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B-198620 1 (1981-08-13)

handle is hein.gao/gaobabjbq0001 and id is 1 raw text is: COMPTROLLER GENERAL OF THE UNITED STATES WASHINGTON D.C. 20548 PLRD/GP-40 August 13, 1981 B-198620 The Honorable James J. Blanchard Chairman, Subcommittee on Economic Stabilization Committee on Banking, Finance and Urban Affairs ,,.. .. House of Representatives ,j, yj 0 L, LOW : Dear Mr. Chairman: This is in response to your June 29, 1981, letter in which you raised two - sues related to Cost Accounting Standards (CAS). First, you pointed out that before any attempt was made to amend or repeal CAS 409, Depreciation of Tangible (Capital) Assets, an independent agency should further examine all of the issues involved. Second, you asked to be apprised of the status of any current GAO reviews dealing with Cost Accounting Standards. We agree that an examination and review should be made prior to changing any of the Cost Accounting Standards promulgated under Public Law 91-379. As you pointed out CAS 409 underwent extensive research in support of its promulgation. The report of the Defense Industrial Base Panel of the House Committee on Armed Services, dated December 31, 1980, and the Department of Defense (DOD) Memo- randum dated April 30, 1981, both include a common element, in that they suggest changes to CAS 409 as a means of offering incentives for industry to invest in tangible capital assets. It should be remembered, however, factors other than CAS 409 which bear directly on this point. CAS 414, for example, is one factor; DOD's profit policy is another. Before an apparently simple solution, such as amending or repealing CAS 409 is attempted, all of the factors that have been identified as affecting additional capital investment should be examined and a set of recommendations should be developed that would deal with all of the issues. This would include considera- tion of the current DOD profit policy, CAS 414, and corporate man- agement's orientation toward long-term investment. In particular, the position to avoid is one where corrective action is taken that deals only with some of the factors involved and thus provides no real assurance that the remaining impediments do not negate the attainment of the goal of improving the investment climate. The recommendations dealing with CAS 409 should not be segregated from other issues in this rather complex area dealing with investment incentives.

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