Timbo Posted December 2, 2022 Report Share Posted December 2, 2022 Please accept my apology for the elementary question, but I need some insight regarding pass through costs and instances if and when they are recognized as revenue for a prime contractor. A potential scenario would be something like: A Subcontractor submits expenses to Prime contractor for Defense Base Act insurance and airfare with regards to a specific contract. The prime reimburses the sub and then submits these costs for reimbursement requests to the government. When the prime is reimbursed from the government are there any scenarios where this reimbursement would be considered revenue to the prime? Link to comment Share on other sites More sharing options...
Vern Edwards Posted December 2, 2022 Report Share Posted December 2, 2022 By ordinary definition, the amount paid to the prime contractor is revenue of the prime. Link to comment Share on other sites More sharing options...
here_2_help Posted December 2, 2022 Report Share Posted December 2, 2022 1 hour ago, Timbo said: A Subcontractor submits expenses to Prime contractor for Defense Base Act insurance and airfare with regards to a specific contract. The prime reimburses the sub and then submits these costs for reimbursement requests to the government. When the prime is reimbursed from the government are there any scenarios where this reimbursement would be considered revenue to the prime? To Vern's point, I have a hard time thinking about scenarios where government payment's to the prime would not be considered as prime contractor revenue/sales. The subK incurs costs and submits an invoice to the prime. The prime pays the invoice, incurring a cost -- presumably recording the cost as an element of cost of sales. The prime submits an invoice to the government for its costs, which now include the subK's costs that it paid. The government pays the prime's invoice, which is treated as revenue/sales. The difference between the revenue recorded and the cost of sales recorded is the contract's gross margin. Link to comment Share on other sites More sharing options...
Retreadfed Posted December 2, 2022 Report Share Posted December 2, 2022 2 hours ago, Timbo said: When the prime is reimbursed from the government are there any scenarios where this reimbursement would be considered revenue to the prime? The reimbursement of the specific costs mentioned would be considered as revenue. However, for determining a firm's size when a revenue (receipts)standard is used, see 13, CFR 121.104. Link to comment Share on other sites More sharing options...
Timbo Posted December 2, 2022 Author Report Share Posted December 2, 2022 Thanks everyone, this is very helpful information! Link to comment Share on other sites More sharing options...
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