Cost Accounting Practice Change
Contents |
Cost Accounting Practice Change
History -- Final Rule Issued June 14, 2000
- Concludes CAS case begun in 1993
- Significantly reduced Scope
Change in Accounting Practice
A Change in Accounting Practice is any change 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]
Examples of Cost Accounting changes when there is a change in the method or technique for:
1. Determining whether a cost is directly or indirectly allocated.
2. Determining the composition of the cost pools.
3. Determining the selection of the allocation base.
4. Determining the composition of the allocation base.
Initial Adoption or Elimination of Costs
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.
Types of Changes
Required Change
Cost Accounting Practice change is required because of a new standard or changed standard
Unilateral Change
The contractor may unilaterally change its disclosed or established cost accounting practices, but the Government may 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.
Noncompliance
Requirements - Contractor
- FAR requires 60 day notice of any change in Accounting Practice, with a description of the change. The change will then be reviewed for adequacy and compliance by the cognizant federal agency, normally an Administrative Contracting Officer (ACO).
- All changes must be quantified, through one or both of 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
Related Pages
Cost Accounting Practice Change - Examples
