New GAAP References in FAR

Now a little something for our "accountant" readers.

There is a new proposal to amend the FAR to update references to authoritative accounting standards owing to the FASB's (Financial Accounting Standards Board's) Accounting Standards Codification (ASC) of Generally Accepted Accounting Principles (GAAP).

In June of 2009, the FASB announced, in its Statement Number 168, that effective for financial statements issued for interim and annual periods ending after September 15, 2009, the FASB ASC would become the source of authoritative U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. The FASB stated that this codification supersedes existing references in U.S. GAAP. Consequently, FAR needs to be updated for the superseded references in three FAR sections with the GAAP Codification references. The revisions to the three FAR sections are intended to have no effect other than to simply replace the superseded references with updated references.

This change will update most but not all references to GAAP contained in the FAR. The notable exception is FAR 31.205-6(o)(2)(iii)(A)(1) which discusses post retirement benefits other than pensions and provides that costs in excess of that computed in accordance with FASB 106 is unallowable. The FAR Councils have promised that this will be handled in a separate FAR case which makes us believe that there is something more substantial coming then just a mere change to a GAAP reference.

Specific changes include:

31.205-11 Depreciation.

(h) A ``capital lease,'' as defined in Financial Accounting Standards Board's Accounting Standards Codification (FASB ASC) 840, Leases, is subject to the requirements of this cost principle. (See 31.205-36 for Operating Leases.) FASB ASC 840 requires that capital leases be treated as purchased assets, i.e., be capitalized, and the capitalized value of such assets be distributed over their useful lives as depreciation charges or over the leased life as amortization charges, as appropriate, except that--

31.205-36 Rental costs.

(a) This section is applicable to the cost of renting or leasing real or personal property acquired under ``operating leases'' as defined in Financial Accounting Standards Board's Accounting Standards Codification (FASB ASC) 840, Leases. (See 31.205-11 for Capital Leases.)

52.204-10 Reporting Executive Compensation and First-Tier Subcontract

(2) Awards of stock, stock options, and stock appreciation rights. Use the dollar amount recognized for financial statement reporting purposes with respect to the fiscal year in accordance with the Financial Accounting Standards Board's Accounting Standards Codification (FASB ASC) 718, Compensation-Stock Compensation.