Cost Accounting Standards: They’re Policy for Government Contracts

“Cost Accounting Standards” are a list of financial standards and rules the United States government requires of its contractors. A contract cannot be awarded to a vendor otherwise. Cost Accounting Standards, or CAS, applies to larger companies and not small businesses.

Here’s What We’ll Cover:

What is CAS?

How Many Cost Accounting Standards Are There?

Are Small Businesses Exempt from CAS?

What Is a CAS Disclosure Statement?

What is CAS?

CAS stands for Cost Accounting Standards. The standards are determined by the CASB, or Cost Accounting Standards Board. CASB is a part of the White House’s Office of Federal Procurement Policy (OFPP). The OFPP provides the rules for government-wide procurement of contracts.

CASB was originally established in 1970 but disbanded in 1980 once the standards were established. The board was re-established in 1988.

How Many Cost Accounting Standards Are There?

There are 19 accounting standards, as set by the Cost Accounting Standards Board. They are:

1. Consistency in estimating, accumulating, and reporting costs.
2. Consistency in allocating costs incurred for the same purpose.
3. Allocation of home office expenses to segments.
4. Capitalization of tangible assets.
5. Accounting for unallowable costs.
6. Cost accounting period.
7. Use of standard costs for direct material and direct labor.
8. Accounting for compensated personal absence.
9. Depreciation of tangible capital assets.
10. Allocation of business unit general and administrative expenses to final cost objectives.
11. Accounting for acquisition costs of material.
12. Composition and measurement of pension costs.
13. Adjustment and allocation of pension costs.
14. Cost of money as an element of the cost of facilities capital.
15. Accounting for the cost of deferred compensation.
16. Accounting for insurance costs.
17. Cost of money as an element of the cost of capital assets under construction.
18. Allocation of direct and indirect costs.
19. Accounting for independent research and development costs and bid and proposal costs.

Are Small Businesses Exempt from CAS?

Yes, small businesses are exempt from CAS. The other following exemptions apply too:

• Contract sizes valued at less than 7.5 million US dollars, unless the contractor has already been awarded a contract greater than that amount.
• Contracts less than $750,000 US are always exempt.
• Contracts for commercial items.
• Contracts where the price is already set by law.
• Contracts awarded to foreign governments or foreign concerns.
• Sealed bids.

What is a CAS Disclosure statement?

The management of a business that wishes to contract with the government under CAS must provide a disclosure statement first, if the contract is valued over 50 million US dollars. The statement outlines the accounting practices of the business.

The provided statement will be subject to scrutiny by the government, in order to ensure the company’s accounting practices are in compliance with CAS. If not, the company will not be awarded the contract.

The disclosure statement is required in order to be awarded the contract.

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