Conceptual Groupings of Cost Accounting Standards

Although the Cost Accouning Standards are grouped into categories, the individual standards within each group have certain similarities, and the groups overlap to some extent. Therefore, one standard can apply to more than one group. The group used here are:

1)      Fundamental cost accounting practices:CAS 401, 402, 405, and 406.

2)      Allocation concepts: CAS 403, 410, 418, and 420.

3)      Fixed asset accounting: CAS 404, 409, 414, and 417.

4)      Compensation of personnel: CAS 408, 412, 413, and 415.

5)      Other standards: CAS 407, 411, and 416.

         a            Fundamental Cost Accounting Practices

The standars in this group are those standards that are fundamental to any adequate cost accounting system used for government contract costing. The standards are so fundamental that the CASB decided that these standards are required for the modified CAS coverage. Two of the standards deal. With consistent use of cost accounting practices in estimating, accumulating, and reporting costs and in classifying costs as direct or indirect cost. The other two standards address the importance and impact of the treatment of unallowable costs in the accounting system and the significance of the fiscal year in the calculatiom of indirect cost rates. The standards in this group provide broad principles for specific function, elements of cost, or cost pools.

        b            Allocation Copcepts

The standards in this group cover the cost accounting treatment of specific pools of cost. The standards establish criteria for accumulating costs within the pools, with particular attention to ensuring the homogeneity of the pooled costs. They also establish acceptable allocation bases or criteria for base selection in accordance with the beneficial or causal relationships between the pool and the cost objective.

         c            Fixed Asset Accounting

The standards that cover fixed asset accounting ddres three issues:

1)      Thresholds for cost capitalization

2)      Depreciation policies that reflect physical use of the asset, and

3)      Cost of money as an element of cost facilities capital.

        d            Compensation of personel

These standards cover the costs of compensation to personel paid in money, paid with the direct compensation paid for work performed on a regular basis. Moreover, they do not cover all types of compensation paid to personal or establish rules under which specific compensation would be treated as a direct or an indirect cost. Rather, the focus is on how to treat the costs in the ccompany’s cost accounting practices.   

        e            Other Standards

The standard in this group cover the definition and cost accounting treatment of individual classes, categories, or elements of cost that do not fit more logivally into any of the previous groupings.

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