Difference between revisions of "Cost Accounting Practice Change"
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| − | A Change in Accounting Practice is any alteration | + | A Change in Accounting Practice is any alteration to a disclosed or established accounting method or technique which is used for allocation of costs to cost objectives, assignment of costs to cost accounting periods, or measurement of costs. <ref>(48 CFR 9903.302)</ref> |
A change in practice has not occured if the initial adoption of a practice coincides with the first time a cost is incurred or function is created. <ref>(48 CFR 9903.302)</ref>, or | A change in practice has not occured if the initial adoption of a practice coincides with the first time a cost is incurred or function is created. <ref>(48 CFR 9903.302)</ref>, or | ||
Revision as of 11:40, 25 February 2015
Contents |
Cost Accounting Practice Change
Introduction
A Change in Accounting Practice is any alteration to a disclosed or established accounting method or technique which is used for allocation of costs to cost objectives, assignment of costs to cost accounting periods, or measurement of costs. [1]
A change in practice has not occured if the initial adoption of a practice coincides with the first time a cost is incurred or function is created. [2], or
- Elimination (partial or total) of a costs or costs of a function is not a change in practice, or
- Revision of a practice for a previously immaterial costs is not a change in practice.
Final Rule Issued June 14, 2000
- Concludes CAS case begun in 1993
- Significantly reduced Scope
Areas of Coverage
- CAS Administration deferred to FAR Council
- NO change to cost accounting practice definition
3 Types of Changes
Required Change
Cost Accounting Practice change is required because of a new standard or changed standard
Unilateral Change
Unilateral and Desirable Changes
The contractor may unilaterally change its disclosed or established cost accounting practices, but the Government shall not pay any increased costs, in the aggregate, as a result of the unilateral change.
Contractor changes from one compliant method to another
Desirable
Term normally used by government, identifying whether the change is "desirable" to them.
Requirements - Contractor
- FAR requires 60 day notice of any change in Accounting Practice, with a description of the change, and whether the change should be retroactively applied,
- All changes must be quantified, normally through the following steps;
- General Dollar Magnitude (if material, then a Cost Impact)
- Cost Impact
Requirements - Government (CFAO)
Prior to making any contract price or cost adjustment the CFAO shall determine
- The contemplated contract price or cost adjusment will protect the Government from the payment of the estimated increased costs, in the aggregate; and
- The net effect of the contemplated adjustments will not result in the recovery of more than the increased costs to the Government
Examples of Changes in Cost Accounting Practice
Organizational changes which result in a change in the measurement of costs, the assignment of costs to cost accounting periods, or the allocation of costs to cost objectives should be considered to be changes in cost accounting practice requiring an adjustment to CAS-covered contracts for any increased costs.
A corporate reorganization that involves a change in the grouping of segments for home office expense allocation purposes should not be considered a change in accounting practice unless the method or technique used to allocate the costs changes.[3]
Related Topics
FAR 52.230-3 Disclosure and Consistency of Cost Accounting Practices
