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Proposed Rule2025-17472

Conformance of Cost Accounting Standards to Generally Accepted Accounting Principles for Cost Accounting Standards 404, 408, 409, and 411

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Published

September 11, 2025

Issuing agencies

Management and Budget OfficeFederal Procurement Policy Office

Abstract

The Office of Federal Procurement Policy (OFPP), Cost Accounting Standards Board (the Board), is releasing this notice of proposed rulemaking (NPRM) to elicit public comments on proposed changes to the Cost Accounting Standards (CAS) to conform CAS 404, 408, 409, and 411 to Generally Accepted Accounting Principles (GAAP). This notice combines CAS Board Case 2020-01 related to CAS 404 and CAS 411 and CAS Board Case 2021-02 related to CAS 408 and CAS 409 to provide a streamlined and efficient process for expedited completion of rulemaking for these two cases.

Full Text

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<title>Federal Register, Volume 90 Issue 174 (Thursday, September 11, 2025)</title>
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[Federal Register Volume 90, Number 174 (Thursday, September 11, 2025)]
[Proposed Rules]
[Pages 43994-43999]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-17472]

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OFFICE OF MANAGEMENT AND BUDGET

Office of Federal Procurement Policy

48 CFR Part 9903 and 9904

RIN 0348-AB90

Conformance of Cost Accounting Standards to Generally Accepted
Accounting Principles for Cost Accounting Standards 404, 408, 409, and
411

AGENCY: Cost Accounting Standards Board, Office of Federal Procurement
Policy, Office of Management and Budget.

ACTION: Notice of proposed rulemaking.

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SUMMARY: The Office of Federal Procurement Policy (OFPP), Cost
Accounting Standards Board (the Board), is releasing this notice of
proposed rulemaking (NPRM) to elicit public comments on proposed
changes to the Cost Accounting Standards (CAS) to conform CAS 404, 408,
409, and 411 to Generally Accepted Accounting Principles (GAAP). This
notice combines CAS Board Case 2020-01 related to CAS 404 and CAS 411
and CAS Board Case 2021-02 related to CAS 408 and CAS 409 to provide a
streamlined and efficient process for expedited completion of
rulemaking for these two cases.

DATES: Comments must be in writing and must be received by October 14,
2025.

ADDRESSES: Submit comments to the Federal Rulemaking Portal: <a href="https://www.regulations.gov">https://www.regulations.gov</a>. by searching for ``CASB 2025-01''. Select the link
``Comment Now'' that corresponds with ``CASB 2025-01''. Follow the
instructions provided on the ``Comment Now'' screen. Please include
your name, company name (if any), and ``CASB 2025-01'' on your attached
document. If your comment cannot be submitted using <a href="https://www.regulations.gov">https://www.regulations.gov</a>, call or email the points of contact in the FOR
FURTHER INFORMATION CONTACT section of this document for alternate
instructions. Comments received generally will be posted without change
to <a href="https://www.regulations.gov">https://www.regulations.gov</a>, including any personal and/or business
confidential information provided. Public comments may be submitted as
an individual, as an organization, or anonymously (see frequently asked
questions at <a href="https://www.regulations.gov/faq">https://www.regulations.gov/faq</a>). To confirm receipt of
your comment(s), please check <a href="https://www.regulations.gov">https://www.regulations.gov</a>,
approximately two or three days after submission to verify posting.
Privacy Act Statement: The Board proposes this rule to elicit
public views pursuant to 41 U.S.C. 1502. Submission of comments is
voluntary. The information will be used to inform sound decision-
making. Do not include any information you would not like to be made
publicly available. Additionally, the OMB System of Records Notice, OMB
Public Input System of Records, OMB/INPUT/01, 88 FR 20913 (available at
<a href="http://www.federalregister.gov/documents/2023/04/07/2023-07452/privacy-act-of-1974-system-of-records">www.federalregister.gov/documents/2023/04/07/2023-07452/privacy-act-of-1974-system-of-records</a>), includes a list of routine uses associated
with the collection of this information.

FOR FURTHER INFORMATION CONTACT: John L. McClung, Manager, Cost
Accounting Standards Board (telephone: 202-881-9758; email:
<a href="/cdn-cgi/l/email-protection#701a1f181e5e1c5e1d13131c051e1742301f1d125e151f005e171f06"><span class="__cf_email__" data-cfemail="2d47424543034103404e4e4158434a1f6d42404f0348425d034a425b">[email&#160;protected]</span></a>).

SUPPLEMENTARY INFORMATION:

I. Background

Section 820 of the 2017 National Defense Authorization Act modified
statutory responsibilities of the Board, codified at 41 U.S.C. 1501(c).
These changes require the Board to conform CAS to GAAP and minimize the
burden on contractors while protecting the interests of the Government.
On March 13, 2019, the Board published a staff discussion paper (SDP)
(84 FR 9143). The SDP established a global roadmap to help guide its
approach to conformance. The roadmap identified seven standards (404,
407, 408, 409, 411, 415, and 416) as most suitable for potential
conformance to GAAP. Each of these standards focuses primarily on cost
measurement and assignment of costs to accounting periods.
The Board noted that despite the difference in general focus
between CAS and GAAP, there has been some convergence over the years as
GAAP has evolved to address cost measurement and assignment of costs to
accounting periods. Furthermore, the creation of the Financial
Accounting Standards Boards (FASB) and the Accounting Standards
Codification (ASC) as the recognized financial accounting and reporting
standards for GAAP fosters increased uniformity and consistency. The
FASB is recognized by the U.S. Securities and Exchange Commission as
the designated accounting standard setter for public companies. FASB
standards are recognized as authoritative by many other organizations,
including State Boards of Accountancy and the American Institute of
Certified Public Accountants (AICPA). The Board has concluded that
these developments create opportunities to modify or eliminate
overlapping CAS requirements--many of which have remain unchanged for
over 50 years--where GAAP standards under ASC may be applied reasonably
as a substitute for CAS to support contract cost and pricing.
The March 2019 SDP also included the Board's initial assessment of
CAS 408 and CAS 409 to conform them, where practicable, to GAAP. Based
on the public comments from the SDP, and additional research conducted
by the Board, the Board published an advanced notice of proposed
rulemaking (ANPRM) (89 FR 53575) on June 27, 2024. The ANPRM noted the
Board's provisional conclusions that CAS 408 could be eliminated in its
entirety and the vast majority of CAS 409 could also be eliminated.
On September 18, 2020, the Board published an SDP (85 FR 58399) to
solicit views with respect to the Board's initial assessment of CAS 404
and CAS 411 to conform them, where practicable, to GAAP. Based on the
public comments from the SDP, and additional Board research, the Board
published an ANPRM (90 FR 5803) on January 17, 2025. The ANPRM noted
the Board's provisional conclusions that the vast majority of CAS 404
could be eliminated and that CAS 411 could be eliminated in its
entirety.
In regards to CAS 408 and CAS 411, the Board provisionally
concluded that these standards in their entirety have become
unnecessary to protect the Government's interests, which may be
achieved through reliance on GAAP, existing requirements in other CAS
Standards, and the Federal Acquisition Regulation (FAR).
In regards to CAS 404 and CAS 409, the Board provisionally
concluded that nearly all of the content in these standards has become
unnecessary to protect the Government's interests which may be achieved
through reliance on GAAP, existing requirements in other CAS Standards
and the FAR. Because of the limited amount of content identified for
retention, the Board provisionally concluded that moving the retained
requirements to another Standard rather than maintaining CAS 404 and
CAS 409 with minimal content would best achieve the goal of
streamlining CAS.

[[Page 43995]]

This NPRM reflects input from the public, as well as research
conducted by the Board. Unique CAS requirements were assessed for their
necessity in protecting the interests of the Government or if the
existing requirements in other CAS Standards or requirements in other
relevant regulations may protect the interests of the Government. This
NPRM is issued by the Board in accordance with the requirements of 41
U.S.C. 1502.

II. CAS 404--Capitalization of Tangible Assets

A. Overview and Conclusion

CAS 404 was initially published February 27, 1973, at 38 FR 5318.
It requires contractors, for the purposes of cost measurement, to
establish and adhere to policies with respect to capitalization of the
acquisition costs of tangible assets. CAS 404 also established criteria
that the contractor's policies and procedures must satisfy. CAS 404 was
modified in 1996 by the addition of CAS 404-50(d) to address issues
relating to the treatment of gains or losses attributable to tangible
capital assets subsequent to mergers or business combinations by
government contractors, along with other relatively modest changes.
With the exception of the 1996 additions, CAS 404 has remained static
for over 50 years.
As noted in the ANPRM, the comparison of CAS 404 with pertinent
GAAP content revealed significant overlap and equivalent requirements
with the noted exception of CAS 404-50(d)., which protects the
government from paying duplicative costs when government contractors
merge or are acquired. Absent the requirements of CAS 404-50(d)(1) the
government would be at risk if an asset was increased in value such
that the combined depreciation recognized by the both the acquired
company and the acquiring company for government contracts exceeds the
historic cost for which the asset was originally purchased for use. For
all other requirements in CAS 404 a comparable requirement exists in
GAAP that would protect the Government's interests and promote
uniformity and consistency. The Board has concluded that reliance on
GAAP would materially achieve uniformity and consistency necessary for
government contracting. Furthermore, other CAS requirements adequately
protect the government's interests. The Board has concluded that the
Government's interests are adequately protected by relying on disclosed
GAAP practices that are consistently followed and subject to notice of
changes and cost recovery as follows: (1) All contractors whether
subject to full or modified CAS coverage are subject to CAS 401 and
will continue to be required to consistently follow their disclosed or
actual cost accounting practices; and (2) They will continue to be
bound by the 9903.201-4 CAS contract clauses requiring disclosure and
consistency in cost accounting practices regardless of whether a
specific standard exists. These contract clauses implement the
statutory requirements for disclosure of 41 U.S.C. 1502(f)(1) and
protections from payment of increased costs as a result of changes to
contractor's cost accounting practices provided by 41 U.S.C.
1502(f)(2).
In summary, the Board has concluded that CAS 404, with the
exception of CAS 404-50(d)(1), has become unnecessary to protect the
Government's interests, which may be achieved through reliance on GAAP
and other CAS Standards. Therefore, the Board is proposing to eliminate
CAS 404 and retain the requirements CAS 404-50(d)(1) by relocating them
to a new paragraph 9904.406-50(g) instead of maintaining an entire
Standard. The new paragraph 9904.406-50(g) will also include the
retained requirements from CAS 409 discussed in Section IV. below. The
Board seeks comment on such action in this NPRM.
This action would be consistent with the Board's guiding principles
for conforming CAS to GAAP because it would eliminate CAS content to
minimize the burden on contractors while protecting the interests of
the Federal Government. Furthermore, the Board's conclusion on CAS 404
would align with the guiding principles to rely on coverage in GAAP
when it would materially achieve uniformity and consistency in cost
accounting without bias or prejudice to either party, rely on other CAS
Standards which may protect the Government's interests, and eliminate
CAS coverage no longer necessary.
The Board has not identified any instance where the elimination of
CAS 404, as contemplated, would result in a change to a contractor's
disclosed cost accounting practices for government contracts. With the
noted exception of CAS 404-50(d), which is being retained, the current
CAS requirements are nearly identical to GAAP. The Board expects that
contractors would continue to follow their existing practices as they
are both compliant with CAS and GAAP. As such, having identified no
cost accounting practice changes as a result of this proposed rule any
current or future changes related to capitalization of the acquisition
costs of tangible assets would be considered unilateral as defined in
9903.201-6(b)(2). The Board is interested in comments on this
determination and any instances requiring further consideration by the
Board.

B. Summary of Public Comments CAS 404

The Board received two sets of public comments to the ANPRM related
to CAS 404 both coming from industry associations.
Comment: Both of the public respondents agreed with the Board's
provisional conclusion to eliminate CAS 404. However, they also both
would prefer CAS 404-50(d)(1) not be retained. In addition, if retained
they believe CAS 418 is not an appropriate location as CAS 404-50(d)(1)
does not address allocation of either direct or indirect costs and
relates to measurement as asserted by the Board in the ANPRM.
Response: The Board continues to believe the CAS 404-50(d)(1)
difference between CAS and GAAP may create an exposure of unknown
materiality and place the Government at risk of paying twice for the
same assets. The Board has concluded that the underlying issue relates
to the measurement of costs and therefore should be addressed by the
Board. However, the Board agrees with the commentors that the location
should be adjusted and is proposing to retain the requirements in CAS
404-50(d)(1) but move them to a new section in new paragraph 9904.406-
50(g). This proposed action would be consistent with the Board's
guiding principles to eliminate content from CAS where GAAP, other CAS
Standards or other relevant regulations may protect the interests of
the Government. In addition, the Board concluded that moving the
retained requirement to another Standard rather than maintaining CAS
404 with minimal content would best achieve the goal of streamlining
CAS. The Board is seeking comments on such actions in this NPRM.

III. CAS 408--Accounting for Costs of Compensated Personal Absence

A. Overview and Conclusion

CAS 408 was initially published September 19, 1974, at 39 FR 33681.
The stated purpose of the standard was to improve, and provide
uniformity in, the measurement of costs of vacation, sick leave,
holiday, and other compensated personal absence for a cost accounting
period, and thereby increase the probability that the measured costs
are allocated to the proper cost objectives.

[[Page 43996]]

The principal need for the promulgation of CAS 408, which has
remained nearly unchanged for 50 years, no longer exists. GAAP has been
revised significantly with additional content since the original
promulgation of CAS 408. Comparison of CAS 408 with pertinent GAAP
content revealed significant overlap and nearly completely equivalent
requirements. For each requirement in CAS 408, the Board identified
that a comparable requirement exists in GAAP that would protect the
Government's interests and promote uniformity and consistency.
CAS 408 is nearly duplicative of GAAP. The Board identified only
one difference between CAS and GAAP that required further
consideration. GAAP requires accrual of accumulated rights in addition
to vested rights in the year earned, unlike CAS which only requires the
accrual of entitled (i.e., vested) rights. The Board has concluded that
reliance on GAAP would materially achieve the uniformity and
consistency necessary for government contracting. Furthermore, as
discussed in Section II above, CAS 401 and the 9903.201-4 CAS contract
clauses adequately protect the Government's interests by protecting the
Government from payment of increased costs as a result of changes to a
contractor's accounting practices.
In summary, the Board has concluded that CAS 408 has become
unnecessary to protect the Government's interests which may be achieved
through reliance on GAAP and other CAS Standards. Therefore, the Board
is issuing this proposed rule that would eliminate CAS 408 and seeks
comment on such action in this NPRM. This action would be consistent
with the Board's guiding principles for conforming CAS to GAAP because
it would eliminate CAS content to minimize the burden on contractors
while protecting the interests of the Government. Furthermore, the
Board's provisional conclusion on CAS 408 would align with the guiding
principles to rely on coverage in GAAP when it would materially achieve
uniformity and consistency in cost accounting without bias or prejudice
to either party, rely on other CAS Standards which may protect the
Government's interests, and eliminate CAS coverage no longer necessary.
The Board recognizes that conformance to GAAP related to CAS 408
may result in accounting practices changes in some cases as GAAP allows
assigning the costs to earlier cost accounting periods than CAS 408
currently permits. Because GAAP requires estimates and adjustments for
forfeitures, the Board continues to believes these differences would
only result in immaterial timing differences. As such, the Board seeks
to eliminate the administration burden of the cost impact process and
is proposing to exempt these changes from the required cost impact
process by the addition of 9903.201-9(b).

B. Summary of Public Comments for CAS 408

The Board received five sets of comments from the public in
response to the ANPRM. These comments came from companies, industry
associations, professional associations, and individuals.
Comment: Four sets of comments generally agreed with the proposed
changes and basis described by the Board in the ANPRM. However, one of
those commentors believes the Board should focus more on
recommendations of the Section 809 Panel instead of GAAP conformance
efforts. The commentor asserted that the Panel's recommendations, such
as raising the thresholds for CAS applicability, full CAS compliance,
and disclosure requirements would be a more impactful way of reducing
CAS administrative burden and promoting competition.
Response: The Board believes CAS-GAAP harmonization, which is
statutorily required, and careful consideration of the section 809
Panel's recommendations are both deserving of prioritization, as
reflected in the Board's agenda, which was recently published in the
Federal Register at 90 FR 29048.
Comment: One commentor generally agreed with the Board's analysis
and conclusions that requirements of GAAP and CAS 408 are nearly
identical, but does not believe the Board should eliminate CAS
standards. They believe the resultant administrative process for GAAP
noncompliances identified by the Government would be significantly more
complicated, less efficient, and not as equitable.
Response: As noted above and discussed in Section II above, CAS 401
and the 9903.201-4 CAS contract clauses adequately protect the
Government's interests by protecting the Government from payment of
increased costs as a result of changes to contractor's accounting
practices. A contractor must follow their disclosed cost accounting
practices and failure to do so would result in a noncompliance with
their disclosed practices not GAAP. This would be consistent with the
current administrative process for resolving a noncompliance with a
disclosed practice. In addition, as noted in the guiding principles for
CAS-GAAP conformance efforts (85 FRN 15857) the Board will continue to
monitor future changes to GAAP and the FAR to identify and evaluate
their impact to CAS and revise CAS, as necessary, through the
rulemaking process. The Board will also monitor future significant
disputes related to the elimination of any CAS requirements in
conformance to GAAP, evaluate whether the Board should address them
through clarifying guidance or the rulemaking process, and take action
as necessary.

IV. CAS 409--Depreciation of Tangible Capital Assets

A. Overview and Conclusion

CAS 409 was initially published Jan. 29, 1975, at 40 FR 4259. The
purpose of CAS 409 is to provide criteria and guidance for assigning
costs of tangible capital assets to cost accounting periods and for
allocating such costs in cost objectives within such periods in an
objective and consistent manner. CAS 409 is based on the concept that
depreciation costs identified with cost accounting periods and
benefiting cost objectives within periods should be a reasonable
measure of the expiration of service potential of the tangible assets
subject to depreciation. The original preamble to the 1975 rulemaking
also noted that depreciation cost was a significant issue at the time,
and explained many contractors primarily relied on the Internal Revenue
Code (IRC) to measure depreciation costs. The IRC contained accelerated
depreciation methods for tax purposes, and the Board viewed this as
inequitable and improper cost accounting because the methods did not
match the depreciation expense over the useful life of the asset. GAAP
now prohibits using the accelerated depreciation methods in the IRC for
financial reporting purposes if the amounts do not fall within a
reasonable range of the asset's useful life. Thus, one of the principal
concerns for the promulgation of CAS 409 no longer exists. In addition,
GAAP has added significant content since the initial promulgation of
CAS 409, while CAS for the most part has not changed over the last 50
years.
As noted in the ANPRM, the comparison of CAS 409 with pertinent
GAAP content revealed significant overlap and nearly completely
equivalent requirements with the noted exceptions of CAS 409-50(e)(5),
CAS 409-50(j)(1), and CAS 409-50(j)(4). For all other requirements in
CAS 409 a comparable requirement exists in GAAP that would protect the
Government's interests and promote uniformity and consistency. The
Board has concluded

[[Page 43997]]

that reliance on GAAP would materially achieve uniformity and
consistency necessary for Government contracting. Furthermore, as
discussed in detail in Section II above, CAS 401 and the 9903.201-4 CAS
contract clauses adequately protect the Government's interests by
protecting the Government from payment of increased costs as a result
of changes to contractor's accounting practices.
In summary, the Board has concluded that CAS 409, with the
exception of CAS 409-50(e)(5), CAS 409-50(j)(1), and CAS 409-50(j)(4)
has become unnecessary to protect the Government's interests which may
be achieved through reliance on GAAP, and other CAS Standards. CAS 409-
50(e)(5) retains the current flexibility of the contracting parties to
agree on the estimated service life of individual tangible capital
assets where the unique purpose for which the equipment was acquired or
other special circumstances warrant a shorter estimated service life.
CAS 409-50(j)(1) ensure that gains and losses are properly measured and
assigned consistent with the costs of the associated depreciation
charged. CAS 409-50(j)(4) protects the government against shifting of
gains and losses associated with the disposition of tangible capital
assets transferred in other than an arms-length transaction that are
subsequently disposed of within 12. Therefore, the Board is issuing
this proposed rule that would eliminate CAS 409 and retain the
requirements of CAS 409-50(e)(5), CAS 409-50(j)(1), and CAS 409-
50(j)(4) by relocating them to a new paragraph 9904.406-50(g) instead
of maintaining an entire Standard 409. The new paragraph 9904.406-50(g)
will also include the retained requirement from CAS 404 discussed in
Section II above. The Board seeks comment on such action in this NPRM.
This action would be consistent with the Board's guiding principles
for conforming CAS to GAAP because it would eliminate CAS content to
minimize the burden on contractors while protecting the interests of
the Government. Furthermore, the Board's conclusion on CAS 409 would
align with the guiding principles to rely on coverage in GAAP when it
would materially achieve uniformity and consistency in cost accounting
without bias or prejudice to either party, rely on GAAP, and other CAS
Standards which may protect the Government's interests, and eliminate
CAS coverage no longer necessary.
The Board has not identified any instance where the elimination of
CAS 409, as proposed would result in a change to a contractor's
disclosed cost accounting practices for government contracts. With the
noted exceptions of CAS 409-50(e)(5), CAS 409-50(j)(1), and CAS 409-
50(j)(4), which would be retained, the current CAS requirements are
nearly identical to GAAP. The Board expects that contractors would
continue to follow their existing practices as they are both compliant
with CAS and GAAP. As such, having identified no cost accounting
practice changes as a result of this proposed rule any current or
future changes related to capitalization of the acquisition costs of
tangible assets would be considered unilateral as defined in 9903.201-
6(b)(2). The Board is interested in comments on this determination, and
any instances requiring further consideration by the Board.

B. Summary of Public Comments for CAS 409

V. CAS 411--Accounting for Acquisition Costs of Materials

A. Overview and Conclusion

CAS 411 was initially published on May 5, 1975, at 40 FR 19425. The
purpose of CAS 411 is to provide criteria for the accounting for
acquisition costs of material, and provisions on the use of inventory
costing methods. The majority of the CAS 411 standard has remained
static since the initial promulgation. The standard, however, was
corrected in 1992 (57 FR 34167) to make clear that it does not cover
accounting for the acquisition costs of tangible capital assets nor the
accountability for government-furnished materials.
The principal need for the promulgation of CAS 411 no longer
exists. As noted in the ANPRM, GAAP has been revised significantly with
additional content and changes in requirements since the original
promulgation of CAS 411 that has resulted in a significant overlap and
nearly completely equivalent requirements between GAAP and CAS.
For requirements in CAS 411, a comparable requirement exists in
GAAP, other CAS Standards, and FAR 31.205-26 Material costs that would
protect the Government's interests and promote uniformity and
consistency. The Board has concluded that reliance on GAAP would
materially achieve uniformity and consistency necessary for government
contracting. Furthermore, as discussed in Section II above, CAS 401 and
the 9903.201-4 CAS contract clauses adequately protect the Government's
interests by protecting the Government from payment of increased costs
as a result of changes to contractor's accounting practices.
In summary, the Board has concluded that CAS 411 has become
unnecessary to protect the Government's interests which may be achieved
through reliance on GAAP, other CAS Standards and FAR 31.205-26
Material costs. Therefore, the Board is considering a proposed rule
that would eliminate CAS 411 in its entirety. The Board seeks comment
on such action in this NPRM.
This action would be consistent with the Board's guiding principles
for conforming CAS to GAAP because it would eliminate CAS content to
minimize the burden on contractors while protecting the interests of
the Government. Furthermore, the Board's conclusion on CAS 411 would
align with the guiding principles to rely on coverage in GAAP when it
would materially achieve uniformity and consistency in cost accounting
without bias or prejudice to either party, rely on GAAP, and other CAS
Standards which may protect the Government's interests, and eliminate
CAS coverage no longer necessary.
The Board has not identified any instance where the elimination of
CAS 411 would result in a change to a contractor's disclosed cost
accounting practices for government contracts. The Board expects that
contractors would continue to follow their existing practices as they
are both compliant with CAS and GAAP. As such, having identified no
cost accounting practice changes as a result of this proposed rule any
current or future changes related to capitalization of the acquisition
costs of tangible assets would be considered unilateral as defined in
9903.201-6(b)(2). The Board is interested in comments on this
determination, and

[[Page 43998]]

any instances requiring further consideration by the Board.

B. Summary of Public Comments for CAS 411

The Board received two sets of public comments to the ANPRM related
to CAS 411 both coming from industry associations. Both of the public
respondents generally agreed with the Board's analysis and provisional
conclusion to eliminate CAS 411.

VI. Expected Impact of the Rule

The proposed rule is deregulatory in furtherance of 41 U.S.C.
1501(c), which requires the Board ensure that the Cost Accounting
Standards used by contractors rely, to the maximum extent practicable,
on commercial standards and accounting practices and systems. In
addition, 41 U.S.C. 1501(c) requires the Board to conform CAS
requirements, where practicable, to GAAP. The proposed rule would
eliminate four of the current 19 CAS and retain only the minimal
content the Board has identified as needed to protect the Government's
interest by moving it to another standard. This would remove 68 of the
72 combined individual requirements contained in these four standards.
The proposed rule will result in removal of over 10,000 words of
unnecessary regulatory text currently in place in these four standards.
Reliance on a contractor's disclosed GAAP practices for CAS purposes
significantly reduces the regulatory footprint associated with CAS and
places reliance commercial accounting practices under GAAP consistent
with 41 U.S.C. 1501(c). These change if finalized are expected to
reduce burden for contractors, external auditors, government auditors,
and oversight functions by reducing duplicative compliance
requirements.
These changes individually and in conjunction with the Board's
ongoing broader CAS-GAAP conformance efforts and modernization of the
CAS programmatic requirements are expected to simplify CAS
administration and reduce barriers to entry for non-traditional
contractors including new mid-size entities who no longer qualify as
small businesses. These actions should increase competition in federal
contracting, as envisioned by the Senate Armed Services Committee in
promoting CAS-GAAP conformance (S. Rept. 114-25 Section 811), ``The
committee is concerned that the current cost accounting standards favor
incumbent defense contractors and limit competition by serving as a
barrier to participation by non-traditional, small business, and
commercial contractors. To level the competitive playing field to
access new sources of innovation it is in the government's interest to
adopt more commercial ways of contracting, accounting, and oversight.''
The Board is interested in comments on the expected impact of this
rule, including any quantified estimates on the cost reductions and
savings expected to be achieved by the proposed elimination of CAS 404,
408, 409, and 411.

VII. Regulatory Flexibility Act

CAS Board rules do not impact small entities within the meaning of
the Regulatory Flexibility Act 5 U.S.C. 601-612. Contracts and
subcontracts with small business concerns are exempted from all CAS
requirements.

VIII. Executive Orders 12866, 13563, and 14192

Executive Orders (E.O.s) 12866 and 13563 direct agencies to assess
all costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). E.O.
13563 emphasizes the importance of quantifying both costs and benefits,
of reducing costs, of harmonizing rules, and of promoting flexibility.
This is a significant regulatory action under E.O. 12866, Regulatory
Planning and Review, dated September 30, 1993. This rule is anticipated
to be deregulatory action under E.O. 14192 based on the discussion in
the ``Expected Impact of the Rule'' section.

IX. Paperwork Reduction Act

The Paperwork Reduction Act, Public Law 96-511, does not apply to
this proposed rule because this rule imposes no paperwork burden on
offerors, affected contractors and subcontractors, or members of the
public which requires the approval of OMB under 44 U.S.C. 3501, et seq.

List of Subjects in 48 CFR 9903 and 9904

Government procurement, Cost accounting standards.

Mathew Blum,
Acting Administrator, Office of Federal Procurement Policy, and Acting
Chair, Cost Accounting Standards Board.

For the reasons set forth in the preamble, the Office of Federal
Procurement Policy proposes to amend Chapter 99 of Title 48 of the Code
of Federal Regulations as set forth below:

PART 9903--CONTRACT COVERAGE

0
1. The authority citation for part 9903 continues to read as follows:

Authority: Pub. L. 111-350, 124 Stat. 3677, 41 U.S.C. 1502.

Subpart 9903.201 [Amended]

0
2. In Sec. 9903.201-9, add paragraph (b) to read as follows:

Sec. 9903.201-9 Treatment of certain compliant cost accounting
practice changes related to conformance of CAS to GAAP.

* * * * *
(b) Conformance of CAS 408 to GAAP
The contract price and cost adjustment requirements of part 9903
are not applicable to changes directly associated with the conformance
of CAS 408 to GAAP. Changes must be disclosed and made during the
contractor's fiscal year directly following the effective date of the
final rule.

PART 9904--COST ACCOUNTING STANDARDS

0
3. The authority citation for part 9904 continues to read as follows:

Authority: Pub. L. 100-679, 102 Stat. 4056, 41 U.S.C. 422.

Subpart 9904.404--[Removed and Reserved]

0
4. Remove and reserve subpart 9904.404.

Subpart 9904.406 [Amended]

0
5. In Sec. 9904.406-50, add paragraph (g) to read as follows:

Sec. 9904.406-50 Techniques for application

* * * * *
(g) Elimination of CAS 404 and 409 as a result of CAS-GAAP
conformance by the Board resulted in the following retained content
related to asset accounting and depreciation:
(1) When gains and losses are recognized on disposition of tangible
capital assets, the gains or losses shall be considered as adjustments
of depreciation costs previously recognized and shall be assigned to
the cost accounting period in which disposition occurs. The gain to be
recognized for contract costing purposes shall be limited to the
difference between the original acquisition cost of the asset and its
undepreciated balance.
(2) Gains and losses on disposition of tangible capital assets
transferred in

[[Page 43999]]

other than arm's-length transaction and subsequently disposed of within
12 months from the date of transfer shall be assigned to the
transferor.
(3) The capitalized values of tangible capital assets acquired in a
business combination shall be assigned to these assets as follows: All
the tangible capital assets of the acquired company that during the
most recent cost accounting period prior to a business combination
generated either depreciation expense or cost of money charges that
were allocated to Federal government contracts or subcontracts
negotiated on the basis of cost, shall be capitalized by the buyer at
the net book value(s) of the asset(s) as reported by the seller at the
time of the transaction.
(4) The contracting parties may agree on the estimated service life
of individual tangible capital assets where the unique purpose for
which the equipment was acquired or other special circumstances warrant
a shorter estimated service life and where the shorter life can be
reasonably predicted.

Subpart 9904.408--[Removed and Reserved]

0
6. Remove and reserve subpart 9904.408.

Subpart 9904.409--[Removed and Reserved]

0
7. Remove and reserve subpart 9904.409.

Subpart 9904.411--[Removed and Reserved]

0
8. Remove and reserve subpart 9904.411.

[FR Doc. 2025-17472 Filed 9-10-25; 8:45 am]
BILLING CODE 3110-01-P

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