Immaterial direct costs may be treated as indirect costs. CAS puts three conditions for treating immaterial direct costs as indirect: (1) the cost is a minor dollar amount (2) the accounting treatment for the cost is consistently applied for all final cost objectives and (3) the treatment produces results that are substantially the same as those obtained had the cost been treated as a direct cost. Neither the standard nor DCAA audit guidance establishes what is considered "immaterial" but in practice we usually see DCAA accept as immaterial amounts representing less than 2% of total indirect costs and they will rarely accepts as immaterial anything greater than 5% of total indirect costs. Between 2-5 percent, it will largely depend on the individual auditor’s judgment.

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