Yes, small businesses are generally exempt from Cost Accounting Standards (CAS) requirements for federal contracts, as established by 48 C.F.R. § 9903.201-1(b)(3). This exemption allows small businesses to avoid the rigorous, long audits associated with CAS compliance.
CAS applies to contracts, not to contractors or agencies. CAS requirements apply to all negotiated contracts in excess of $2 million, unless an exemption applies. A contract award of $7.5 million or more is generally a “trigger” contract that establishes CAS coverage, unless an exemption below applies.
Cost accounting looks at all the expenses that go into producing your business's offerings. This includes both fixed costs (like rent) and variable costs (like materials). The goal is to identify all the factors that go into your production process—which includes both products and services.
CAS Compliance Requirements
Coverage and Thresholds: CAS applies to negotiated contracts exceeding $7.5 million, with full CAS coverage for contracts over $50 million. Smaller contracts may be subject to modified CAS coverage.
For general SBA purposes, a small business must be for-profit, U.S.-based, independently owned, not dominant nationally in its field, and meet specific size standards (revenue/employees) for its industry, with variations for specific programs like loans or contracting. Key requirements include being a for-profit entity, operating in the U.S., being independently owned, not being nationally dominant, and meeting SBA's specific size definitions.
The most common reasons why small businesses are denied SBA loans are: Not having a good credit score. Not having adequate collateral. Not having adequate cash flow to pay the loan back (or not being able to prove it)
CAS applies to all negotiated contracts except those awarded to small businesses. Contracts that require full coverage apply when: A contract is $50 million or more.
4.1 All Large Taxpayers classified under Revenue Regulations No. 1-98 are required to maintain Computerized Accounting Systems (CAS) or components thereof. Accordingly, all books of accounts and accounting records shall be in electronic formats.
Micro, Small, and Medium Enterprises (MSMEs) are exempt from cost audit—even if they operate in regulated or non-regulated sectors. If your business qualifies as an MSME, you do not need to maintain cost records or undergo cost audit—even if you exceed product-wise revenue thresholds.
Cost accounting is mandatory for companies engaged in specified goods/services with a turnover of at least ₹35 crore.
Types of cost accounting
Cost accounting helps companies identify areas where they may be able to better control their costs, and also informs pricing decisions to ensure profitability. Cost accounting figures are used only by a company's internal management team, so collection methods can be customized according to company needs.
Proposed CAS changes
If a current award is equal to or greater than $7.5 million, or a business unit is performing a CAS covered contract/subcontract valued at $7.5 million or more, the award triggers CAS coverage. There are two types of CAS coverage: full CAS and modified CAS.
Standard costs can be established at different levels depending on your business goals. These include basic standards (long-term benchmarks), ideal standards (perfect operating conditions), attainable standards (efficient but realistic conditions), and current standards (based on existing performance levels).
Having overall annual turnover during immediately preceding financial year of Rs. 100 crore or more for all goods and services and Rs. 35 crore for individual goods and services.
Who Needs to Register Under CAS?
Additionally, the OPC is not required to have a minimum capital stock, whether in terms of authorized, subscribed, or paid-up, except as otherwise provided by special law. The only payments needed to incorporate an OPC are filing fees, name reservation fees, and legal research fees.
(b) The head of an executive agency may waive the applicability of the Cost Accounting Standards for a contract or subcontract under exceptional circumstances when necessary to meet the needs of the agency.
GAAP is focused on financial accounting, so they are more broadly applicable and wide ranging. CAS only focuses on cost accounting and applies to entities holding contracts with the U.S. federal government and its agencies on a contract-by-contract basis when a certain threshold in contract value is met.
Launching a CAS division is almost like creating a new business from the ground up: To do so, firms need to think through everything from the technology they use to how they bill clients, track time, hire and train staff, package and market their services, set goals, and assess their progress.
California's New Small Business Laws
For 2025, some notable changes include: Minimum Wage Increase: California's minimum wage is set to increase, continuing a phased approach toward $16.50 per hour. This impacts wage calculations and payroll budgets.
It defines small business by firm revenue (ranging from $1 million to over $40 million) and by employment (from 100 to over 1,500 employees). For example, according to the SBA definition, a roofing contractor is defined as a small business if it has annual revenues of $16.5 million or less.