Summary: On July 8, 2026, the Cost Accounting Standards Board (CASB) finalized a rule that rescinds CAS 404, 408, 409, and 411 in whole or in part and relies on GAAP instead, effective August 7, 2026. For most contractors already following GAAP, day-to-day accounting won’t change. The real work is administrative: updating disclosure statements, policies, and pricing narratives, and documenting why your practices still hold.
What are the recent changes to the Cost Accounting Standards (CAS)?
Industry has eagerly been awaiting this final rule for the Cost Accounting Standards (CAS) to conform to Generally Accepted Accounting Principles (GAAP) across a number of standards. On July 8, 2026, the Cost Accounting Standards Board (CASB) finalized a rule that rescinds four standards in whole or in part and relies on GAAP instead. Here’s what it means for your accounting, estimating, pricing, and compliance.
Before the details, a quick refresher on why this matters to you: The Cost Accounting Standards (CAS) apply to negotiated federal contracts and subcontracts at or above the basic applicability threshold and recently raised to $35 million by Section 1806 of the FY 2026 National Defense Authorization Act (NDAA), which decoupled CAS from the Truth in Negotiations threshold and eliminated the former $7.5 million “trigger contract.”
Small businesses, commercial-item contracts, and sealed-bid awards remain exempt. Full CAS coverage (i.e., all 19 standards plus a disclosure statement) attaches at a higher tier that the CASB has proposed to raise from $50 million to $100 million. If your work falls under CAS, how you measure, assign, and allocate costs is not just an accounting preference but also a compliance obligation. Getting it wrong can mean disallowed costs, contract price adjustments, or findings against your disclosure statement or business systems. That is why a change to the standards themselves, even a deregulatory one, is worth a close read.
Briefly, the CASB is retiring most of CAS 404, 408, 409, and 411, and relying on GAAP to protect the Government’s interest instead. For most contractors who already follow GAAP, day-to-day accounting will not change. The work will be in documenting why the conformance does not change your existing practices and confirm that your disclosure statement, estimating practices, and pricing narratives still line up.
This FAQ walks through what changed, what it means, and the specific steps to take before the August 7, 2026 effective date.
What did the CAS Board actually change?
On July 8, 2026, the Board published a final rule (91 FR 42139, RIN 0348-AB90) that conforms four Cost Accounting Standards to GAAP. It fully rescinds CAS 408 (Accounting for Costs of Compensated Personal Absence) and CAS 411 (Accounting for Acquisition Costs of Materials) and rescinds most of CAS 404 (Capitalization of Tangible Assets) and CAS 409 (Depreciation of Tangible Capital Assets).
In the Board’s own words, the rule is “deregulatory.” It removes substantial requirements in these standards and over 10,000 words of regulatory text (i.e., four of the current 19 CAS, in whole or in part). It follows the Notice of Proposed Rulemaking published September 11, 2025 (90 FR 43994), and the Board’s conclusions are unchanged from that proposal.
Which pieces survived and where did they go?
The Board viewed a small set of provisions as still necessary; these were retained and relocated into a single new paragraph, 9904.405-40(g).
- From CAS 404, the Board kept 404-50(d)(1), which guards the Government against paying duplicative depreciation after a merger or acquisition by requiring assets acquired in a business combination to be carried at the seller’s net book value (a “no step-up, no step-down” approach).
- From CAS 409, the Board kept three provisions: 409-50(e)(5) (parties may agree on a shorter estimated service life for special-purpose equipment), 409-50(j)(1) (gains and losses on disposition treated as adjustments to depreciation), and 409-50(j)(4) (gains and losses on non-arm’s-length transfers disposed of within 12 months assigned to the transferor).
- Subparts 9904.404, 9904.408, 9904.409, and 9904.411 are removed and reserved.
The chart below helps summarize these changes:
| STANDARD | WHAT HAPPENED | RETAINED CONTENT AND NEW LOCATION |
|---|---|---|
| CAS 404 – Capitalization of Tangible Assets | Rescinded except one provision | 404-50(d)(1) (no step-up / no step-down on business-combination assets) moves to new paragraph 9904.405-40(g). |
| CAS 408 – Accounting for Costs of Compensated Personal Absence | Rescinded in full | None was retained. GAAP plus CAS 401, 402, 403, 410, and 418 cover it. |
| CAS 409 – Depreciation of Tangible Capital Assets | Rescinded except three provisions | 409-50(e)(5), 409-50(j)(1), and 409-50(j)(4) move to new paragraph 9904.405-40(g). |
| CAS 411 – Accounting for Acquisition Costs of Materials | Rescinded in full | None was retained. GAAP, other CAS, and FAR 31.205-26 cover it. |
When does this take effect?
The effective date is August 7, 2026, 30 days after publication. There is no phased transition or grandfather window for the standards themselves. For the one situation where a practice change is possible (CAS 408, as discussed below), the change is made during the contractor’s fiscal year directly following the effective date.
What is the real impact on my company?
There is minimal impact for accounting, but potentially meaningful for documentation and governance. Because the CAS 404, 409, and 411 requirements are nearly identical to GAAP, the Board did not identify where rescinding them would change a contractor’s disclosed cost accounting practices. In plain terms: if you comply today, you should keep complying, and you can continue your existing practices.
The cost is administrative: updating disclosure statements, policies, and desk procedures that cite rescinded standards. Additionally, be ready to explain to auditors why your practices remain sound without the CAS reference. The upside the Board is promoting is a lighter compliance footprint and lower barriers to entry for midsize and nontraditional contractors.
Will this be treated as a “required change” and will it trigger a cost impact?
The short answer should be no. For CAS 404, 409, and 411, the Board found no situation where rescission changes disclosed practices, so any change a contractor makes is not a “required change” under CAS 9903.201-6(a) (for 404) or 9903.201-6(b)(2) (for 409 and 411).
For CAS 408, the Board acknowledged that rescission could shift the timing of when certain compensated absence costs are assigned because GAAP can allow assignment to earlier periods than CAS 408 permitted. It concluded those are immaterial timing differences and added a new 9903.201-9(b) that makes the contract price and cost adjustment requirements of Part 9903 not applicable to changes tied to conforming CAS 408 to GAAP, provided the change is disclosed and made during the fiscal year directly following the effective date. The practical impact is there should be no cost impact proposal for CAS 408 conformance so long as you disclose it and time it correctly.
What steps should a contractor take to implement this?
- Inventory your exposure: Confirm which business units carry full CAS coverage and actually reference 404, 408, 409, or 411. Small business subcontracts and modified covered business units may be unaffected.
- Read your disclosure statement (CASB DS-1): Flag every reference to the four standards. Capitalization thresholds, depreciation methods and service lives, compensated absence accrual, and material costing and inventory methods are the likely touch points.
- Map each practice to its new home: For anything you relied on in CAS 404 or 409, confirm the practice now rests on GAAP, plus the retained content in 9904.405-40(g), and on CAS 401, 402, 403, 410, and 418.
- Assess CAS 408 timing: Determine whether your compensated absence accrual (vested versus accumulated rights) will shift under GAAP. If so, plan the change for the fiscal year directly following August 7, 2026, and document it as a disclosed, conformance-driven change under 9903.201-9(b).
- Update policies, procedures, and system configurations: Revise accounting manuals, estimating manuals, and any ERP or general ledger settings and logic that cite the rescinded standards. This should also include impacted forward pricing and rate models.
- Brief your teams and notify your auditors: Give accounting, FP&A, contracts, estimating, and pricing a common summary. Provide notice to the cognizant Administrative Contracting Officer (ACO), Defense Contract Management Agency (DCMA), and Defense Contract Audit Agency (DCAA) wherever your disclosure statement changes. Make sure cost estimates and pricing are consistent.
- Document the “no change” conclusion: Where practices do not change, write down why, with the GAAP and CAS citations that now support them. That memo is your audit defense.
What are the risks and considerations by system?
Accounting system
Your books likely already follow GAAP, so the general ledger should not move. The risk is that policies and disclosure statements still citing CAS 404, 408, 409, or 411 will be read as out of date and can draw audit findings. Reconfirm that gain or loss on asset disposition still flows as a depreciation adjustment (retained 409-50(j)(1)) and that business combination assets stay at net book value (retained 404-50(d)(1)).
Estimating system
Forward-pricing rates that assumed CAS 409 service lives or CAS 408 accrual timing should be re-derived from your GAAP-based practices. Update the estimating manual and its cross references so a DCAA estimating system review or proposal audit does not flag a standard that no longer exists.
Financial reporting and internal controls
Update your CAS compliance controls, disclosure statement change log, and entity-level control documentation to reflect the new regulatory basis, and retain evidence of the “no required change” determination. Additionally, watch the one potential change from CAS 408: timing differences need a control to confirm the change is disclosed and booked in the correct fiscal year.
Pricing
For most proposals nothing changes, but pricing narratives, cost-volume language, and rate buildups that reference the rescinded standards should be scrubbed. Overall, the impact should be minimal.
Final thoughts: What should contractors do next?
The safest reading of this rule and what industry has been requesting is that it lowers your compliance burden without lowering the bar. GAAP, the consistency standards, and the allocation standards still require you to disclose your practices and follow them consistently; contractors, not the Government, still bear the cost increases that result from changes to their own practices.
The high cost of unknowns here is the reference you forgot to update, the CAS 408 timing shift you booked in the wrong year, or the acquisition you priced. A focused review before August 7, 2026 puts those risks to bed.
If you want a second set of eyes on your disclosure statement, estimating manual, and CAS 408 exposure, Aprio can help your business account for the change and document why your practices still hold. Contact our team today.
