[Federal Register Volume 78, Number 120 (Friday, June 21, 2013)]
[Rules and Regulations]
[Pages 37696-37697]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-14619]
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DEPARTMENT OF DEFENSE
GENERAL SERVICES ADMINISTRATION
NATIONAL AERONAUTICS AND SPACE ADMINISTRATION
48 CFR Part 31
[FAC 2005-67; FAR Case 2011-019; Item X; Docket 2011-0019, Sequence 1]
RIN 9000-AM23
Federal Acquisition Regulation; Updated Postretirement Benefit
(PRB) References
AGENCY: Department of Defense (DoD), General Services Administration
(GSA), and National Aeronautics and Space Administration (NASA).
ACTION: Final rule.
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SUMMARY: DoD, GSA and NASA are issuing a final rule amending the
Federal Acquisition Regulation (FAR) to remove references to specific
paragraphs of an accounting standard that were deleted in the Financial
Accounting Standards Board's (FASB's) Accounting Standards Codification
(ASC) of Generally Accepted Accounting Principles (GAAP). The
references no longer exist in the authoritative GAAP (the ASC). This
final rule replaces the current GAAP references in the FAR with
explicit criteria that generally replicate the substance of the
formerly referenced GAAP methodology so that the substance of the FAR
does not change as a result of this final rule.
DATES: Effective Date: July 22, 2013.
FOR FURTHER INFORMATION CONTACT: Mr. Edward N. Chambers, Procurement
Analyst, at 202-501-3221 for clarification of content. For information
pertaining to status or publication schedules, contact the Regulatory
Secretariat at 202-501-4755. Please cite FAC 2005-67, FAR Case 2011-
019.
SUPPLEMENTARY INFORMATION:
I. Background
DoD, GSA, and NASA published a proposed rule in the Federal
Register at 77 FR 29305 on May 17, 2012, to replace the obsolete
references to paragraphs 110, 112, and 113 of Financial Accounting
Standard (FAS) 106 (provisions of GAAP that no longer exist) in FAR
31.205-6(o)(2)(iii)(A)(1) with explicit criteria that generally
replicate the GAAP methodology detailed in the deleted paragraphs. This
revision is intended to allow a general continuation for FAR purposes
(for PRB costs for Government contract cost accounting) of the now-
obsolete GAAP delayed recognition method for contractors that move from
a pay-as-you-go method of accounting to an accrual basis of accounting.
In June of 2009, the FASB announced, in its Statement Number 168,
that effective for financial statements issued for interim and annual
periods ending after September 15, 2009, the ASC would become the
source of authoritative U.S. GAAP recognized by the FASB to be applied
by nongovernmental entities. The FASB stated that this codification
supersedes existing references in U.S. GAAP.
The now-superseded GAAP provisions in FAR 31.205-6(o)(2)(iii)(A)(1)
referenced the description of ``transition obligation'' in paragraph
110 of FAS 106 and the ``delayed recognition methodology'' in
paragraphs 112 and 113, also of FAS 106.
These references to FAS 106 in the cost principle were added in FAR
Case 91-42, published in the Federal Register at 56 FR 41738 on August
22, 1991. At the time, the Civilian Agency Acquisition Council and the
Defense Acquisition Regulations Council (Councils) decided not to allow
contractors to claim the entire ``transition obligation'' associated
with their initial application of FAS 106 as an allowable cost in
accordance with the ``immediate recognition'' procedure in (the now-
superseded) paragraph 111 of FAS 106. (The transition obligation
associated with initial application of FAS 106 is referred to hereafter
as the ``initial application transition obligation.'') Therefore, the
Councils disallowed costs for the amortization of the initial
application transition obligation in excess of the amount amortized
using the delayed recognition method procedure in (the now-superseded)
paragraphs 112 and 113 of FAS 106.
As a result of the FASB announcement that the ASC is now the source
of the authoritative U.S. GAAP, the Councils note that the references
to paragraphs 111, 112, and 113, respectively, of FAS 106 (for the
immediate and delayed recognition procedures for the initial
application transition obligation), are no longer valid because FAS 106
no longer exists in the authoritative GAAP (the ASC). When the FASB
recodified FAS 106 into the ASC, paragraphs 111 through 114 were not
included because public
[[Page 37697]]
companies recognized the transition obligation in the first fiscal
period beginning after December 15, 1994, or shortly thereafter if
exempted from the initial effective date. While the existing provision
at FAR 31.205-6(o)(2)(iii)(A)(1) remains in force because the
referenced GAAP paragraphs can be found in the historical accounting
literature, the passage of time raises concerns that the text of these
paragraphs may become less readily available. The Councils conclude,
therefore, that explicit criteria that generally replicates the
substance of the formerly referenced GAAP methodology are needed for
determining the allowability of the transition obligation, when
converting from pay-as-you-go accounting for PRBs to an accrual method
of accounting for the purposes of Government contract cost accounting,
as they do not intend to change the substance of the FAR.
The Councils acknowledge that contractors may continue to propose
(as they have in the past) a change to their Government contract cost
accounting practice whereby the ``pay-as-you-go'' method is replaced by
the ``accrual'' method, and this may give rise to a transition
obligation that is similar in its nature, but not its amount, to the
initial application transition obligation that arose when (now-
superseded) FAS 106 first became applicable in the early 1990's for
financial reporting purposes.
II. Discussion and Analysis
DoD, GSA, and NASA received no comments on the proposed rule and
are therefore issuing the rule as final with minor changes from the
proposed rule.
III. Executive Orders 12866 and 13563
Executive Orders 12866 and 13563 direct agencies to assess all
costs and benefits of available regulatory alternatives and, if
regulation is necessary, to select regulatory approaches that maximize
net benefits (including potential economic, environmental, public
health and safety effects, distributive impacts, and equity). Executive
Order 13563 emphasizes the importance of quantifying both costs and
benefits, of reducing costs, of harmonizing rules, and of promoting
flexibility. This is not a significant regulatory action and,
therefore, was not subject to review under Section 6(b) of Executive
Order 12866, Regulatory Planning and Review, dated September 30, 1993.
This rule is not a major rule under 5 U.S.C. 804.
IV. Regulatory Flexibility Act
DoD, GSA, and NASA certify that this final rule will not have a
significant economic impact on a substantial number of small entities
within the meaning of the Regulatory Flexibility Act, 5 U.S.C. 601, et
seq., because the rule only removes references to specific paragraphs
in an accounting standard that were deleted in the Financial Accounting
Standards Board's (FASB's) Accounting Standards Codification (ASC) of
Generally Accepted Accounting Principles (GAAP) and replaces them with
explicit criteria that generally replicate the substance of the
formerly referenced GAAP methodology (i.e., the substance of the FAR
did not change as a result of this final rule). No comments from small
entities were received in response to the Regulatory Flexibility Act
request under the proposed rule.
V. Paperwork Reduction Act
The final rule does not contain any information collection
requirements that require the approval of the Office of Management and
Budget under the Paperwork Reduction Act (44 U.S.C. chapter 35).
List of Subject in 48 CFR Part 31
Government procurement.
Dated: June 13, 2013.
William Clark,
Acting Director, Office of Governmentwide Acquisition Policy, Office of
Acquisition Policy, Office of Governmentwide Policy.
Therefore, DoD, GSA, and NASA amend 48 CFR part 31 as set forth
below:
PART 31--CONTRACT COST PRINCIPLES AND PROCEDURES
0
1. The authority citation for 48 CFR part 31 continues to read as
follows:
Authority: 40 U.S.C. 121(c); 10 U.S.C. chapter 137; and 51
U.S.C. 20113.
0
2. Amend section 31.205-6 by revising paragraph (o)(2)(iii)(A) to read
as follows:
31.205-6 Compensation for personal services.
* * * * *
(o) * * *
(2) * * *
(iii) * * *
(A) Be measured and assigned in accordance with one of the
following two methods described under paragraphs (o)(2)(iii)(A)(1) or
(o)(2)(iii)(A)(2) of this subsection:
(1) Generally accepted accounting principles. However, transitions
from the pay-as-you-go method to the accrual accounting method must be
handled according to paragraphs (o)(2)(iii)(A)(1)(i) through (iii) of
this subsection.
(i) In the year of transition from the pay-as-you-go method to
accrual accounting for purposes of Government contract cost accounting,
the transition obligation shall be the excess of the accumulated PRB
obligation over the fair value of plan assets determined in accordance
with paragraph (o)(2)(iii)(E) of this subsection; the fair value must
be reduced by the prepayment credit as determined in accordance with
paragraph (o)(2)(iii)(F) of this subsection.
(ii) PRB cost attributable to the transition obligation assigned to
the current year that is in excess of the amount assignable to
accounting periods on the basis of a straight line amortization of the
transition obligation over the average remaining working lives of
active employees covered by the PRB plan or a 20-year period, whichever
period is longer, is unallowable. However, if the plan is comprised of
inactive participants only, the PRB cost attributable to the transition
obligation assigned to the current year that is in excess of the amount
assignable to accounting periods on a straight line amortization of the
transition obligation over the average future life expectancy of the
participants is unallowable.
(iii) For a plan that transitioned from pay-as-you-go to accrual
accounting for Government contract cost accounting prior to July 22,
2013, the unallowable amount of PRB cost attributable to the transition
obligation amortization shall continue to be based on the cost
principle in effect at the time of the transition until the original
transition obligation schedule is fully amortized.
* * * * *
[FR Doc. 2013-14619 Filed 6-20-13; 8:45 am]
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