CAS Board Final Rule – Conformance of CAS 407 to GAAP
15th October 2026
On March 20, 2026, the CAS Board published a Notice of Proposed Rulemaking (NPRM) to partially eliminate CAS 407 (Use of standard costs for direct material and direct labor) because there is significant overlap between CAS 407 and GAAP. On September 1, 2026, the CAS Board issued a final rule to rescind CAS 407. The final rule stated that CAS 407 will be eliminated, with the exception of CAS 407-30(a)(7), CAS 407-40(b), CAS 407-50(a)(4)(i) and (ii), CAS 407-50(d)(1) and (2), CAS 407-50(e), and CAS 407-60(b) that will be relocated to CAS 418. These five sections address standard costs and related variances at the production unit level. The final rule states that any changes a contractor makes related to these standards will be treated as unilateral changes.
The final rule is effective October 1, 2026. On September 24, 2026, DCAA published an MRD addressing the September 1 final rule. The MRD provided audit guidance that was closely aligned with its August 20, 2026 MRD that addressed the conformance of CAS 404, 408, 409, and 411 to GAAP.
Read the rule here.
Read the audit guidance here.
HKA’s Government Contracting Group
HKA Government Contracting experts understand the complex business and regulatory environments in which government contractors operate and have a history of finding practical, cost-effective solutions to challenges faced by government contractors and their counsel.
