Which of the following statements regarding Cost Accounting Standards is correct?

Cost Accounting Standards (CAS) are a set of standards that govern the accounting practices of contractors engaged in government contracts. The correct statement regarding CAS focuses on the conditions under which they apply to contracts.

The statement that CAS do not apply unless an economic price adjustment based on actual cost incurred is provided is correct because CAS typically comes into play when a contract is subject to cost reimbursement or when there is a need to adjust contract prices based on the actual costs incurred. Economic price adjustments are often tied to the actual cost performance of a contractor, indicating that CAS might not be relevant unless such adjustments arise.

Understanding the context of CAS application is crucial. For instance, they are primarily applicable to certain types of government contracts, predominantly those involving cost-reimbursement or fixed-price contracts with certain criteria that trigger CAS compliance. In general, they aren't universally applied to all commercial acquisitions; they specifically pertain to federal contracts and certain subcontracts. Therefore, recognizing the conditional nature of their applicability based on the type of pricing agreement is essential in comprehending the nuances of cost accounting practices concerning government contracts.