Define: Allocable

Allocable refers to the ability to assign or allocate costs, expenses, or revenues to specific activities, projects, or entities. In legal terms, it refers to the principle or requirement of accurately attributing costs or revenues to the appropriate entity or activity for accounting or financial purposes.

The concept of allocable costs is particularly relevant in contract law, where parties may agree on the allocation of costs between them. This ensures that each party bears its fair share of the expenses incurred in the performance of the contract.

In government contracting, allocable costs are a key consideration. Contractors must ensure that costs charged to a government contract are reasonable, allowable, and allocable to the specific contract. Failure to comply with allocability requirements can result in disallowed costs, penalties, or even contract termination.

Allocability is also important in tax law, as it determines whether certain expenses or revenues can be deducted or included in taxable income. The Internal Revenue Service (IRS) provides guidelines and criteria to determine the allocability of expenses for tax purposes.

Overall, allocability is a fundamental principle in various legal contexts, ensuring that costs, expenses, or revenues are appropriately assigned to the relevant entity, activity, or contract. Compliance with allocability requirements is crucial to maintain transparency, fairness, and accuracy in financial reporting and legal obligations.

This site contains general legal information but does not constitute professional legal advice for your particular situation. Persuing this glossary does not create an attorney-client or legal adviser relationship. If you have specific questions, please consult a qualified attorney licensed in your jurisdiction.

This glossary post was last updated: 29th March 2024.