ABSTRACT
LONG-TERM CONTRACTS We have seen that when a transaction covers more than one period firms must decide when to recognize revenue and charge expenses. ‘Long-term’ contracts involve two or more accounting periods. It is fairly obvious that not all the profit was ‘earned’ the day the contract was signed, and likewise that such profit as there is will not all accrue on the final day when the last work is completed. Some other basis is required, to spread the total profit ‘fairly’ over the years.
