3 In which accounting period should a construction company take the profit on a contract:

(a) when the contract is signed;

(b) apportioned over the life of the contract;

(c) when the contract is completed;

(d) when the warranty period is over;

(e) when it is clear a profit will be made?

This news story deals with two companies (Capita and W S Atkins) both of whom are involved in the construction industry. If a contract takes longer than one year to complete, at what point should the company take any expected profit? A prudent approach would be to wait until the contract has finished. A highly imprudent one would be to take all the expected profit when the contract was signed. The accountancy profession’s answer is to take some profit on account provided certain conditions are met.