The purpose of this standard is to facilitate the negotiation, review, management and execution of contracts. It provides guidance on: (c) The provision of FAR 52.230-7, Proposal Disclosure-Changes in Cost Accounting Practices, is to be included in tenders for contracts submitted to the CAS in accordance with 48 CFR 9903.201. (a) Full coverage. Full coverage requires the Division to comply with all Part 9904 CASs that are in effect at the time of procurement and all CASs that become applicable as a result of the subsequent award of a CAS contract. Full coverage applies to business units of contractors who – Modified coverage. If a non-exempt contract costs less than $50 million but more than $7.5 million, and the business unit received less than $50 million in net premiums in the previous accounting period, four of the standards apply: CAS 401, CAS 402, CAS 405 and CAS 406. Once a contract with modified coverage is awarded to an industry during an analytical accounting period, all non-exempt contracts of that business entity will also be amended for the period, unless a supplement fully covered by the CAS is awarded. A subsequent contract award of $850,000 (this changes frequently) will be covered in full or modified according to the coverage of previous contracts. 4. At the request of CAD/CAM, all contracts and subcontracts covered by the CAS concerned shall be indicated.
(b) a portion of unhedged actuarial liabilities (where the value of assets is less than actuarial liabilities and interest) and (c) adjustments for actuarial gains and losses (where actuarial assumptions differ from experience). Defined contribution plan costs are the costs that an employer must pay to the plan for the period, while defined pay-as-you-go plan costs are amounts paid to retirees (and their beneficiaries) for benefits for the period, plus depreciation payments on the amount paid to pay future benefits. In general, only pension costs financed on the date of filing of the corporate tax can be recovered if they are not funded, if they cannot be covered now or in the future. CAS 413, adjustment and allocation of pension plan costs. This sister standard of CAS 412 includes adjusting pension plan costs to account for actuarial gains and losses, as well as allocating pension plans to sectors. It requires that actuarial gains and losses be calculated annually, amortized and allocated in instalments in the current and future periods. With respect to the segment allocation, a composite rate is normally permitted, but the retirement costs of one segment must be calculated separately if (a) there is a significant separation in the segment, (b) the level of benefits or eligibility of the segment differs significantly from the other segments, or (c) the actuarial assumptions of the segment differ from the other segments. In addition, the standard requires adjustments if the plan`s services or the contractor`s activities with the government change.
When a segment is closed, which may also be the case when a segment is no longer seeking public affairs, a plan is terminated, or benefits are changed, the difference between the market value of the asset and the actuarial liability represents an adjustment to past pension costs, where the adjustment may favour the government or the entrepreneur. CAS 414, Cost of money as part of the cost of capital of facilities. The cost of capital of facilities (FCCM) is an interest rate based on the interest rates set every six months by the Department of Finance multiplied by the net book value of depreciated property, plant and equipment and intangible assets (including land). The resulting amount is allocated to cost pools where a separate FCCM factor is determined for each indirect cost pool to which a significant amount of private equity has been allocated. CAS 414 provides a form and example (CASB-CMF) for the calculation of these amounts. CAS 415, Accounting for Deferred Compensation Costs. Deferred compensation is defined as a bonus granted by an employer to compensate an employee during a future billing period for services provided during a period prior to payment. The acquisition cost of deferred compensation is the present value of the future payment.
CAS 415 requires contractors to award compensation to the period in which the obligation to pay compensation is determined, not to the future period in which it is paid. The standard prescribes a six-part test to determine whether an obligation is justified if the test is essentially (a) when a payment (which must be made in cash, assets or shares to a known person) cannot be declared invalid by the employer (b) the future compensation is reasonably measurable and (c) the occurrence of a condition of payment is reasonably likely. CASE 416, taking into account insurance costs. This standard regulates the measurement, allocation and allocation of insurance costs. The standard concept of insurance costs is the « projected average loss », i.e. the estimated long-term average loss per period. When taking out insurance, it is assumed that the projected average loss corresponds to the amount of insurance premiums. In the case of self-insurance, the projected average loss (plus administrative costs) is the amount charged to a period, not the actual loss for that period. CAS 417, Cost of money as part of the cost of acquiring capital assets under construction. Unlike its sister FCCM in CAS 414, the cost of money is collected as part of the capitalized acquisition cost of the asset. The CMO is an interest rate based on U.S.
Treasury interest rates, which are set every six months and multiplied by the « representative amount of investment » of assets under construction. The standard is quite vague on how to calculate this amount, but in general, GAAP accounting is acceptable. CAS 418, Allocation of Direct and Indirect Costs. This standard addresses whether they are direct or indirect costs, the consistent grouping of indirect costs, and the allocation of indirect costs among cost targets. CAS 418 requires operational units to systematically establish and apply guidelines to classify costs as direct or indirect. It also requires that indirect costs be accumulated in « homogeneous » cost pools (where the cost elements are similar and their relationship to direct costs is similar). Common costs must be allocated among cost targets, which are based on « advantageous or causal relationships ». General guidelines and many examples of appropriate bases for action are provided, but these are only suggestive and not necessary, so that in practice there is a high degree of flexibility here. A special assignment is also permitted, unlike a mandatory special allowance provision in CAS 410. CAS 420, Accounting for Independent Research and Development (IR&D) costs and Bid and Proposal (B&P) costs.
This standard regulates the determination and allocation of IR&D/B&P costs, under which IR&D costs that are neither supported by a grant nor required in the performance of a contract can be considered indirect IR&D costs, while if sponsored or required, they must be considered direct. The IR&D/B&P costs of a business unit are allocated on the same basis as that used to allocate G&A costs (typically included in the G&A pool). The IR&D/B&P costs accumulated in the home office must be distributed directly to the beneficiary segments, with all IR&D/B&P costs remaining in the home office being included in the residual cost pool after direct allocation. As with CAS 418, special IR&D/B&P cost allowances are allowed. (1) Customer shall include the clause under FAR 52.230-4, Disclosure and Consistency of Cost Accounting Practices – External Companies, in contracts negotiated with foreign companies, unless the contract is otherwise excluded from the CAS (see 48 CFR 9903.201-1). Foreign companies do not include foreign governments or their agents or instruments. (Editor`s note. Many of our non-small business subscribers don`t know if their contracts are covered by cost accounting standards. The issue is particularly tricky with the proliferation of contract vehicles such as letters, IDs/IQs, Basic Order Agreements (BOAs) and options, so we`ve done some research to clarify this issue. We found an article by Karen Manos and Darryl Oyer in the November 2009 issues of the cp&A report that was particularly useful and discussed the meaning of « price » and « net prices. ») Although an IDIQ is a contract under Part 16 of the FAR, several contracts are typically awarded when it becomes almost impossible to determine the value of the contract. .