On January 17, 2025, the Cost Accounting Standards (CAS) Board released an advance notice of proposed rulemaking (ANPRM) to elicit comments on its efforts to conform CAS 404, Capitalization of Tangible Assets, and CAS 411, Accounting for Acquisition Costs of Material, to generally accepted accounting principles (GAAP). The ANPRM follows a Staff Discussion Paper issued on September 18, 2020.

With respect to CAS 404, the CAS Board concluded that comparable requirements exist within GAAP, with the exception of CAS 404-50(d)(1), which was added in 1996 to “address issues relating to the treatment of gains or losses attributable to tangible capital assets subsequent to mergers or business combinations by government contractors.” The CAS Board identified two other potential differences between CAS 404 and GAAP that may require further consideration related to (i) the minimum capitalization threshold (currently not to exceed $5,000) and (ii) written statements of accounting policies and procedures. Notwithstanding the foregoing, the CAS Board provisionally concluded that CAS 404, with the exception of CAS 404-50(d)(1), is unnecessary and should be eliminated. The CAS Board is proposing to eliminate CAS 404 and relocate the CAS 404-50(d)(1) requirements to CAS 418-50.

With respect to CAS 411, the CAS Board determined that because of revisions to GAAP subsequent to the original promulgation of CAS 411 in 1975, there is no longer a need for CAS 411. The CAS Board only identified two differences between CAS 411 and GAAP related to (i) CAS requirements for written statements of accounting policies and (ii) the inclusion of terms “moving” and “weighted” average in CAS, whereas GAAP only uses “average.” The CAS Board concluded that contractors’ disclosure requirements and the fact that contractors generally use the moving average, weighted average, or standard cost method for inventory costing indicate that relying on GAAP would achieve desired levels of uniformity and consistency with respect to these two differences. Consequently, the CAS Board is proposing to eliminate CAS 411 in its entirety.

Comments on the ANPRM must be provided to the CAS Board in writing by March 18, 2025.

The January 17 ANPRM can be found here.