DETERMINING THE STAGE AT WHICH IT IS APPROPRIATE TO RECOGNISE PROFIT UNDER LONG-TERM CONTRACTS

Statement of Standard Accounting Practice 9 (Revised) "Stock and Long-Term Contracts" (1988) prescribes that where the outcome of a long-term contract can be assessed with reasonable certainty before its conclusion, the prudently calculated attributable profit should be recognized in the profit and loss account. However, the term reasonable certainty is not defined. A workable definition for the term and a method for determining the earliest point from which profits should be recognized is proposed.