Rule2025-17480
Conformance of Cost Accounting Standards to Generally Accepted Accounting Principles for Operating Revenue and Lease Accounting
Primary source
Metadata and text below are from the Federal Register, a public-domain U.S. government work. Always verify the official published version before relying on it for any legal matter.
Published
September 11, 2025
Effective
October 14, 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 publishing, with additional clarification based on public comments from the notice of proposed rulemaking (NPRM), a final rule revising the Cost Accounting Standards (CAS) to conform them with changes in Generally Accepted Accounting Principles (GAAP) related to operating revenue and lease accounting. This final rule follows issuance of a NPRM, June 27, 2024; an advanced notice of proposed rulemaking (ANPRM), November, 5, 2020; and a Staff Discussion Paper (SDP), March 13, 2019.
Full Text
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[Federal Register Volume 90, Number 174 (Thursday, September 11, 2025)]
[Rules and Regulations]
[Pages 43942-43946]
From the Federal Register Online via the Government Publishing Office [<a href="http://www.gpo.gov">www.gpo.gov</a>]
[FR Doc No: 2025-17480]
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OFFICE OF MANAGEMENT AND BUDGET
Office of Federal Procurement Policy
48 CFR Parts 9903 and 9904
RIN 0348-AB78
Conformance of Cost Accounting Standards to Generally Accepted
Accounting Principles for Operating Revenue and Lease Accounting
AGENCY: Cost Accounting Standards Board, Office of Federal Procurement
Policy, Office of Management and Budget.
ACTION: Final rule.
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SUMMARY: The Office of Federal Procurement Policy (OFPP), Cost
Accounting Standards Board (the Board), is publishing, with additional
clarification based on public comments from the notice of proposed
rulemaking (NPRM), a final rule revising the Cost Accounting Standards
(CAS) to conform them with changes in Generally Accepted Accounting
Principles (GAAP) related to operating revenue and lease accounting.
This final rule follows issuance of a NPRM, June 27, 2024; an advanced
notice of proposed rulemaking (ANPRM), November, 5, 2020; and a Staff
Discussion Paper (SDP), March 13, 2019.
DATES: Effective date: October 14, 2025.
FOR FURTHER INFORMATION CONTACT: John L. McClung, Manager, Cost
Accounting Standards Board (telephone: 202-881-9758; email:
<a href="/cdn-cgi/l/email-protection#402a2f282e6e2c6e2d23232c352e2772002f2d226e252f306e272f36"><span class="__cf_email__" data-cfemail="f49e9b9c9ada98da99979798819a93c6b49b9996da919b84da939b82">[email protected]</span></a>).
SUPPLEMENTARY INFORMATION:
I. Background
On March 13, 2019, the Board published a Staff Discussion Paper
(SDP) (84 FR 9143) to solicit views with respect to the Board's efforts
to conform CAS requirements, where practicable, to GAAP as required by
41 U.S.C. 1501(c). Respondents were invited to comment on, among other
things, whether and how CAS may need to be modified to conform to
changes to GAAP that occurred after a related CAS was promulgated. More
specifically, the SDP asked what recommended actions, if any, the Board
should take regarding the changes in GAAP for operating revenue and
lease accounting rules. The Board recognized that since the initial
promulgation of CAS 403 (38 FR 26680, Dec. 14, 1972), numerous changes
have been made to GAAP. This growth in GAAP content presents
opportunities to modify or eliminate overlapping CAS requirements where
GAAP standards may be applied reasonably as a substitute for CAS.
Furthermore, some changes in GAAP may create inconsistencies not
contemplated during the initial promulgations of CAS requiring action
by the Board.
Public comments received on the SDP, amongst other things, urged
the Board to prioritize efforts to address changes in GAAP related to
operating revenue and lease accounting. In response to these comments,
the Board issued an advanced notice of proposed rulemaking (ANPRM) on
November 5, 2020, (85 FR 70572) that described proposed changes to the
CAS that, if adopted, would (i) align CAS with GAAP on the handling of
operating revenue and (ii) clarify CAS definitions to make clear that
GAAP changes on lease accounting are not recognized for CAS purposes.
In regards to revenue, comments received from the ANPRM agreed with
relying on GAAP for operating revenue. However, they believed the
Board's desire to retain the CAS 403 criterion regarding only utilizing
the ``fee for management contracts under which the contractor
essentially acts as an agent of the Government in the erection or
operation of Government-owned facilities,'' was unnecessary. The
commenters pointed out the additional conceptual framework GAAP
includes related to the principal versus agent relationship in
contracts with customers. In regards to lease accounting, comments
received from the ANPRM generally agreed with the need for the
definitional changes of both tangible and intangible assets to include
financing leases and exclude operating leases. However, they believed
the Board's proposed language was ambiguous and may not achieve the
desired goal of avoiding confusion or inconsistent treatment.
On June 27, 2024, the Board published the NPRM (89 FR 53575). The
NRPM made further refinements to the proposed regulatory changes based
on the public comments received from the ANPRM and additional research
and consideration by the Board. This final rule addresses the public
comments received in response to the NPRM and also reflects research
accomplished by the Board. The final rule is issued by the Board in
accordance with the requirements of 41 U.S.C. 1502(c).
II. Operating Revenue
A. Overview. The definitions of operating revenue in CAS and
revenue in GAAP are currently different. The GAAP definition of
``revenue,'' found at Financial Accounting Standards Board (FASB)
Accounting Standards Codification (ASC) 606-10-20, reads as follows:
``Inflows or other enhancements of assets of an entity or
settlements of its liabilities (or a combination of both) from
delivering or producing goods, rendering services, or other
activities that constitute the entity's ongoing major or central
operations.''
The CAS 403-30(a)(3) definition of ``operating revenue'' reads as
follows:
``. . . amounts accrued or charge[d] to customers, clients, and
tenants, for the sale of products manufactured or purchased for
resale, for services, and for rentals of property held primarily for
leasing to others. It includes both reimbursable costs and fees
under cost-type contracts and percentage-of-completion sales
accruals except that it includes only the fee for management
[[Page 43943]]
contracts under which the contractor essentially acts as an agent of
the Government in the erection or operation of Government-owned
facilities. It excludes incidental interest, dividends, royalty, and
rental income, and proceeds from the sale of assets used in the
business.''
In the NPRM, the Board stated its belief that while the underlying
definitions are worded differently, revenue as reported by contractors
in accordance with GAAP if applied for CAS purposes would achieve
materially the same result as applying the current definition of
operating revenue in CAS, thereby, achieving uniformity and
consistency. The NPRM proposed language to remove the definition of
operating revenue from CAS 403 and rely on revenue reported in
accordance with GAAP for CAS purposes. In addition, the Board stated
its belief that changes, if any, to cost accounting practices to
conform Operating Revenue to ASC 606 should be considered to be a
required change defined in accordance with 48 CFR 9903.201-6(a)(2). The
Board also contemplated an exemption for cost accounting practices, if
any, from the cost impact process for the initial conformance efforts
to align disclosed practices with ASC 606. Lastly, the Board requested
specific input on whether there are any instances where an entity might
not consider itself an agent, based on ASC 606-10-55-38 when performing
on a Government-owned contractor-operated (GOCO) contract.
B. Public comments. The Board received five sets of public comments
in response to the NPRM. Comments came from industry associations,
consulting firms, and individuals.
Comment: Four sets of comments generally agreed with the proposed
changes and basis described by the Board in the NPRM.
Response: Based on public comments and additional research
conducted by the Board, the Board continues to believe that the
definition of operating revenue in CAS and revenue in GAAP are
essentially equivalent. Furthermore, the Board has not identified any
material impact that would occur if revenue as reported in accordance
with GAAP was used for CAS purposes. On this basis, the Board has
concluded that the CAS 403 definition of operating revenue has become
unnecessary to protect the Government's interests and may be deleted in
its entirety to allow for reliance on revenue reported in accordance
with GAAP for CAS purposes.
Comment: One commentor believes the Board should focus more on
recommendations of the Section 809 Panel instead of CAS-GAAP
conformance efforts. The commentor asserts 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: Three sets of comments responded to the Board's query in
the NPRM for specific input on whether there are any instances where an
entity might not consider itself an agent, based on ASC 606-10-55-38,
when performing on a GOCO contract. One commentor was unaware of any
circumstance where this would be the case. Another commentor asserted
there could be instances where an entity might not consider itself an
agent based on ASC 606-10-55-38, when performing a GOCO contract. The
hypothetical provided was an entity producing a good at a GOCO facility
and then placing it in its own inventory to be sold later to the
government or a third party. In this and other instances where the
entity is not an agent, the commentor concludes that the special
allocation rules should be used to accommodate exceptions to GAAP when
the use of GAAP for determining revenue does not result in an equitable
allocation to GOCO segments. Finally, one commentor raised concerns
that the ``privity of contract'' concept could be distorted by prime
contractors in making a determination of Agency status for purposes of
revenue recognition. They stated that a GOCO agency arrangement should
not be the basis to combine otherwise distinct performance obligations.
Response: As noted in the NPRM, the current qualifying language in
the definition of operating revenue in CAS relates to contracts where
``the contractor acts essentially as an agent of the Government in the
erection or operation of Government-owned facilities.'' The Board notes
that the scenario highlighted by the public appears to be related to
production or both production and operation occurring at a GOCO
facility. In cases where both activities are occurring on a single
contract, these two separate and distinct performance obligations would
allow for revenue calculations in accordance with ACS 606 that would be
consistent with the current application of CAS. The Board acknowledges
as a factual matter that special allocation rules exist within CAS.
These special allocation rules are designed for the parties to consider
the unique facts and circumstances, and negotiate if appropriate.
Furthermore, as also noted in the NPRM, while GAAP does not provide
an express limitation in measuring revenue, it does recognize a
conceptual framework consistent with the intent of the CAS 403
limitation. In determining revenue, GAAP, specifically FASB ASC 606--
Revenue from contracts with customers, requires an entity to consider
whether it is acting as a principal or an agent for each specified good
or service promised to a customer. ASC 606-10-55-38 reads as follows:
``An entity is an agent if the entity's performance obligation
is to arrange for the provision of the specified good or service by
another party. An entity that is an agent does not control the
specified good or service provided by another party before that good
or service is transferred to the customer. When (or as) an entity
that is an agent satisfies a performance obligation, the entity
recognizes revenue in the amount of any fee or commission to which
it expects to be entitled in exchange for arranging the specified
goods or services to be provided by the other party. An entity's fee
or commission might be the net amount of consideration that the
entity retains after paying the other party the consideration
received in exchange for the goods or services to be provided by
that party.''
The relationship of a contractor performing on contracts where
``the contractor acts essentially as an agent of the Government in the
erection or operation of Government-owned facilities'' is similar
enough to that of an agent as described in ASC 606-10-55-38, that the
Board has concluded that a government contractor would record revenue
the same using GAAP, as it would under CAS. For these reasons, the
final rule deletes the definition of operating revenue in its entirety
from CAS 403 and relies on revenue as reported in accordance with GAAP
when needed for CAS purposes.
Lastly, in regards to the concerns raised related to privity of
contract, the Board notes that the reliance of revenue as reported by
GAAP for CAS purposes does not change, nor should it be construed as
changing, any other legal or contractual requirement(s).
Comment: Three commenters addressed the potential cost impact
implications of conformance related to the definition of operating
revenue. Two believed the proposed changes related to operating revenue
fall under the
[[Page 43944]]
definition of a required change. They all also believed the Board
should exempt changes, if any, related to conformance efforts from the
cost impact process by adding to the existing exemption for External
Restructuring (see 48 CFR 9903.201-8). The main rationale provided was
that the CAS/GAAP conformance efforts are not expected to have a
material impact on the Government or contractor; however, the
administrative burden associated with preparing and evaluating cost
impact proposals could be significant. For example, one comment noted
that, since the CAS definition of ``operating revenue'' and the GAAP
definition of ``revenue'' are essentially the same, the expectation is
that there would be no cost impact to the Government or contractors as
a result of the change. In addition, they envision that any changes to
a contractor's Disclosure Statement as a result of this change would
most likely be an administrative wording change and not a change in
cost accounting practice. Another commenter stated they understood why
the CAS Board would determine that there is no need for a cost impact
to limit the administrative burden associated with immaterial changes.
However, this commentor suggested the CAS Board be guarded in
proffering whether a cost impact is required, even in this case, as it
could lead to contracting parties seeking the CAS Board to opine on
individual cost accounting changes. The commentor instead suggested
that the Board amend its rules to provide additional general principles
on accounting changes so that each contracting officer could determine
whether a cost impact is required.
Response: The Board has concluded that proposed changes fall under
the definition of a required change. Because the CAS and GAAP
definitions of operating revenue are essentially the same, the Board
does not anticipate any material impact to the Government or
contractors as a result of this change. The Board believes it would not
be prudent to make an across-the-board determination that all future
CAS/GAAP conformance efforts are required changes, and will continue to
evaluate each individual regulatory action related to CAS/GAAP
conformance and state its determination as part of the rulemaking.
Leaving these determinations to individual contracting officers could
cause unnecessary friction, confusion or inconsistency related to the
treatment of CAS/GAAP conformance. However, as noted in final
regulatory text the exemption only applies to current disclosed
practices where a contractor is required to use the three-factor
formula prescribed in CAS 403 for residual expenses, or where their
current disclosed and compliant accounting practice includes revenue as
a basis for allocating costs to cost objectives. Any change a
contractor makes related to their current practice that would make a
change to or from using revenue as a basis for allocation would be
treated as a unilateral change and subject to the normal cost impact
and resolution process.
C. Final Rule. Based on public comment and additional research
conducted by the Board, the Board has concluded the definition of
operating revenue in CAS and revenue in GAAP are essentially
equivalent. The CAS 403 definition of operating revenue has become
unnecessary to protect the Government's interests and, therefore, is
deleted in its entirety to allow for reliance on revenue as reported in
accordance with GAAP for CAS purposes. The Board has also concluded
that properly disclosed accounting changes, if any, related to the
elimination of the definition of operating revenue to rely on revenue
as reported in accordance with GAAP ASC 606 is a required change as
described at 48 CFR 9903.201-4(a), and exempt from the cost impact
process.
These actions are consistent with the Board's guiding principles
for conforming CAS to GAAP because it eliminates CAS content minimizing
burden on contractors while protecting the interests of the Government.
Furthermore, relying on GAAP for the definition of operating revenue in
CAS 403 aligns with the guiding principles to rely on coverage in GAAP
when it materially achieves uniformity and consistency in cost
accounting without bias or prejudice to either party and protects the
Government's interests.
Therefore, the Board is issuing a final rule that (i) modifies CAS
403 to rely on GAAP for revenue and (ii) exempts changes directly
associated with conformance of Operating Revenue to revenue reported in
accordance with GAAP from the contract price and cost adjustment
requirements of part 9903. The final rule also removes the term
``operating'' in relation to revenue in CAS 403. The Board has
concluded this change is necessary to avoid confusion and make clear
that the definition of revenue in GAAP is consistent with ``operating
revenue'' as historically used in CAS.
III. Lease accounting
A. Overview. Since the initial promulgations of CAS 414 and 417,
changes have been made to GAAP related to lease accounting, creating
confusion about which assets are included in the calculations of
Facilities Capital Cost of Money (FCCOM). The classification of
``right-of-use'' (ROU) assets, formerly known as operating leases, as
assets and liabilities, required clarification from the Board to avoid
confusion or inconsistent treatment. In the NPRM, the Board proposed
clarifications to the CAS definitions and handling of tangible and
intangible assets to make clear that GAAP requirements to classify
``right-of-use'' assets on an entity's balance sheet should not be
recognized as assets for the purpose of computing FCCOM in CAS 414 and
CAS 417.
B. Public comments. The Board received five sets of public comments
in response to the NPRM. Comments came from industry associations,
consulting firms, and individuals. Three sets of these comments
discussed the substance of the rule related to lease accounting.
Comment: All commenters supported the Board's intent to clarify
which assets should be included in the calculations of FCCOM. However,
one commentor noted confusion in terminology based on the proposed
changes included in the NPRM. They asserted no changes are needed to
the existing definitions of tangible capital asset in 48 CFR 9904.403-
30(a)(5), 9904.404-30(a)(4), 9904.409-30(a)(3), 9904.414-30(a)(5), and
9904.417-30(a)(2). As a result, they recommended the Board limit the
definition of ROU assets to intangible assets in 48 CFR 9904.414-
30(a)(4) and 9904.417-30(a)(1). They are concerned that changes
proposed in the NPRM could be construed as applying the financial
accounting rules governing tangible capital assets to ROU assets
acquired under finance leases. They noted that a ROU asset, by
definition, is an intangible asset acquired in a lease. It is the
right, obtained under a lease, to use the underlying asset. While a
finance lease generally includes a transfer of ownership of the
underlying asset, it is still considered an intangible asset until that
transfer occurs. They noted that with the current intangible asset
definition, there is no need to distinguish ROU assets acquired in
finance leases from ROU assets acquired under operating leases. They
suggested the Board could accomplish the desired outcome and avoid
confusion by simply adding, ``[i]t includes right-of-use assets
acquired under leases'' to the end of the existing CAS definition of
intangible asset. They also suggested that if the Board adopts the
approach of revising only the definition of intangible capital asset to
address ROU assets, a conforming change to CAS 9904.403-
[[Page 43945]]
50(c)(1)(iii) would be needed to add the value of ROU assets acquired
in finance leases to the three-factor formula.
Response: The Board appreciates the breath and careful
consideration of unintended consequences by commentors. After
consideration of the concerns raised and additional research, the Board
concurs that the changes should be limited to the definition of
intangible assets with the recommended conforming change to the three-
factor formula.
Comment: Another commentor recommended the Board expand the scope
of the NPRM to address International Financial Reporting Standards
(IFRS) lease accounting requirements. They are concerned that foreign
entities subject to IFRS will be subject to increased unallowable
interest expense as a result of IFRS requirement to recognize interest
expense as part of ROU asset lease payments. They acknowledge that
foreign concerns are exempt from much of CAS, but note cost of money
can be recovered under FAR 31.205-10. FAR 31.205-10(b)(1) requires CAS
414 be followed when cost of money is proposed and claimed. The
requirement to treat all leases as finance (capital) leases under IFRS
will result in contractors applying IFRS having unallowable interest
and not allow the net book value of right-to-use leased assets to be
included in the cost of money calculation. They recommended the Board
provide for the recognition of interest for CAS purposes. They believe
this will not only address the current issue faced by contractors
applying IFRS, but it will also address any future changes made by the
FASB as the GAAP and IFRS are brought into conformity with each other.
Response: The Board appreciates this comment and the underlying
concerns raised. However, the Board does not consider them to be within
the scope of this rulemaking and has not incorporated them into the
final rule. The Congressional mandate and focus of the Board are on
conformance of CAS with GAAP, not IFRS. In regards to concerns about
potential future GAAP changes to achieve alignment with IFRS the Board
has commitment to monitor future changes to GAAP and FAR to identify
and evaluate their impact to CAS and revise CAS as necessary, through
the rulemaking process (see 85 FR 15817 March 19, 2020).
Comment: One commentor asserted conformance efforts related to
lease accounting should be treated as required and exempted from the
cost impact process.
Response: As noted in the NPRM, the exemption contemplated by the
Board was limited to the potential changes with conformance of the
definition of Operating Revenue. The Board has not identified any
instance where the clarifications provided to the treatment of ROU
leases for CAS purposes would trigger any accounting practices changes
by a contractor. The commentor did not dispute this or provide any
example for the Board to consider. As such, having identified no cost
accounting practice changes as a result of the treatment of ROU leases
the exemption in the final rule is limited to conformance of the
definition of Operating Revenue, and any changes a contractor initiates
unilaterally related to asset accounting would continue to be subject
to disclosure and the established cost impact process.
C. Final Rule. Based on public comment and additional research
conducted by the Board, the Board has concluded that clarifications to
CAS are necessary to avoid confusion or inconsistent treatment about
which assets should be included in the calculations of FCCOM as a
result of changes in GAAP related to lease accounting. Therefore, the
Board is issuing a final rule clarifying which assets should be
included in the calculations of FCCOM, and conforming clarifications
related to the calculation of the three-factor formula allocation base.
The final rule adopts language in the NPRM with additional
clarification. The Final Rule limits the changes of definitions to only
intangible assets in 48 CFR 9904.414-30(a)(4) and 9904.417-30(a)(1),
and makes a conforming change in 48 CFR 9904.403-50(c)(1)(iii). The
Final rule also adds language in Appendix A. of 9904.414, in the
Instructions for Form CASB CMF to reflect these changes.
IV. Expected Impact of the Rule
The final rule is deregulatory in furtherance of 41 U.S.C. 1501(c),
which requires the Board ensure that the cost accounting standards used
by Federal 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 elimination of ``operating revenue'' as
historically defined in CAS and the reliance of ``revenue'' reported in
compliance with GAAP for CAS purposes reduces the regulatory footprint
associated with CAS and places reliance on commercial accounting
practices under GAAP. This change is expected to reduce burden for
contractors, external auditors, and government auditors and oversight
functions by reducing the need for duplicative compliance activity
related to revenue calculations. The rule also clarifies CAS
definitions to make clear that GAAP changes on lease accounting are not
recognized for CAS purposes. This clarification will avoid unnecessary
ambiguity, friction and disputes between the parties. These changes,
both individually and in conjunction with the Board's ongoing broader
CAS/GAAP conformance efforts and modernization of CAS programmatic
requirements, are expected to simplify CAS administration and reduce
barriers to entry for nontraditional contractors, including new mid-
size entities who no longer qualify as small businesses. These actions
should promote greater 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''.
V. 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.
VI. 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 a
deregulatory under E.O. 14192 based on the discussion in the ``Expected
Impact of the Rule'' section.
[[Page 43946]]
VII. Paperwork Reduction Act
The Paperwork Reduction Act, Public Law 96-511, does not apply to
this 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 U.S.C. 3501, et seq.
List of Subjects in 48 CFR Parts 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 amends 48 CFR parts 9903 and 9904 as set forth
below:
PART 9903--CONTRACT COVERAGE
0
1. The authority citation for part 9903 continues to read as follows:
Authority: Public Law 111-350, 124 Stat. 3677, 41 U.S.C. 1502.
0
2. Add section 9903.201-9 to read as follows:
Sec. 9903.201-9 Treatment of certain compliant cost accounting
practice changes related to conformance of CAS to GAAP.
(a) Conformance of CAS Operating Revenue to GAAP Revenue. The
contract price and cost adjustment requirements of part 9903 are not
applicable to changes directly associated with conformance of operating
revenue to revenue reported in accordance with GAAP. This exemption
only applies to current disclosed practices where a contractor is
required to use the three-factor formula prescribed in CAS 403 for
residual expenses, or where their current disclosed and compliant
accounting practice includes revenue as a basis for allocating costs to
cost objectives. Any change a contractor makes related to their current
practice that would make a change to or from using revenue as a basis
for allocation would be treated as a unilateral change and subject to
the normal cost impact and resolution process.
(b) [Reserved].
Sec. 9903.301 [Amended]
0
3. Section 9903.301 is amended in paragraph (a) by removing the
definition ``operating revenue''.
PART 9904--COST ACCOUNTING STANDARDS
0
4. The authority citation for part 9904 continues to read as follows:
Authority: Pub. L. 100-679, 102 Stat. 4056, 41 U.S.C. 422.
Sec. 9904.403-30 [Amended]
0
5. Section 9904.403-30 is amended by removing and reserving paragraph
(a)(3).
Sec. 9904.403-40 [Amended]
0
6. Section 9904.403-40 is amended by removing the word ``operating'' in
paragraph (c)(2) wherever it appears.
0
7. Section 9904.403-50 is amended by revising paragraphs (c)(1)(ii) and
(c)(1)(iii) to read as follows:
Sec. 9904.403-50 Techniques for application.
* * * * *
(c) * * *
(1) * * *
(ii) The percentage of the segment's revenue to the total revenue
of all segments. For this purpose, the method used for determining
revenue for financial accounting shall be used. The revenue, however,
of any segment shall include amounts charged to other segments and
shall be reduced by amounts charged by other segments for purchases.
(iii) The percentage of the average net book value of the sum of
the segment's tangible capital assets, plus right-of-use assets
acquired in finance leases, plus inventories to the total average net
book value of such assets of all segments. Property held primarily for
leasing to others shall be excluded from the computation. The average
net book value shall be the average of the net book value at the
beginning of the organization's fiscal year and the net book value at
the end of the year.
* * * * *
0
8. Section 9904.414-30 is amended by revising paragraph (a)(4) to read
as follows:
Sec. 9904.414-30 Definitions.
(a) * * *
(4) Intangible capital asset means an asset that has no physical
substance, has more than minimal value, and is expected to be held by
an enterprise for continued use or possession beyond the current
accounting period for the benefits it yields. It includes right-of-use
assets acquired under leases.
* * * * *
0
9. Appendix A to 9904.414 is amended by revising the paragraph under
the undesignated center heading ``Recorded, Leased Property,
Corporate,'' to read as follows:
Appendix A to 9904.414--Instructions for Form CASB CMF
* * * * *
Recorded, Leased Property, Corporate
The net book value of facilities capital items in this column
shall represent the average balances outstanding during the cost
accounting period. This applies both to items that are subject to
periodic depreciation or amortization and also to such items as land
that are not subject to periodic write-offs. Unless there is a major
fluctuation, it is adequate to ascertain the net book value of these
assets at the beginning and end of each cost accounting period, and
to compute an average of the beginning and ending values.
``Recorded'' facilities are the capital items owned by the
contractor, carried on the books of the business unit, and used in
its regular business activity. ``Leased property'' is the
capitalized value of leases for which constructive costs of
ownership are allowed in lieu of rental costs under Government
procurement regulations, including right-of-use assets acquired in a
finance lease, but excluding right-of-use assets acquired in an
operating lease. Corporate or group facilities are the business
unit's allocable share of corporate-owned and leased facilities. The
net book value of items of facilities capital which are held or
controlled by the home office shall be allocated to the business
unit on a basis consistent with the home office expense allocation.
* * * * *
0
10. Section 9904.417-30 is amended by revising paragraph (a)(1) to read
as follows:
Sec. 9904.417-30 Definitions.
(a) * * *
(1) Intangible capital asset means an asset that has no physical
substance, has more than minimal value, and is expected to be held by
an enterprise for continued use or possession beyond the current
accounting period for the benefits it yields. It includes right-of-use
assets acquired under leases.
* * * * *
[FR Doc. 2025-17480 Filed 9-10-25; 8:45 am]
BILLING CODE 3110-01-P
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</html>Indexed from Federal Register on September 11, 2025.
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