Pricing Data & Cost Accounting Standards · FAR Part 30 · 48 CFR 9903 · 41 U.S.C. § 1502

Cost Accounting Standards (CAS) — And the Small Business Exemption

Also known as: CAS coverage, 48 CFR Chapter 99, CAS Board standards, Disclosure Statement

What you do here: Confirm your small-business exemption — and understand what changes if you grow past it

At a Glance

Who it applies to: Contractors with CAS-covered negotiated contracts above the applicability threshold — small businesses are exempt
The small business exemption: 48 CFR 9903.201-1(b) exempts contracts and subcontracts with small businesses from all CAS requirements
Governing authority: 41 U.S.C. §§ 1501–1506 (CAS Board), 48 CFR Chapter 99 (9903 / 9904), FAR Part 30
Two coverage levels: Modified coverage (CAS 401, 402, 405, 406) and full coverage (all 19 standards), driven by award size thresholds
The stakes: Full coverage brings a Disclosure Statement and price adjustments for any change in cost accounting practice

What It Is

The Cost Accounting Standards are a body of rules, issued by the Cost Accounting Standards Board and codified at 48 CFR Chapter 99, that govern how a covered contractor measures costs, assigns them to accounting periods, and allocates them to cost objectives. Where FAR Part 31 asks whether a cost is allowable, CAS asks whether your accounting practices are uniform and consistent — and it binds you to the practices you disclosed. There are nineteen standards. Four of them form 'modified' coverage: CAS 401 (consistency in estimating, accumulating, and reporting costs), CAS 402 (consistency in allocating costs incurred for the same purpose), CAS 405 (accounting for unallowable costs), and CAS 406 (cost accounting period). 'Full' coverage applies all nineteen, adding standards on depreciation, pension cost, home office allocation, direct and indirect cost allocation, cost of money, and more. Which coverage applies turns on award size: a contract at or above the CAS applicability threshold triggers coverage, and a contractor that receives a single CAS-covered award at or above the higher full-coverage threshold, or that received that amount in net CAS-covered awards in its preceding cost accounting period, becomes fully covered and must file a CAS Disclosure Statement describing its cost accounting practices in detail. FAR Part 30 administers the whole scheme, most notably the change-in-cost-accounting-practice rules: once you are CAS-covered, altering a disclosed practice triggers a price adjustment process so the government is left no worse off. For an SDVOSB, the headline is short and important: 48 CFR 9903.201-1(b) exempts contracts and subcontracts with small businesses from all CAS requirements. If you qualify as small under the size standard for the applicable NAICS code, CAS does not apply to you — regardless of contract value. Two cautions follow from that. The exemption depends on your size status, so it can lapse as you grow or after an acquisition or recertification event. And the exemption is from CAS, not from FAR Part 31: allowability, allocability, reasonableness, unallowable-cost segregation, and the consistency requirements of FAR 31.202 and 31.203 apply to small businesses in full.

When It Applies

When a solicitation includes the CAS notices and certifications and asks you to represent your CAS status and exemptions.
When you certify your business size on a negotiated award — the small-business exemption rides on that status.
When your firm approaches its size standard, or after a merger, acquisition, or recertification event that changes size status.
When you are a subcontractor to a large prime and the prime asks about your CAS coverage and disclosure.
When you contemplate changing a cost accounting practice, if you are covered — the change triggers FAR Part 30 adjustment procedures.

Key Features

Feature	What It Means
Small businesses are exempt	48 CFR 9903.201-1(b) exempts contracts and subcontracts with small businesses from all CAS requirements — the single most important fact for an SDVOSB.
Nineteen standards, two coverage levels	Modified coverage applies CAS 401, 402, 405, and 406; full coverage applies all nineteen and adds a Disclosure Statement obligation.
Consistency is the theme	CAS 401 and 402 require you to estimate, accumulate, and report costs consistently and to allocate like costs the same way — the disciplines FAR 31.202/31.203 already demand.
Coverage is threshold-driven	Applicability turns on the value of a single CAS-covered award, and full coverage on a higher single-award or prior-period net-award test.
The Disclosure Statement is a commitment	Fully covered contractors describe their practices in writing and are then bound to follow them; departures are accounting-practice changes.
Practice changes carry a price adjustment	Under FAR Part 30, changing a disclosed practice triggers an adjustment so the government is not made worse off by the change.
Exempt from CAS ≠ exempt from FAR Part 31	A small business still owes allowability, allocability, reasonableness, and consistent classification under the cost principles.

The SDVOSB Angle

For nearly every SDVOSB, CAS is a question to answer correctly on a representation rather than a regime to implement — and answering it correctly matters. The small-business exemption at 48 CFR 9903.201-1(b) is complete: if you qualify as small under the size standard for the NAICS code assigned to the solicitation, no CAS requirement attaches, no matter how large the contract. Two consequences deserve real planning attention. First, the exemption is tied to size status, which is not permanent. A firm approaching its size standard, or one that recertifies as other than small after a merger or acquisition, can find CAS coverage attaching to future negotiated awards for the first time — and full coverage brings a Disclosure Statement and a formal change-in-practice regime that a company accustomed to adjusting its pools freely will find genuinely constraining. Building the discipline early — documented pools, documented bases, deliberate and prospective practice changes — makes that eventual transition an administrative event rather than a rebuild. Second, do not let the exemption breed complacency about FAR Part 31. Small businesses are exempt from CAS; they are not exempt from allowability, reasonableness, allocability, unallowable-cost segregation, or the FAR 31.202 consistency rule. In practice the disciplines that CAS 401, 402, and 405 formalize are exactly the ones a preaward accounting system survey and an incurred cost audit will test in a small firm anyway — so a firm that operates as if those standards applied is simply running a defensible cost system, and will be ready if the exemption ever lapses.

How to Comply

Confirm your size status under the NAICS code assigned to the solicitation before completing the CAS notices and certifications.
Claim the small-business exemption accurately in the solicitation representations — and re-verify it on each new award rather than assuming.
Track how close you are to your size standard, and model what CAS coverage would mean before you cross it.
Document your cost accounting practices — pools, bases, classification rules — in writing now, which is the substance of a Disclosure Statement later.
Make cost accounting practice changes deliberately, prospectively, and with documentation, as though the change rules already applied.
Keep meeting FAR Part 31 in full: allowability, reasonableness, allocability, consistent classification, and unallowable-cost segregation.
If you become other than small, get advice on coverage level, Disclosure Statement obligations, and the FAR Part 30 change procedures before your next negotiated award.

Watch Out For

Assuming CAS applies because a contract is large — award size is irrelevant if you are a small business for that NAICS code.
Assuming CAS never applies because you have always been small — the exemption follows size status, which changes.
Confusing the CAS exemption with a FAR Part 31 exemption; the cost principles apply to small businesses in full.
Overlooking a recertification event (merger, acquisition, novation, long-term contract recertification) that changes your size status and your exemption.
Answering the CAS representations carelessly — they are certifications, and an inaccurate one is a compliance problem in its own right.
Changing pools or bases casually as you grow, which becomes an expensive habit the moment coverage attaches.

Run the Numbers

SDVOSB Size Standard Calculator →Price-to-Win Calculator →

Frequently Asked

Are small businesses exempt from the Cost Accounting Standards?

Yes. Under 48 CFR 9903.201-1(b), contracts and subcontracts with small businesses are exempt from all CAS requirements. The exemption is complete and does not depend on contract value — a small business can hold a very large negotiated contract without CAS coverage attaching. The exemption is tied to size status under the size standard for the applicable NAICS code, so it can lapse if the firm grows beyond its size standard or recertifies as other than small following a merger, acquisition, or a long-term-contract recertification event.

What is the difference between modified and full CAS coverage?

Modified coverage applies four of the nineteen standards: CAS 401 (consistency in estimating, accumulating, and reporting costs), CAS 402 (consistency in allocating costs incurred for the same purpose), CAS 405 (accounting for unallowable costs), and CAS 406 (cost accounting period). Full coverage applies all nineteen standards and additionally requires the contractor to file a CAS Disclosure Statement describing its cost accounting practices. Full coverage attaches when a contractor receives a single CAS-covered award at or above the full-coverage threshold, or received that amount in net CAS-covered awards during its preceding cost accounting period.

If I'm exempt from CAS, do the FAR cost principles still apply?

Yes, and this is the most consequential misunderstanding in the area. The CAS exemption for small businesses removes the Cost Accounting Standards; it does not touch FAR Part 31. A small business billing or pricing from cost must still meet the allowability test at FAR 31.201-2, the reasonableness and allocability tests at FAR 31.201-3 and 31.201-4, the direct/indirect consistency requirements at FAR 31.202 and 31.203, and the obligation at FAR 31.201-6 to identify and exclude unallowable costs. Those requirements are what a preaward accounting system survey and an incurred cost audit actually test at a small firm.

What is a CAS Disclosure Statement?

A CAS Disclosure Statement is a formal written description of a contractor's cost accounting practices — how it classifies direct and indirect costs, what its pools and allocation bases are, how it measures and assigns various cost elements, and how it treats unallowable costs. It is required of fully CAS-covered contractors, and once submitted it binds the contractor: departing from a disclosed practice is a change in cost accounting practice that triggers the FAR Part 30 adjustment procedures, under which the price of affected contracts may be adjusted so the government is not made worse off by the change. Small businesses, being exempt from CAS, do not file one.

Primary Sources

Plain-English reference, not legal, accounting, or tax advice. Cost allowability and accounting determinations are fact-specific, and the FAR, the Cost Accounting Standards, and the statutory dollar thresholds quoted here are amended and escalated for inflation over time. Always read the current FAR text and the cost and payment clauses in your specific contract, confirm the applicable thresholds and your accounting treatment with the contracting officer or cognizant administrative contracting officer, and consult a qualified government-contract accountant or counsel before relying on a cost position, signing a certificate, or submitting a claim.

Last updated Aug 3, 2026Update cadence: Quarterly, plus on FAR amendment or inflation adjustment of the TINA / CAS / penalty thresholds

Change log (1)

Aug 3, 2026
LaunchedPublished the federal cost principles, indirect rates & government accounting requirements reference covering how the government decides what an SDVOSB may charge it — the five allowability tests of FAR 31.201-2, reasonableness and allocability (FAR 31.201-3 / 31.201-4), the expressly unallowable costs of FAR 31.205 with directly associated costs (FAR 31.201-6) and the FAR 42.709 / 52.242-3 penalty, the direct-vs-indirect consistency rule (FAR 31.202 / 31.203), the fringe/overhead/G&A pool-and-base structure behind a wrap rate, provisional billing rates (FAR 42.704), the incurred cost submission and final indirect rate settlement (FAR 52.216-7(d) / 42.705 / 42.708 quick closeout), the adequate accounting system tested on the SF 1408 (FAR 16.301-3 / 9.106), timekeeping and labor charging with floor checks and total time accounting, DCAA audits versus DCMA administrative contracting officer determinations, certified cost or pricing data and defective pricing (FAR 15.403-1 / 15.403-4 / 15.406-2 / 52.215-10), and the Cost Accounting Standards with the small-business exemption at 48 CFR 9903.201-1 — each with an at-a-glance quick-facts card, a when-it-applies list, a key-features table, an SDVOSB-specific angle, a how-to-comply checklist, watch-outs, FAQPage, Article, Dataset, and BreadcrumbList structured data, primary-source FAR / U.S.C. / CFR citations, and cross-links into the glossary, contract types, payment methods, thresholds, clauses, forms (SF 1408), regulation explainers, contracting roles, how-to guides, FAQ, and the price-to-win, size-standard, win-probability, and limitations-on-subcontracting calculators.