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phrase “estimated contract price”.5 This language indicates that
Congress was aware of the fact that taxpayers were being required
to estimate when using the percentage of completion method in
accounting for long-term contracts. The fact that section
460(b)(2)(A) requires a taxpayer to substitute “actual contract
price and costs” for “estimated contract price and costs” when
applying the look-back method at the contract’s completion
underscores the fact that the total contract price used in the
percentage of completion method calculation is an estimate of the
total contract price and is likely to change during the
performance of the contract. This conceptual underpinning is the
antithesis of the all events test.6
The term “estimated” does not necessarily include, as
respondent contends, revenues from disputed claims. The term
“estimate,” however, does not preclude the possibility that
Congress intended that disputed claims be included. In any
5 The parties do not dispute the definition of the term
“estimated”. According to the dictionary, “estimate” means to
judge tentatively or approximately the value, worth or
significance of; to determine roughly the size, extent, or nature
of; or to produce a statement of the approximate cost of. See
Merriam-Webster’s Tenth Collegiate Dictionary 397 (1997).
6 Furthermore, in a number of tax accounting cases, the
Supreme Court has decided that estimates of anticipated expenses
are not accruable as deductions under the all events test. See
United States v. General Dynamics Corp., 481 U.S. 239, 243-244
(1987). The repeated use of the word “estimated” indicates that
standard principles of accrual accounting, including the all
events test, are not determinative.
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