Collapse to view only 9903.303 - 9903.303 Effect of filing Disclosure Statement.
- 9903.301 - 9903.301 Definitions.
- 9903.302 - 9903.302 Definitions, explanations, and illustrations of the terms, “cost accounting practice” and “change to a cost accounting practice.”
- 9903.302-1 - 9903.302-1 Cost accounting practice.
- 9903.302-2 - 9903.302-2 Change to a cost accounting practice.
- 9903.302-3 - 9903.302-3 Illustrations of changes which meet the definition of “change to a cost accounting practice.”
- 9903.302-4 - 9903.302-4 Illustrations of changes which do not meet the definition of “Change to a cost accounting practice.”
- 9903.303 - 9903.303 Effect of filing Disclosure Statement.
- 9903.304 - 9903.304 Concurrent full and modified coverage.
- 9903.305 - 9903.305 Materiality.
- 9903.306 - 9903.306 Interpretations.
- 9903.307 - 9903.307 Cost Accounting Standards Preambles.
9903.301 - 9903.301 Definitions.
(a) The definitions set forth below apply to this chapter 99.
Accrued benefit cost method. See 9904.412-30.
Accumulating costs. See 9904.401-30.
Actual cash value. See 9904.416-30.
Actual cost. See 9904.401-30 for the broader definition and 9904.407-30 for a more restricted definition applicable only to the standard on the use of standard costs for direct material and direct labor.
Actuarial assumption. See 9904.412-30 or 9904.413-30.
Actuarial cost method. See 9904.412-30 or 9904.413-30.
Actuarial gain and loss. See 9904.412-30 or 9904.413-30.
Actuarial liability. See 9904.412-30 or 9904.413-30.
Actuarial valuation. See 9904.412-30 or 9904.413-30.
Allocate. See 9904.402-30, 9904.403-30, 9904.406-30, 9904.410-30, 9904.411-30, 9904.418-30 or 9904.420-30.
Asset accountability unit. See 9904.404-30.
Assignment of cost to cost accounting periods. See 9903.302-1(b).
Bid and proposal (B&P) cost. See 9904.420-30.
Business unit. See 9904.410-30, 9904.411-30 or 9904.414-30.
CAS-covered contract, as used in this part, means any negotiated contract or subcontract in which a CAS clause is required to be included.
Category of material. See 9904.411-30.
Change to a cost accounting practice. See 9903.302-2.
Compensated personal absence. See 9904.408-30.
Cost accounting practice. See 9903.302-1.
Cost input. See 9904.410-30.
Cost objective. See 9904.402-30, 9904.406-30, 9904.410-30 or 9904.411-30.
Cost of capital committed to facilities. See 9904.414-30.
Currently performing, as used in this part, means that a contractor has been awarded a contract, but has not yet received notification of final acceptance of all supplies, services, and data deliverable under the contract (including options).
Deferred compensation. See 9904.415-30.
Defined-benefit pension plan. See 9904.412-30.
Defined-contribution pension plan. See 9904.412-30.
Direct cost. See 9904.402-30 or 9904.418-30.
Directly associated cost. See 9904.405-30.
Disclosure statement, as used in this part, means the Disclosure Statement required by 9903.202-1.
Entitlement. See 9904.408-30.
Estimating costs. See 9904.401-30.
Expressly unallowable cost. See 9904.405-30.
Facilities capital. See 9904.414-30.
Final cost objective. See 9904.402-30 or 9904.410-30.
Fiscal year. See 9904.406-30.
Funded pension cost. See 9904.412-30.
Funding agency. See 9904.412-30.
General and administrative (G&A) expense. See 9904.410-30 or 9904.420-30.
Home office. See 9904.403-30 or 9904.420-30.
Immediate-gain actuarial cost method. See 9904.413-30.
Independent research and development (IR&D) cost. See 9904.420-30.
Indirect cost. See 9904.402-30, 9904.405-30, 9904.418-30 or 9904.420-30.
Indirect cost pool. See 9904.401-30, 9904.402-30, 9904.406-30 or 9904.418-30.
Insurance administration expenses. See 9904.416-30.
Intangible capital asset. See 9904.414-30 or 9904.417-30.
Labor cost at standard. See 9904.407-30.
Labor-rate standard. See 9904.407-30.
Labor-time standard. See 9904.407-30.
Material cost at standard. See 9904.407-30.
Material inventory record. See 9904.411-30.
Material-price standard. See 9904.407-30.
Material-quantity standard. See 9904.407-30.
Measurement of cost. See 9904.302-1(c).
Moving average cost. See 9904.411-30.
Multiemployer pension plan. See 9904.412-30.
Negotiated subcontract, as used in this part, means any subcontract except a firm fixed-price subcontract made by a contractor or subcontractor after receiving offers from at least two persons not associated with each other or with such contractor or subcontractor, providing
(1) The solicitation to all competitors is identical,
(2) Price is the only consideration in selecting the subcontractor from among the competitors solicited, and
(3) The lowest offer received in compliance with the solicitation from among those solicited is accepted.
Net awards, as used in this chapter, means the total value of negotiated CAS-covered prime contract and subcontract awards, including the potential value of contract options, received during the reporting period minus cancellations, terminations, and other related credit transactions.
Normal cost. See 9904.412-30 or 9904.413-30.
Operating revenue. See 9904.403-30.
Original complement of low cost equipment. See 9904.404-30.
Pay-as-you-go cost method. See 9904.412-30.
Pension plan. See 9904.412-30 or 9904.413-30.
Pension plan participant. See 9904.413-30.
Pricing. See 9904.401-30.
Production unit. See 9904.407-30.
Projected average loss. See 9904.416-30.
Projected benefit cost method. See 9904.412-30 or 9904.413-30.
Proposal. See 9904.401-30.
Repairs and maintenance. See 9904.404-30.
Reporting costs. See 9904.401-30.
Residual value. See 9904.409-30.
Segment. See 9904.403-30, 9904.410-30, 9904.413-30 or 9904.420-30.
Self-insurance. See 9904.416-30.
Self-insurance charge. See 9904.416-30.
Service life. See 9904.409-30.
Small business, as used in this part, means any concern, firm, person, corporation, partnership, cooperative, or other business enterprise which, under 15 U.S.C. 637(b)(6) and the rules and regulations of the Small Business Administration in part 121 of title 13 of the Code of Federal Regulations, is determined to be a small business concern for the purpose of Government contracting.
Spread-gain actuarial cost method. See 9904.413-30.
Standard cost. See 9904.407-30.
Tangible capital asset. See 9904.403-30, 9904.404-30, 9904.409-30, 9904.414-30 or 9904.417-30.
Termination gain or loss. See 9904.413-30.
Unallowable cost. See 9904.405-30.
Variance. See 9904.407-30.
Weighted average cost. See 9904.411-30.
(b) The definitions set forth below are applicable exclusively to educational institutions and apply to this chapter 99.
Business unit. See 9903.201-2(c)(2)(ii).
Educational institution. See 9903.201-2(c)(2)(i).
Intermediate cost objective. See 9905.502-30(a)(7).
Segment. See 9903.201-2(c)(2)(ii).
9903.302 - 9903.302 Definitions, explanations, and illustrations of the terms, “cost accounting practice” and “change to a cost accounting practice.”
9903.302-1 - 9903.302-1 Cost accounting practice.
Cost accounting practice, as used in this part, means any disclosed or established accounting method or technique which is used for allocation of cost to cost objectives, assignment of cost to cost accounting periods, or measurement of cost.
(a) Measurement of cost, as used in this part, encompasses accounting methods and techniques used in defining the components of cost, determining the basis for cost measurement, and establishing criteria for use of alternative cost measurement techniques. The determination of the amount paid or a change in the amount paid for a unit of goods and services is not a cost accounting practice. Examples of cost accounting practices which involve measurement of costs are—
(1) The use of either historical cost, market value, or present value;
(2) The use of standard cost or actual cost; or
(3) The designation of those items of cost which must be included or excluded from tangible capital assets or pension cost.
(b) Assignment of cost to cost accounting periods, as used in this part, refers to a method or technique used in determining the amount of cost to be assigned to individual cost accounting periods. Examples of cost accounting practices which involve the assignment of cost to cost accounting periods are requirements for the use of specified accrual basis accounting or cash basis accounting for a cost element.
(c) Allocation of cost to cost objectives, as used in this part, includes both direct and indirect allocation of cost. Examples of cost accounting practices involving allocation of cost to cost objectives are the accounting methods or techniques used to accumulate cost, to determine whether a cost is to be directly or indirectly allocated to determine the composition of cost pools, and to determine the selection and composition of the appropriate allocation base.
9903.302-2 - 9903.302-2 Change to a cost accounting practice.
Change to a cost accounting practice, as used in this part, means any alteration in a cost accounting practice, as defined in 9903.302-1, whether or not such practices are covered by a Disclosure Statement, except for the following:
(a) The initial adoption of a cost accounting practice for the first time a cost is incurred, or a function is created, is not a change in cost accounting practice. The partial or total elimination of a cost or the cost of a function is not a change in cost accounting practice. As used here, function is an activity or group of activities that is identifiable in scope and has a purpose or end to be accomplished.
(b) The revision of a cost accounting practice for a cost which previously had been immaterial is not a change in cost accounting practice.
9903.302-3 - 9903.302-3 Illustrations of changes which meet the definition of “change to a cost accounting practice.”
(a) The method or technique used for measuring costs has been changed.
| Description | Accounting treatment | (1) Contractor changes its actuarial cost method for computing pension costs. | (1)(i) Before change: The contractor computed pension costs using the aggregate cost method.
(ii) After change: The contractor computes pension cost using the unit credit method. | (2) Contractor uses standard costs to account for its direct labor. Labor cost at standard was computed by multiplying labor-time standard by actual labor rates. The contractor changes the computation by multiplying labor-time standard by labor-rate standard | (2)(i) Before change: Contractor's direct labor cost was measured with only one component set at standard.
(ii) After change: Contractor's direct labor cost is measured with both the time and rate components set at standard. |
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(b) The method or technique used for assignment of cost to cost accounting periods has been changed.
| Description | Accounting treatment | (1) Contractor changes his established criteria for capitalizing certain classes of tangible capital assets whose acquisition costs totaled $1 million per cost accounting period | (1)(i) Before change: Items having acquisition costs of between $200 and $400 per unit were capitalized and depreciated over a number of cost accounting periods.
(ii) After change: The contractor charges the value of assets costing between $200 and $400 per unit to an indirect expense pool which is allocated to the cost objectives of the cost accounting period in which the cost was incurred. | (2) Contractor changes his methods for computing depreciation for a class of assets | (2)(i) Before change: The contractor assigned depreciation costs to cost accounting periods using an accelerated method.
(ii) After change: The contractor assigns depreciation costs to cost accounting periods using the straight line method. | (3) Contractor changes his general method of determining asset lives for classes of assets acquired prior to the effective date of CAS 409 | (3)(i) Before change: The contractor identified the cost accounting periods to which the cost of tangible capital assets would be assigned using guideline class lives provided in IRS Rev. Pro. 72-10.
(ii) After change: The contractor changes the method by which he identifies the cost accounting periods to which the costs of tangible capital assets will be assigned. He now uses the expected actual lives based on past usage. |
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(c) The method or technique used for allocating costs has been changed.
| Description | Accounting treatment | (1) Contractor changes his method of allocating G&A expenses under the requirements of Cost Accounting Standard 410 | (1)(i) Before change: The contractor operating under Cost Accounting Standard 410 has been allocating his general and administrative expense pool to final cost objectives on a total cost input base in compliance with the Standard. The contractor's business changes substantially such that there are significant new projects which have only insignificant quantities of material.
(ii) After change: After the addition of the new work, an evaluation of the changed circumstances reveals that the continued use of a total cost input base would result in a significant distortion in the allocation of the G&A expense pool in relation to the benefits received. To remain in compliance with Standard 410, the contractor alters his G&A allocation base from a total cost input base to a value added base. | (2) The contractor changes the accounting for hardware common to all projects | (2)(i) Before change: The contractor allocated the cost of purchased or requisitioned hardware directly to projects.
(ii) After change: The contractor charges the cost of purchased or requisitioned hardware to an indirect expense pool which is allocated to projects using an appropriate allocation base. | (3) The contractor merges operating segment A and B which use different cost accounting practices in accounting for manufacturing overhead costs | (3)(i) Before change: In segment, A, the costs of the manufacturing overhead pool have been allocated to final cost objectives using a direct labor hours base; in segment B, the costs of the manufacturing overhead pool have been allocated to final cost objectives using a direct labor dollars base.
(ii) After change: As a result of the merger of operations, the combined segment decides to allocate the cost of the manufacturing overhead pool to all final cost objectives, using a direct labor dollars base. Thus, for those final cost objectives referred to in segment A, the cost of the manufacturing overhead pool will be allocated to the final cost objectives of segment A using a direct labor dollars base instead of a direct labor hours base. |
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9903.302-4 - 9903.302-4 Illustrations of changes which do not meet the definition of “Change to a cost accounting practice.”
| Description | Accounting treatment | (a) Changes in the interest rate levels in the national economy have invalidated the prior actuarial assumption with respect to anticipated investment earnings. The pension plan administrators adopted an increased (decreased) interest rate actuarial assumption. The company allocated the resulting pension costs to all final cost objectives | (a) Adopting the increase (decrease) in the interest rate actuarial assumption is not a change in cost accounting practice. | (b) The basic benefit amount for a company's pension plan is increased from $8 to $10 per year of credited service. The change increases the dollar amount of pension cost allocated to all final cost objectives | (b) The increase in the amount of the benefits is not a change in cost accounting practice. | (c) A contractor who has never paid pensions establishes for the first time a pension plan. Pension costs for the first year amounted to $3.5 million | (c) The initial adoption of an accounting practice for the first time incurrence of a cost is not a change in cost accounting practice. | (d) A contractor maintained a Deferred Incentive Compensation Plan. After several years' experience, the plan was determined not to be attaining its objective, so it was terminated, and no future entitlements were paid | (d) There was a termination of the Deferred Incentive Compensation Plan. Elimination of a cost is not a change in cost accounting practice. | (e) A contractor eliminates a segment that was operated for the purpose of doing research for development of products related to nuclear energy | (e) The projects and expenses related to nuclear energy projects have been terminated. No transfer of these projects and no further work in this area is planned. This is an elimination of cost and not a change in cost accounting practice. | (f) For a particular class of assets for which technological changes have rarely affected asset lives, a contractor starts with a 5-year average of historical lives to estimate future lives. He then considers technological changes and likely use. For the past several years the process resulted in an estimated future life of 10 years for this class of assets. This year a technological change leads to a prediction of a useful life of 7 years for the assets acquired this year for the class of assets | (f) The change in estimate (not in method) is not a change in cost accounting practice. The contractor has not changed the method or technique used to determine the estimate. The methodology applied has indicated a change in the estimated life, and this is not a change in cost accounting practice. | (g) The marketing department of a segment has reported directly to the general manager of the segment. The costs of the marketing department have been combined as part of the segment's G&A expense pool. The company reorganizes and requires the marketing department to report directly to a vice president at corporate headquarters | (g) After the organization change in the company's reporting structure, the parties agree that the appropriate recognition of the beneficial or causal relationship between the costs of the marketing department and the segment is to continue to combine these costs as part of the segment's G&A expense pool. Thus, the organizational change has not resulted in a change in cost accounting practice. |
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9903.303 - 9903.303 Effect of filing Disclosure Statement.
(a) A disclosure of a cost accounting practice by a contractor does not determine the allowability of particular items of cost. Irrespective of the practices disclosed by a contractor, the question of whether or not, or the extent to which, a specific element of cost is allowed under a contract remains for consideration in each specific instance. Contractors are cautioned that the determination of the allowability of cost items will remain a responsibility of the contracting officers pursuant to the provisions of the applicable procurement regulations.
(b) The individual Disclosure Statement may be used in audits of contracts or in negotiation of prices leading to contracts. The authority of the audit agencies and the contracting officers is in no way abrogated by the material presented by the contractor in his Disclosure Statement. Contractors are cautioned that their disclosures must be complete and accurate; the practices disclosed may have a significant impact on ways in which contractors will be required to comply with Cost Accounting Standards.
9903.304 - 9903.304 Concurrent full and modified coverage.
Contracts subject to full coverage may be performed during a period in which a previously awarded contract subject to modified coverage is being performed. Compliance with full coverage may compel the use of cost accounting practices that are not required under modified coverage. Under these circumstances the cost accounting practices applicable to contracts subject to modified coverage need not be changed. Any resulting differences in practices between contracts subject to full coverage and those subject to modified coverage shall not constitute a violation of 9904.401 and 9904.402. This principle also applies to contracts subject to modified coverage being performed during a period in which a previously awarded contract subject to full coverage is being performed.
9903.305 - 9903.305 Materiality.
In determining whether amounts of cost are material or immaterial, the following criteria shall be considered where appropriate; no one criterion is necessarily determinative:
(a) The absolute dollar amount involved. The larger the dollar amount, the more likely that it will be material.
(b) The amount of contract cost compared with the amount under consideration. The larger the proportion of the amount under consideration to contract cost, the more likely it is to be material.
(c) The relationship between a cost item and a cost objective. Direct cost items, especially if the amounts are themselves part of a base for allocation of indirect costs, will normally have more impact than the same amount of indirect costs.
(d) The impact on Government funding. Changes in accounting treatment will have more impact if they influence the distribution of costs between Government and non-Government cost objectives than if all cost objectives have Government financial support.
(e) The cumulative impact of individually immaterial items. It is appropriate to consider whether such impacts:
(1) Tend to offset one another, or
(2) Tend to be in the same direction and hence to accumulate into a material amount.
(f) The cost of administrative processing of the price adjustment modification shall be considered. If the cost to process exceeds the amount to be recovered, it is less likely the amount will be material.
9903.306 - 9903.306 Interpretations.
In determining amounts of increased costs in the clauses at 9903.201-4(a), Cost Accounting Standards, 9903.201-4(c), Disclosure and Consistency of Cost Accounting Practices, and 9903.201-4(d), Consistency in Cost Accounting, the following considerations apply:
(a) Increased costs shall be deemed to have resulted whenever the cost paid by the Government results from a change in a contractor's cost accounting practices or from failure to comply with applicable Cost Accounting Standards, and such cost is higher than it would have been had the practices not been changed or applicable Cost Accounting Standards complied with.
(b) If the contractor under any fixed-price contract, including a firm fixed-price contract, fails during contract performance to follow its cost accounting practices or to comply with applicable Cost Accounting Standards, increased costs are measured by the difference between the contract price agreed to and the contract price that would have been agreed to had the contractor proposed in accordance with the cost accounting practices used during contract performance. The determination of the contract price that would have been agreed to will be left to the contracting parties and will depend on the circumstances of each case.
(c) The statutory requirement underlying this interpretation is that the United States not pay increased costs, including a profit enlarged beyond that in the contemplation of the parties to the contract when the contract costs, price, or profit is negotiated, by reason of a contractor's failure to use applicable Cost Accounting Standards, or to follow consistently its cost accounting practices. In making price adjustments under the Cost Accounting Standards clause at 9903.201-4(a) in fixed price or cost reimbursement incentive contracts, or contracts providing for prospective or retroactive price redetermination, the Federal agency shall apply this requirement appropriately in the circumstances.
(d) The contractor and the contracting officer may enter into an agreement as contemplated by subdivision (a)(4)(ii) of the Cost Accounting Standards clause at 9903.201-4(a), covering a change in practice proposed by the Government or the contractor for all of the contractor's contracts for which the contracting officer is responsible, provided that the agreement does not permit any increase in the cost paid by the Government. Such agreement may be made final and binding, notwithstanding the fact that experience may subsequently establish that the actual impact of the change differed from that agreed to.
(e) An adjustment to the contract price or of cost allowances pursuant to the Cost Accounting Standards clause at 9903.201-4(a) may not be required when a change in cost accounting practices or a failure to follow Standards or cost accounting practices is estimated to result in increased costs being paid under a particular contract by the United States. This circumstance may arise when a contractor is performing two or more covered contracts, and the change or failure affects all such contracts. The change or failure may increase the cost paid under one or more of the contracts, while decreasing the cost paid under one or more of the contracts. In such case, the Government will not require price adjustment for any increased costs paid by the United States, so long as the cost decreases under one or more contracts are at least equal to the increased cost under the other affected contracts, provided that the contractor and the affected contracting officers agree on the method by which the price adjustments are to be made for all affected contracts. In this situation, the contracting agencies would, of course, require an adjustment of the contract price or cost allowances, as appropriate, to the extent that the increases under certain contracts were not offset by the decreases under the remaining contracts.
(f) Whether cost impact is recognized by modifying a single contract, several but not all contracts, or all contracts, or any other suitable technique, is a contract administration matter. The Cost Accounting Standards rules do not in any way restrict the capacity of the parties to select the method by which the cost impact attributable to a change in cost accounting practice is recognized.
9903.307 - 9903.307 Cost Accounting Standards Preambles.
Preambles to the Cost Accounting Standards published by the original Cost Accounting Standards Board, as well as those preambles published by the signatories to the Federal Acquisition Regulation respecting changes made under their regulatory authorities, are available by writing to the: Publications Office, Office of Administration, Executive Office of the President, 725 17th Street NW., room 2200, Washington, DC 20500, or by calling (202) 395-7332.