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.
Topics: Non-US Government Contractor, Compliant Accounting Infrastructure, Proposal Cost Volume Development & Pricing, Contracts & Subcontracts Administration, Cost Accounting Standards (CAS)
On August 17, 2020; Acting Principal Director for Defense Pricing and Contracting issued two memos providing guidance in support of DFARS Class Deviation 2020-O0013 and 2020-O0021 – CARES Act Section 3610 Implementation. There is also a memo providing contracting officers with a template for a Memorandum for Record to document the file for the issuance of the Section 3610 related contract modification.
Topics: Compliant Accounting Infrastructure, Contracts & Subcontracts Administration, DCAA Audit Support, Defense Procurement & Acquisition Policy (DPAP), Cost Accounting Standards (CAS), COVID-19
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.
Topics: Proposal Cost Volume Development & Pricing, Contracts & Subcontracts Administration, DCAA Audit Support, Defense Procurement & Acquisition Policy (DPAP), Cost Accounting Standards (CAS), COVID-19
Topics: Compliant Accounting Infrastructure, Proposal Cost Volume Development & Pricing, DFARS Business Systems, DCAA Audit Support, Cost Accounting Standards (CAS), Federal Acquisition Regulation (FAR)
In previous blogs, we have recommended preparing a CAS Disclosure Statement (DS) soon after emerging from small business status. We also recommended reviewing your cost accounting practices prior to preparing a Disclosure Statement to prevent having to change afterwards and ending up requiring a cost impact statement. So, by now you are probably wondering what this mythical beast is and what is the big deal about preparing it.
Topics: Compliant Accounting Infrastructure, Cost Accounting Standards (CAS)
Accounting for Bid and Proposal (B&P) Explained
Bid and Proposal is a topic that comes up with our contractor clients on a regular basis. Most questions surrounding this topic involve: whom at the contractor should be charging B&P, especially, contractor personnel that typically charge overhead or G&A. We understand why this is confusing. It is our opinion that the guidance per FAR (Federal Acquisition Regulations) and CAS (Cost Accounting Standards) regarding this topic is unclear and leaves contractors scratching their heads trying to be compliant.
Topics: Compliant Accounting Infrastructure, Incurred Cost Proposal Submission (ICP/ICE), Cost Accounting Standards (CAS)
Previously, we discussed how a company ends up with CAS covered contracts. This month we are going to talk about some of the further fun with CAS. We recommended preparing a CAS Disclosure Statement soon after emerging from small business status,
Topics: Compliant Accounting Infrastructure, Cost Accounting Standards (CAS)
The most common CAS (Cost Accounting Standards) exemption for most businesses is the small business exemption. Most contractors understand that as long as they’re small, CAS is a non-issue. What happens when you’re approaching your NAICS cap and headed toward the dreaded “other than small” status?
Topics: Compliant Accounting Infrastructure, Small Business Compliance, Cost Accounting Standards (CAS)
In responding to contractor criticisms that DCAA has far too many criteria within their “adequacy checklists”, DCAA has now developed and is pilot testing a new adequacy checklist which involve the same criterion, but each criterion is individually weighted to yield a true risk and materiality based adequacy determination. Additionally, in developing the weighted criterion, DCAA has implicitly acknowledged that contractor proposals do not have to be 100 percent adequate to be auditable.
“My DCAA auditor is telling me I’m now subject to CAS. What does that mean? What do I do?” We get questions like this almost every day. Usually we then obtain as much information as we can to determine why DCAA has made this claim and advise our clients accordingly.
Topics: Contracts & Subcontracts Administration, DCAA Audit Support, Cost Accounting Standards (CAS)