Saturday, May 12, 2007
Cost Audit to services-Extended by CBEC in the finance bill
Excise audits uptill now applicable to manufacturing unit has been extended to Services under the Service Tax.
Thursday, April 19, 2007
To Act As Company Secretary.
Companies (Appointment and Qualifications of Secretary) Rules, 1988
In exercise of the powers conferred by clauses (a) and (b) of section 642 read with clause
(45) of section 2 and section 383A of the Companies Act, 1956 (1 of 1956), and in
supersession of the Companies (Secretary's Qualifications) Rules, 1975, the Central
Government hereby makes the following Rules, namely :
1. Short title and commencement -
(1) These rules may be called the Companies (Appointment and Qualifications of
Secretary) Rules, 1988.
(2) It shall come into force on the 1st day of December, 1988.
2. Appointment, etc., of whole-time secretary -
(1) Every company having a paid-up share capital of not less than rupees fifty lakhs
shall have a whole-time secretary.
(2) No person shall be appointed as whole-time secretary under sub-rule (1) unless
he is a member of the Institute of Company Secretaries of India constituted under the
Company Secretaries Act, 1980 (56 of 1980).
(3) A company having a paid-up share capital of less than rupees fifty lakhs may
appoint any individual as its whole-time secretary to perform the duties of a
secretary under the Companies Act, 1956, and any other ministerial or administrative
duties :
Provided that no individual shall be eligible to be so appointed unless he possesses one or
more of the qualifications specified in sub-rule (4).
(4) No individual shall be appointed as secretary pursuant to sub-rule (3) unless he
possesses any one or more of the following qualifications, namely :-
(i) membership of the Institute of Company Secretaries of India constituted
under the Company Secretaries Act, 1980 (56 of 1980) ;
(ii) pass in the Intermediate examination conducted either by the Institute of
Company Secretaries of India constituted under the Company Secretaries Act,
1980 (No. 56 of 1980), or by the earlier Institute of Company Secretaries of
India incorporated on 4th October, 1968, under the Companies Act, 1956 (1 of
1956), and licensed under section 25 of that Act ;
(iii) Post-graduate degree in commerce or corporate secretary ship granted by
any university in India ;
(iv) degree in law granted by any university ;
(v) membership of the Institute of Chartered Accountants of India constituted
under the Chartered Accountants Act, 1949 (38 of 1949) ;
(vi) membership of the Institute of Cost and Works Accountants of India
constituted under the Cost and Works Accountants Act, 1959 (23 of 1959) ;
(vii) post-graduate degree or diploma in management sciences, granted by any
university, or the Institutes of Management, Ahmedabad, Calcutta, Bangalore
or Lucknow ;
(viii) post-graduate diploma in company secretary ship granted by the Institute
of Commercial Practice under the Delhi Administration or Diploma in
Corporate Laws and Management granted by the Indian Law Institute, New
Delhi ;
(ix) post-graduate diploma in company law and secretarial practice granted by
the University of Udaipur; or
(x) membership of the Association of Secretaries and Managers, Calcutta,
registered under the West Bengal Registration of Societies Act, 1961 (XXVI of
1961) :
Provided that where the paid-up share capital of such company is increased to rupees
twenty-five lakhs or more, the company shall, within a period of one year from the date
of such increase, comply with the provisions of sub-rules (1) and (2) of rule 2.
Explanation - In this rule, "University" has the meaning assigned to it in the University
Grants Commission Act, 1956 (No. 3 of 1956), and includes any university outside India
which is recognised by the Union Public Service Commission for the purposes of
recruitment to public services and posts in connection with the affairs of the Union or of
any State.
3. Provisions relating to existing secretaries -
Notwithstanding contained in sub-rules (1) and (2) of rule 2, the qualifications
possessed by a person holding the office of whole-time secretary of a company
immediately before 30th October, 1980, in terms of the second proviso to clause (a)
of rule 2 of the Companies (Secretaries Qualifications) Rules, 1975, shall be
deemed to be the qualifications which he shall be required to possess in order to be
eligible to continue as whole-time secretary in that company.
In exercise of the powers conferred by clauses (a) and (b) of section 642 read with clause
(45) of section 2 and section 383A of the Companies Act, 1956 (1 of 1956), and in
supersession of the Companies (Secretary's Qualifications) Rules, 1975, the Central
Government hereby makes the following Rules, namely :
1. Short title and commencement -
(1) These rules may be called the Companies (Appointment and Qualifications of
Secretary) Rules, 1988.
(2) It shall come into force on the 1st day of December, 1988.
2. Appointment, etc., of whole-time secretary -
(1) Every company having a paid-up share capital of not less than rupees fifty lakhs
shall have a whole-time secretary.
(2) No person shall be appointed as whole-time secretary under sub-rule (1) unless
he is a member of the Institute of Company Secretaries of India constituted under the
Company Secretaries Act, 1980 (56 of 1980).
(3) A company having a paid-up share capital of less than rupees fifty lakhs may
appoint any individual as its whole-time secretary to perform the duties of a
secretary under the Companies Act, 1956, and any other ministerial or administrative
duties :
Provided that no individual shall be eligible to be so appointed unless he possesses one or
more of the qualifications specified in sub-rule (4).
(4) No individual shall be appointed as secretary pursuant to sub-rule (3) unless he
possesses any one or more of the following qualifications, namely :-
(i) membership of the Institute of Company Secretaries of India constituted
under the Company Secretaries Act, 1980 (56 of 1980) ;
(ii) pass in the Intermediate examination conducted either by the Institute of
Company Secretaries of India constituted under the Company Secretaries Act,
1980 (No. 56 of 1980), or by the earlier Institute of Company Secretaries of
India incorporated on 4th October, 1968, under the Companies Act, 1956 (1 of
1956), and licensed under section 25 of that Act ;
(iii) Post-graduate degree in commerce or corporate secretary ship granted by
any university in India ;
(iv) degree in law granted by any university ;
(v) membership of the Institute of Chartered Accountants of India constituted
under the Chartered Accountants Act, 1949 (38 of 1949) ;
(vi) membership of the Institute of Cost and Works Accountants of India
constituted under the Cost and Works Accountants Act, 1959 (23 of 1959) ;
(vii) post-graduate degree or diploma in management sciences, granted by any
university, or the Institutes of Management, Ahmedabad, Calcutta, Bangalore
or Lucknow ;
(viii) post-graduate diploma in company secretary ship granted by the Institute
of Commercial Practice under the Delhi Administration or Diploma in
Corporate Laws and Management granted by the Indian Law Institute, New
Delhi ;
(ix) post-graduate diploma in company law and secretarial practice granted by
the University of Udaipur; or
(x) membership of the Association of Secretaries and Managers, Calcutta,
registered under the West Bengal Registration of Societies Act, 1961 (XXVI of
1961) :
Provided that where the paid-up share capital of such company is increased to rupees
twenty-five lakhs or more, the company shall, within a period of one year from the date
of such increase, comply with the provisions of sub-rules (1) and (2) of rule 2.
Explanation - In this rule, "University" has the meaning assigned to it in the University
Grants Commission Act, 1956 (No. 3 of 1956), and includes any university outside India
which is recognised by the Union Public Service Commission for the purposes of
recruitment to public services and posts in connection with the affairs of the Union or of
any State.
3. Provisions relating to existing secretaries -
Notwithstanding contained in sub-rules (1) and (2) of rule 2, the qualifications
possessed by a person holding the office of whole-time secretary of a company
immediately before 30th October, 1980, in terms of the second proviso to clause (a)
of rule 2 of the Companies (Secretaries Qualifications) Rules, 1975, shall be
deemed to be the qualifications which he shall be required to possess in order to be
eligible to continue as whole-time secretary in that company.
Sunday, March 04, 2007
Legal Representatives for Appelate tribunal
Right to legal representations
22C. The appellant may either appear in person or authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers or present his or its case before the Securities Appellate Tribunal.
Explanation. - For the purposes of this section, -
1. "chartered accountant" means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
2. "company secretary" means a company secretary as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
3. "cost accountant" means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
4. "legal practitioner" means an advocate, vakil or an attorney of any High Court, and includes a pleader in practice.40
22C. The appellant may either appear in person or authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers or present his or its case before the Securities Appellate Tribunal.
Explanation. - For the purposes of this section, -
1. "chartered accountant" means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
2. "company secretary" means a company secretary as defined in clause (c) of sub-section (1) of section 2 of the Company Secretaries Act, 1980 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
3. "cost accountant" means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
4. "legal practitioner" means an advocate, vakil or an attorney of any High Court, and includes a pleader in practice.40
Valuation in Banks RBI
RBI No.2006-2007/224
DBOD.BP.BC No. 50 / 21.04.018/ 2006-07
January 4, 2007
The Chairmen/Chief Executives
All Commercial Banks
(excluding RRBs)
Dear Sir,
Valuation of Properties - Empanelment of Valuers
It has been observed that different banks follow different policies
for valuation of properties and appointment of valuers for the
purpose. The issue of correct and realistic valuation of fixed assets
owned by banks and that accepted by them as collateral for a sizable
portion of their advances portfolio assumes significance in view of
its implications for correct measurement of capital adequacy position
of banks. In this context, there is a need for putting in place a
system/procedure for realistic valuation of fixed assets and also for
empanelment of valuers for the purpose.
2. Banks may be guided by the following aspects while formulating a
policy on valuation of properties and appointment of valuers:
(a) Policy for valuation of properties
i) Banks should have a Board approved policy in place for valuation of
properties including collaterals accepted for their exposures.
ii) The valuation should be done by professionally qualified
independent valuers i.e. the valuer should not have a direct or
indirect interest.
iii) The banks should obtain minimum two Independent Valuation Reports
for properties valued at Rs.50 crore or above.
(b) Revaluation of bank’s own properties
In addition to the above, the banks may keep the following aspects in
view while formulating policy for revaluation of their own properties.
i) The extant guidelines on Capital Adequacy permit banks to include
revaluation reserves at a discount of 55% as a part of Tier II
Capital. In view of this, it is necessary that revaluation reserves
represent true appreciation in the market value of the properties and
banks have in place a comprehensive policy for revaluation of fixed
assets owned by them. Such a policy should interalia cover procedure
for identification of assets for revaluation, maintenance of separate
set of records for such assets, the frequency of revaluation,
depreciation policy for such assets, policy for sale of such revalued
assets etc. The policy should also cover the disclosure required to be
made in the 'Notes on Account' regarding the details of revaluation
such as the original cost of the fixed assets subject to revaluation
and accounting treatment for appreciation / depreciation etc.
ii) As the revaluation should reflect the change in the fair value of
the fixed asset, the frequency of revaluation should be determined
based on the observed volatility in the prices of the assets in the
past. Further, any change in the method of depreciation should reflect
the change in the expected pattern of consumption of the future
economic benefits of the assets. The banks should adhere to these
principles meticulously while changing the frequency of
revaluation/method of depreciation for a particular class of asset and
should make proper disclosures in this regard.
(c) Policy for Empanelment of Independent valuers
i) Banks should have a procedure for empanelment of professional
valuers and maintain a register of 'approved list of valuers'.
ii) Banks may prescribe a minimum qualification for empanelment of
valuers. Different qualifications may be prescribed for different
classes of assets (e.g. land and building, plant and machinery,
agricultural land, etc.). While prescribing the qualification, banks
may take into consideration the qualifications prescribed under
Section 34AB (Rule 8A) of the Wealth Tax Act, 1957.
3. Banks may also be guided by the relevant Accounting Standard issued
by the Institute of Chartered Accountants of India.
Registration of valuers.
34AB. (1) The 32[Chief Commissioner or Director General] shall
maintain a register to be called the Register of Valuers in which
shall be entered the names and addresses of persons registered under
sub-section (2) as valuers.
(2) Any person who possesses the qualifications prescribed33 in this
behalf may apply to the 34[Chief Commissioner or Director General] in
the prescribed form35 for being registered as a valuer under this section:
Provided that different qualifications may be prescribed for valuers
of different classes of assets.
36(3) Every application under sub-section (2) shall be verified in the
prescribed manner, shall be accompanied by such fees as may be
prescribed and shall contain a declaration to the effect that the
applicant will
(i) make an impartial and true valuation of any asset which he may be
required to value;
(ii) furnish a report of such valuation in the prescribed form;
(iii) charge fees at a rate not exceeding the rate or rates prescribed
in this behalf;
(iv) not undertake valuation of any asset in which he has a direct or
indirect interest.
37(4) The report of valuation of any asset by a registered valuer
shall be in the prescribed form and be verified in the prescribed manner.
Qualifications of registered valuers.
8A. (1) For the purposes of sub-section (2) of section 34AB, the
qualifications for registration as valuers of different classes of
asset shall be as specified in sub-rules (2) to (11).
(7) A valuer of stocks, shares, debentures, securities, shares in
partnership firms and of business assets, including goodwill but
excluding those referred to in sub-rules (2) to (6) and (8) to (11),
shall have the following qualifications, namely :
(i) he must be a member of the Institute of Chartered Accountants of
India or the Institute of Cost and Works Accountants of India 62[or
the Institute of Company Secretaries of India]; and
(ii) 63[(A) he must have been in practice as a chartered accountant or
a cost and works accountant or a company secretary for a period of not
less than ten years and his gross receipts from such practice should
not be less than fifty thousand rupees in any three of the five
preceding years, or]
(B) he must be a person formerly employed
(a) in a post under Government as a gazetted officer, or
(b) in a post under any other employer carrying a remuneration of not
less than Rs. 64[2,000] per month,
and, in either case, must have retired or resigned from such
employment after having rendered service for a period of not less than
65[ten] years in the field of audit and accounts or taxation work 66[, or]
66[(c) as a Company Secretary 67[or a Deputy Company Secretary] or an
Assistant Company Secretary in a post carrying a remuneration of not
less than Rs. 68[2,000] per month and must have retired or resigned
from such employment after having rendered service for a period of not
less than 69[ten] years.]
DBOD.BP.BC No. 50 / 21.04.018/ 2006-07
January 4, 2007
The Chairmen/Chief Executives
All Commercial Banks
(excluding RRBs)
Dear Sir,
Valuation of Properties - Empanelment of Valuers
It has been observed that different banks follow different policies
for valuation of properties and appointment of valuers for the
purpose. The issue of correct and realistic valuation of fixed assets
owned by banks and that accepted by them as collateral for a sizable
portion of their advances portfolio assumes significance in view of
its implications for correct measurement of capital adequacy position
of banks. In this context, there is a need for putting in place a
system/procedure for realistic valuation of fixed assets and also for
empanelment of valuers for the purpose.
2. Banks may be guided by the following aspects while formulating a
policy on valuation of properties and appointment of valuers:
(a) Policy for valuation of properties
i) Banks should have a Board approved policy in place for valuation of
properties including collaterals accepted for their exposures.
ii) The valuation should be done by professionally qualified
independent valuers i.e. the valuer should not have a direct or
indirect interest.
iii) The banks should obtain minimum two Independent Valuation Reports
for properties valued at Rs.50 crore or above.
(b) Revaluation of bank’s own properties
In addition to the above, the banks may keep the following aspects in
view while formulating policy for revaluation of their own properties.
i) The extant guidelines on Capital Adequacy permit banks to include
revaluation reserves at a discount of 55% as a part of Tier II
Capital. In view of this, it is necessary that revaluation reserves
represent true appreciation in the market value of the properties and
banks have in place a comprehensive policy for revaluation of fixed
assets owned by them. Such a policy should interalia cover procedure
for identification of assets for revaluation, maintenance of separate
set of records for such assets, the frequency of revaluation,
depreciation policy for such assets, policy for sale of such revalued
assets etc. The policy should also cover the disclosure required to be
made in the 'Notes on Account' regarding the details of revaluation
such as the original cost of the fixed assets subject to revaluation
and accounting treatment for appreciation / depreciation etc.
ii) As the revaluation should reflect the change in the fair value of
the fixed asset, the frequency of revaluation should be determined
based on the observed volatility in the prices of the assets in the
past. Further, any change in the method of depreciation should reflect
the change in the expected pattern of consumption of the future
economic benefits of the assets. The banks should adhere to these
principles meticulously while changing the frequency of
revaluation/method of depreciation for a particular class of asset and
should make proper disclosures in this regard.
(c) Policy for Empanelment of Independent valuers
i) Banks should have a procedure for empanelment of professional
valuers and maintain a register of 'approved list of valuers'.
ii) Banks may prescribe a minimum qualification for empanelment of
valuers. Different qualifications may be prescribed for different
classes of assets (e.g. land and building, plant and machinery,
agricultural land, etc.). While prescribing the qualification, banks
may take into consideration the qualifications prescribed under
Section 34AB (Rule 8A) of the Wealth Tax Act, 1957.
3. Banks may also be guided by the relevant Accounting Standard issued
by the Institute of Chartered Accountants of India.
Registration of valuers.
34AB. (1) The 32[Chief Commissioner or Director General] shall
maintain a register to be called the Register of Valuers in which
shall be entered the names and addresses of persons registered under
sub-section (2) as valuers.
(2) Any person who possesses the qualifications prescribed33 in this
behalf may apply to the 34[Chief Commissioner or Director General] in
the prescribed form35 for being registered as a valuer under this section:
Provided that different qualifications may be prescribed for valuers
of different classes of assets.
36(3) Every application under sub-section (2) shall be verified in the
prescribed manner, shall be accompanied by such fees as may be
prescribed and shall contain a declaration to the effect that the
applicant will
(i) make an impartial and true valuation of any asset which he may be
required to value;
(ii) furnish a report of such valuation in the prescribed form;
(iii) charge fees at a rate not exceeding the rate or rates prescribed
in this behalf;
(iv) not undertake valuation of any asset in which he has a direct or
indirect interest.
37(4) The report of valuation of any asset by a registered valuer
shall be in the prescribed form and be verified in the prescribed manner.
Qualifications of registered valuers.
8A. (1) For the purposes of sub-section (2) of section 34AB, the
qualifications for registration as valuers of different classes of
asset shall be as specified in sub-rules (2) to (11).
(7) A valuer of stocks, shares, debentures, securities, shares in
partnership firms and of business assets, including goodwill but
excluding those referred to in sub-rules (2) to (6) and (8) to (11),
shall have the following qualifications, namely :
(i) he must be a member of the Institute of Chartered Accountants of
India or the Institute of Cost and Works Accountants of India 62[or
the Institute of Company Secretaries of India]; and
(ii) 63[(A) he must have been in practice as a chartered accountant or
a cost and works accountant or a company secretary for a period of not
less than ten years and his gross receipts from such practice should
not be less than fifty thousand rupees in any three of the five
preceding years, or]
(B) he must be a person formerly employed
(a) in a post under Government as a gazetted officer, or
(b) in a post under any other employer carrying a remuneration of not
less than Rs. 64[2,000] per month,
and, in either case, must have retired or resigned from such
employment after having rendered service for a period of not less than
65[ten] years in the field of audit and accounts or taxation work 66[, or]
66[(c) as a Company Secretary 67[or a Deputy Company Secretary] or an
Assistant Company Secretary in a post carrying a remuneration of not
less than Rs. 68[2,000] per month and must have retired or resigned
from such employment after having rendered service for a period of not
less than 69[ten] years.]
Friday, January 26, 2007
Depositaries act
23C. Right to legal representation. — The appellant may either appear in person or authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers to present his or its case before the Securities Appellate Tribunal.
Explanation. — For the purposes of this section, —
(a) ';chartered accountant'; means a chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act:
(b) ';company secretary'; means a company secretary as defined in clause (c) os sub-section (1) of section 2 of the Company Secretaries Act, 1980 (56 of 1980) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
(c) ';cost accountant'; means a cost accountant as defined in clause (b) of sub-section (1) of section 2 of the Cost and Works Accountants Act, 1959 (23 of 1959) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
(d) ';legal practitioner'; means an advocate, vakil or an attorney of any High Court, and includes a pleader in practice.
Securities contracts regulation act
22C. Right to legal representation. — The appellant may either appear in person or authorise one or more chartered accountants or company secretaries or cost accountants or legal practitioners or any of its officers to present his or its case before the Securities Appellate Tribunal.
Explanation. — For the purposes of this section, —
(a) ';chartered accountant'; means chartered accountant as defined in clause (b) of sub-section (1) of section 2 of the Chartered Accountants Act, 1949 (38 of 1949) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
(b) ';company secretary'; means a company secretary as defined in clause (c) of sub-section (10 of section 2 of the Company Secretaries Act, 1980 (56 of 1980) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
(c) ';cost accountant'; 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) and who has obtained a certificate of practice under sub-section (1) of section 6 of that Act;
(d) ';legal practitioner'; means an advocate, vakil or an attorney of any High Court, and includes a pleader in practice.
22D. Limitation. — The provisions of the Limitation Act, 1963 (36 of 1963), shall, as far as may be, apply to an appeal made a to a Securities Appellate Tribunal.
Cost Audit in Global Perspective-Emerging Global economic order and the relevance of Cost records.
Cost Audit –Here to stay in a Global perspective.
Maintenance of Cost records and Audit of the same has been in India since long and
recognized in the companies act 1956 by an amendment in 1965.The main intention
of the legislature was laying emphasis on controlling cost and setting up an
administrative pricing mechanism to protect the interest of the society.
Its emphasis is manifold unlike maintenance of financial records and its audit year on
year basis. While financial accountants addresses the needs of owner partially they
seldom address the interests of the society at large. In this context Maintenance of cost
records through a compliance mechanism has to travel a longway since the same is not
yet compulsory across board among companies(exemption to small scale sector)across
sectors(services and agriculture still to take up)Regularity(audit depends on order from
CAB even when Cost records maintenance is made compulsory)Accounts not certified by
qualified cost accountant(where Audit is not ordered ).
In the above back drop let us discuss few lines about the hype created in the Industry
circle about abolition of cost audit in global perspective.
First of all one must understand that maintenance of records reflecting cost of production
and services is the primary need for any business and in the global scenario it is all the
more vital .Unlike formatted financial accounts, which lay emphasis on recording of
transaction in a double entry mode, Cost accounts concentrate on business process
through a planning mechanism(budget) setting up of standards for physical and financial
incurrence(thus an inclusive mechanism of financial and non-financial measure) and
records transaction in a double entry mode to reflect a true and fair view for business
sustenance and growth.Its vision covers the interests of all internal and external
stakeholder and thus all encompassing.
Cost accounting is, State of Economy-Neutral, in the sense it does not simply focus on
recording transactions to claim such a neutrality while it addresses issues of economic
prosperity, its sustenance, through resource planning and overall growth
perspective(through enabling business process re-engineering) in the global arena.
Be it Capitalist Mode where Money is driving growth{(Optimising the yield from
investment is primary concern through internal(Process efficiency ) and
external(Delivery end-to-end and Income maximization) re-engineering)}.Be it Socialist
which lay emphasis on Planning process for resource allocation and egalitarian approach
to push a sustainable growth forward.
It is sector neutral since there is a longstanding and a reliable relation between money and
its exchange(Goods and services) and Cost is relational parameter for measuring value to
a business.
It impacts business cycle and prolongs the process, if not , completely plug the process
of concentration of economic power by checking the system and allowing efficient
process to flow thereby protecting the stakeholders from vagaries of business cycle.
It is something related to good governance and fair practices in “business and
governance of the economy “and can be defined for all the socio-economic setup and is a
very dynamic tool for measuring growth and efficiency.
The relevance of the stakeholders is better addressed in a liberalized and global setup
than a controlled setup and the relevance of cost accounting in the emerging world order
can only be better emphasized by looking into the global consumer and business
perspective. Infact the global scenario has complicated the economics of scale and
resource consumption specially, the speed of delivery, that we need to fall back on cost
accounting as addressing the whole range of issues that are the expectation of community
of nations.
Cost accounting is” Forms of business” neutral in that it addresses the core issues of
Value engineering for recording of transaction and has the business perspective, rather
than simply counting numbers it grows numbers and directs a sustainable growth in the
economy.
In the light of what has been stated above it is highly relevant and utmost imperative to
infuse the culture of recording transaction in the cost accounting mode transcending
business territories , economic model adopted by the state and the forms of business and
also in the governance of the economy.
In this context Indian economy had made a good beginning way back in 1965 and if the
realization of social-cost benefit is percolated down the line and addresses individual
citizens perspective in the society that is well geared in a political setup where
individual citizen has the right of choice to elect the representative to govern the society
and the resources, which is of common concern ,and the business model and any
economic activity is, that of exploitation of resources owned in equal measure of right
and opportunity by every citizen of India, then the agency factor comes alive for any
exploitors who come to the forefront of such activity and hence they are liable not only to
their business interest but also to the community interest and in that Cost accounting is a
potent tool of measurement. The object of competition and free movement of goods and
services is to plug inefficiency in global perspective and improve efficient delivery model
and these can seldom be addressed by financial statements of Profit and loss account
and balance sheet.
Having discussed at length of the requirement of cost accounting in the global economic
scenario we will now deal with what can be the way ahead from the stakeholders
perspective. These are recommendations to march ahead.
1.IFAC a world body of accountants which has yet far concentrated on the management
accounting issues should be geared with the might of Management accounting bodies to
come up with Statements of management accounting practice that is “economy, sector
and business forms neutral” which addresses the triple bottom line issues in global
perspective.
2.ICWAI in its interest and in the interest of stakeholders at large become proactive in
the delivery model (end to end) to percolate cost consciousness and other management
accounting related issues. It should come with policy guidelines that will push forward
reforms in accounting practices in the Indian context. It should also ensure quality man
power is made available in five years from now positioning the management accounting
model where the demand could be anywhere between 500000 to 1000000.
3.The GOI should become proactive and also come with a policy paper on the Inclusive
accounting aspect(financial and management accounting) addressing socio-economic
model of sustainable growth. It should re-position the role of Management accountant
as a Public accountants on par with Chartered accountants in all spheres of economic
activity and encourage them to participate in the process of maintenance of accounts and
audit in all forms of business and in government specially Taxation and budgeting
aspect.It should also shift away from the belief that ICAI is be all and end all of
Accounting and auditing profession.
4.Various economic legislation should define the role of Management accountant
clearly addressing the needs of our society.
Specific issues that needs to be re looked and amendments sought are:
1.Companies act should make a provision for Compulsory maintenance of cost records
for all businesses registered with it and allow audit on par with Statutory financial audit.
The cost auditor should submit its report to the Board and where after a gist can be
presented before the AGM.
2.All other forms of business where specific legislation is available should have
compulsory maintenance of cost records as a mandatory provision.
3.TAX departments should extensively use the services of Cost and Management
accountants in the process of collection of tax revenue.A process of auditing cost records
should be in place to ascertain exact cost of transaction and true determination of Income.
4.Government should recognize the true potential of Cost and management accountants
and employ them under ICAS or in consultancy assignments as an expert in social-cost
benefit analysis. The services should also be utilized in various regulatory frame work
that is coming up in administrative ministries for determination of fair price and
efficiency parameters.
CMA.R.Veeraraghavan
Maintenance of Cost records and Audit of the same has been in India since long and
recognized in the companies act 1956 by an amendment in 1965.The main intention
of the legislature was laying emphasis on controlling cost and setting up an
administrative pricing mechanism to protect the interest of the society.
Its emphasis is manifold unlike maintenance of financial records and its audit year on
year basis. While financial accountants addresses the needs of owner partially they
seldom address the interests of the society at large. In this context Maintenance of cost
records through a compliance mechanism has to travel a longway since the same is not
yet compulsory across board among companies(exemption to small scale sector)across
sectors(services and agriculture still to take up)Regularity(audit depends on order from
CAB even when Cost records maintenance is made compulsory)Accounts not certified by
qualified cost accountant(where Audit is not ordered ).
In the above back drop let us discuss few lines about the hype created in the Industry
circle about abolition of cost audit in global perspective.
First of all one must understand that maintenance of records reflecting cost of production
and services is the primary need for any business and in the global scenario it is all the
more vital .Unlike formatted financial accounts, which lay emphasis on recording of
transaction in a double entry mode, Cost accounts concentrate on business process
through a planning mechanism(budget) setting up of standards for physical and financial
incurrence(thus an inclusive mechanism of financial and non-financial measure) and
records transaction in a double entry mode to reflect a true and fair view for business
sustenance and growth.Its vision covers the interests of all internal and external
stakeholder and thus all encompassing.
Cost accounting is, State of Economy-Neutral, in the sense it does not simply focus on
recording transactions to claim such a neutrality while it addresses issues of economic
prosperity, its sustenance, through resource planning and overall growth
perspective(through enabling business process re-engineering) in the global arena.
Be it Capitalist Mode where Money is driving growth{(Optimising the yield from
investment is primary concern through internal(Process efficiency ) and
external(Delivery end-to-end and Income maximization) re-engineering)}.Be it Socialist
which lay emphasis on Planning process for resource allocation and egalitarian approach
to push a sustainable growth forward.
It is sector neutral since there is a longstanding and a reliable relation between money and
its exchange(Goods and services) and Cost is relational parameter for measuring value to
a business.
It impacts business cycle and prolongs the process, if not , completely plug the process
of concentration of economic power by checking the system and allowing efficient
process to flow thereby protecting the stakeholders from vagaries of business cycle.
It is something related to good governance and fair practices in “business and
governance of the economy “and can be defined for all the socio-economic setup and is a
very dynamic tool for measuring growth and efficiency.
The relevance of the stakeholders is better addressed in a liberalized and global setup
than a controlled setup and the relevance of cost accounting in the emerging world order
can only be better emphasized by looking into the global consumer and business
perspective. Infact the global scenario has complicated the economics of scale and
resource consumption specially, the speed of delivery, that we need to fall back on cost
accounting as addressing the whole range of issues that are the expectation of community
of nations.
Cost accounting is” Forms of business” neutral in that it addresses the core issues of
Value engineering for recording of transaction and has the business perspective, rather
than simply counting numbers it grows numbers and directs a sustainable growth in the
economy.
In the light of what has been stated above it is highly relevant and utmost imperative to
infuse the culture of recording transaction in the cost accounting mode transcending
business territories , economic model adopted by the state and the forms of business and
also in the governance of the economy.
In this context Indian economy had made a good beginning way back in 1965 and if the
realization of social-cost benefit is percolated down the line and addresses individual
citizens perspective in the society that is well geared in a political setup where
individual citizen has the right of choice to elect the representative to govern the society
and the resources, which is of common concern ,and the business model and any
economic activity is, that of exploitation of resources owned in equal measure of right
and opportunity by every citizen of India, then the agency factor comes alive for any
exploitors who come to the forefront of such activity and hence they are liable not only to
their business interest but also to the community interest and in that Cost accounting is a
potent tool of measurement. The object of competition and free movement of goods and
services is to plug inefficiency in global perspective and improve efficient delivery model
and these can seldom be addressed by financial statements of Profit and loss account
and balance sheet.
Having discussed at length of the requirement of cost accounting in the global economic
scenario we will now deal with what can be the way ahead from the stakeholders
perspective. These are recommendations to march ahead.
1.IFAC a world body of accountants which has yet far concentrated on the management
accounting issues should be geared with the might of Management accounting bodies to
come up with Statements of management accounting practice that is “economy, sector
and business forms neutral” which addresses the triple bottom line issues in global
perspective.
2.ICWAI in its interest and in the interest of stakeholders at large become proactive in
the delivery model (end to end) to percolate cost consciousness and other management
accounting related issues. It should come with policy guidelines that will push forward
reforms in accounting practices in the Indian context. It should also ensure quality man
power is made available in five years from now positioning the management accounting
model where the demand could be anywhere between 500000 to 1000000.
3.The GOI should become proactive and also come with a policy paper on the Inclusive
accounting aspect(financial and management accounting) addressing socio-economic
model of sustainable growth. It should re-position the role of Management accountant
as a Public accountants on par with Chartered accountants in all spheres of economic
activity and encourage them to participate in the process of maintenance of accounts and
audit in all forms of business and in government specially Taxation and budgeting
aspect.It should also shift away from the belief that ICAI is be all and end all of
Accounting and auditing profession.
4.Various economic legislation should define the role of Management accountant
clearly addressing the needs of our society.
Specific issues that needs to be re looked and amendments sought are:
1.Companies act should make a provision for Compulsory maintenance of cost records
for all businesses registered with it and allow audit on par with Statutory financial audit.
The cost auditor should submit its report to the Board and where after a gist can be
presented before the AGM.
2.All other forms of business where specific legislation is available should have
compulsory maintenance of cost records as a mandatory provision.
3.TAX departments should extensively use the services of Cost and Management
accountants in the process of collection of tax revenue.A process of auditing cost records
should be in place to ascertain exact cost of transaction and true determination of Income.
4.Government should recognize the true potential of Cost and management accountants
and employ them under ICAS or in consultancy assignments as an expert in social-cost
benefit analysis. The services should also be utilized in various regulatory frame work
that is coming up in administrative ministries for determination of fair price and
efficiency parameters.
CMA.R.Veeraraghavan
TRAI-Account separation and the role of cost and management accountant
4. Reports - (1) Based on the information available in the books of accounts and
other documents specified in the Rules and the order/notification issued there
under, service provider shall prepare geographical area-wise following financial
and non-financial reports: -
Financial Reports
Profit and Loss Statements
(i) Profit and loss statement of the products mentioned in column (4)
against services rendered by the service providers specified in column
(2) of the Schedule I. The statement shall be prepared in the Proforma
“A” of Schedule III;
(ii) Separate Profit and Loss statement for each of the service rendered by
the service provider and specified in regulation 1(2). The statement
shall be prepared in the Proforma “B” of Schedule III;
Page 5
Product Cost Statement
(iii) Product wise Cost Sheet in the Proforma “C” of Schedule III;
Network Element Cost Statements
(iv) Network Element wise Cost Sheet shall be prepared which clearly
indicates cost and its allocation to various products. An indicative list
of Network elements of services for which these cost sheets shall be
prepared is at Schedule II. However, the list of network elements shall
depend on network architecture used by the service provider. The
Network Element Cost Statements shall be prepared in the Proforma
“D” of Schedule III;
(v) A summary sheet showing network element wise total cost, cost driver
and cost per unit of usage. The statement shall be prepared in Proforma
“E” of Schedule III;
(vi) A summary sheet indicating network element wise cost allocated to
various products. The statement shall be prepared in Proforma “F” of
Schedule III;
Capital Employed Statements
(vii) Capital Employed Statement for each of the service rendered by the
service provider and specified in regulation 1(2). The statement shall
be prepared in Proforma “G” of Schedule III;
(viii) A statement showing allocation of capital employed for a service to the
network elements. The statement shall be prepared in Proforma “H” of
Schedule III;
Fixed Asset Statement
(ix) Statement showing category wise fixed assets and depreciation in the
Proforma “I” of Schedule III’; and
Non-Financial Report
(x) A statement of operational data relating to network architecture,
network usage, network capacity, product, services volumes, tariffs,
etc. Reports for services mentioned in Regulation 1(2) shall be
prepared in Proformae “L” to “T” of Schedule III.
(2) The service providers shall prepare Reports mentioned in Regulation 4 (1) every
year on the basis of historical cost accounting and every second year on the basis
of replacement cost accounting:
Provided that if less than three years have elapsed since issue of the license to
provide a particular service, the financial statements based on Replacement Cost
Accounting may not be prepared for that service.
Page 6
(3) The profit and loss statement and capital employed statement mentioned under
Regulation 4(1) of this regulation prepared on the basis of the Historical cost
Accounting shall be reconciled with the Annual Financial Statement of the
service provider prepared under Section 211 of the Companies Act, 1956. The
reconciliation statements shall be prepared in Proformae J and K of Schedule III.
(4) The service providers shall prepare financial reports mentioned in regulation
4(1) on the basis of replacement cost accounting, by-
(i) following financial capital maintenance methodology;
(ii) limiting cost adjustment to the fixed assets;
(iii) ignoring replacement cost adjustment for assets having life of less
than 3 years;
(iv) taking cost of modern equivalent asset when existing asset is not
available due to change in technology. Whenever, old asset is
replaced by modern equivalent asset, change in operational
expenditure as a result of such replacement shall also be accounted
for; and
(v) clearly indicating holding gain or loss, supplementary depreciation
and change in the operational cost due to replacement of old asset by
modern equivalent asset.
5. Periodicity of submission of report � (1) The service providers
shall submit
audited reports based on the historical cost accounting every year
within six
months of the end of accounting year to the Authority.
(2) The service provider shall also submit reports based on the
replacement cost
accounting every second year within six months of the end of
accounting year to
the Authority.
(3) The reporting period shall be same as followed by the company for
preparation
of the annual financial accounts under sub section (4) of section 210
of the
Companies Act, 1956.
Provided that, if reporting period exceeds fifteen calendar months,
the accounting
separation statements shall be divided into 12 months and the balance
period.
6. Audit - (1) Every service provider, to which these regulations
apply, shall appoint
an auditor who is qualified for appointment as an auditor under
section 224 or
233-B of The Companies Act, 1956.
(2) The auditor shall audit the reports so prepared.
(3) The auditor in his report shall express an opinion as to whether
the reports
have been properly drawn in accordance with the regulation and he has
received
all information and explanation necessary for the purpose of audit.
7. Confidentiality - The Authority shall ensure the confidentiality of
the financial
information submitted under various provisions of the Regulation.
Page 7
Provided that, where the Authority is of the opinion that it is
necessary or
expedient to disclose the information in public interest, it may, for
reasons to be
recorded in writing, do so.
Provided further that no information shall be disclosed by the
Authority, except
after giving the company an opportunity of making such representation
in writing,
as it may wish to make in that behalf and taking such representation into
consideration.
other documents specified in the Rules and the order/notification issued there
under, service provider shall prepare geographical area-wise following financial
and non-financial reports: -
Financial Reports
Profit and Loss Statements
(i) Profit and loss statement of the products mentioned in column (4)
against services rendered by the service providers specified in column
(2) of the Schedule I. The statement shall be prepared in the Proforma
“A” of Schedule III;
(ii) Separate Profit and Loss statement for each of the service rendered by
the service provider and specified in regulation 1(2). The statement
shall be prepared in the Proforma “B” of Schedule III;
Page 5
Product Cost Statement
(iii) Product wise Cost Sheet in the Proforma “C” of Schedule III;
Network Element Cost Statements
(iv) Network Element wise Cost Sheet shall be prepared which clearly
indicates cost and its allocation to various products. An indicative list
of Network elements of services for which these cost sheets shall be
prepared is at Schedule II. However, the list of network elements shall
depend on network architecture used by the service provider. The
Network Element Cost Statements shall be prepared in the Proforma
“D” of Schedule III;
(v) A summary sheet showing network element wise total cost, cost driver
and cost per unit of usage. The statement shall be prepared in Proforma
“E” of Schedule III;
(vi) A summary sheet indicating network element wise cost allocated to
various products. The statement shall be prepared in Proforma “F” of
Schedule III;
Capital Employed Statements
(vii) Capital Employed Statement for each of the service rendered by the
service provider and specified in regulation 1(2). The statement shall
be prepared in Proforma “G” of Schedule III;
(viii) A statement showing allocation of capital employed for a service to the
network elements. The statement shall be prepared in Proforma “H” of
Schedule III;
Fixed Asset Statement
(ix) Statement showing category wise fixed assets and depreciation in the
Proforma “I” of Schedule III’; and
Non-Financial Report
(x) A statement of operational data relating to network architecture,
network usage, network capacity, product, services volumes, tariffs,
etc. Reports for services mentioned in Regulation 1(2) shall be
prepared in Proformae “L” to “T” of Schedule III.
(2) The service providers shall prepare Reports mentioned in Regulation 4 (1) every
year on the basis of historical cost accounting and every second year on the basis
of replacement cost accounting:
Provided that if less than three years have elapsed since issue of the license to
provide a particular service, the financial statements based on Replacement Cost
Accounting may not be prepared for that service.
Page 6
(3) The profit and loss statement and capital employed statement mentioned under
Regulation 4(1) of this regulation prepared on the basis of the Historical cost
Accounting shall be reconciled with the Annual Financial Statement of the
service provider prepared under Section 211 of the Companies Act, 1956. The
reconciliation statements shall be prepared in Proformae J and K of Schedule III.
(4) The service providers shall prepare financial reports mentioned in regulation
4(1) on the basis of replacement cost accounting, by-
(i) following financial capital maintenance methodology;
(ii) limiting cost adjustment to the fixed assets;
(iii) ignoring replacement cost adjustment for assets having life of less
than 3 years;
(iv) taking cost of modern equivalent asset when existing asset is not
available due to change in technology. Whenever, old asset is
replaced by modern equivalent asset, change in operational
expenditure as a result of such replacement shall also be accounted
for; and
(v) clearly indicating holding gain or loss, supplementary depreciation
and change in the operational cost due to replacement of old asset by
modern equivalent asset.
5. Periodicity of submission of report � (1) The service providers
shall submit
audited reports based on the historical cost accounting every year
within six
months of the end of accounting year to the Authority.
(2) The service provider shall also submit reports based on the
replacement cost
accounting every second year within six months of the end of
accounting year to
the Authority.
(3) The reporting period shall be same as followed by the company for
preparation
of the annual financial accounts under sub section (4) of section 210
of the
Companies Act, 1956.
Provided that, if reporting period exceeds fifteen calendar months,
the accounting
separation statements shall be divided into 12 months and the balance
period.
6. Audit - (1) Every service provider, to which these regulations
apply, shall appoint
an auditor who is qualified for appointment as an auditor under
section 224 or
233-B of The Companies Act, 1956.
(2) The auditor shall audit the reports so prepared.
(3) The auditor in his report shall express an opinion as to whether
the reports
have been properly drawn in accordance with the regulation and he has
received
all information and explanation necessary for the purpose of audit.
7. Confidentiality - The Authority shall ensure the confidentiality of
the financial
information submitted under various provisions of the Regulation.
Page 7
Provided that, where the Authority is of the opinion that it is
necessary or
expedient to disclose the information in public interest, it may, for
reasons to be
recorded in writing, do so.
Provided further that no information shall be disclosed by the
Authority, except
after giving the company an opportunity of making such representation
in writing,
as it may wish to make in that behalf and taking such representation into
consideration.
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