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Government Entitled to Equitable Segment Closing Adjustment

The government was summarily entitled to an equitable adjustment in a segment closing adjustment dispute, according to the Court of Federal Claims, because application of the revised Cost Accounting Standard 413 may result in the government owing more for pension costs subject to the original CAS 413. The court in Viacom, Inc. v. U.S. (49 CCF 78,425) held that a contractor or the government is entitled to an adjustment "to the extent that the contractor or the government is liable for more under the revised CAS 413 than they would have been liable for under the original CAS 413." According to the court, this rule is intended "to prevent a windfall to either side based on a CAS change that alters prior expectations."

Adjustment Purpose

The contractor argued that because the government changed the accounting rules that applied to its contracts, it should not complain that the change now "upsets its expectations." However, the purpose of the equitable adjustment is to ensure the revised CASB CAS 413 does not increase the amount the government or a contractor owes to the other with respect to a segment's surplus or deficit attributable to pension costs that were subject to the original CAS 413 prior to the 1995 revisions. The fact the government changed accounting rules does not alter this purpose. (Raytheon Co. v. U.S., FedCl, 55 CCF 79,522)




(The news featured above is a selection from the news covered in the Government Contracts Report Letter, which is published weekly and distributed to subscribers of the Government Contracts Reporter. )


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