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Preface to the Cost Accounting Standards
Constitution of the Cost Accounting Standards Board
The Council of the Institute of Cost Accountants of India (ICAI), recognizing the need for structured approach to the measurement of cost so as to provide guidance to the user organizations, government bodies, regulators, research agencies, academic institutions and others to achieve uniformity and consistency in classification, measurement and assignment of cost, has constituted the Cost Accounting Standards Board (CASB) in 2001-02 with the objective of formulating the Cost Accounting Standards.

Many of the principles stipulated in the Cost Accounting Standards issued by CASB are applicable to entities engaged in manufacture of goods and/or rendering of services. At later date CASB might issue Cost Accounting Standards specific to service sector.

The composition of the CASB will be broad based and ensure participation of all interest groups in the standard setting process. It will comprise of the following:

  1. Six members of the Council including the Chairman of the Board to be nominated by the Council.
  2. Adviser (Cost), Cost Audit Branch, or his representative nominated by the Ministry of Corporate Affairs, Government of India;
  3. A nominee of the Central Board of Indirect Taxes and Customs, Government of India;
  4. A nominee of the Central Board of Direct Taxes, Government of India;
  5. Two members of the Institute representing leading companies;
  6. Nominees from regulators (CAG, RBI, TRAI, SEBI, CCI, CERC, IRDA, & PNGRB);
  7. Two nominees from professional Institutions (ICAI-CA and ICSI);
  8. Three nominees of Industry Associations (ASSOCHAM, CII, PHDCCI, FICCI);
  9. A nominee of the Indian Banks’ Association (IBA);
  10. Eminent academicians from Institutes of National Importance;
  11. Four eminent practicing members of the Institute;
  12. President is authorized to include a maximum of two eminent persons having knowledge and expertise in the Cost and Management Accounting / Accounting Standards not falling under the categories as defined in the constitution;
  13. Three permanent invitees as observers from CMA Sri Lanka, CMA Pakistan and CMA Bangladesh.

The quorum of the Board including those attending above shall be eight members. This shall not include co-opted members, observers, invitees and permanent invitees.

The Chairman, CASB with the approval of the President can co-opt experts, as may be required, to be invited to the meeting/s of the Board.

The term of the nominees (sl. no. 2 to 9) shall remain upto the term of the Council of the Institute unless the nominee organization changes its nominee.

The Board shall have atleast one meeting in every quarter and there should not be a gap of more than four months between the two meetings of the Board.

The minutes of the meeting of the Board shall be prepared and circulated among the Board Members within 15 days of the date of the meeting.

The terms and period of appointment will be decided by the Council.

Objectives and Functions of the Cost Accounting Standards Board
The objectives of the Cost Accounting Standards Board are to develop high quality Cost Accounting Standards to enable the management to take informed decisions and to enable regulators to function more effectively by Integrating, harmonizing, and standardizing cost accounting principles and practices.

The following will be the functions of the CASB:

(i) To issue the framework for the Cost Accounting Standards.
(ii) To equip the Cost and Management Accounting professionals with better guidelines on Cost Accounting Practices.
(iii) To assist the members in preparation of uniform cost statements under various statutes.
(iv) To provide from time to time interpretations on Cost Accounting Standards.
(v) To issue application guidance relating to a particular standard.
(vi) To propagate the Cost Accounting Standards and to persuade the users to adopt them in the preparation and presentation of General Purpose Cost Statement.
(vii) To persuade the Government and appropriate authorities to enforce Cost Accounting Standards, to facilitate the adoption thereof, by industry and corporate entities in order to achieve the desired objectives of standardization of Cost Accounting practices.
(viii) To educate the users about the utility and need for compliance of cost accounting standards.

Procedure for issuing the Cost Accounting Standards
The following procedure shall be adopted for formulating and issuing Cost Accounting Standards:

I. The selection of topics which the Cost Accounting Standards have to be formulated and the sequence in which they will be developed will be decided by the CASB, on its own volition or on the basis of requests received from and interest group.
II. The CASB will constitute a Task Force for each issue taken up for the formulation of the Cost Accounting Standard. The Task force will prepare the initial draft of the proposed standard.
III. The draft of the proposed standard will generally be in the following format:

1. Introduction;
2. Objectives;
3. Scope;
4. Definitions and explanations of the terms used;
5. Principles of Measurement;
6. Assignment of Cost;
7. Presentation;
8. Disclo sure;

Application Guidance will be provided as annexure, wherever required.

In case of deviation from the above format, suitable explanation shall be provided by the Task Force preparing the standard.

The standards formulated by the Cost Accounting Standards Board include paragraphs in bold italic type and plain type, which have equal authority. Paragraphs in bold italic type indicate the main principles. An individual Cost Accounting Standard should be read in the context of the objective stated in that standard and this Preface.

IV. The initial draft prepared by the Task Force shall be examined by the CASB, with inputs from the Technical Directorate.
V. The CASB will issue an Exposure Draft with or without modification to the initial draft.
VI. The Exposure draft of the Cost Accounting Standard will be hosted on the website of the Institute and published in Management journal for comments of stakeholders and public at large.
VII. The Exposure Draft will be sent to the members of the Central Council, Past Presidents, members of the regional councils and chapters and the leading entities in public and private sectors and circulated among bodies for their comments.
VIII. To allow adequate time for due consideration and comments from all interested parties, exposure period is of thirty days or longer as decided by the CASB.
IX. The comments and suggestions received within the exposure period are considered by the CASB appropriately.
X. After taking into consideration the comments received, the draft of the proposed Standard will be finalized by the CASB as Cost Accounting Standard and will be submitted to the Council of the ICAI for approval.
XI. The Council of the ICAI will consider the proposed Standard, and if found necessary, will modify the same in consultation with the CASB. After the Council recommends adoption, the Cost Accounting Standard on the relevant subject will then be issued by the ICAI.
XII. The Cost Accounting Standards shall be issued under the authority of the Council of the ICAI.
XIII. The effective date of implementation of the Standard will be decided by the Council of the ICAI in consultation with CASB. However, no standards will have retrospective application unless otherwise stated.

Authority attaching to Cost Accounting Standards
While formulating the Cost Accounting Standards, the CASB will take into consideration the applicable laws, usage and business environment prevailing in India. CASB will also give due consideration to the Cost Accounting Standards, principles and practices being followed by the other countries in the world. If a particular standard or and part thereof is inconsistent with a law, the provisions of the said law shall prevail.

The Cost Accounting Standards are intended to apply to the items which are material.

The Cost Accounting Standards Board may consider any issue requiring interpretation of and Cost Accounting Standard. Interpretations will be issued under the authority of the Council. The authority of interpretations is the same as that of Cost Accounting Standard to which it relates.

Procedure for and Authority of Application Guidance
This preface recognizes, as one of the functions of the Cost Accounting Standards Board (CASB), the issuance of Application Guidance (AG) relating to individual Cost Accounting Standards. For the purpose, the CASB will identify implementation issues and consider how CASB can best respond to such issues.

The response will take the form of Application Guidance which may take several forms narratives, FAQs, Illustrative examples and others. The objective is to help preparers of cost statement, auditors, and users to understand Cost Accounting Standards better, particularly first-time preparers and users and to ensure consistent application of a standard.

Procedure for preparation and issue of the Application Guidance
The procedure to be followed in this regard will be as follows:

1. The Application Guidance will be drafted by the CASB Secretariat with or without the support of outside experts. The draft shall take into account issues identified by the CASB and queries or opinions received from various stakeholders during the exposure period of the Standard and after its publication.
2. The Exposure Draft of the Application Guidance will be approved by the CASB with or without modification to the initial draft and the same shall be posted on the CASB website atleast for thirty days for public comments.
3. The Secretariat will finalise the Application Guidance based on the comments received from the public and recommend the same to CASB for its approval.
4. The CASB shall consider and approve, with or without modification, the Application Guidance for issuance.

Authority attached to the application Guidance
The Application Guidance will be explanatory to the corresponding Cost Accounting Standard and will not override the same.

Compliance with the Cost Accounting Standards
The Cost Accounting Standards will be mandatory from the respective date(s) mentioned in the Cost Accounting Standard(s). The mandatory status of a Cost Accounting Standard implies that while discharging their attest functions, it will be the duty of the members of the Institute to examine whether the Cost Accounting Standard is complied with in the preparation of the General Purpose / Special Purpose Cost Statement which is required to be attested by the Cost Accounting professionals wherever applicable.

As far as maintenance of cost accounting records under the Companies Act or any other statute is concerned, relevant matter covered under the standards, wherever applicable shall be followed. In the event of any deviation from the Cost Accounting Standard, it will be their duty to make adequate disclosures in their cost audit reports so that the users of cost statements may be aware of such deviation.

Cost Statements cannot be described as complying with the Cost Accounting Standards unless they comply with all the requirements of each applicable Standard.

Procedure for revision of the Standards and Guidance Notes issued by the Board
The CASB undertakes revision of the Standards and Guidance Notes based on the subsequent legal or professional requirements or any other national or international developments in the field of Cost Accounting. The procedure followed for revision is the same as that followed for formulation of a new Standard and Guidance Note as the case may be, as detailed above. Limited revision of Standards and Guidance Notes due to change in reference of Act and Rules thereof shall be carried out by the Board and Standards with approval of the Council of Institute. Also limited revision due to adoption of standardized definition in any standard shall be carried out in all the Cost Accounting Standards by the Board with approval of the Council of Institute.



* Revised by the Council of the Institute in its 329th meeting