Determination of at What Segment a Disclosure Needs to be Made

Introduction

Determine disclosure based on who performs the function and how the cost benefits work. If the home office incurs the cost and allocates it down, disclose it at the home office level. If an operating segment incurs and consumes the cost, disclose it within the operating segment.

Where to Disclose Payroll Costs

Operating Segment Level (Parts II and IV):

Disclose payroll here if the employees work directly for or are managed by that specific segment.

• Direct Labor Payroll: Disclose in Part II (Direct Costs). You must define how hands-on payroll is tracked and charged to specific government contracts.

• Indirect/Fringe Payroll: Disclose in Part IV (Indirect Costs). This covers how local administrative salaries, shift differentials, and segment-specific overtime are pooled.

Home Office Level (Part VIII):

Disclose payroll here only if the payroll belongs to corporate headquarters staff (e.g., corporate executives, centralized HR, or centralized legal).These costs are gathered in a corporate pool and allocated down to the segments based on an allocation base like Total Payroll Dollars or Headcount.

Where to Disclose Property Taxes

Operating Segment Level (Part IV - Indirect Costs):

Disclose property taxes here if the segment owns or leases its own local facilities, manufacturing plants, or equipment. The taxes are pooled locally into a segment overhead or G&A pool.

Home Office Level (Part VIII - Home Office Expenses):

Disclose property taxes here if the corporate headquarters owns or leases the property. This applies even if an operating segment physically occupies a portion of that corporate building

Where to Disclose Freight Charges

You must disclose freight accounting methods at the segment level because shipping is directly tied to the movement of physical production materials or finished contract deliverables.

Outbound Freight (Finished Product): Disclose this in Part III, Item 3.2.3(f).

Standard Practice: Under FAR 31.205-45 (Transportation Costs), outbound freight is typically treated as a Direct Cost charged straight to the specific government contract because the destination is a contract-specified delivery point.

Inbound Freight (Raw Materials/Components): Disclose this in Part III, Item 3.3.0(b).

Direct Allocation Practice: If the inbound freight can be traceably identified to the specific vendor parts being received, it is added directly to the cost of that material or charged as an Other Direct Cost (ODC).

Indirect Allocation Practice: If a freight invoice covers a bulk shipment containing mixed materials for multiple projects, it cannot be easily segregated. In this case, you must disclose that it is charged to a local segment indirect pool, such as a Material Handling Pool or Manufacturing Overhead.

The Home Office Exception

You will only disclose freight charges at the Home Office Level (Part VIII) if your corporate office incurs freight costs completely independent of contract production. This includes moving corporate assets between corporate offices or shipping executive office records. These taxes are collected in a corporate pool and allocated down using the home office's standard G&A allocation base.