Pharmaceutical Industry (Cost Accounting Records)

Order, 2000

18th October, 2000

1.   Short title, extent and commencement

a.   It may be called the Pharmaceutical Industry (Cost Accounting Records) Order, 2000.

b.   It extends to the whole of Pakistan.

c.    It shall come into force on such date as the Securities and Exchange Commission may, by notification in the official Gazette, appoint.

2.   Application
This Order shall apply to every company engaged in production, processing and manufacturing of drug products registered with Central Licencing Board setup by Federal Government under the type of “formulations” as per rule 3(iii), 197 framed under Drug Act 1976 (Act No. XXXI of 1976), as amended from time to time.

3.   Maintenance of records

a.   Every company to which this Order applies shall, in respect of each financial year commencing on or after the commencement of this Order, keep cost accounting records, containing, inter-alia, the particulars specified in Schedule I, II and III to this Order.

b.   The cost accounting records referred to in sub-paragraph (1) shall be kept in such a way as to make it possible to calculate from the particualrs entered thererin the cost of production and cost of sales of each of the formulation products referred to in paragraph 2, during a financial year.

c.    Where a company is manufacturing any other product in addition to those referred to in paragraph 2, the particualrs relating to the utilization of materials, labour and other items of cost in so far as they are applicable to such other product shall not be included in the cost of product referred to in that paragraph.

d.   It shall be the duty of every person referred to in sub-section (7) of section 230 of the Companies Ordinance, 1984 (XL VII of 1984), to comply with the provisions of sub-paragraph (1), and (2) and (3) in the same manner as they are liable to maintain financial accounts required under section 233 of the said Ordinance.

4.   Penalty
If a company contravenes the provisions of paragraph 3 the company and every officer thereof who is in default, including the persons referred to in sub-paragraphs (4) of paragraph 3 shall be punishable under sub-section (7) of section 230 of the companies Ordinance 1984 (XL VII of 1984)



[See paragraph 3(1)]


1.   Direct Materials:

a.   Adequate records shall be maintained showing receipts, issues and balances, both in quantities and values of each item of direct materials such as basic for manufacture, semi-basic manufacture, excipients, pharmaceutical aids etc, required for manufacture of different types of formulations batch-wise. The basis on which the value of receipts, and issues have been calculated shall be clearly indicated in the cost records maintained or if so desired by the company in a separate manual of procedures, if any, maintained by the company or in footnotes or separate explanatory notes to the cost statements for the relevant period. Such basis shall be applied consistently throughout the relevant period. The values shall include all direct charges upto works such as excise duty, sales tax, transport, freight, handling and transit insurance premium incurred for local materials. In case of imported materials, custom duty, Iqra surcharge, sales tax, port charges, inland freight charges, sea freight and insurance charges, and any other levies and charges, and any other levies and charges payable at the time of import shall be shown separately and included to work out the landed cost. Separate record shall be maintained for imports of basic drugs from the parent company or third party suppliers in foreign country alongwith transfer prices.

b.   In case basic manufactures and semi-basic manufactures used as direct materials in the manufacture of formulations, which are being produced or processed by the company itself proper cost records shall be maintained so as to arrive at the cost of each such item.

c.    Consumption reflected in cost records should correspond to the date recorded in the manufacturing records under the same nomenclature as maintained under the Drugs Rules,1976.

d.   All issues of production and packing materials shall be reconciled with figures shown in Annexes of Schedule III, or in any other form as thereto as possible. Any losses/surpluses arising as a result of physical verification of inventories and adjustments thereof shall be clearly indicated in the cost records.

e.   Record of purchase/supply contracts entered into with local and foreign suppliers including principals shall be maintained showing the rates at which various quantities of materials are to be acquired. The records shall indicate principal features of each contract particularly conditions relating to quantity, quality, price, period of delivery, discount for transit loss and terms of payment including cash discounts. In case of basic drugs and chemicals the chemical specifications, strength and technical contents should also be clearly indicated.

f.     Where some of the direct materials apart from basic manufactures and semi-basic manufactures are being produced or processed by the Company, separate records showing the cost of producing/processing such direct materials shall be maintained in such detail as may enable the company to provide particulars required in the annexes of Schedule III.

g.   Any abnormal wastage of material whether in transit, storage or for any other reason shall be recorded separately indicating the stage at which such losses occurred and reasons thereof. The method of dealing with such losses in the calculation of costs shall also be indicated in the cost records. Normal wastage will be absorbed by the remaining material in itself. Realizable value of any waste material recovered or sale proceeds of any process material shall be credited to the cost of such process to arrive at the net cost of formulation produced.

h.   If the quantity and value of materials consumed in a company are determined on any basis other than actuals for example at standards, the method adopted shall be mentioned in cost records and followed consistently. The overall reconciliation of such quantities and values of materials with the actuals shall be made at the end of the financial year explaining the reasons of variances. The treatment of such variances in determining the cost of items referred to in sub-para (2) of paragraph V shall be indicated in the cost records.

i.      The records shall be maintained in such details as may enable the company to readily provide data required in the various Annexes of Schedule III, in a verifiable state.

2.   Consumable Stores/Spares/Operating Supplies

a.   Record of each item of consumable stores/spares/operating supplies shall be maintained so as to show receipts, issues and balances, both in quantities and values, required or actually used for the relevant cost centres. In case of consumable stores a