Cost Accounting Standards (CAS) Board Final Rule – Conformance of CAS to GAAP for CAS 404, 408, 409, and 411
15th October 2026
On September 11, 2025, the CAS Board released a Notice of Proposed Rulemaking (NPRM), to partially or wholly eliminate CAS 404, 408, 409, and 411 to conform CAS to Generally Accepted Accounting Principles (GAAP). On July 8, 2026, consistent with the NPRM, the CAS Board published a final rule wholly rescinding CAS 408 and 411, while simultaneously rescinding most provisions under CAS 404 and 409 to conform to GAAP. Certain elements of CAS 404 and 409 are being moved to CAS 405. Ultimately, the CAS Board concluded that GAAP either wholly or mostly protects the Government’s interests with respect to the aforementioned standards.
For CAS 404, 409, and 411, the CAS Board did not identify any situations where rescinding these standards would result in a change to a contractor’s disclosed cost accounting practices. Therefore, any changes that a contractor makes related to these standards will not be treated as a “required change” as defined in CAS 9903.201-6(a). For CAS 408, the CAS Board identified certain instances in which the rescission of CAS 408 may result in changes in cost accounting practices, but the Board concluded such differences would represent immaterial timing differences. Therefore, the CAS Board is exempting such changes from the cost impact process.
The final rule became effective August 7, 2026.
Audit Guidance on CAS Board Final Rule
On August 20, 2026, the Defense Contract Audit Agency (DCAA) published a memorandum for regional directors (MRD) addressing the CAS Board’s July 8 Final Rule. The MRD notes that these four standards will no longer apply to any new contracts or subcontracts, but they remain in effect for contracts subject to full CAS coverage that were awarded prior to the effective date (i.e., any existing noncompliances must still be resolved).The MRD instructs auditors not to initiate new audits related to CAS 404, 408, 409, and 411, but auditors shall continue working to resolve material noncompliances for fiscal years prior to August 7, 2026. It also instructs auditors to review proposals, rate calculations, and incurred cost submissions to identify potential cost accounting practice changes. Notably, the MRD states that portions of CAS 404 and 409 that were moved to CAS 405 will now apply to contracts subject to modified CAS coverage.
The CAS Board final rule and DCAA’s audit guidance can be found below:
Read the CAS Board Final Rule.
Read the Audit Guidance.
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