[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: 48CFR9904.406-50]



[Page 372]

 

            TITLE 48--FEDERAL ACQUISITION REGULATIONS SYSTEM

 

     CHAPTER 99--COST ACCOUNTING STANDARDS BOARD, OFFICE OF FEDERAL 

           PROCUREMENT POLICY, OFFICE OF MANAGEMENT AND BUDGET

 

PART 9904_COST ACCOUNTING STANDARDS--Table of Contents

 

Sec. 9904.406-50  Techniques for application.



    (a) The cost of an indirect function which exists for only a part of 

a cost accounting period may be allocated on the basis of data for that 

part of the cost accounting period if the cost is:

    (1) Material in amount,

    (2) Accumulated in a separate indirect cost pool, and

    (3) Allocated on the basis of an appropriate direct measure of the 

activity or output of the function during that part of the period.

    (b) The practices required by 9904.406-40(b) of this Standard shall 

include appropriate practices for deferrals, accruals, and other 

adjustments to be used in identifying the cost accounting periods among 

which any types of expense and any types of adjustment to expense are 

distributed. If an expense, such as taxes, insurance or employee leave, 

is identified with a fixed, recurring, annual period which is different 

from the contractor's cost accounting period, the Standard permits 

continued use of that different period. Such expenses shall be 

distributed to cost accounting periods in accordance with the 

contractor's established practices for accruals, deferrals, and other 

adjustments.

    (c) Indirect cost allocation rates, based on estimates, which are 

used for the purpose of expediting the closing of contracts which are 

terminated or completed prior to the end of a cost accounting period 

need not be those finally determined or negotiated for that cost 

accounting period. They shall, however, be developed to represent a full 

cost accounting period, except as provided in paragraph (a) of this 

subsection.

    (d) A contractor may, upon mutual agreement with the Government, use 

as his cost accounting period a fixed annual period other than his 

fiscal year, if the use of such a period is an established practice of 

the contractor and is consistently used for managing and controlling the 

business, and appropriate accruals, deferrals or other adjustments are 

made with respect to such annual periods.

    (e) The contracting parties may agree to use an annual period which 

does not coincide precisely with the cost accounting period for 

developing the data used in establishing an allocation base: Provided,

    (1) The practice is necessary to obtain significant administrative 

convenience,

    (2) The practice is consistently followed by the contractor,

    (3) The annual period used is representative of the activity of the 

cost accounting period for which the indirect costs to be allocated are 

accumulated, and

    (4) The practice can reasonably be estimated to provide a 

distribution to cost objectives of the cost accounting period not 

materially different from that which otherwise would be obtained.

    (f) When a transitional cost accounting period is required under the 

provisions of 9904.406-40(a)(3), the contractor may select any one of 

the following:

    (1) The period, less than a year in length, extending from the end 

of his previous cost accounting period to the beginning of his next 

regular cost accounting period,

    (2) A period in excess of a year, but not longer than 15 months, 

obtained by combining the period described in paragraph (f)(1) of this 

subsection with the previous cost accounting period, or

    (3) A period in excess of a year, but not longer than 15 months, 

obtained by combining the period described in paragraph (f)(1) of this 

subsection with the next regular cost accounting period.



A change in the contractor's cost accounting period is a change in 

accounting practices for which an adjustment in the contract price may 

be required in accordance with paragraph (a)(4) (ii) or (iii) of the 

contract clause set out at 9903.201-4(a).