Recently, due to the combined influence of multiple factors, the coal market has been bullish, and in this winter season, the coal industry is showing signs of recovery. At the same time, cost management in the coal industry has also ushered in a new opportunity

Recently, the Ministry of Finance released the "Enterprise Product Cost Accounting System - Coal Industry" (hereinafter referred to as the "Coal Industry Cost Accounting System"), which is the third industry product cost accounting system released by the Ministry of Finance since the issuance of the "Enterprise Product Cost Accounting System" in 2013

Industry insiders have expressed that the "Coal Industry Cost Accounting System" is of great significance for standardizing product cost accounting and improving product cost management in the coal industry

Providing Important Basis for Industry Benchmarking

"The Coal Industry Cost Accounting System provides an important basis for cost benchmarking between coal enterprises. The new system closely adheres to the actual production of coal enterprises, starts from sorting out the production process of coal enterprises, defines relevant concepts, solves the problem of consistency in accounting standards, and has strong operability." said Jiang Zhanhua, Chief Accountant of China Coal Science and Technology Group Corporation

The coal industry can deeply tap into cost potential and achieve the goal of reducing costs and increasing efficiency by applying cost benchmarking management. Especially in recent years, major domestic coal enterprises have entered a critical period of overcapacity, structural adjustment, and transformation development. The coal market is imbalanced in supply and demand, and the problem of overcapacity is prominent. Coal prices continue to decline, and the loss area and amount of coal enterprises are gradually expanding

Professor Zhang Junzhi from the School of Management at China University of Mining and Technology (Beijing) told reporters that in this situation, the coal industry is actively exploring the application of various cost management tools and methods, striving to turn losses and overcome difficulties. However, due to the inconsistent division standards of cost items among coal enterprises, the horizontal comparability of coal costs is not strong, which seriously affects the effectiveness of cost benchmarking and cannot fully reflect the cost management level gap between coal enterprises

For example, before standardizing product cost accounting in the coal industry, when it comes to product cost, some refer to raw coal cost, while others refer to coal washing cost. The caliber is inconsistent, and there is a lack of comparability between cost and cost

The Cost Accounting System of the Coal Industry specifies that the cost accounting objects are raw coal and washed coal, and that the "variety method" is used as the cost calculation method for coal products. The product variety is refined, and washed coal is divided into clean coal, middling coal, slime, gangue, etc. Moreover, specific methods such as price coefficient method have been specified for the allocation of actual production costs among various coal product varieties

This not only makes the product cost accounting of coal enterprises rule-based, but also greatly improves the comparability of cost accounting information among different coal enterprises, which is conducive to cost management and control in the coal industry, promotes the in-depth application of industry cost benchmarking, and improves the effectiveness of benchmarking management

Promoting the Rationalization and Precision of Cost Management

The Coal Industry Cost Accounting System not only inherits the overall cost element division in the Enterprise Product Cost Accounting System, but also combines the industry characteristics and cost accounting needs of coal enterprises

Zhang Junzhi believes that such institutional arrangements have solved the long-standing problem of fixed asset repair costs incurred in production workshops (departments) not being accounted for in coal costs

Previously, the mining equipment in the coal industry had a high proportion of maintenance and repair costs due to its high production intensity and poor environment. At the same time, equipment maintenance and repair are also necessary links to ensure normal coal production. If, like other industrial manufacturing enterprises, all repair costs are included in the period expenses, it cannot reflect the true cost of coal products

At the same time, the "Coal Industry Cost Accounting System" clarifies in the product cost element "depletion and amortization" that this element refers to the capitalized mining area equity cost, coal exploration cost, coal development cost, and disposal obligation cost that can be allocated to the cost of coal products

This solves the long-standing problem of coal cost range being too narrow and not reflecting resource costs, closure and bankruptcy funds, conversion funds, and new well construction funds. It not only improves the authenticity and accuracy of coal cost information, but also benefits the sustainable development of coal enterprises

Zhang Junzhi stated that the new system includes coal mining, compensation costs, and disposal obligation costs in the cost accounting scope for the first time. This is actually a way to coordinate the relationship between the government, enterprises, and individuals through accounting methods, which is conducive to adjusting the relationship between economic development, environmental protection, and human resource development, promoting the construction of a harmonious society and sustainable economic development, "said Zhang Junzhi

In addition, the "Coal Industry Cost Accounting System" provides a detailed description of the production process of coal products in the appendix, which has been recognized by the industry

Lei Dongsheng, Deputy General Manager of the Finance Department of China Coal Energy Group Corporation, said that the appendix content enables cost accounting personnel to comprehensively understand and master the production process of coal products, which is conducive to accurate and timely collection, allocation, and transfer of product costs. At the same time, it can also help business departments understand costs and make management more refined

Jiang Zhanhua said that the Coal Industry Cost Accounting System reflects the idea of industry finance integration, and combines the objectives of management accounting and financial accounting in detail design, which provides a good guide for enterprises to carry out accounting efficiently

Cost management is an eternal topic for enterprises. Recently, news of the recovery of the coal industry and the rebound in coal product prices have occupied an important position in financial news. Industry insiders have also confirmed to reporters that the situation of coal enterprises is improving

The recent improvement in the situation of coal enterprises is mainly due to the restorative increase in coal prices brought about by 'capacity reduction'. However, in the long run, there is still overcapacity in the coal industry, and the supply-demand contradiction still exists, "said Lei Dongsheng

According to professional analysis, compared to previous years, the recent decline in coal prices will significantly narrow, showing a trend of fluctuating adjustment in the bottom range. The resulting inventory is at a high level, funds are extremely tight, and financing is extremely difficult, especially for enterprises with aging mines, coal resource reserves, and complex production conditions, which will become more prominent and have a significant impact on the economic operation of coal enterprises

Jiang Zhanhua said that strengthening cost accounting and reducing cost level are important means for enterprises to enhance market competitiveness. Coal enterprises cannot relax their efforts in strengthening cost accounting work. At present, it is even more important to seize the favorable opportunity of the new system introduction, elevate product cost accounting work to a higher level, and strive to reverse the passive business situation in the industry as soon as possible

Industry insiders also unanimously believe that coal enterprises should adhere to relying on internal skills to enhance competitiveness, continuously strengthen cost accounting, further refine product costs, promote lean cost management, calculate the profitability of product varieties on a monthly, quarterly, and annual basis, produce marketable products, strengthen market research, adjust marketing strategies in a timely manner, achieve maximum economic benefits, and promote enterprise transformation and upgrading