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plan in order to provide a minimum month period is allocable to cost objectives of t ly retirement income to each participant. period. If such payments cannot be C Pursuant to $ 412.50(a)(9), the two planspelled, the amount of assignable cost all shall be considered as a single plan for pur- ble to cost objectives of that period is lir poses of this Standard. Because the effected to the amount of benefits actually p of the supplemental fund is to provide de- in that period ($24,000). fined-benefits for the plan's participants, the provisions of this Standard relative to (3) Contractor G has two defined-ben, defined-benefit pension plans shall be appli pension plans which provide for fixed dol cable to the combined plan.

payments to hourly employees. Under C (b) Measurement of pension cost. (1) Con

plan, the contractor's actuary believes ti tractor E has a pension plan whose costs are

the contractor will be required to incre: assigned to cost accounting periods by use the level of benefits by specified perce of an actuarial cost method which does notages over the next several years. In calcul separately identify actuarial gains and ing pension costs, the contractor may r losses or the effect on pension cost resulting assume future benefits greater than th from changed actuarial assumptions. If this

currently required by the plan. With rega

currently required by the plan. Wi cost method is used to measure costs for fi to the second plan, a collective bargaini nancial accounting purposes, it may be used agreement negotiated with the employe for purposes of this Standard, provided that

labor union provided that pension benef the contractor develops the supplementary

will increase by specified percentages ov information set forth in § 412.50(b)(2)(iii) re

the next several years. Because the il garding such gains and losses and changed

proved benefits are required to be made, tl actuarial assumptions. In addition, the con

contractor can consider such tractor must develop an actuarial liability

increase determined by a projected benefit cost

benefits in computing pension costs for ti method set forth in $ 412.50(b)(1). If the re

current cost accounting peric sultant actuarial liability is less than the

(§ 412.50(b)(6)). value of the pension fund, the pension cost

(c) Assignment of pension cost. Contract computed for the cost accounting period must be reduced by that amount

H has a trusteed pension plan for its sal: ($ 412.50(b)(2)(ii)).

ried employees. It computes $1 million

pension cost for a cost accounting perio (2) For a number of years Contractor F

Pursuant to the funding provisions of th has had a pay-as-you-go pension plan which

Employee Retirement Income Security Ac provides for payments of $200 a month to

of 1974, the company must fund at leas employees after retirement. The contractor is currently making such payments to sever

$800,000. Because liquidation of the liabilit al retired employees and charges such pay

for the portion of pension cost required b ments against current income as its pension

law to be funded ($800,000) can be com cost. For the current cost accounting period. pelled, such cost is allocable to cost objec the contractor paid benefits totaling tives of the period, in accordance wit] $24,000. Contractor F's method of account. § 412.40(c). If Contractor H can be com ing for pension cost does not comply with pelled by the trustee or the plan partici the provisions of this Standard relative to pants to fund the remaining $200,000, the li pay-as-you-go plans as set forth in ability therefor is also allocable to cost ob $$ 412.40(c) and 412.50(b)(4). The contractor jectives of that period. should:

(i) Compute, by use of an actuarial cost $ 412.70 Exemptions. method, its actuarial liability for benefits earned by plan participants. This entire lia None for this Standard. bility is always unfunded for a pay-as-yougo plan.

§ 412.80 Effective date. (ii) Compute a level amount which, includ.

(a) The effective date of this Standard is ing an interest equivalent, would amortize the unfunded actuarial liability over a

January 1, 1976 (40 FR 58281, December 16, period of no less than 10 or more than 40

1975). years.

(b) This Standard shall be followed by (iii) Compute, by use of the actuarial cost each contractor on or after the start of his method selected, a normal cost for the

next cost accounting period beginning after period. The sum of paragraphs (b)(2) (ii)

the receipt of a contract to which this Cost and (iii) of this section represents the

Accounting Standard is applicable. amount of pension cost assignable to the period. If payment of benefits earned by (41 FR 47244, Oct. 28, 1976) plan participants can be compelled, the entire amount of cost assignable to the

§ 1-3.1220-13 (Reserved)

$ 1-3.1229-14 Cost of money as an element

of the cost of facilities capital. PART 414-Cost ACCOUNTING STANDARD

COST OF MONEY AS AN ELEMENT OF THE

COST OF FACILITIES CAPITAL See. 414.10 General applicability. 414.20 Purpose. 414.30 Definitions. 414.40 Fundamental requirement. 414.50 Technique for application. 414.60 Illustrations. 414.70 Exemptions. 414.80 Effective date.

AUTHORITY: Sec. 719 of the Defense Production Act of 1950, as amended, Pub. L. 91379, 50 USC App. 2168.

SOURCE: 41 FR 22241, June 7, 1976, unless otherwise noted. $ 414.10 General applicability.

General applicability of this Cost ACcounting Standard is established by $ 331.30 of the Board's regulations on applicability, exemption, and waiver of the requirement to include the Cost Accounting Standards contract clause in negotiated defense prime contracts and subcontracts (4 CFR 331.30). $ 414.20 Purpose.

The purpose of this Cost Accounting Standard is to establish criteria for the measurement and allocation of the cost of capital committed to facilities as an element of contract cost. Consistent application of these criteria will improve cost measurement by providing for allocation of cost of contractor investment in facilities capital to negotiated contracts. | 414.30 Definitions.

(a) The following definitions of terms which are prominent in this Standard are reprinted from Part 400 of this chapter for convenience. Other terms which are used in this Standard and are defined in Part 400 of this chapter have the meanings ascribed to them in that part unless the text demands a different definition or the definition is modified in paragraph (b) of this section:

(1) Business Unit. Any segment of an organization, or an entire business organiza tion which is not divided into segments.

(2) Cost of Capital Committed to Facilities. An imputed cost determined by apply. ing a cost of money rate to facilities capital.

(3) Facilities Capital. The net book value of tangible capital assets and of those intangible capital assets that are subject to amor tization.

(4) Intangible Capital Asset. 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.

(5) Tangible Capital Asset. An asset that has physical substance, 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 services it yields.

(b) The following modifications of definitions set forth in Part 400 of this chapter are applicable to this Standard: None. $ 414.40 Fundamental requirement.

(a) A contractor's facilities capital shall be measured and allocated in accordance with the criteria set forth in this Standard. The allocated amount shall be used as a base to which a cost of money rate is applied.

(b) The cost of money rate shall be based on interest rates determined by the Secretary of the Treasury pursuant to Pub. L. 9241 (85 Stat. 97).

(c) The cost of capital committed to facilities shall be separately computed for each contract using facilities capital cost of money factors computed for each cost accounting period. § 414.50 Techniques for application.

(a) The investment base used in computing the cost of money for facilities capital shall be computed from accounting data used for contract cost purposes. The form and instructions stipulated in this Standard shall be used to make the computation.

(b) The cost of money rate for any cost accounting period shall be the arithmetic mean of the interest rates specified by the Secretary of the Treasury pursuant to Pub. L. 92-41 (85 Stat. 97). Where the cost of money must be determined on a prospective basis the cost of money rate shall be based on the most recent available rate published by the Secretary of the Treasury.

(c)(1) A facilities capital cost of money factor shall be determined for each indirect cost pool to which a significant amount of facilities capital has been allocated and which is used to allocate indirect costs to final cost objectives.

(2) The facilities capital cost of money factor for an indirect cost pool shall be determined in accordance with Form CASBCMF, and its instructions which are set forth in Appendix A. One form will serve for all the indirect cost pools of a business unit.

(3) For each CAS-covered contract, the applicable cost of capital committed to facilities for a given cost accounting period is the sum of the products obtained by multiplying the amount of allocation base units (such as direct labor hours, or dollars of total cost input) identified with the contract for the cost accounting period by the facili

ties capital cost of money factor for the corresponding indirect cost pool. In the case of process cost accounting systems the contracting parties may agree to substitute an appropriate statistical measure for the allocation base units identified with the contract.

$ 414.60 Ilustrations.

The use of Form CASB-CMF and other computations anticipated for this Cost ACcounting Standard are illustrated in Appen. dix B.

on price as shown on the contractor's sign, certificate of current cost or pricing dat precedes the effective date of this Standar

(b) This Standard shall not apply whei compensation for the use of tangible capiti assets is based on use rates or allowanci such as provided by the provisions of Fede al Management Circular 73-8 (Cost Princ ples for Educational Institutions), Federa Management Circular 74-4 (Principles fa Determining Costs Applicable to Grants an Contracts with State and Local Govern ments), § 15.402-1(a) of the Armed Service Procurement Regulation, or other appropri ate Federal procurement regulations. $ 414.80 Effective date.

The effective date of this Standard is Oc tober 1, 1976 (41 FR 37091, September 2 1976).

$ 414.70 Exemption.

(a) This Standard shall not apply to any prime contract or subcontract providing that (1) the date of award of such contract, or (2) if the contractor has submitted cost of pricing data, the date of final agreement

[blocks in formation]

rate-pct

Accumulation

and direct
distribution
of N.B.V.

Allocation of undistributed,

basis of allocation

Total net book value, cols. 2+3

Cost of money

for the cost
accounting

period,
cols. 1x4

Allocation

base for
the period,

in unit(s)
of measure

Facilities
capital cost
of money

factors,
cols. 5-6

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APPENDIX A

cost pool which is used to allocate indirect

costs to final cost objectives, are listed INSTRUCTIONS FOR FORM CASB-CMF

against the applicable pools and are classi

fied as “distributed." "Undistributed" is the Purpose

remainder of the business unit's facilities The purpose of this form is to (a) accumu- capital. The sum of "distributed" and "unlate total facilities capital net book values distributed" must also correspond to the allocated to each business unit for the con amount shown on the "total" line. tractor cost accounting period and (b) con- Allocation of Distributed.-List in the narvert those values to facilities capital cost of rative column all the overhead and G&A exmoney factors applicable to each overhead pense pools to which "distributed" facilities or G&A expense allocation base employed capital items have been allocated. Enter the within business unit.

corresponding amounts in (Col. 2). The sum Basis

of all the amounts shown against specific

overhead and G&A expense pools must corAll data pertain to the cost accounting respond to the amount shown in the “disperiod for which the contractor prepares tributed" line. overhead and G&A expense allocations. The

Allocation of Undistributed (Col. 3) cost of money computations should be compatible with those allocation procedures. Business unit “undistributed" facilities More specifically, facilities capital values are allocated to overhead and the G&A exused should be the same values that are pense pools on any reasonable basis that apused to generate depreciation or amortiza proximates the actual absorption of deprecition that is allowed for Federal Government ation or amortization of such facilities. For contract costing purposes; land which is in instance, the basis of allocation of undistribtegral to the regular operation of the busi uted assets in each business unit between, ness unit shall be included.

e.g., engineering overhead pool and the

manufacturing overhead pool, should be reApplicable Cost of Money Rate (Col. 1)

lated to the manner in which the expenses Enter here the rate as computed in ac generated by these assets are allocated becordance with § 414.50(b).

tween the two overhead pools. Detailed Accumulation and Direct Distribution of

analysis of this allocation is not required

where essentially the same results can be Net Book Value (Col. 2)

obtained by other means. Where the cost Recorded, Leased Property, Corporate. - accounting system for purposes of GovernThe net book value of facilities capital items ment contract costing uses more than one in this column shall represent the average "charging rate" for allocating indirect costs balances outstanding during the cost ac accumulated in a single cost pool, one reprecounting period. This applies both to items sentative base may be substituted for the that are subject to periodic depreciation or multiplicity of bases used in the allocation amortization and also to such items as land process. The net book value of service that are not subject to periodic write-offs. center facilities capital items appropriately Unless there is a major fluctuation, it will allocated should be included in this column. be adequate to ascertain the net book of The sum of the entries in Column 3 is equal these assets at the beginning and end of to the entry in the undistributed line, each cost accounting period, and to compute Column 2. an average of those two sets of figures. "Re- A supporting work sheet of this allocation corded" facilities are the facilities capital should be prepared if there is more than items owned by the contractor, carried on one service center or other similar “intermethe books of the business unit and used in diate" cost objective involved in the realloits regular business activity. “Leased proper cation process. ty" is the capitalized value of leases for Alternative Allocation Process-As an alwhich constructive costs of ownership are ternative to the above allocation process all allowed in lieu of rental costs under Govern the undistributed assets for one or more ment procurement regulations. Corporate or service centers or similar intermediate cost group facilities are the business unit's allo- objectives may be allocated to the G&A excable share of corporate-owned and leased pense pool. Consequently, the cost of money facilities. The net book value of items of for these undistributed assets will be distribfacilities capital which are held or con uted to the final cost objectives on the same trolled by the home office shall be allocated basis that is used to allocate G&A expense. to the business unit on a basis consistent This procedure may be adopted for any cost with the home office expense allocation. accounting period only when the contract

Distributed and Undistributed.-All facili- ing parties agree (a) that the depreciation ties capital items that are identified in the or amortization generated by these undiscontractor's records as solely applicable to tributed assets is immaterial or (b) that the an organizational unit corresponding to a results of this alternative procedure are not specific overhead, G&A or other indirect likely to differ materially from those which

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