FASB 842 Lease Accounting – What is the Impact on Government Cost Accounting?

The Financial Accounting Standards Board (FASB) issued Topic 842, Leases, in February 2016 effective for fiscal years beginning after December 15, 2018. The change was “to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the balance sheet and disclosing key information about leasing arrangements.” For the past 40 years or so, operating leases were only required to be presented in the disclosure and were off-balance sheet transactions. Other than the new asset (Right to Use asset) and a related liability on the balance sheet, the impact on the income statement (a single line item for lease expense) and cash flow are unchanged, at least under GAAP. International Financial Reporting Standards (IFRS) now requires all leases be treated similar to capital leases (Topic 842 calls these finance leases). So, under IFRS there will be more unallowable interest to properly account for on Government proposals and contracts incorporating FAR Part 31.

Read More

Topics: Non-US government contractor, Cost and Pricing and Budgeting, Contracts Administration, Cost-Type Contracts, Accounting & Billing System, DOD Contractors, Cost Accounting Standards (CAS)

DCAA COVID-19 Guidance – Still in a Wait and See, Holding Pattern

We Lifted the Vail

A few months back we submitted a request to DCAA under Freedom of Information Act. Based on the DPC guidance referencing both DCAA and DCMA as playing a key role in support of the rest of the DoD Acquisition Community, we expected DCAA would have a significant number of documents disclosing this key role. Turns out, not so much. All we got was a single document listing 13 frequently asked questions (FAQs) DCAA has been fielding from their auditors, dated July 31, 2020.

Read More

Topics: Cost and Pricing and Budgeting, Contracts Administration, Defense Contractors, Cost-Type Contracts, DCAA Audit Support, DPAP, DOD Contractors, Cost Accounting Standards (CAS), COVID-19

Deltek Costpoint 8 is Coming: 5 Things You Need to Know

5 Things You Need to Know Before Your Update

Read More

Topics: Business Systems Review, Cost and Pricing and Budgeting, Defense Contractors, Cost-Type Contracts, DCAA Audit Support, FAR, Accounting & Billing System, DOD Contractors, Cost Accounting Standards (CAS)

DCAA’s Renewed Challenge to Lowest Available Airfare: “Déjà vu All Over Again”

A recent DCAA audit reintroduced (or resurrected) a DCAA MRD (Memorandum for Regional Directors) dated March 22, 2010 which provided auditors with DCAA’s liberal interpretation of a January 2010 change to FAR 31.205-46(b) limiting allowable airfare to “lowest priced airfare available to the contractor.”

Read More

Topics: Cost and Pricing and Budgeting, Government Regulations

Costpoint - Managing Your Unbilled Receivables Doesn’t Require Magic

If your unbilled receivables account has you searching for a solution as simple as waving a Harry Potter wand and reciting “Evanesco!” you are not alone. The everyday life of an accountant is chock-full of number-crunching, and then you suddenly realize the “deathly hollows” of year-end is quickly approaching. Whether you are new to the tracking of unbilled receivables or the account has been covered in cobwebs, understanding the creation process to this “chamber of secrets” is where your journey out of the “dark forest” can begin.

Read More

Topics: Compliant Accounting Infrastructure, Cost and Pricing and Budgeting, Accounting & Billing System

Seminar, Government Employees and Gratuities

As we (Redstone Government Consulting, Inc.) began to plan our September 21, 2017 Redstone Edge, we sought out speakers and potential attendees from government agencies, including those from DCAA (Defense Contract Audit Agency) and DCMA (Defense Contract Management Agency). In both cases, their potential speakers had a list of questions which seemed to be unnecessary, but related to OGE (Office of Government Ethics) regulations and interpretations, to identify and otherwise prohibit anything which might be an illegal (or at least unethical) gratuity. Although we might not be a “government contractor”, for those who are, there is another regulation in play; FAR 52.203-3 prohibits government contractors from offering gratuities to government employees.

Read More

Topics: Redstone GCI, Compliant Accounting Infrastructure, Cost and Pricing and Budgeting, Small Business Compliance, Contracts Administration, DCAA Audit Support

If you Outsource your Tax Return, Why Not Outsource your Incurred Cost Proposal?

As a business owner or executive, it is highly likely that you are not preparing and submitting your business tax return. After all, tax rules are complicated and submission requirements can be a little unnerving. So, for those reasons and for peace of mind knowing that your tax return is prepared correctly, a savvy business owner or executive will outsource their tax preparation to a trusted firm that specializes in taxes.

Read More

Topics: Cost and Pricing and Budgeting, Incurred Cost Proposals

Application of CAS 420 – Independent Research & Development and Bid & Proposal Costs

Accounting for independent research and development costs and bid and proposal costs are found in Far 31.205-18 and Cost Accounting Standards 420. Because FAR 31.205-18 incorporates CAS 420, it does not matter if your company has revenue of $50 million or under $5 million; if you have IR&D and B&P costs, this Cost Accounting Standard (CAS) provides the criteria for accumulation and allocation of those costs.

Read More

Topics: Cost and Pricing and Budgeting

Is My Accounting System Adequate, Acceptable or Approved...Does it Matter?

To the uninformed, there may be little or no distinction between the three adjectives which could apply to a contractor (or potential contractor) accounting system. To those dealing with the terminology in government solicitations, there may appear to be no significant distinction because the words seem to be used interchangeably. For example, an Air Force solicitation may have a prerequisite for an adequate accounting system, in contrast to Navy solicitation which substitutes the words acceptable accounting system. Then a third alternative could be a solicitation which gives competing bidders points for approved systems; i.e. 500 points for having an approved accounting system. In most cases, the solicitation links the accounting system status (adequate, acceptable or approved) to an action (written opinion or written determination) by a federal government agency or, less frequently, an opinion by an independent third party such as a CPA or consultant. There is a fourth alternative, an accounting system which has never been reviewed by any independent party (government or otherwise). In this case, a contractor (or a potential contractor) may have an accounting system awaiting its first test, so to speak.

Read More

Topics: Compliant Accounting Infrastructure, Cost and Pricing and Budgeting, Small Business Compliance, Contracts Administration, Government Compliance Training

When a Firm-Fixed-Price Contract Becomes a Curse

Sometimes, a company is so anxious to receive a government contract that it ignores warning signs in the solicitation and accepts a firm-fixed-price contract when the contract type is not appropriate for the circumstances. Often the warning signs are subtle and consist of vague specifications, but in other cases, the warning signs are written, literally in capital letters. One such contract resulted in the ASBCA issuing a decision on March 30, 2016, on case number 58243. This case upheld a termination for default issued April 23, 2012, against Highland Al Hujaz Co., Ltd. This case illustrates both the warning signs the contractor should have heeded and the consequences.

Read More

Topics: Cost and Pricing and Budgeting