ADMINISTRATIVE OVERHEADS

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....urement and assignment of administrative overheads, for determination of the Cost of product or service, and the presentation and disclosure in cost statements. 2. Objective The objective of this standard is to bring uniformity and consistency in the principles and methods of determining the administrative overheads with reasonable accuracy. 3. Scope This standard should be applied to cost statements, which require classification, measurement, assignment, presentation and disclosure of administrative overheads including those requiring attestation. 4. Definitions The following terms are being used in this standard with the meaning specified. 4.1 Abnormal cost: An unusual or atypical cost whose occurrence is usuall....

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....s, finance costs, and borrowing costs are used interchangeably. 4.7 Normal capacity: Normal Capacity is the production achieved or achievable on an average over a number of periods or seasons under normal circumstances taking into account the loss of capacity resulting from planned maintenance.^[5] 4.8 Overheads: Overheads comprise costs of indirect materials, indirect employees and indirect expenses. 5. Principles of Measurement 5.1 Administrative overheads shall be the aggregate of cost of resources consumed in activities relating to general management and administration of an organisation. It usually represents the cost of shared services, cost of infrastructure and general management costs. Adminis....

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....s shall not include any abnormal administrative cost. Example: Expense incurred in a situation of natural calamity. 5.7 Fines, penalties, damages and similar levies paid to statutory authorities or other third parties shall not form part of the administrative overheads. 5.8 Credits/ recoveries relating to the administrative overheads including those rendered without any consideration, material and quantifiable, shall be deducted to arrive at the net administrative overheads. 5.9 Any change in the cost accounting principles applied for the measurement of the administrative overheads should be made only if it is required by law or for compliance with the requirements of a cost accounting standard or a chang....

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.... administrative overheads. • Administrative overheads incurred in foreign exchange. • Cost of administrative activities received from or supplied to related parties^[7]. • Any Subsidy / Grant / Incentive or any amount of similar nature received / receivable reduced from administrative overheads. • Credits / recoveries relating to the administrative overheads. • Any abnormal portion of the administrative overheads. • Penalties and damages excluded from the administrative overheads. 8.2 Disclosures shall be made only where material, significant and quantifiable. 8.3 Disclosures shall be made in the body of the Cost Statement or as a foot note or as....