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Nilanjan Dey

KOLKATA, Jan. 29

THE accounting standards board, set up recently by the Institute of Cost & Works Accountants of India (ICWAI), has prepared its first ever exposure draft on cost classification, which is expected to become a full-fledged cost accounting standard. ICWAI has also sought to identify a number of areas on which standards can be issued.

The exposure draft is ICWAI's maiden initiative towards standardising the various cost classifications that are generally used by accounting professionals. The standards-setting body, under the chairmanship of Mr Chandra Wadhwa, a Government nominee in the institute's central council, has dealt with more than 20 classifications. The idea is to codify these in a way that they are used in identical manner universally.

The attempt, the institute concedes, does not pertain to `treatment' of a particular subject. In this respect, it is quite different from the standards set by the Institute of Chartered Accountants of India (ICAI). At the same time, it is considered necessary from the point of view of harmonisation of classifications.

The next exposure draft, however, will specifically relate to the `cost of production for captive consumption', according to Mr Kunal Banerjee, Vice-President of ICWAI. The forthcoming guidelines on this subject will put an end to speculation on the nature of production costs in the context of captive consumption. It will also address a few issues raised earlier on the matter by such authorities as the Central Board of Excise and Customs.

The institute further intends to work out cost accounting standards in certain other areas, one of them being transfer pricing. The latter, it is explained, is an emerging concept, one that accounting circles are increasingly talking about nationally and internationally.

It may be mentioned that the two other apex institutes - ICAI and the Institute of Company Secretaries of India - have their own accounting standard boards. The ICAI body, in fact, has so far issued nearly 30 standards, and a number of others are likely to be issued in the days ahead.

The standard-setting body within ICSI had worked out its first standard (subject: general meetings). Cost accounting standard boards also exist in developed markets such as the US.

ICWAI, Mr Banerjee said, aims to establish corporate accountability and transparency through its own cost accounting standards. "Costing principles are involved at almost all levels of corporate functioning. Given this background, the need for standardisation arises automatically," he said, adding that the proposed standards will be initially issued as recommendations. These will be subsequently implemented on a mandatory basis.

The costing institute will push for guidelines on certification of costs by its members. At the moment, such certification is typically done by a number of entities, including CAs and employees of companies.

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