FERTILIZER INDUSTRY (COST ACCOUNTING RECORDS) ORDER, 2011
[Gazette of Pakistan, Extraordinary, Part-II, 19th September, 2011]
S.R.O. 852(I)/2011.—The following draft of Fertilizer Industry (Cost Accounting Records) Order, 2011 which is proposed to be made in exercise of powers conferred by clause (e) of sub-section (1) of Section 230 read with Section 246 of the Companies Ordinance, 1984 (XLVII of
1984), and Section 43 of the Securities and Exchange Commission of Pakistan Act, 1997 (XLVII of 1997) is hereby published for the information of all persons likely to be affected thereby and notice is hereby given that the draft will be taken into consideration after thirty days of its publication in the Official Gazette.
Any objection or suggestion which may be received from any person in respect of the said draft before the expiry of the said date will be considered by the Securities and Exchange Commission of Pakistan.
1. Short title, extent, commencement and application.—(1) This Order shall be called the Fertilizer Industry (Cost Accounting Records) Order, 2011.
(2) It shall come into force at once.
(3) This Order shall apply to every company engaged in production, processing and manufacturing of Fertilizers
2. Maintenance of records.—(1) 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.
(2) 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 particulars entered therein the cost of production and cost of sales of each of the formulation products referred to in sub- Para (2) of Para 1, during a financial year.
(3) Where a company is manufacturing any other .product in addition to those referred to in sub-Para (2) of Para 1, the particulars relating to the utilization of materials, labour and other items of cost insofar as they are applicable to such other product shall not be included in the cost of product referred to in that para.
(4) It shall be the duty of every person referred to in sub-section (7) of Section 230 of the Companies Ordinance, 1984 (XLVII of 1984), to comply with the provisions of sub-Paragraph (1) to (3) in the same manner as they are liable to maintain financial accounts required under Section 230 of the said Ordinance.
3. 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 2 shall be punishable under sub-section (7) of Section 230 of the companies Ordinance, 1984 (XLVII of 1984).
(See Paragraph 2)
(1) Direct Material.–
(a) Adequate records shall be maintained showing receipts, issues and balances, both in quantities and values of each item of direct material required for production of chemical fertilizer of any type. 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 foot-notes 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 up to works such as excise duty, haulage, transport, freight, handling and insurance. In case of imported material, custom duty, Iqra surcharge, port charges, inland freight charges, freight and insurance charges, sales tax and any other levies payable at the time of import shall be shown separately and included to work out landed cost.
(b) If the value of direct material consumed is determined on a basis other than actual, the method adopted for such valuation as well as the method for reconciliation of such consumption with actual and the method for dealing with variations, if any, shall be disclosed in the cost records or indicated by way of footnotes or in any other suitable manner.
(c) All issues of production materials shall be reconciled with figures shown in 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.
(d) Record of purchase/supply contracts entered into with local and foreign suppliers as the case may be shall be maintained showing the rate 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 and, in case of catalysts showing their life, and in case of chemicals their strength and technical contents, price, period of delivery, discount for transit loss and terms of payment including cash discounts.
(e) 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 occur and reasons thereof. Method of dealing with such losses in the calculation of cost shall be indicated in the records. Normal wastages will be absorbed by the remaining material itself.
(f) Realizable value of any waste material, by-product or intermediary product recovered or sale proceeds of any process material or intermediary product shall be credited to the cost of such process to arrive at the net cost of that particular process and finally that of the fertilizer produced.
(g) If the quantity and value of materials consumed in a company are determined on a basis other than actual, the method adopted shall be mentioned in cost records and it shall be followed consistently. The overall reconciliation of such quantities and values of materials with the actual shall be made at least quarterly during the financial year explaining the reasons for variances. The treatment of such variances in determining the cost of items referred to in Paragraph 3 shall be indicated in the cost records.
(h) The records shall be maintained in such detail as may enable the company to readily provide data as required in the various Cost Statements prescribed in this Order in a verifiable state.
(2) Catalysts, Other Chemicals, Consumable Stores/Spares, etc:–
(a) Adequate record of each item of catalysts, chemicals, consumable stores/spares shall be maintained to show receipts, issues and balances, both in quantities and, values, required for production of chemical fertilizer and/or actually used for the relevant cost centers.
(b) Cost of catalysts, chemicals, consumable stores and spare parts shall include all direct charges incidental to procurement of each item upto the factory. The cost of such chemicals, stores/spares etc. consumed shall be charged to relevant cost centers on the basis of actual consumption as recorded in the Cost Statements. The items issued for capital expenditure, viz. as additions to plant and machinery shall be shown under relevant heads and not in the cost statements of chemical fertilizer.
(c) The basis of valuation of receipt and consumption of each item shall be indicated in the cost records and shall be consistently followed.
(d) Wastage of chemicals, consumable stores, spares whether in transit, storage or at any other point shall be quantified and shown separately. Method of dealing with such losses in costing shall also be indicated in the cost records.
II. SALARIES AND WAGHS
(a) Adequate record shall be maintained to show the attendance of workers employed by the company whether on regular, temporary, or on contract basis, as the case may be. Proper record shall also be maintained in respect of payment made for overtime work and production incentives whether in the shape of production bonus or incentives based on out-put given to the workers, Payment of any retirement benefits including pension, provident fund, gratuity, old age benefits and any welfare expenses shall also be included in the labour or factory overhead cost of beneficiary cost center/department. This will be done in a manner that labour cost is available for each cost center or department and for each product whether intermediary, by-product or main product so that different Cost Statements are filled properly and easily. Idle time shall be recorded separately, cost center-wise as far as possible showing reasons for idle time. The method adopted for accounting of idle time payment in determining cost of each product shall be disclosed in the cost records.
(b) Fair and reasonable allocation shall be made for wages paid to such direct labour as has been utilized in more than one departments, between the various departments or cost centers and the basis of such allocation shall be consistently followed. Idle time or lay-off payments shall be recorded separately indicating the reasons and the method of treatment in the calculation of the cost of the items referred to in Paragraph 2. Any wages paid for additions to plant and machinery or other capitalized assets, shall be capitalized and excluded from the cost statements of chemical fertilizer.
(a) Adequate records shall be maintained showing the quantity and cost of various utilities and services both purchased and produced as detailed below and consumed and utilized by different cost centers:–
(iii) De-mineralised Water
(iv) Compressed Air
(v) Others (to be specified)