Friday, April 8, 2011

Proposal to Increase Operating Thresholds under CAS 403

Yesterday we discussed CAS 403 and how "residual expenses" exceeding a certain threshold, must be allocated to segments over a three factor formula that includes payroll dollars, operating revenue, and net book value.

Over the past few years, the CAS Board has received unsolicited proposals to increase the thresholds which haven't changed since the CAS 403 was promulgated 35 years ago. One proposal recommended that the thresholds be tied to the CPI (Consumer Price Index).

The CAS Board published a "Staff Discussion Paper" in the Federal Register requesting comments on that approach. Three comments were received. Two were in favor and the third recommended that the board conduct more research. The expressed concern is that the proposed thresholds are so high that possibly no contractor would meet them.

The following chart compares current and proposed thresholds.

This matter does not appear to be high on the Board's priority list. In fact, nothing seems to be very high on their priority list since they had only two meetings in 2010 and made no decisions.

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