|Cost accounting has evolved from being a rule based mechanism to a principle based mechanism with standard / uniform requirements prescribed by Cost accounting Standards (CAS) and Generally Accepted Cost Accounting Principle (GACAP). The recent notification issued by the Ministry of Corporate Affairs relating to maintenance of cost records is a recognition of this shift to principle based mechanism. Given this radical shift, a proactive and a integrated approach is called for. This should not be viewed as an additional statutory compliance but as an opportunity to develop a dynamic and acceptable performance management system in the Company, which facilitates the management and users to measure, review and improve the performance at all levels of the Company.
The recently notified Cost Accounting Record Rules, being principle based, don’t prescribe any particular format unlike the earlier Industry/product specific Cost accounting Record rules; this is both an opportunity and a challenge. The companies can and will have to design their own formats, mechanism and process to capture the cost and performance information. Management and performance management teams of the respective companies can decide upon different information requirements which are critical to their company with respect to competitiveness and control. Needless to say, that the System and processes have to be compliant with all the Principles prescribed by the Cost Accounting Standards and GACAP. The Cost reporting system has to be simple and integrated with the ERP package used in the company with checks in place to avoid information overload. GHSA recommends the following stages in the Installation of the Costing Accounting system.