Article
Maintain successful government contracts with a focus on cost accounting standards
Aug. 5, 2024 · Authored by Rich Weber, Sheila Herrera, Karen Melendez
Securing government contracts can bring significant opportunities and resources to your organization; however, contracts bring specific requirements — particularly cost accounting standards (CAS) — that can lead to major penalties if not followed properly.
Fortunately, understanding CAS fundamentals, as well as addressing common misconceptions and following practical implementation tips, can help you improve compliance and avoid potential pitfalls.
CAS can become a manageable and integral part of your accounting practices, supporting successful and compliant government contracts with continuous learning and adaptation.
Fundamentals of cost accounting standards (CAS)
This set of 19 standards is designed to achieve uniformity and consistency in the measurement, assignment, and allocation of costs to government contracts. It was administered by the Cost Accounting Standards Board (CASB) so that contractors accurately charge costs to government contracts, preventing overcharging or misallocation of costs.
Key components of CAS
Understanding the key components of CAS is crucial for compliance. Here are some primary standards and their relevance.
CAS 401: Consistency in estimating, accumulating, and reporting costs
CAS 401 ensures that contractors consistently apply the same practices in estimating and accumulating costs.
CAS 402: Consistency in allocating costs incurred for the same purpose
CAS 402 prevents contractors from charging the same type of cost in different ways to various contracts.
CAS 403: Allocation of home office expenses to segments
CAS 403 governs how home office expenses are distributed among the company's segments.
CAS 404: Capitalization of tangible assets
CAS 404 defines the criteria for capitalizing costs associated with tangible assets.
CAS 405: Accounting for unallowable costs
CAS 405 ensures that costs not allowable under the contract are identified and excluded from billings.
