bears some excise classification codes. ii. Manufacturing or processing or mining or growing a product for use, consumption, sale, transport, delivery or disposal; or even agricultural produce seems to be covered here. iii. Creation of value or wealth by producing goods or services. (2) “Processing Activity” includes any act, process, procedure, function, operation, technique, treatment or method employed in relation to-
(i) Altering the condition or properties of inputs for their use, consumption, sale, transport, delivery or disposal; or
(ii) Accessioning, arranging, describing, or storing products; or (Warehousing etc.)
(iii) Developing, fixing, and washing exposed photographic or
cinematographic film or paper to produce either a negative image or a
positive image; or (Photography companies, Media/Movie production
houses etc..)
(iv) Printing, publishing, finishing, perforation, trimming, cutting,
or packaging; or (printing/packaging companies are also covered)
(v) Pumping oil, gas, water, sewage or any other product; or
(vi) Transforming or transmitting, distributing power or electricity; or
(vii) Harboring, berthing, docking, elevating, lading, stripping, stuffing, towing, handling, or warehousing products; or
(viii) Preserving or storing any product in cold storage; or
(ix) Constructing, reconstructing, reconditioning, repairing,
servicing, refitting, finishing or demolishing of buildings or
structures; or (Construction or Real estate companies along with
companies providing Repair and maintenance services are covered)
(x) Farming, feeding, rearing, treating, nursing, caring, and stocking
of living organisms; or (Dairy business, hospitals run by companies etc.
are covered)
(xi) Telecasting, broadcasting, telecommunicating voice, text, picture,
information, data or knowledge through any mode or medium; or (Media
Companies, TV channels etc)
(xii) Obtaining, compiling, recording, maintaining, transmitting,
holding or using the information or data or knowledge; or (research
companies etc are covered)
(xiii) Executing instructions in memory to perform some transformation
and/or computation on the data in the computer's memory. (Software
companies etc are covered)
(3) "Manufacturing Activity” includes any act, process or method employed in relation to -
(i) Transformation of raw materials, components, sub-assemblies, or parts into semi-finished or finished products; or
(ii) Making, altering, repairing, fabricating, generating, composing,
ornamenting, furnishing, finishing, packing, re-packing, oiling,
washing, cleaning, breaking-up, demolishing, or otherwise treating or
adapting any product with a view to its use, sale, transport, delivery
or disposal; or (Service Sector companies) in repairing (AMC’s, Service
Station companies) etc are also covered.
(iii) Constructing, reconstructing, reconditioning, servicing, refitting, repairing, finishing or breaking up of any products
(4) “Mining Activity” includes any act, process or method employed in relation to the extraction of ores, minerals, oils, gases or other geological materials from the earth’s crust, including sea bed or river bed.
Apart from the above, there are six specific Cost Accounting Record
rules for Telecom, Electricity, Sugar, Fertilizers, Petroleum and
pharma. The companies under the six specific Industries are also
covered.
b. The applicability clause further set the requirement for CARR-2011 applicability as:
1. Turnover of the company should exceed Rs 20 Crores. or2. Net worth of the company should exceed Rs 5 Crores. or 3. The company is listed. The companies falling under Cost Records Regime must file their Cost records Compliance Report signed by a cost accountant and duly approved by Board of Directors for the year 2011-12 by 27 Sep 2012.
Apart from the industries covered under the erstwhile Cost Accounting
Record Rules, The newer industries which have come under CARR 2011
include the companies having manufacturing/production activities in
respect products like or made up of glass, wood, furniture, garments,
Electronics cosmetics, eatables like packaged food/snacks, soft and hard
drinks, plastics, edible oils etc. The list is very exhaustive as per
various CETA chapters.
Source : caclubindia.com
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Thursday, 10 May 2012
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