The government contracting world is full of acronyms. Many businesses looking to enter the federal marketplace commonly hear FAR, CAS, DCAA and GAAP, but do not understand the difference or how they relate to accounting system requirements for government contractors. Here is a brief summary:
- GAAP: These are Generally Accepted Accounting Principles, a common set of authoritative accounting standards and procedures that companies, both government and commercial (if they distribute financial statements outside of the company) must follow.
- FAR: Federal Acquisition Regulations. By definition, the FAR is system that governs how to sell goods and services to the Federal government. It’s basically a long list of clauses that provides guidance for establishing a government compliant accounting system. This is the crucial set of regulations that government contractors need to adhere to.
- CAS: Cost Accounting Standards – it’s a set of 19 standards and rules used in determining costs on negotiated procurements. CAS is a lot like GAAP but specifically for government contractors. So what is the difference between CAS and FAR? FAR applies to all contractors whereas CAS coverage varies based on the size of the company.
- DCAA: Defense Contract Audit Agency—they conduct audits to ensure compliance with the FAR, CAS and GAAP.