The Office of Management and Budget's Cost Accounting Standards Board has finalized a rule rescinding four Cost Accounting Standards that trace back to the 1970s, replacing them with reliance on Generally Accepted Accounting Principles. The final rule, published in the Federal Register on July 8, 2026, eliminates CAS 408 and CAS 411 entirely and strips out most of CAS 404 and CAS 409, closing a rulemaking that began with a 2017 statutory mandate.

Background

The four standards at issue have governed contractor cost accounting for half a century. CAS 408, covering compensated personal absence, dates to 1974 and set rules for how contractors measure the cost of vacation, sick leave, and holiday pay. CAS 411, covering acquisition costs of material, dates to 1975 and governs how contractors cost material and inventory. CAS 404, on capitalization of tangible assets, has been in place since 1973, and CAS 409, on depreciation of tangible capital assets, since 1975.

Congress directed this cleanup in the 2017 National Defense Authorization Act, which instructed the CASB to conform CAS requirements to GAAP wherever the two overlapped. That effort traces back further within the board itself, to a March 2019 staff discussion paper and a November 2020 advance notice of proposed rulemaking, both aimed at identifying which CAS provisions duplicate requirements a contractor already has to satisfy under GAAP for its financial statements. Contractors and their advisors have described the resulting deregulatory push as long-promised, and the CASB has pursued it in stages rather than a single sweeping rule. The board issued a notice of proposed rulemaking addressing CAS 408 and CAS 409 conformance in June 2024, and it published a separate final rule conforming CAS operating-revenue and lease-accounting provisions to GAAP on September 11, 2025. The rule published July 8, 2026, is the next installment in that campaign, and CASB has signaled it will keep working through the remaining standards.

The rulemaking record for this specific action runs about ten months. The CASB published its notice of proposed rulemaking on September 11, 2025, in the Federal Register, with public comments due October 14, 2025. The final rule reflects the board's response to that comment period and closes the docket.

Key Details

The final rule takes effect August 7, 2026, thirty days after publication. Its core actions:

  • CAS 408 (compensated personal absence) is rescinded in its entirety.
  • CAS 411 (acquisition costs of material) is rescinded in its entirety.
  • Most of CAS 404 (capitalization of tangible assets) is rescinded, with one provision relocated rather than eliminated.
  • Most of CAS 409 (depreciation of tangible capital assets) is rescinded, with three provisions relocated rather than eliminated.

The board did not treat every provision the same way. Three CAS 409 provisions and one CAS 404 provision are moving into a new section of CAS 406 (cost accounting period) instead of disappearing, because CASB determined those specific requirements provide protections that GAAP does not cover on its own. On the CAS 409 side, the surviving provisions cover individual asset service-life agreements, consistent assignment of gains and losses on asset disposition, and protections against contractors shifting the timing of disposition gains and losses. On the CAS 404 side, the surviving provision addresses duplicative costs that can arise during contractor mergers and acquisitions. Everything else in the four standards is being struck because CASB found significant overlap between GAAP and the CAS text — in the board's assessment, GAAP already addresses the same accounting concerns those CAS provisions were written to address, making the CAS-specific language redundant. In total, the rule touches roughly 72 individual requirements spread across the four standards.

The rule amends 48 CFR Parts 9903 and 9904, the sections of the Federal Acquisition Regulation system that house the Cost Accounting Standards Board's rules and the standards themselves. Those two parts are also where the earlier operating-revenue, lease-accounting, and compensated-absence conformance actions were codified, so contractors tracking the board's broader GAAP-conformance project can expect future rescissions to land in the same two parts of the CFR. Contractors below the CAS applicability threshold continue to fall outside the standards' scope entirely, a boundary this rescission does not touch.

What It Means for Contractors

For CAS-covered contractors, the rescission of CAS 408 and 411 removes two freestanding compliance regimes that required distinct cost accounting practices, disclosure statement entries, and audit trails separate from what GAAP already requires for financial reporting. Contractors that have maintained parallel CAS-specific and GAAP-specific treatments for compensated absences and material costs can move toward a single GAAP-based methodology for those areas, which should simplify disclosure statements and reduce the administrative overlap that CAS practitioners have flagged for years.

The picture is more nuanced for CAS 404 and 409. Because CASB chose to relocate rather than eliminate the provisions it judged necessary — the one CAS 404 provision and three CAS 409 provisions moving into CAS 406 — contractors cannot simply treat capitalization and depreciation as fully GAAP-governed going forward. Compliance teams will need to identify exactly which surviving requirements now live in CAS 406 and update disclosure statements, cost accounting practice descriptions, and internal control documentation to reflect the new home for those provisions rather than assuming a clean handoff to GAAP.

Contractors have a one-month runway: the rule is effective August 7, 2026. That is a tight window for updating CAS disclosure statements (particularly Part I and Part IV entries touching absences, material costing, capitalization, and depreciation), briefing internal audit and government compliance staff on which requirements moved to CAS 406 versus which disappeared outright, and coordinating with cognizant auditors on how existing cost accounting practices will be evaluated once the standards they were built around no longer exist in their current form. Contractors with cost accounting practice changes already in flight tied to these four standards should confirm with their contracting officers whether those changes still require the same disclosure and cost-impact treatment post-rescission.

This is also unlikely to be the CASB's last move. The board's stated approach — work through CAS standards one cluster at a time, comparing each to GAAP and relocating only what GAAP doesn't already cover — suggests additional standards remain candidates for similar treatment in future rulemakings, following the same notice-and-comment cadence used to reach this rescission of CAS 404, 408, 409, and 411.

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