FAR 31.205-16, Gains and losses on dispositions or impairment of depreciable property or capital assets.  The change addresses the method and timing for determining the gains and loss associated with the sale and leaseback arrangements of depreciable property.  The gain or loss will now be determined at the end of the lease term or when the contractor no longer occupies the property – whichever date is later – rather than the date of the sale and leaseback arrangements.  The changes are made to help ensure (1) the contractor should neither benefit or be penalized for entering into the arrangement (2) the government should reimburse the contractor the same amount as if it had retained title and (3) the government would be precluded from recovering the financing cost that are embedded in the sale price if the gain is recognized at the date of the sale-leaseback arrangement.

FAR 31.205-26, Material costs.  The current paragraphs (c) and (d) would be deleted.  Paragraph (c) requires adjustments for the differences in physical and book inventories be made during the period of contract performance and the change would rely on generally accepted accounting principles (GAAP).  Paragraph (d) addresses specific methods of estimating material costs and the deletions are made because FAR Part 31 should address allowability of costs not methods of estimates

FAR 31.205-24, Maintenance and repair costs.  The proposed rule would delete the entire cost principle.  The councils say CAS adequately addresses these costs for CAS covered contractors and GAAP is sufficient for non-CAS covered contractors (Fed. Reg. 40466).

In a separate action, the FAR Council proposed a change to FAR 31.201-6, Accounting for unallowable costs.  The amendment would add a new paragraph (c)(2) that would recognize the acceptability of using sampling as a method to identify unallowable costs under specific criteria.  Two criteria are proposed: (1) the statistical sampling results in an unbiased sample that accurately represents the universe of data and (2) the statistical sample permits audit verification (Fed. Reg. 28108).

Finally, the FAR Council has proposed amending FAR 31.205-6, Compensation for personal services related to post-retirement benefits (PRBs).  The proposal:

1.  Adds language that specifies the contractor would have to give the government either a credit or cash, whichever the government elects, for refunds and credits related to plans for PRBs or other provisions. The current FAR language simply states the government will receive “an equitable share” where the share reflects the government’s previous participation in PRB costs on those contracts covered by the FAR.   Similar language would be included in the revised contract clause at FAR 52.215-18, revisions or adjustments of plans for post retirement benefits other than pensions.  

2.  To make it consistent with CAS, change the phrase in section (k)(2) from “measure, assigned and accounted for: to “measure, assigned and allocated.”

3.  Move to another paragraph (o)(2)(iii) requirements that apply to accrual costing other than terminal funding while maintaining the substance of requirements in (o)(3) through (o)(5) that address timing of recognition of the costs (Fed. Reg. 33326).

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