BLUF: The Office of Management and Budget's Cost Accounting Standards Board finalized a rule rescinding Cost Accounting Standard (CAS) 407, effective October 1, 2026.

The rule rescinds CAS 407, which had governed the use of standard costs for direct material and direct labor, in order to conform the requirement with Generally Accepted Accounting Principles (GAAP). A single definition from the rescinded standard is relocated elsewhere within chapter 99 of title 48 of the Code of Federal Regulations. The final rule follows a Notice of Proposed Rulemaking published at 91 FR 13562.

Why it matters: Contractors whose accounting systems currently document compliance against CAS 407 will need to update their disclosure statements and internal cost-accounting practice documentation to reflect the standard's removal and reliance on GAAP-conforming treatment instead. This is a deregulatory, compliance-simplifying change rather than a new substantive cost-accounting obligation.

By the numbers:

• Effective date: October 1, 2026
• Publication date: September 1, 2026
• RIN: 0348-AB91
• Prior rulemaking: NPRM at 91 FR 13562

The change is administered by the Cost Accounting Standards Board within the Office of Federal Procurement Policy at OMB, and applies to CAS-covered contracts and subcontracts under 48 CFR chapter 99.

Source: Federal Register