COST ACCOUNTING STANDARDS

CAS - 1

COST ACCOUNTING STANDARD ON

CLASSIFICATION OF COST

ISSUED BY

THE INSTITUTE OF COST AND WORKS ACCOUNTANTS

OF

INDIA

PREFACE TO COST ACCOUNTING STANDARD BOARD

1. Introduction

Due to open competition for globalization, the Cost Management has gained special importance in the business activities. Cost Accounting Standard Board ( hereinafter called CASB) set up by the Council of the Institute of Cost and Works Accountants of India ( ICWAI ) and following statements are issued to define the objectives, operating procedures, scope and applicability and authority of CASB.

2. Constitution

2.1 The CASB will have a Chairman as appointed and nominated by the Council of the Institute and other members will also be appointed and nominated by the Council.

2.2 The terms and period of appointment will also be decided by the council of the Institute.

2.3 The Director( Technical ) will be the Secretary of the CASB.

2.4 The CASB will prepare a report of its work each year and send it to the Council.

3. Objective

The work of CASB is to develop Cost Accounting Standard on important issues/topics relating to Cost and Management Accounting with the following objectives :

3.1 To equip the profession with better guidelines on standard cost accounting practices

3.2 To assist the Cost Accountants in preparation of uniform cost statements

3.3 To provide guidelines to Cost Accountants to make standard approach towards maintenance of Cost Accounting Record Rules and Undertaking Cost Audit under section 209 (1) (d) and section 233B of Companies Law respective and various other Acts like Income Tax Act, Central Excise Act, Customs Act, Sales Tax Act, etc.

3.4 To assist the management to follow the standard cost accounting practices in the matter of compliance of statutory obligations.

3.5 To help Indian industry and the Government towards better cost management

4. Operating Procedure and policies of CASB

4.1 Organizing and initiating discussion and deliberation at national level to identify the areas/topics in respect of which needs for standards are felt

4.2 Generating information on all alternative cost accounting practices in respect of selected practices

4.3 Preparation of draft on the standard cost accounting practices in respect of chosen areas/topic in cost accounting and circulate it to the members of the Institute, national accounting institute and other end user bodies like industry association, Chambers of Commerce and Industry, Government bodies etc

4.4 Allowing sufficient time for consideration and comments on the exposure draft

4.5 Pronouncement of the exposure draft as ‘standard’ after giving due consideration to the suggestions and modification generated on the circulated exposure drafts from such individuals and agencies as mentioned in 4..3 above.

4.6 To fix a date for the standard to be effective

4.7 To propagate and generate acceptance and commitment to follow the ‘standards’ prescribed by CASB

4.8 To revise the ‘standards’ once issued, if dictated by environment, government, legal authority and other situation.

5. Scope and Applicability

5.1 The ‘standards’ issued by CASB will be recommendatory in nature and every member of the institute is expected to honour the same.

5.2 A standards will always make sure that it complies with the legal regulations in respect of the matter covered by it. However, a standard by its vary nature will have to be more definite and specific than its legal requirements.

5.3 Any limitation in application of a ‘standard’ in specific circumstances must be spelt out in the ‘standard’ itself.

5.4 Every standard will broadly have two parts – (a) explanatory part and (b) the operative part. The explanatory section will set out topic covered, the premises, the need for standardization and methodology and rationale for practice recommended. The second part, the operative portion will be the definite direction on the matter.

5.5 Every standard will indicate the date from which it will be operative.

5.6 The standards will be applicable to preparation of cost statements and other documents where the concepts embedded in the standard will be applicable.

5.7 As far as maintenance of cost accounting record rules under section 209 (1) (d) is concerned, relevant matter covered under the standards , wherever applicable, will be followed.

5.8 Cost Auditors will adopt and encourage the adoption of the standards, wherever applicable, in maintenance of Cost Accounting Record Rules under section 209(1)(d) and report the deviations, if any, in the Cost Audit Reports under section 233B.

5.9 The Institute will take up the standards with National Accounting Standard Board to enforce them and to include in Companies Act, 1956.

6. Authority attaching to the standard

6.1 So long the standards are not enforced by National Accounting Standard Board or by Companies Act, the CASB does not possess the legal authority to impose its views as statutory regulations but it is by only persuasion the standard can be followed as normal practice by the members of the profession

6.2 ICWAI will be duty bound to protect its members who respect and adhere to the standard prescribed.

6.3 Disciplinary restriction may be imposed by the Council of the Institute at appropriate stages as may be felt necessary for not complying with or not honouring the standard.