chapter to the extent of performance at such minimum rates.

(3) In any case in which a contract is performed in part at minimum rates established by the Civil Aeronautics Board, and in part at rates in excess of such minimum rates, the portion of the contract which is performed at rates in excess of such minimum rates will not be considered exempt under subparagraph (1) or (2) of this paragraph. Exemption of any such portion will be determined in accordance with the procedures described in subparagraph (4) of this paragraph.

(4) In any case in which the Air Force has not advised the Board that a contract was awarded at minimum rates established by CAB, and the contractor has not furnished a certification to that effect but claims an exemption of a contract for air transportation, the contractor will be asked to furnish a copy of the contract involved, a copy of the tariff with which the contract rate is to be compared, and an evaluation of any benefits available to the contractor under the contract. When received, such evaluation will be transmitted to the appropriate Air Force authority, to determine whether the contractor has evaluated all benefits under the contract, and, if so, whether such evaluation is fair and reasonable. If the Board concludes that the contract rate, aggregated with the prorated fair value of any Governmentfurnished benefits or other advantages, does not exceed the comparable regulated rate, the contract will be considered exempt under § 1453.3 (e) (2) (ii) of this chapter.

(f) In order that exemption claims may be processed expeditiously, contractors are urged to observe the foregoing procedures and to avoid delay in furnishing required information.

§ 1499.2-18 Renegotiation Bulletin No. 18: Concurrent renegotiation.

(a) Section 105(a) of the act requires consolidated renegotiation upon the request of an affiliated group of contractors who consent to the Board's regulations, and authorizes it in the case of a related group. The Board has also authorized, in certain circumstances, consideration of commonly-owned contractors on a group basis without the formalities of consolidation. This is the procedure

known as "concurrent renegotiation." In concurrent renegotiation, a loss or profit deficiency of one member of a group can be offset against excessive profits of any other member or members.

(b) The allowance and conduct of concurrent renegotiation will be subject to the following rules and conditions: (1) Contractors desiring concurrent renegotiation for a fiscal year shall file a request therefor with the Board on or before the first date on which any member of the group files the Standard Form of Contractor's Report for such fiscal year. The Board may grant requests filed after that date if no inconvenience to the Board will result (cf. § 1464.7 (a) of this chapter). The Board may conduct concurrent renegotiation of contractors upon its own motion if, in the opinion of the Board, such treatment is necessary or appropriate, but the Board will not do so in any case in which any member of the group sustained a renegotiation loss unless such member files a Waiver of Loss Carryforward as provided in subparagraph (5) below.

(2) Notwithstanding any other provisions of this section, the allowance of concurrent renegotiation to any group of contractors is subject to the discretion of the Board. Thus, even if the conditions prescribed in subparagraph (3) below exist, the Board in its discretion may deny concurrent renegotiation in a particular case.

(3) Concurrent renegotiation will not be allowed unless (i) all members of the group have the same fiscal year and were members of the group for such entire fiscal year, except that any differences resulting from the organization or dissolution of a member during such fiscal year will be disregarded; and (ii) all members of the group would, upon their request, be allowed consolidated renegotiation as a group for such fiscal year (see §§ 1464.2 and 1464.4 of this chapter).

(4) A renegotiation loss sustained in a prior fiscal year by a member of the group will be allowed as a carryforward to the concurrent renegotiation of the group for the fiscal year under review only if the members of the group would have qualified for consolidated renegotiation in the loss year; and the aggregate amount so allowed will be limited

to the amount, if any, which would have been the consolidated renegotiation loss of the group in the loss year (cf. § 1464.12(d) (2) of this chapter).

(5) With the request for concurrent renegotiation, each loss member of the group shall file, in form acceptable to the Board, a waiver of any right to carry forward its loss, except to the same extent as that provided in § 1464.12(c) of this chapter for a contractor who was a loss member of a consolidated group in the loss year. The Board will not permit a loss to be used once in offsetting profits within the group for the year in which the loss was sustained, and then used a second time as a carryforward to the years following the loss year. Thus, as in consolidated renegotiation, both the profit deficiency of a loss member, as well as the loss of such member, will be included in the concurrent renegotiation for the loss year. The waiver shall be in substantially the following form:

Waiver of Loss Carryforward

A. The undersigned is a member of a group of contractors requesting concurrent renegotiation for the fiscal year of the group ended

B. The undersigned sustained a renegotiation loss, as that term is defined in section 103 (m) (2) (B) of the Renegotiation Act of 1951, ended

amended, for its fiscal year

accrued or paid or incurred in the fiscal year to which such items are to be attributed in accordance with the method of accounting employed by the contractor in determining net income for Federal income tax purposes."

(b) For renegotiation purposes, the effort of the Board is to match sales and costs as much as practicable in order to reflect renegotiable profits properly. In some cases, although a contractor's method of accounting may be acceptable for Federal income tax purposes, it may not be suitable for renegotiation purposes because it does not adequately match sales and costs and thus does not properly reflect the profits realized in a particular fiscal year from renegotiable business performed in that year. In such cases, the Board is authorized under section 103 (i) of the Act to substitute such method of accounting as, in the opinion of the Board, will properly reflect the contractor's sales and costs, and thus his profits, for the fiscal year. To achieve this result, in a proper case, the Board will enter into a "special accounting agreement" with the contractor.

(c) Special accounting agreements: Such agreements are made pursuant to § 1459.1 (b) (2) of this chapter. In addition to effectuating the desired change of accounting method for renegotiation purposes for the fiscal year under review, the agreement is required to contain specific provisions designed to prevent double recognition of sales or costs and to achieve proper and consistent accounting treatment in subsequent years. Specifically, the agreement requires that the method of accounting adopted therein be used for renegotiation purposes not only in the fiscal year under review, but in all subsequent years as well. As under the Internal Revenue Code, consistency of accounting treatment is thus assured.

(d) When sales and the related costs are reported in different fiscal years for tax purposes and are to be brought together into the same fiscal year for renegotiation purposes, the matching is generally effected by moving the costs into the year of the receipts or accruals. [In certain situations, the Board accomplishes the matching by moving receipts or accruals into the fiscal year in which the related costs were paid or incurred; see, for example, § 1457.5 of this chapter

relating to contract price adjustment clauses.]

(e) The matching of sales and costs is, of course, subject to the necessary limitation that any amounts included in the renegotiation of a fiscal year will not be transferred by agreement to a later fiscal year if, or to the extent that, such transfer would affect the result reached in the renegotiation of such earlier fiscal year.

(f) Situations in which the Board commonly enters into a special accounting agreement include the following:

(1) When the contractor employs the cash receipts and disbursements method of accounting for Federal income tax purposes, but the accrual method of accounting is considered more appropriate for renegotiation purposes. See § 1459.1 (b) (2) (ii).

(2) When, for contracts performed over a period of more than one fiscal year, the completed contract method of accounting is considered appropriate for renegotiation purposes. See § 1459.1(b) (2) (iii).

(3) When the contractor, reporting under the accrual method of accounting for Federal income tax purposes, deducts costs which can be shown by his accounting records to relate to deliveries made in a later year or years, and it is agreed that such costs should be amortized over the period of the related deliveries. Such costs include preproduction costs and research and development expenses.

(4) When it is agreed that for renegotiation purposes manufacturing overhead applicable to work-in-process or finished goods should be deferred to the year or years in which the related deliveries are made, although for Federal income tax purposes the particular contractor may be permitted by the Internal Revenue Service to deduct such costs when incurred.

(5) When the contractor deducts in the year of payment, for Federal income tax purposes, amounts paid to officers or employees under bonus and profitsharing plans, and it is agreed that such amounts should be reported as costs for renegotiation purposes in the year in which they are earned.

(6) When the contractor, for Federal income tax purposes, deducts costs incurred as a result of guarantees or war

ranties given in connection with sales made in an earlier year, and it is agreed that for renegotiation purposes such amounts should be taken as costs in such earlier year.

(g) When the Board and the contractor desire to provide for an accounting treatment of a special nonrecurring item or items of cost or income different from that accorded such item or items under the method of accounting employed by the contractor for Federal income tax purposes, a letter type of special accounting agreement may be used. This type of agreement deals with the repositioning of specific amounts between specific fiscal years, and includes other provisions to prevent the double allowance of an item of cost or the double recognition of an item of income.

(h) The Board will entertain a request for a special accounting agreement in any case in which the contractor believes that his method of accounting for Federal income tax purposes, either in whole or in part, is manifestly unsuitable for the purpose of renegotiation because it does not properly reflect his profits for a fiscal year and thus does not provide a fair and equitable basis for fiscal year renegotiation. Any such request should ordinarily be made prior to the processing of the case in the Accounting Division of the regional board.

(i) Unilateral changes in accounting methods: Ordinarily the need for a change in accounting method to deviate from the Federal income tax basis is met by special accounting agreement. If necessary, however, the Board will exercise its authority under section 103 (f) or (i) of the Act to make such changes without the consent of the contractor. Such changes, when made, are generally designed to match costs with the receipts or accruals to which they relate, and thereby to reflect profits in a manner appropriate to the requirements and objectives of the renegotiation law. As in the case of changes by agreement, any changes in accounting method effected by unilateral action of the Board will be applied in the renegotiation proceedings for the year under review and all subsequent years, whether such proceedings are concluded by agreement or order.

[36 F.R. 24058, Dec. 18, 1971] Correction noted at 37 F.R. 668, Jan. 15, 1972.