[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: 48CFR9903.302-4]



[Page 349-350]

 

            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. 9903.302-4  Illustrations of changes which do not meet the definition 

of ``Change to a cost accounting practice.''



------------------------------------------------------------------------

              Description                      Accounting treatment

------------------------------------------------------------------------

(a) Changes in the interest rate levels  (a) Adopting the increase

 in the national economy have             (decrease) in the interest

 invalidated the prior actuarial          rate actuarial assumption is

 assumption with respect to anticipated   not a change in cost

 investment earnings. The pension plan    accounting practice.

 administrators adopted an increased

 (decreased) interest rate actuarial

 assumption. The company allocated the

 resulting pension costs to all final

 cost objectives.

(b) The basic benefit amount for a       (b) The increase in the amount

 company's pension plan is increased      of the benefits is not a

 from $8 to $10 per year of credited      change in cost accounting

 service. The change increases the        practice.

 dollar amount of pension cost

 allocated to all final cost objectives.

(c) A contractor who has never paid      (c) The initial adoption of an

 pensions establishes for the first       accounting practice for the

 time a pension plan. Pension costs for   first time incurrence of a

 the first year amounted to $3.5          cost is not a change in cost

 million.                                 accounting practice.



[[Page 350]]





(d) A contractor maintained a Deferred   (d) There was a termination of

 Incentive Compensation Plan. After       the Deferred Incentive

 several years' experience, the plan      Compensation Plan. Elimination

 was determined not to be attaining its   of a cost is not a change in

 objective, so it was terminated, and     cost accounting practice.

 no future entitlements were paid.

(e) A contractor eliminates a segment    (e) The projects and expenses

 that was operated for the purpose of     related to nuclear energy

 doing research for development of        projects have been terminated.

 products related to nuclear energy.      No transfer of these projects

                                          and no further work in this

                                          area is planned. This is an

                                          elimination of cost and not a

                                          change in cost accounting

                                          practice.

(f) For a particular class of assets     (f) The change in estimate (not

 for which technological changes have     in method) is not a change in

 rarely affected asset lives, a           cost accounting practice. The

 contractor starts with a 5-year          contractor has not changed the

 average of historical lives to           method or technique used to

 estimate future lives. He then           determine the estimate. The

 considers technological changes and      methodology applied has

 likely use. For the past several years   indicated a change in the

 the process resulted in an estimated     estimated life, and this is

 future life of 10 years for this class   not a change in cost

 of assets. This year a technological     accounting practice.

 change leads to a prediction of a

 useful life of 7 years for the assets

 acquired this year for the class of

 assets.

(g) The marketing department of a        (g) After the organization

 segment has reported directly to the     change in the company's

 general manager of the segment. The      reporting structure, the

 costs of the marketing department have   parties agree that the

 been combined as part of the segment's   appropriate recognition of the

 G&A expense pool. The company            beneficial or causal

 reorganizes and requires the marketing   relationship between the costs

 department to report directly to a       of the marketing department

 vice president at corporate              and the segment is to continue

 headquarters.                            to combine these costs as part

                                          of the segment's G&A expense

                                          pool. Thus, the organizational

                                          change has not resulted in a

                                          change in cost accounting

                                          practice.

------------------------------------------------------------------------