Cost Accounting Standards (CAS)

FAR Part 30, 41 U.S.C. chapter 15, Cost Accounting Standards (CAS), requires certain contractors and subcontractors to comply with CAS and to disclose in writing and follow consistently their cost accounting practices. CAS consists of nineteen standards numbered 401 to 420 (CAS 419 is reserved). They cover a variety of costs such as depreciation, pension plans, personal compensation, indirect costs, etc. They ensure uniformity and consistency in measurement (how much), assignment (to which cost accounting period), and allocation (which contract gets charged). These nineteen standards are as follows:

• * CAS 401 – Consistency in Estimating, Accumulating, and Reporting Costs
• * CAS 402 – Consistency in Allocating Costs Incurred for the Same Purpose
• CAS 403 – Allocation of Home Office Expenses to Segments
• CAS 404 – Capitalization of Tangible Assets
• * CAS 405 – Accounting for Unallowable Costs
• * CAS 406 – Cost Accounting Period
• CAS 407 – Use of Standard Costs for Direct Material and Direct Labor
• CAS 408 – Accounting for Compensated Personal Absence
• CAS 409 – Depreciation of Tangible Capital Assets
• CAS 410 – Allocation of Business Unit General and Administrative Expenses to Final Cost Objectives
• CAS 411 – Accounting for Acquisition Costs of Material
• CAS 412 – Composition and Measurement of Pension Cost
• CAS 413 – Adjustment and Allocation of Pension Cost
• CAS 414 – Cost of Money as an Element of the Cost of Facilities Capital
• CAS 415 – Accounting for the Cost of Deferred Compensation
• CAS 416 – Accounting for Insurance Costs.
• CAS 417 – Cost of Money as an Element of the Cost of Capital Assets Under Construction
• CAS 418 – Allocation of Direct and Indirect Costs
• CAS 419 – [Reserved]
• CAS 420 – Accounting for Independent Research and Development Costs and Bid and Proposal Costs

Note: * Included for modified coverage

CAS applies to contracts, not to contractors or agencies. CAS requirements apply to all negotiated contracts in excess of $2 million, unless an exemption applies. A contract award of $7.5 million or more is generally a “trigger” contract that establishes CAS coverage, unless an exemption below applies.

The CAS is promulgated by the Cost Accounting Standards Board (CASB), which undergoes a process similar to (but not the same as) the rulemaking process for the Federal Acquisition Regulation System. However, since they are not the same, there may be a lag time between a rule promulgated by the CASB before it is incorporated into the FAR and vice versa.

It is the responsibility of the contracting officer to determine if CAS may apply to a contract. If so, the contracting officer must place the appropriate provisions in the solicitation as described in FAR 52.230. The contracting officer shall not award a contract that is CAS covered until he/she determines that the Cognizant Federal Agency Official (CFAO) has made a determination of adequacy of the Disclosure Statement.

Determining CAS applicability and coverage is a two-step process. The first step is to determine whether CAS does or does not apply to the contract being negotiated / awarded. If CAS does not apply, there is no CAS coverage and the second step of the process is irrelevant. If CAS does apply, it must be determined whether the contract is subject to full CAS coverage (all nineteen standards), modified CAS coverage (CAS 401, 402, 405 and 406) or only CAS 401 and 402.

The CAS determination process is illustrated in the next chart.