-: Presentation on :Companies (Cost Records and Audit)
Amendment Rules 2014
By:
CMA Harshad S. Deshpande,
Practicing Cost Accountant
M.com, ACMA, CS, CISA(USA),CIMA(UK)
1. Applicability of Cost Records
2. Applicability of Cost Audit
3. Form CR-3 for Cost Audit Report
4. Annexure to Cost Audit Report
For the purposes of sub-section (1) of Section 148 of the Act,
the class of companies, including foreign companies defined
in clause (42) of Section 2 of the Act, engaged in the
production of the goods or providing services, specified in
the Table below, having an overall turnover from all its
products and services of rupees thirty five crore or more
during the immediately preceding financial year, shall
include cost records for such products or services in their
books of account, namely:-
Regulated Sector
Non Regulated Sector
A. Regulated Industry
Sr
Industry/ Sector/ Product/ Service
CETA Heading
(wherever applicable)
1Telecommunication services made available to users by Not applicable
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);
2Generation, 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(referred to in the Electricity Rules, 2005);
3Petroleum products regulated by the Petroleum and Natural 2709 to 2715;
Gas Regulatory Board under the Petroleum and Natural Gas
Regulatory Board Act, 2006 (19 of 2006);
4Drugs and pharmaceuticals;
2901 to 2942; 3001 to
3006.
5Fertilisers;
3102 to 3105.
6Sugar and industrial alcohol;
1701; 1703; 2207.
B. Non -Regulated Industry
Sr
Industry/ Sector/ Product/ Service
CETA Heading
(wherever applicable)
1Machinery and mechanical appliances used in defence, space 8401 to 8402; 8801 to
and atomic energy sectors excluding any ancillary item or
8805; 8901 to 8908
items;
Explanation.-For the purposes of this sub-clause, any
company which is engaged in any item or items supplied
exclusively for use under this clause, shall be deemed to be
covered under these rules.
2Turbo jets and turbo propellers;
3Arms and ammunitions;
4Propellant powders; prepared explosives (other than
propellant powders); safety fuses; detonating fuses;
percussion or detonating caps; igniters; electric detonators;
5Radar apparatus, radio navigational aid apparatus and radio
remote control apparatus;
8411
3601 to 3603; 9301 to
9306.
3601 to 3603
8526
B. Non -Regulated Industry
Sr
Industry/ Sector/ Product/ Service
6
Tanks and other armoured fighting vehicles, motorised, 8710
whether or not fitted with weapons and parts of such vehicles,
that are funded (investment made in the company) to the
extent of ninety per cent or more by the Government or
Government agencies;
Port services of stevedoring, pilotage, hauling, mooring,re- Not applicable.
mooring, hooking, measuring, loading and unloadingservices
rendered by a Port in relation to a vessel or goodsregulated by
the Tariff Authority for Major Ports undersection 111 of the
Major Port Trusts Act, 1963(38 of1963);
Aeronautical
services
of
air
traffic
management, Not applicable.
aircraftoperations, ground safety services, ground handling,
cargofacilities and supplying fuel rendered by airports
andregulated by the Airports Economic Regulatory
Authorityunder the Airports Economic Regulatory Authority
ofIndia Act, 2008 (27 of 2008);
Steel;
7201 to 7229; 7301 to
7326
Roads and other infrastructure projects corresponding to para Not applicable.
No. (1) (a) as specified in Schedule VI of the Companies Act,
7
8
9
10
CETA Heading
(wherever applicable)
B. Non -Regulated Industry
Sr
Industry/ Sector/ Product/ Service
CETA Heading
(wherever applicable)
11Rubber and allied products being regulated by the Rubber
4001 to 4017
Board constituted under the Rubber Act, 1947 (XXIV of1947).
12Coffee and tea;
0901 to 0902
13Railway or tramway locomotives, rolling stock, railway or
tramway fixtures and fittings, mechanical (including electro
mechanical) traffic signalling equipment’s of all kind;
14Cement;
8601 to 8608.
15Ores and Mineral products;
2502 to 2522; 2524 to
2526; 2528 to 2530;
2601 to 2617
2701 to 2708
7401 to 7403; 7405 to
7413; 7419;7501 to
7508; 7601 to 7614;
7801 to7802; 7804;
7806; 7901 to
7905;7907; 8003;
8007; 8101 to8113
16Mineral fuels (other than Petroleum), mineral oils etc.;
17Base metals;
2523; 6811 to 6812
B. Non -Regulated Industry
Sr
Industry/ Sector/ Product/ Service
CETA Heading
(wherever applicable)
18Inorganic chemicals, organic or inorganic compounds
2801 to 2853; 2901 to
ofprecious metals, rare-earth metals of radioactive elementsor 2942; 3801 to3807;
isotopes, and Organic Chemicals;
3402 to 3403; 3809 to
3824.
19Jute and Jute Products;
5303, 5310
20Edible Oil;
1507 to 1518
21Construction Industry as per para No. (5) (a) as specifiedin
Schedule VI of the Companies Act, 2013 (18 of 2013)
22Health services, namely functioning as or runninghospitals,
diagnostic centres, clinical centres or testlaboratories;
23Education services, other than such similar services falling
under philanthropy or as part of social spend which do not
form part of any business.
24Milk powder;
25Insecticides;
Not applicable.
Not applicable.
Not applicable.
0402
3808
B. Non -Regulated Industry
Sr
Industry/ Sector/ Product/ Service
26Plastics and polymers;
CETA Heading
(wherever applicable)
27Tyres and tubes;
3901 to 3914; 3916 to
3921; 3925
4011 to 4013
28Paper;
4801 to 4802.
29Textiles;
5004 to 5007; 5106 to
5113; 5205 to5212;
5303; 5310; 5401 to
5408;5501 to 5516
7003 to 7008; 7011;
7016
8403 to 8487
8501 to 8507; 8511 to
8512; 8514 to 8515;
8517; 8525 to 8536;
8538 to 8547
9018 to 9022
30Glass;
31Other machinery;
32Electricals or electronic machinery;
33Production, import and supply or trading of medical devices,
(1) Every company specified in item (A) of rule 3 shall get its
cost records audited in accordance with these rules if the overall
annual turnover of the company from all its products and
services during the immediately preceding financial year is
rupees fifty crore or more and the aggregate turnover of the
individual product or products or service or services for which
cost records are required to be maintained under rule 3 is rupees
twenty five crore or more.
(2) Every company specified in item (B) of rule 3 shall get its
cost records audited in accordance with these rules if the overall
annual turnover of the company from all its products and
services during the immediately preceding financial year is
rupees one hundred crore or more and the aggregate turnover
of the individual product or products or service or services for
which cost records are required to be maintained under rule 3 is
rupees thirty five crore or more.
CRA – 3 - Form of Cost Audit Report
2011 Rules
2014 Rules
Structure of Cost Audit Report
Structure of Cost Audit Report
 Cost Audit Report
 Annexure to Cost Audit
Report
 Annexure 1 to 11 – applicable
to all companies
 Performance Appraisal Report
 Cost Audit Report
 Annexure to Cost Audit
Report
 Part A – Annexure 1 to 4
 Part B – Annexure 1 & 2
(For Manufacturing Sector)
 Part C – Annexure 1 & 2
(For Service Sector)
 Part D – Annexure 1 to 6
CRA – 3 - Form of Cost Audit Report
2011 Rules
2014 Rules
I/We,
……
having
been
appointed as Cost Auditor(s)
under Section 233B of the
Companies Act, 1956 (1 of
1956) of …….. having its
registered office at ……….
(hereinafter referred to as the
company), have audited the
books of account prescribed
under clause (d) of sub-section
(1) of section 209 of the said Act,
and other relevant records in
respect of the ………. for the
year ……. maintained by the
company and report, in addition
to
our
observations
and
suggestions in para 2.
I/We,
……
having
been
appointed as Cost Auditor(s)
under Section 148(3) of the
Companies Act, 2013 (18 of
2013) of …….. having its
registered office at ……….
(hereinafter referred to as the
company), have audited the
Cost Records maintained u/s
148 of the said Act, in
compliance with the cost
auditing standards in respect of
the ………. for the year …….
maintained by the company and
report, in addition to our
observations and suggestions in
para 2.
CRA – 3 - Form of Cost Audit Report
2011 Rules
(i) I/We have obtained all the
information and explanations,
which to the best of my/our
knowledge and belief were
necessary for the purpose of this
audit.
2014 Rules
No Change
CRA – 3 - Form of Cost Audit Report
2011 Rules
2014 Rules
(ii) In my/our opinion, proper cost
records, as per the applicable
Cost
Accounting
Records
Rules, 2011 prescribed under
clause (d) of sub-section (1) of
section 209 of the Companies
Act, 1956, have / have not been
maintained by the company so
as to give a true and fair view
of
the
cost
of
production/operation, cost of
sales and margin of the
product/activity groups under
reference.
(ii) In my/our opinion, proper cost
records, as per rule 5 of the
Companies (Cost Records &
Audit) Rules, 2014 have/have not
been
maintained
by
the
Company in respect of the
product(s) / service(s) under
reference.
True and fairness covered in
clause (vi)
CRA – 3 - Form of Cost Audit Report
2011 Rules
(iii) In my/our opinion, proper
returns adequate for the purpose
of the Cost Audit have / have not
been received from the branches
not visited by me/us.
2014 Rules
No Change
CRA – 3 - Form of Cost Audit Report
2011 Rules
2014 Rules
(iv) In my/our opinion and to the
best of my/our information, the
said books and records give / do
not give the information required
by the Companies Act, 1956, in
the manner so required.
No Change apart from the
reference to the Companies Act
2013
CRA – 3 - Form of Cost Audit Report
2011 Rules
(v) In my/our opinion, the said
books and records are in
conformity with the Cost
Accounting Standards issued
by The Institute of Cost
Accountants of India, to the
extent these are found to be
relevant and applicable.
2014 Rules
Deleted
CRA – 3 - Form of Cost Audit Report
2011 Rules
2014 Rules
(vi) In my/our opinion, company
has / does not have adequate
system of internal audit of cost
records which to my/our opinion
is commensurate to its nature
and size of its business.
(v) In my/our opinion, company
has / does not have adequate
system of internal audit of cost
records which to my/our opinion
is commensurate to its nature
and size of its business.
CRA – 3 - Form of Cost Audit Report
2011 Rules
2014 Rules
(vi)
In
my/our
opinion,
information, statements in the
annexure to this cost audit
report gives / does not give a
true and fair view of the cost of
production of product(s) /
rendering of service(s), cost of
sales, margin and other
information
relating
to
product(s)/service(s)
under
reference.
Additional clause to take care
of partial clause covered in (ii)
CRA – 3 - Form of Cost Audit Report
2011 Rules
2014 Rules
(vii) Detailed unit-wise and
product / activity-wise cost
statements
and
schedules
thereto in respect of the product
groups / activities under
reference of the company duly
audited and certified by me/us
are / are not kept in the company.
(vii) Detailed unit-wise and
product / service-wise cost
statements
and
schedules
thereto in respect of the product
/service under reference of the
company duly audited and
certified by me/us are / are not
kept in the company.
CRA – 3 - Form of Cost Audit Report
2011 Rules
(viii) As required under the
provisions of The Companies
(Cost Audit Report) Rules,
2011, I/we have furnished
Performance Appraisal Report,
to the company, on the
prescribed form.
2014 Rules
Deleted
Annexure to Cost Audit Report
2011 Rules
2014 Rules
Para 1
General Information statement
(about company & cost auditor)
Part A - Para 1
• General Information statement
(about company)
Part A - Para 2
• General Details of Cost
Auditor
• Additional Details Required –
Name of product / service with
CETA Heading
Cost audit order date & number
deleted
Annexure to Cost Audit Report
2011 Rules
2014 Rules
Para 2
Cost Accounting Policy
• Cost Centers / objects
• Material cost
• Overheads
• Depreciation
• By-products / joint products
• Inventory valuation
• Inter unit transfers & related
party
• Normal & abnormal costs
• IFRS
• Other relevant cost accounting
policy
Part A - Para 3
Cost Accounting Policy
Following clause in earlier CARR
is deleted:
“in case the company has
adopted IFRS, variations in
treatment of Cost Accounting
arising out of the adoption of
IFRS in Financial Accounting”
Annexure to Cost Audit Report
2011 Rules
Para 3
Product Group Details
2014 Rules
Part A – Para 4
Product / Service Group Details
(For the company as a whole)
• Additional Details Required –
• Extra ordinary income if
any,
• Turnover as per Excise /
Service tax records,
• Explain the difference if
any between turnover as
per Annual Accounts &
Turnover as per Excise/
Service tax Records.
Annexure to Cost Audit Report
2011 Rules
2014 Rules
Para 4
Quantitative information (For
each Product Group separately)
Part B & C – Para 1
Quantitative information (For
each CETA Heading separately)
Details as per CETA Heading /
Service Code instead of
Product Group.
Annexure to Cost Audit Report
2011 Rules
2014 Rules
Para 5
Abridge Cost statement (For
each Product Group separately)
Part B & C - Para 2
Abridge Cost statement (For
each
product
with
CETA
Heading
/
Service
Code
separately)
• Additional Details Required • Cost
of
finished
goods
purchased
• Cost of sale before interest
expenses.
Annexure to Cost Audit Report
2011 Rules
….. continued
Para 5
Notes -
Note 3:
Proforma may be suitably
modified to meet the requirement
of industry
2014 Rules
….. continued
Part B & C - Para 2
Notes • Separate Cost Statement shall
be prepared for each CETA
heading / Service Code
representing
the
product
(instead of product group).
• In case the product has
different unit of measure
separate
cost
statement
should be provided for
different unit of measures.
Deleted
Annexure to Cost Audit Report
2011 Rules
2014 Rules
Para 5 - a
• Details of material consumed
(For each product group
separately)
Part B & C - Para -2A
• Details of material consumed
(For each CETA Heading /
Service separately)
Para 5 – b
• Details of utilities ( For each
product group separately)
Part B & C - Para -2B
• Details of utilities ( For each
CETA
Heading / Service
separately)
Para 5 – c
• Details of industry specific
expenses (For each product
group separately)
Part B & C - Para -2C
• Details of industry specific
expenses (For each CETA
Heading / Service separately)
Annexure to Cost Audit Report
2011 Rules
Para 6
• Operating Ratio (For each
product group separately)
Para 7
• Profit Reconciliation (For the
company as a whole)
2014 Rules
• Para 6 is deleted
Part D – Para 2
• Profit Reconciliation (For the
company as a whole)
• Note–
Show abnormal wastages,
Expenses
on
strikes
/
lockouts, & any other items of
expenses or incomes of
abnormal
nature
not
considered in cost.
Annexure to Cost Audit Report
2011 Rules
2014 Rules
Para 8
Value Addition & Distribution of
earnings (For the company as a
whole)
Part D – Para 3
Value Addition & Distribution of
earnings (For the company as a
whole)
• Additional Details Required –
Extra ordinary income
Extra ordinary expenditure
Annexure to Cost Audit Report
2011 Rules
2014 Rules
Para 9
Financial Position & Ratio
Analysis (For the company as a
whole)
Part -D – Para 4
Financial Position & Ratio
Analysis (For the company as a
whole)
B. Financial Performance
Deleted:
• Cost of Production and
• Cost of Sales
E. Working Capital Ratios
Deleted:
• Net working Capital to Cost
of Sales
• WIP to Cost of Production
Definition of Net Worth linked
to Companies Act
Annexure to Cost Audit Report
2011 Rules
2014 Rules
Para 10
Related Party Transactions
Part D – Para 5
Related Party Transactions
XBRL requirement not provided
• CIN/PAN of related party.
• Country of related party.
• Product or activity eight digit
code.
Para 11
Reconciliation Of Indirect Taxes
Part D – Para
Reconciliation Of Indirect Taxes
• Additional Details Required –
Amount of duty free clearance
Annexure to Cost Audit Report
2011 Rules
2014 Rules
New Insertion
Part D – Para 1
Product & service profitability
statement
(
For
Audited
Products/ Services)
Variation in Part B – Manufacturing Sector
& Part C - Service Sector
Services Covered under Cost Records / Cost Audit
• Telecommunication Services other than broadcasting
• Electricity Generation, transmission, distribution and supply
• Port Services
• Aeronautical services
• Roads & other infrastructure projects
• Construction Industry
• Health services – hospitals, diagnostics, clinical centers etc.
• Educational Services excluding Philanthropy
Variation in Part B – Manufacturing Sector
& Part C - Service Sector
Part B - Manufacturing
Part C - Service
Para 1
Quantitative Information
Name of Product
CETA Heading
1. Available Capacity
a. Installed Capacity
b. Capacity enhanced during
year
c. Capacity available thru
leasing
d. Capacity available thru
loan licensing
e. Total Available Capacity
Para 1
Quantitative Information
Name of Service
Service Code
1. Available Capacity
a. Installed Capacity
b. Capacity enhanced during
year
NA
NA
c. Total Available Capacity
Variation in Part B – Manufacturing Sector
& Part C - Service Sector
Part B - Manufacturing
Part C - Service
….. continued
Quantitative Information
2. Actual Production
a. Self Manufactured
b. Produced under leasing
arrangements
c. Produced on Loan License
d. Total Production
….. continued
Quantitative Information
2. Actual Services Provided
a. Own Services
b. Services under Contractual
Arrangements
c. Outsourced Services
d. Total Services
3. Production as per Excise
3. Services provided as per
Service Tax records
4. Capacity Utilisation
4. Capacity Utilisation
Variation in Part B – Manufacturing Sector
& Part C - Service Sector
Part B - Manufacturing
….. continued
Quantitative Information
5. Finished Goods Purchased
a. Domestic Purchase
b. Imports of FG
c. Total FG Purchased
6. Stock and other adjustments
a. Change in Stock of FG
b. Self
or
Captive
Consumption
c. Other
Quantitative
Adjustments
d. Total Adjustments
Part C - Service
….. continued
Quantitative Information
NA
NA
Variation in Part B – Manufacturing Sector
& Part C - Service Sector
Part B - Manufacturing
….. continued
Quantitative Information
7. Total Available Qty for Sale
2(d) + 5(c) + 6(d)
8. Actual Sales
a. Domestic Sales of Product
b. Domestic Sales of traded
Product
c. Export sale of Product
d. Export sale of traded
Product
e. Total Quantity Sold
Part C - Service
….. continued
Quantitative Information
NA
5. Actual Sales
a. Services Rendered – Dom.
NA
b. Services Rendered – Expo.
NA
c. Total Services Rendered
Variation in Part B – Manufacturing Sector
& Part C - Service Sector
Part B - Manufacturing
Para 2
Abridged Cost Statement
Quantitative Information
• Production
• FG Purchased
• FG Adjustment
• Captive Consumption
• Other Adjustments
• Quantity Sold
Part C - Service
Para 2
Abridged Cost Statement
Quantitative Information
• Services Provided
• NA
• NA
• Captive Consumption
• Other Adjustments
• Services Rendered
Variation in Part B – Manufacturing Sector
& Part C - Service Sector
Part B - Manufacturing
Part C - Service
….. continued
Para 2
Abridged Cost Statement
Major variations in Cost sheet
• Process Material / Chemical
• Increase Decrease in WIP
• Primary Packing Cost
• Cost of FG Purchased
….. continued
Para 2
Abridged Cost Statement
Major variations in Cost sheet
• NA
• NA
• NA
• Cost of Outsourced /
Contractual Services
• NA
• Increase Decrease in FG
Stock
• Secondary Packing Cost
• NA
THANK YOU !
Contact :
Email :
:
CMA Harshad Deshpande,
Practicing Cost Accountant
Harshad S Deshpande & Associates
harshadde@gmail.com
harshadde