(a) Proper records shall be maintained showing the quantity and cost of each major utility such as power, water, steam, effluent treatment, and other related utilities produced and consumed by the different cost centres in such detail as to have particulars for each utility separately.
(b) Each type of utility shall be treated as a distinct cost object.
(c) Cost of utilities purchased shall be measured at cost of purchase including duties and taxes, transportation cost, insurance and other expenditure directly attributable to procurement (net of trade discounts, rebates, taxes and duties refundable or to be credited) that can be quantified with reasonable accuracy at the time of acquisition.
(d) Cost of self-generated utilities for own consumption shall comprise direct material cost, direct employee cost, direct expenses and factory overheads.
(e) In case of utilities generated for the purpose of inter unit transfers, the distribution cost incurred for such transfers shall be added to the cost of utilities determined as above.
(fl Cost of utilities generated for the intercompany transfers shall comprise direct material cost, direct employee cost, direct expenses, factory overheads, distribution cost and share of administrative overheads.
(g) Cost of utilities generated for the sale to outside parties shall comprise direct material cost, direct employee cost, direct expenses, factory overheads, distribution cost, share of administrative overheads and marketing overheads. The sale value of such utilities shall also include the margin.
t (h,) Finance costs incurred in connection with the utilities shall not form part of cost of utilities.
f, The cost of utilities shall include the cost of dishibution of such utilities. The cost of diskibution will consist of the cost of delivery of utilities up to the point of consumption.
(t) Cost of utilities shall not include imputed costs.
(k) Where cost of utilities is accounted at standard cost, the price variances related to utilities shall be treated as part of cost of utilities and the portion of usage variances due to normal reasons shall be treated as part of cost of utilities. Usage variances due to abnormal reasons shall be treated as part of abnormal cost.
(/.) Subsidy or grant or incentive and any such payment received or receivable with respect to any cost of utilities shall be reduced from cost of the cost object in the financial year when such subsidy or grant or incentive and any such payment is recognised as income.
(m) The cost of production and distribution of utilities shall be determined based on the normal capacity or actual capacity utilisation whichever is higher and unabsorbed cost, if any, shall be treated as abnormal cost. Cost of a stand-by utility shall include the committed costs of maintaining such a utility.
(n) Any abnormal cost where it is material and quantifiable shall not form part of the cost of utilities.
(o) Penalties, damages paid to statutory authorities or other third parties shall not form oart of the cost of utilities
(p) Credits or recoveries relating to the utilities including cost of utilities provided to outside parties, material and quantifiable, shall be deducted from the total cost of utility to arrive at the net cost of utility.
(q) Any change in the cost accounting principles applied for the measurement of the cost of utilities shall be made only if, it is required by law or a change would result in a more appropriate preparation or presentation of cost statements of an organisation.
(y' While assigning cost of utilities, traceability to a cost object in an economically feasible manner shall be the guiding principle.
(s) Where the cost of utilities is not directly traceable to cost object, it shall be assigned on the most appropriate basis.
(f) The most appropriate basis of distribution of cost of a utility to the departments consuming services is to be derived from usage parameters.