The Interpretation of CAS 406 set out the required approach for allocating restructuring costs.  However the Interpretation did not say whether multiple or single indirect pools must be used nor how G&A will be affected. Nor does the Interpretation address issues related to continuing costs of discontinued operations that often result from closed, merged or abandoned segments following an internal or external restructuring.  However, DCAA has addressed the issue and advocates a case-by-case evaluation to determine appropriate allocation.  DCAA guidance states (1) costs associated with segments merged into new single or multiple segments should be allocated to the segments where the work effort or contracts are transferred (2) costs directly associated with a sold segment generally are applicable only to the sold segment and not others and (3) costs associated with an abandoned segment may be allocable to government contracts if the work performed at the abandoned segment benefited government contracts and the government will determine on an individual basis how the costs are to be allocated.

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