| Description |
Accounting treatment |
| (a) Changes in the
interest rate levels in the national economy have invalidated the
prior actuarial assumption with respect to anticipated investment
earnings. The pension plan administrators adopted an increased
(decreased) interest rate actuarial assumption. The company
allocated the resulting pension costs to all final cost
objectives |
(a) Adopting the increase
(decrease) in the interest rate actuarial assumption is not a
change in cost accounting practice. |
| (b) The basic
benefit amount for a company's pension plan is increased from $8 to
$10 per year of credited service. The change increases the dollar
amount of pension cost allocated to all final cost objectives |
(b) The increase in the amount
of the benefits is not a change in cost accounting practice. |
| (c) A contractor
who has never paid pensions establishes for the first time a
pension plan. Pension costs for the first year amounted to $3.5
million |
(c) The initial adoption of an
accounting practice for the first time incurrence of a cost is not
a change in cost accounting practice. |
| (d) A contractor
maintained a Deferred Incentive Compensation Plan. After several
years' experience, the plan was determined not to be attaining its
objective, so it was terminated, and no future entitlements were
paid |
(d) There was a termination of
the Deferred Incentive Compensation Plan. Elimination of a cost is
not a change in cost accounting practice. |
| (e) A contractor
eliminates a segment that was operated for the purpose of doing
research for development of products related to nuclear energy |
(e) The projects and expenses
related to nuclear energy projects have been terminated. No
transfer of these projects and no further work in this area is
planned. This is an elimination of cost and not a change in cost
accounting practice. |
| (f) For a
particular class of assets for which technological changes have
rarely affected asset lives, a contractor starts with a 5-year
average of historical lives to estimate future lives. He then
considers technological changes and likely use. For the past
several years the process resulted in an estimated future life of
10 years for this class of assets. This year a technological change
leads to a prediction of a useful life of 7 years for the assets
acquired this year for the class of assets |
(f) The change in estimate
(not in method) is not a change in cost accounting practice. The
contractor has not changed the method or technique used to
determine the estimate. The methodology applied has indicated a
change in the estimated life, and this is not a change in cost
accounting practice. |
| (g) The marketing
department of a segment has reported directly to the general
manager of the segment. The costs of the marketing department have
been combined as part of the segment's G&A expense pool. The
company reorganizes and requires the marketing department to report
directly to a vice president at corporate headquarters |
(g) After the organization
change in the company's reporting structure, the parties agree that
the appropriate recognition of the beneficial or causal
relationship between the costs of the marketing department and the
segment is to continue to combine these costs as part of the
segment's G&A expense pool. Thus, the organizational change has
not resulted in a change in cost accounting practice. |