1. CMA S.A.Murali Prasad Cost Accountant in Practice
Amendments to CRAR
CMA S.A.Murali Prasad
Cost Accountant in Practice

2. The Timeline
Feb Ind AS rules notified by MCA July 2016 Ind AS implemented for Q! financial results by Cos. March 2017 Limited Revision to CAS based on Ind AS by CASB April 2017 Annual financial Statements issued by Cos under IFRS August 2017 Draft Amendments to CRAR issued by MCA December 2017 Amendment Rules issued

3. Reason for the Amendment
The proposed amendments have been made on account of amendments made in the Companies ( Indian Accounting Standards) Rules 2015.
Para 1 has a question on whether Indian Accounting StandARDS ARE APPLICABLE TO THE COMPANY UNDER AUDIT.
S.A.Murali Prasad CRAR Amendment

4. Retrospective Amendment
Effective for FY !!!
Explanatory Memorandum: certified no person is being adversely affected by giving retrospective effect to this notification.
S.A.Murali Prasad CRAR Amendment

5. Spares- inventory or PPE?
Spare parts when they meet the definition to be recognised as PPE and depreciated accordingly. Else classified as inventory.
Spare parts specifically relating to an item of plant
Standby equipment
Servicing equipment
Held for production or supply of goods and services
S.A.Murali Prasad CRAR Amendment

6. Spares- inventory or PPE?
Expected to be used for more than one year
Test of materiality
Group of items- moulds, tools, dies
capital spares/ insurance spares to be amortised over a period, not exceeding the useful life of the equipment.
S.A.Murali Prasad CRAR Amendment

7. Subsidy, or grant or incentive
Deducted from cost of material in the year in which it is recognised as income.
Under Ind AS, Government grants related to assets, … shall be presented in the balance sheet by setting up the grant as deferred income. (20.24)
The grant set up as deferred income is recognised in profit or loss on a systematic basis over the useful life of the asset. (20.26)
S.A.Murali Prasad CRAR Amendment

8. Subsidy, or grant or incentive
Grants related to income presented as ‘Other income’ or deducted in reporting the related expense. (20.29).
Under CRA 1, grants have to be only deducted from cost.
grants as compensation for expenses or losses already incurred with no future related costs shall be recognised in profit or loss of the period in which it becomes receivable. (20.20)
Position under CRA 1 not clarified.
S.A.Murali Prasad CRAR Amendment

9. Non monetary grants will be accounted at fair value (20.23)
Not clarified under CRA 1. Fair value to be offset against cost!!!
S.A.Murali Prasad CRAR Amendment

10. Changes relating to grants
Materials
Employee Cost
Utilities
Direct Expenses
Repairs and Maintenance
Overheads
Administration overheads
8. Royalty and technical Knowhow costs
9. R & D expenses
10. Quality Control Expenses
Pollution Control Expensess
Service Department Expenses
Packing Costs
Finance costs
S.A.Murali Prasad CRAR Amendment

11. Valuation of Issues Not on FIFO, average etc.
But using an appropriate method as per applicable accounting standards.
No place for application of mind by Cost and Accountant.
S.A.Murali Prasad CRAR Amendment

12. Employee Cost
Includes benefits including cost of retirement benefits charged in the financial statements in an accounting period in the case of Ind AS companies
Such cost Includes
(a) service cost
(b) net interest on the net defined benefit liability (asset)
Not to include any re-measurement of such costs recognised in other comprehensive income
S.A.Murali Prasad CRAR Amendment

13. Employee cost Excludes i)actuarial gains and losses;
(ii) return on plan assets in cost
S.A.Murali Prasad CRAR Amendment

14. Repairs and Maintenance
Special treatment of High Value spares omitted.
S.A.Murali Prasad CRAR Amendment

15. Depreciation Amortisation clubbed with depreciation.
amount limited to that recognised as an expense for the year in the financial statements, as per Schedule 11 of CA and the accounting standards.
Other amounts treated as non cost.
Depreciation on asset temporarily retired considered as abnormal cost for the period when not in use.
S.A.Murali Prasad CRAR Amendment

16. Depreciation Impairment loss to be excluded from cost.
Treatment of Spare parts, stand-by equipment and servicing equipment repeated.
Assignment paras retained.
All other paras under depreciation deleted.
S.A.Murali Prasad CRAR Amendment

17. Finance Costs Substituted for Interest and Financing Charges.
Are costs incurred by an entity in connection with the financing arrangements.
shall be measured in accordance with applicable accounting standards
S.A.Murali Prasad CRAR Amendment

18. General
Reference to “ compliance with requirements of a Cost Accounting Standard” omitted from justification for change in Cost Accounting principles applied.
Reference to paragraph 9 on transportation cost included in the sections on Material and Packing Material.
S.A.Murali Prasad CRAR Amendment

19. Changes to CRA 3
Inclusion of Exceptional, Extra Ordinary and Other Comprehensive Income, if any in place of extra ordinary income in Product/Service details for the company as a whole.
Revenue to be net of taxes and duties for Ind As companies
Profit as per financial accounts in Recon to exclude OCI ( what about extra ordinary, exceptional items?).
PBT in ratio analysis to exclude OCI.
Value Added to include extraordinary, exceptional and other comprehensive income and extra ordinary and exceptional expenses
S.A.Murali Prasad CRAR Amendment

20. What is Extra ordinary and exceptional
Extra ordinary items are those not relating to ordinary activities of the entity and are not expected to recur.
Exceptional items relate to ordinary activities of the entity but are exceptional in terms of size or incidence.
Pray, which of them correspond to “abnormal”?
S.A.Murali Prasad CRAR Amendment

21. Clarifications required
Are fair value changes cost?
Clarification needed that all OCI items will be treated as non cost.
In first time adoption, treatment of “deemed cost” of PPE.
To clarify on treatment of depreciation on revalued fixed assets
Depreciation/amortisation on fair value of assets acquired under Business Combinations.
Loss on replacement of individual parts of PPE treated as cost?
S.A.Murali Prasad CRAR Amendment

22. Clarifications required
To clarify on treatment of FVTPL items.Implicit interest removed from material cost?
Changes in fair value of stock options to employees
Omission of words “for use of non equity funds in definition of interest costs- treatment of share issue and equity raising costs.
Implicit interest removal in Revenues.
Treatment of expected credit losses
S.A.Murali Prasad CRAR Amendment

23. Corrections required in old rules not made
Self manufactured items- reference to portion of overheads relating to production and others obsolete.
In Ratios, PBT ratios technically faulted.
Indirect tax reconciliation does not reflect GST change.( another amendment in the offing?)
S.A.Murali Prasad CRAR Amendment

24. CRA 3 Changes
Product/ Service Details: Total Revenue to include extraordinary, exceptional items and other Comprehensive income.
In Profit Reconciliation, Profit or Loss as per financial accounts to exclude other comprehensive income ( what about extra ordinary, exceptional items.
S.A.Murali Prasad CRAR Amendment

25. The End
S.A.Murali Prasad CRAR Amendment