subpart 230.71--facilities capital employed for facilities UNDER
CONSTRUCTION
230.7100 Definitions.
230.7101 Calculations.
230.7101-1 Cost of money.
230.7101-2 Representative
investment.
230.7102 Determining imputed
cost of money.
230.7103 Preaward capital
employed application.
230.7100 Definitions.
(a) “Intangible capital asset” is an asset that has no physical substance, has more than minimal value, and is expected to be held by an enterprise for continued use or possession beyond the current accounting period for the benefit it yields.
(b) “Tangible capital asset” is an asset that has physical substance, more than minimal value, and is expected to be held by an enterprise for continued use or possession beyond the current accounting period for the service it yields.
(c) “Cost of money rate” is either—
(1) The interest rate determined by the Secretary of the Treasury under
Pub. L. 92-41 (85 Stat 97); or
(2) The time-weighted average of the interest rate for each cost accounting period during which the asset is being constructed, fabricated, or developed.
(d) “Representative investment” is the calculated amount considered invested by the contractor during the cost accounting period to construct, fabricate, or develop the asset.
230.7101 Calculations.
230.7101-1 Cost of money.
(a) The interest rate in 230.7100(c)(1) is established semi-annually and is published in the Federal Register during the fourth week of December and June.
(b) To calculate the time-weighted average interest rate—
(1) Multiply the various rates in effect during the months of construction by the number of months each rate was in effect; and
(2) Divide the sum of the products by the total number of months in which the rates were experienced.
230.7101-2 Representative
investment.
(a) The calculation of the representative investment requires consideration of the rate or expenditure pattern of the costs to construct, fabricate, or develop a capital asset.
(b) If a majority of the costs were incurred toward the beginning, middle, or end of the cost accounting period, the contractor shall either—
(1) Determine a representative investment amount for the cost accounting period by calculating the average of the month-end balances for that cost accounting period; or
(2) Treat month-end balances as individual representative investment amounts.
(c) If the costs were incurred in a fairly uniform expenditure pattern throughout the construction, fabrication, or development period, the contractor may—
(1) Determine a representative investment amount for the cost accounting period by averaging the beginning and ending balances of the construction, fabrication, or development cost account for the cost accounting period; or
(2) Treat month-end balances as individual representative investment amounts.
230.7102 Determining imputed
cost of money.
(a) Determine the imputed cost of money for an asset under construction, fabrication, or development by applying a cost of money rate (see 230.7101-1) to the representative investment amount (see 230.7101-2).
(1) When a representative investment amount is determined for a cost accounting period in accordance with 230.7101-2(b)(1) or 230.7101-2(c)(1), the cost of money will be the time-weighted average rate.
(2) When a monthly representative investment amount is used in accordance with 230.7101-2(b)(2) or 230.7101-2(c)(2), the cost of money will be the interest rate in effect each month. (Under this method, the cost of money is determined monthly and the total for the cost accounting period is the sum of the monthly amounts.)
(b) The imputed cost of money will be capitalized only once in any cost accounting period, either at the end of the period or at the end of the construction, fabrication, or development period, whichever comes first.
(c) When the construction of an asset takes more than one cost accounting period, the cost of money capitalized for the first cost accounting period will be included in determining the representative investment amount for any future cost accounting periods.
230.7103 Preaward capital
employed application.
An offset to the profit objectives as set forth in FAR 15.404-4 is not required for CAS 417 cost of money.