GAAP vs. FAR Part 31 vs. CAS — Why Government Contractors Must Understand All Three

In government contracting, compliance isn’t just about “good accounting.” It’s about understanding how three separate frameworks intersect:

• GAAP – Financial reporting

• FAR Part 31 – Cost allowability

• CAS – Cost measurement & allocation consistency

Here’s how they differ — and why it matters.

🔹 GAAP

Established by the Financial Accounting Standards Board, GAAP governs how your company prepares its financial statements.

It answers:👉 Are the financial statements fairly presented?

GAAP applies to the entire company and focuses on external reporting to investors, lenders, and regulators.

🔹 FAR Part 31

Issued under the Federal Acquisition Regulation, FAR Part 31 establishes cost principles for federal contracts.

It answers:👉 Is this cost allowable, allocable, and reasonable on a government contract?

Even if a cost is properly recorded under GAAP, it may still be expressly unallowable under FAR.

🔹 CAS (Cost Accounting Standards)

Promulgated by the Cost Accounting Standards Board, CAS applies to contractors meeting certain thresholds on negotiated contracts.

It answers:👉 Are cost accounting practices consistent in estimating, accumulating, and reporting costs?

CAS is about consistency and methodology, not allowability.

A contractor can be:

✔ GAAP compliant

✔ CAS compliant

❌ And still have costs disallowed under FAR Part 31

These frameworks operate simultaneously, especially on cost-type and other flexibly priced contracts.

Understanding the distinction is critical for:

• Incurred Cost Submissions

• Provisional and final indirect rates

• DCAA audits

• Disclosure Statements

• Forward pricing

Government contracting compliance isn’t one system — it’s layered.

If you work in compliance, accounting, or contracts, which framework do you find causes the most confusion in practice?

Recent Posts