Ten cost accounting standards have been formulated, six of them are mandatory, which will come into effect from April 1 and three more are likely to be added, according to Mr K. Narasimha Murthy, Director of IDBI and LIC Housing Finance.
He was delivering the key-note address at a seminar on ‘Effective corporate environment — best practices for costing,’ organised here on Friday by the Institute of Cost and Works Accountants, Visakhapatnam chapter. Mr Murthy was a member of the Goel Committee appointed by the Union Government to make recommendations for laying down cost accounting standards.
He said in all, 28 cost auditing standards may come into force in the next two years and it would make for better cost auditing.
India did not have a cost audit for government expenditure. “The importance of a cost audit cannot be overemphasised and in most countries there is a strict cost audit even for Government expenditure. The Government is the biggest spender and, therefore, cost audit is absolutely essential,” he said.
He said in a globalised economy, business cycles were becoming frequent and it was becoming increasingly difficult to foresee demand and supply for any product. Therefore, cost-cutting was of the essence.
He called for good corporate governance and performance governance to maximise stakeholder value. There was also need for effective risk management systems.
Mr Ajeya Kallam, Chairman of the Visakhapatnam Port Trust, said costing was not given much importance, especially in the public sector units.
The decision to merge the Dock Labour Board (DLB) with the Visakhapatnam Port Trust (VPT) was one such decision when costing was not taken into account, he said.
The port was served a notice for paying Rs 30 crore in income-tax soon after the merger. The DLB had to pay the IT and apart from that, the VPT had to set apart Rs 100 crore for wage settlement. After all that, it was found to be unviable and the workers had to be given VRS. “It was a political decision imposed on us from above with no regard to the costing norms,” he said.
Mr Satyananda Rao, Chairman of the Vizag chapter of the Institute of Cost and Works Accountants, also spoke on the occasion.