New Delhi: The government will amend the cost audit rules under the companies law in order to ensure parity between financial and cost records.
The amendments have been mooted pursuant to implementation of the Indian Accounting Standards (Ind AS), which is converged with global accounting norms.
The corporate affairs ministry, which is implementing the Companies Act, has come out with a draft of the proposed amendments to the Cost Records and Audit rules.
Various existing provisions under these rules, including some related to intangible assets, would be done away with while Ind AS compliance would be required for certain other aspects.
“Pursuant to implementation of Ind AS, the Companies (Cost Records and Audit) Rules, 2014 are to be amended to bring parity between financial records and cost records,” the ministry said in a communication.
Ind AS is applicable for certain class companies from the current financial year (2017-18).
With respect to employee cost, the ministry has proposed that the same should be ascertained after taking into consideration “the cost of retirement benefits charged in the financial statements in an accounting period”.
Under the current rules, employee cost shall be ascertained taking into account the gross pay including all allowances payable along with the cost to the employer of all the benefits.
In case of companies where Ind AS is applicable, any re- measurement of employee costs “recognised in other comprehensive income shall not form part of the employee cost”, as per the draft rules.
One of the current requirements that the useful life of an intangible asset, in any situation, “shall not exceed 10 years from the date it is available for use” would be removed.
Among others, the provision that the method used for calculating depreciation should reflect the pattern “in which the asset’s future economic benefits are expected to be consumed by the entity” would be done away with.
The ministry has sought comments from stakeholders on the draft amendments till August 26.