It may now become compulsory for all big and medium manufacturing companies to get their cost accounts audited, if an expert group’s recommendation on the same is accepted by the government.
The 13-member expert group comprising representatives from three accounting institutes — ICWAI, ICAI and ICSI — industry body CII and market regulator Sebi, have recommended that all companies whose turnover is more than Rs 50 crore should be mandated to maintain cost audit books.
At present, companies engaged in only 44 products, including paper and sugar, need to get their accounts cost audited.
“We have recommended not to go for 44 products. Make it compulsory for all industry, with exception to small companies with a threshold limit of Rs 50 crore turnover, make all, including goods, services and infrastructure compulsory to maintain cost accounts,” ICWAI President and member of the expert group G Venkataraman told PTI.
In its over 890-page suggestion, the group also mentioned that companies should be allowed to maintain their own cost accounting standards rather than designing it on a rule-oriented format.
“We have given 39 recommendations on cost accounting standards, like the financials for every cost account written by the firms, a definition should go with it,” the Institute of Cost and Works Accountant of India (ICWAI) president said.
For example, if a the cost accounting is about a material manufactured, then the company will have to mention as to what the material consists of and what is the percentage of the composition, Venkataraman elaborated.
This, he added, would bring in clarity in the cost accounting books.
Further, Venkataraman said ICWAI is working on converging cost accounting standards with the International Financial Reporting Standards (IFRS) by 2011.
“Not just accounting, but costing norms too would be merged with international standards by 2011. The ICWAI is preparing the roadmap for the amalgam of cost accounting standards with IFRS,” he said.
The newly-appointed head of the cost accounting regulator feels that with the marriage of Indian accounting norms with the international standards, the practice would become more efficient.
“It will not only help the country maintain a high standard of accounting, it will also open up new avenues for accounting professionals,” he said.