CAS 415 - Accounting for the Cost of Deferred Compensation

CAS 415 - Accounting for the Cost of Deferred Compensation. The purpose of CAS 415 is to provide criteria for measuring deferred compensation costs and assigning those costs to cost accounting periods. This standard applies to all deferred compensation costs except for compensated absences and pension costs covered in CAS 408 and 412 respectively.
This is one of the CAS standards that have been incorporated into the FAR. FAR 31.205.6(k) makes CAS 415 applicable to all contracts, even those that are not CAS covered or those that are modified coverage.

Deferred compensation is an award made by an employer to compensate an employee in a future cost accounting period for services rendered prior to receipt of compensation. It does not include the normal year-end salary, wage or bonus accruals.

To measure deferred compensation, you have to get out your present value calculator. The amount that contractors can claim on Government contracts is the present value of future benefits to be paid. These future payments must meet other criteria as well.

• The contractor cannot unilaterally avoid the payment.
• The award is to be paid in money, other assets, or stock (cannot be time-off)
• The future payment can be measured reasonably accurately (sometimes challenging)
• Events entitling an employee to receive an award have a reasonable probability of occurrence.
• Where compensation is to be paid in stock, there is reasonable probability that stock options will be exercised (also sometimes difficult to support).