Renegotiation of war contracts;

              Accounting Research
BULLETINS
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Issued by the Committee on Accounting Procedure, American Institute of Accountants,
13 East 41st Street, New York, N. Y. Copyright 1942 by American Institute of Accountants
THIS BULLETIN deals with financial statements of contractors or sub-contractors who are affected by the provisions of the War Profits Control Act.
SUMMARY STATEMENT
In the financial statements of contractors or subcontractors who are subject to the provisions of the War Profits Control Act indication should be given of the possibility of renegotiation thereunder of gov-ernment contracts or subcontracts. In some cases a reserve, shown as a deduction in the income account, may be desirable, but probably in most cases, particularly at the present stage, a footnote to the finan-cial statements will accomplish the purpose of disclosure.
September, 1942 No. 15
The Renegotiation of War Contracts
DISCUSSION
In dealing with the problem of accounting for special reserves arising out of the war 1 the committee on accounting procedure em-phasized the necessity of providing, by charges in the current income statement, properly classified, for all foreseeable costs and losses ap-plicable against current revenues. In so doing the committee recog-nized the limited significance of income statements prepared currently to cover comparatively short periods of time and pointed out that the tentative character of such statements is accentuated under war condi-tions. Various kinds of war reserves were considered and accountants were urged to encourage their establishment, not only in the interests of the business enterprise, but in the interests of the national economy as a whole. It was further suggested that the government might well give consideration to the necessity for such reserves in its fiscal policies generally, and particularly in respect of taxation.
War Profits Control Act
The tentative character of current financial statements has been further accentuated as a result of the "renegotiation" or "war profits
1 Accounting Research Bulletin No. 13.
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