Cost Accounting Standards (Background)

30.4Types of CAS Coverage There are two types of CAS coveragefull and modified. Full coverage applies to a business unit of any contractor that (a) receives a single CAS-covered contract or subcontract of $50 million or more or (b) received $50 million or more in net CAS-covered awards during its preceding cost accounting period. A contractor subject to full coverage must follow all of the Standards. A business unit that receives a covered contract of less than $50 million may elect modified CAS coverage if the covered contracts that it was awarded in the immediately preceding cost accounting period totaled less than $50 million. Modified coverage requires that the business unit comply with CAS 401, CAS 402, CAS 405, and CAS 406 (all discussed below). A recent clause, FAR 52.2304, sets forth the rules for disclosure and consistency of the cost accounting practices applicable to foreign concerns. The clause makes clear that CAS does not apply to contracts with foreign concerns otherwise exempt from CAS coverage and that foreign business concerns do not include foreign governments or their agents or instrumentalities.

Given that there are cost accounting systems available specifically for federal contracting,

why is it important to know the principles and processes behind cost accounting standards, financing, taxes, and payments?

What are some possible problems that could arise if contractors don't understand these principles and processes?