Presents an overview on accounting for defense contracts. Opportunities for accounting scholarship in the defense industry; Regulation in the industry; Possibility of efficient behavior in the industry; Contracting frictions; Product costing's impact on factor choice incentives.

The article focuses on accounting systems disclosing income information. Income measurement entails reporting in each time period: present-period cash flows; and an accrual measure based on these cash flows and the change in the expected present values of future cash flows. Information disclosure is ensured if one can always identify which of the possible events in a given event structure has occurred in each time period. D. Vickrey introduces the concept of "weak transparency," referring to the special case of a null information structure. Under the null information structure, there is a constant mapping from underlying states of nature to the set of reported events (or the possible messages to be conveyed). There is essentially no information to be conveyed by income measurement when the information structure is null, so the invertibility condition is satisfied trivially. The main implication of the "possibility result" is that the ability of an accounting system to convey information is not constrained by a requirement that it value assets or measure income.