B-223689, B-223691, OCT 31, 1986, OFFICE OF THE GENERAL COUNSEL
Highlights
WHICH ARE PROPOSED CHANGES TO TWO COST ACCOUNTING STANDARDS (CAS). WOULD NOT BE IMPLEMENTED UNTIL AND UNLESS THE CAS ARE INCORPORATED INTO PART 30 OF THE FAR. WE ALSO SUGGESTED THAT IF THE INCORPORATION PROPOSAL IS IMPLEMENTED. FAR CASE NO. 86-34 IS A PROPOSAL TO CHANGE THE METHOD IN PROPOSED FAR SEC. 30.416-50(A)(3)(II) FOR COMPUTING THE PRESENT VALUE OF SELF INSURED LOSSES WHERE PAYMENTS TO THE CLAIMANT WILL NOT BE MADE UNTIL MORE THAN 1 YEAR AFTER THE LOSS HAS BEEN INCURRED. CURRENTLY CAS 416 PROVIDES THAT THE PRESENT VALUE OF THESE LOSSES IS DETERMINED BY USING A STATE- PRESCRIBED DISCOUNT RATE OR. WE HAVE NO OBJECTION TO THIS PROPOSED CHANGE. FAR CASE NO. 86-35 IS A PROPOSAL TO INCREASE FROM $1.
B-223689, B-223691, OCT 31, 1986, OFFICE OF THE GENERAL COUNSEL
PRECIS-UNAVAILABLE
MS. MARGARET A. WILLIS:
FAR SECRETARIAT
GENERAL SERVICES ADMINISTRATION
THIS RESPONDS TO YOUR LETTER OF JULY 16, 1986, REQUESTING OUR COMMENTS ON FEDERAL ACQUISITION REGULATION (FAR) CASE NOS. 86-34 AND 86 35, WHICH ARE PROPOSED CHANGES TO TWO COST ACCOUNTING STANDARDS (CAS). THE PROPOSED CHANGES, DESCRIBED BELOW, WOULD NOT BE IMPLEMENTED UNTIL AND UNLESS THE CAS ARE INCORPORATED INTO PART 30 OF THE FAR, AS PROPOSED IN FAR CASE NO. 86-31.
BY LETTER TO YOU OF OCTOBER 21, 1986 (COPY ENCLOSED), WE RESPONDED TO YOUR REQUEST FOR COMMENTS ON THE PROPOSAL TO INCORPORATE THE CAS INTO THE FAR BY SUGGESTING THAT ACTION ON THAT PROPOSAL BE SUSPENDED UNTIL CONGRESS HAS HAD TIME TO CONSIDER PENDING CAS LEGISLATION. WE ALSO SUGGESTED THAT IF THE INCORPORATION PROPOSAL IS IMPLEMENTED, AN INDEPENDENT ADVISORY BOARD SHOULD BE ESTABLISHED TO PROVIDE COUNSEL CONCERNING REVISIONS OR ADDITIONS TO THE CAS. OUR RESPONSES CONCERNING THE SPECIFIC CAS CHANGES PROPOSED MUST BE READ IN CONJUNCTION WITH THE OVERALL CONCERNS EXPRESSED IN OUR OCTOBER 21 LETTER.
FAR CASE NO. 86-34 IS A PROPOSAL TO CHANGE THE METHOD IN PROPOSED FAR SEC. 30.416-50(A)(3)(II) FOR COMPUTING THE PRESENT VALUE OF SELF INSURED LOSSES WHERE PAYMENTS TO THE CLAIMANT WILL NOT BE MADE UNTIL MORE THAN 1 YEAR AFTER THE LOSS HAS BEEN INCURRED. CURRENTLY CAS 416 PROVIDES THAT THE PRESENT VALUE OF THESE LOSSES IS DETERMINED BY USING A STATE- PRESCRIBED DISCOUNT RATE OR, IF NONE EXISTS, THE INTEREST RATE PRESCRIBED BY THE SECRETARY OF THE TREASURY UNDER PUB.L. NO. 92-41. THE PROPOSED CHANGE WOULD DELETE THE REFERENCE TO THE STATE DISCOUNT RATE, THUS REQUIRING THE USE OF THE TREASURY RATE IN ALL CASES. WE HAVE NO OBJECTION TO THIS PROPOSED CHANGE.
FAR CASE NO. 86-35 IS A PROPOSAL TO INCREASE FROM $1,000 TO $1,500 THE MINIMUM ACQUISITION COST CRITERION FOR DETERMINING WHETHER THE COST OF A TANGIBLE ASSET MUST BE CAPITALIZED. THE PROPOSAL, WHICH WOULD REQUIRE CHANGES IN PROPOSED FAR SECS. 30.404-40(B)(1), 30.404-60(A)(1), AND 30.404 -60(A)(1)(I), IS INTENDED TO ACCOUNT FOR INFLATION THAT HAS OCCURRED SINCE THE DOLLAR AMOUNT OF THE CRITERION LAST WAS INCREASED IN 1980. ASSUMING THAT AVAILABLE DATA DEMONSTRATE THAT THE PROPOSED INCREASE IS APPROPRIATE, WE WOULD HAVE NO OBJECTION TO THE PROPOSAL.