[Code of Federal Regulations] [Title 48, Volume 7] [Revised as of October 1, 2005] From the U.S. Government Printing Office via GPO Access [CITE: 48CFR9903.302-3] [Page 348-349] TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM CHAPTER 99--COST ACCOUNTING STANDARDS BOARD, OFFICE OF FEDERAL PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET PART 9903_CONTRACT COVERAGE--Table of Contents Subpart 9903.3_CAS Rules and Regulations Sec. 9903.302-3 Illustrations of changes which meet the definition of ``change to a cost accounting practice.'' (a) The method or technique used for measuring costs has been changed. ------------------------------------------------------------------------ Description Accounting treatment ------------------------------------------------------------------------ (1) Contractor changes its actuarial (1)(i) Before change: The cost method for computing pension contractor computed pension costs.. costs using the aggregate cost method. (ii) After change: The contractor computes pension cost using the unit credit method. (2) Contractor uses standard costs to (2)(i) Before change: account for its direct labor. Labor Contractor's direct labor cost cost at standard was computed by was measured with only one multiplying labor-time standard by component set at standard. actual labor rates. The contractor (ii) After change: Contractor's changes the computation by multiplying direct labor cost is measured labor-time standard by labor-rate with both the time and rate standard. components set at standard. ------------------------------------------------------------------------ (b) The method or technique used for assignment of cost to cost accounting periods has been changed. ------------------------------------------------------------------------ Description Accounting treatment ------------------------------------------------------------------------ (1) Contractor changes his established (1)(i) Before change: Items criteria for capitalizing certain having acquisition costs of classes of tangible capital assets between $200 and $400 per unit whose acquisition costs totaled $1 were capitalized and million per cost accounting period. depreciated over a number of cost accounting periods. (ii) After change: The contractor charges the value of assets costing between $200 and $400 per unit to an indirect expense pool which is allocated to the cost objectives of the cost accounting period in which the cost was incurred. (2) Contractor changes his methods for (2)(i) Before change: The computing depreciation for a class of contractor assigned assets. depreciation costs to cost accounting periods using an accelerated method. (ii) After change: The contractor assigns depreciation costs to cost accounting periods using the straight line method. [[Page 349]] (3) Contractor changes his general (3)(i) Before change: The method of determining asset lives for contractor identified the cost classes of assets acquired prior to accounting periods to which the effective date of CAS 409. the cost of tangible capital assets would be assigned using guideline class lives provided in IRS Rev. Pro. 72-10. (ii) After change: The contractor changes the method by which he identifies the cost accounting periods to which the costs of tangible capital assets will be assigned. He now uses the expected actual lives based on past usage. ------------------------------------------------------------------------ (c) The method or technique used for allocating costs has been changed. ------------------------------------------------------------------------ Description Accounting treatment ------------------------------------------------------------------------ (1) Contractor changes his method of (1)(i) Before change: The allocating G&A expenses under the contractor operating under requirements of Cost Accounting Cost Accounting Standard 410 Standard 410. has been allocating his general and administrative expense pool to final cost objectives on a total cost input base in compliance with the Standard. The contractor's business changes substantially such that there are significant new projects which have only insignificant quantities of material. (ii) After change: After the addition of the new work, an evaluation of the changed circumstances reveals that the continued use of a total cost input base would result in a significant distortion in the allocation of the G&A expense pool in relation to the benefits received. To remain in compliance with Standard 410, the contractor alters his G&A allocation base from a total cost input base to a value added base. (2) The contractor changes the (2)(i) Before change: The accounting for hardware common to all contractor allocated the cost projects. of purchased or requisitioned hardware directly to projects. (ii) After change: The contractor charges the cost of purchased or requisitioned hardware to an indirect expense pool which is allocated to projects using an appropriate allocation base. (3) The contractor merges operating (3)(i) Before change: In segment A and B which use different segment, A, the costs of the cost accounting practices in manufacturing overhead pool accounting for manufacturing overhead have been allocated to final costs. cost objectives using a direct labor hours base; in segment B, the costs of the manufacturing overhead pool have been allocated to final cost objectives using a direct labor dollars base. (ii) After change: As a result of the merger of operations, the combined segment decides to allocate the cost of the manufacturing overhead pool to all final cost objectives, using a direct labor dollars base. Thus, for those final cost objectives referred to in segment A, the cost of the manufacturing overhead pool will be allocated to the final cost objectives of segment A using a direct labor dollars base instead of a direct labor hours base. ------------------------------------------------------------------------