DATE: September 15, 2000
FROM: Barry McVay, CPCM
SUBJECT: Cost Accounting Standards Board; Accounting for the Cost of Employee Stock Ownership Plans
SOURCE: Federal Register, September 15, 2000, Vol. 65, No. 180, page 56008
AGENCIES: Cost Accounting Standards Board (CASB), Office of Federal Procurement Policy (OFPP), Office of Management and Budget (OMB)
SYNOPSIS: The CASB is inviting public comments regarding a Staff Discussion Paper (SDP) on accounting for the cost of employee stock ownership plans (ESOP) under government contracts.
EDITOR'S NOTE: The Cost Accounting Standards (CAS) are 19 standards which apply to large contractors performing large contracts. They are in Chapter 99 of Title 48 of the Code of Federal Regulations, and are included as an appendix to the paper-version of the Federal Acquisition Regulation (FAR) for information purposes. The CAS are available on the Internet at http://www.arnet.gov/far/97/html/appendix.html.
DATES: Comments must be submitted no later than November 14, 2000.
ADDRESSES: Address comments to Dr. Rein Abel, Director of Research, Cost Accounting Standards Board, Office of Federal Procurement Policy, 725 17th Street, NW, Room 9013, Washington, DC 20503, Attn: CASB Docket No. 00-03. Include with the written comments a 3.5" computer diskette copy of the comments and denote the word processing format used.
FOR FURTHER INFORMATION CONTACT: Rein Abel, Director of Research, CASB, 202-395-3254.
SUPPLEMENTAL INFORMATION: A number of commenters have identified accounting for the cost of ESOPs under government contracts as an issue requiring CASB consideration, primarily because of the lack of guidance concerning this matter in government contracting regulations, and the attempt by contracting parties to apply various provisions of the CAS to accounting for the costs of ESOPs even though the CAS provisions do not even mention ESOPs, specifically CAS 9904.412, Composition and Measurement of Pension Cost, and CAS 9904.415, Accounting for the Cost of Deferred Compensation. (EDITOR'S NOTE: The SDP points out that ESOPs are mentioned in paragraph (j)(8) of Federal Acquisition Regulation (FAR) 31.205-6, Compensation for Personal Services, and in Defense Contract Audit Agency (DCAA) Contract Audit Manual Section 7-2114). This lack of clear guidance has produced a number of legal actions and other disputes between the government and contractors (the SDP references Ralph Parsons Co., ASBCA [Armed Services Board of Contract Appeals] 37931 (December 20, 1990); and Ball Corp., ASBCA 49118 (April 3, 2000)).
After a thorough discussion of the more prominent ESOP issues involved (most notably, the allowability of interest on funds borrowed to fund leveraged ESOPs), the following six questions are posed:
FOR FURTHER INFORMATION CONTACT: Barry McVay at 703-451-5953 or by e-mail to BarryMcVay@FedGovContracts.com.
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