The transfer of work on a contract from one existing business segment to another is not a change in accounting practice or a noncompliance with CAS 401 (consistency treatment of estimated and actual costs) as long as the cost accounting practices at the segments do not change.

Often when work is transferred from one segment to another, the contract often will not incur the same costs as originally estimated. Instead the contract will incur costs in accordance with the cost accounting practices of the segment where work was transferred. The contract may incur the costs of the transferred work under a different indirect cost pool (e.g. Segment A’s overhead pool instead of Segment B’s overhead pool) or a different cost element (e.g. intra-company transfers). This is considered a business decision in how the work will be performed (similar to a make or buy decision), not a change in the cost accounting practices of either segment. As long as the cost accounting practices of the segments remain the same no change or noncompliance with CAS 401 has occurred. After all, the established cost accounting practices of the two segments were consistently used to estimate and accumulate each segment’s costs.

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