Renegotiation of war contracts (supplement);

              Accounting Research
December, 1943
No. 21
BULLETINS
•
Issued by the Committee on Accounting Procedure,
American Institute of Accountants, 13 East 41 st Street, New York 17, N. Y.
Renegotiation of War Contracts (Supplement)
Copyright 1943 by American Institute of Accountants
THIS bulletin supplements Accounting Research Bulletin No. 15 issued in September, 1942, and deals further with the financial statements of contractors and subcontractors who are affected by the provisions of the War Profits Control Act (Section 403 of Public Law 528, 77th Congress, as amended).
(1) Since renegotiation proceedings have now been conducted over a considerable period of time, it is to be expected that many companies, particularly those which have completed renegotiation proceedings for a prior year, will be in a position to make reasonable provision for renegotiation refunds in their current financial state-ments, in accordance with the long recognized accounting principle that provision should be made in financial statements for all liabili-ties that can be reasonably estimated.
(2) Where such provision is made, there should be disclosure in the financial statements, by footnote or otherwise, of the basis upon which it is made. It is recognized that by reason of changed condi-tions, a settlement made in the preceding year may not, in some cases, be indicative of the amount refundable in respect of the cur-rent year, and the provision made should take account of this pos-sibility. If, however, the provision is materially less than the amount which would be indicated on the basis of a prior year's settlement, the reasons therefor and the approximate effect of the difference upon the net income were a refund required on the same basis for the current year, should be stated, except as hereinafter provided.
(3) Where a provision is not made, a statement to that effect should be set forth in a footnote, together with appropriate dis-closure of the reasons therefor and of the company's renegotiation status. If a settlement has been effected for a prior year, such dis-closure should, except as hereinafter provided, include a statement of the approximate effect upon the net income were a refund re-quired on the same basis for the current year.
(4) The information required under paragraphs (2) and (3)
SUMMARY STATEMENT
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