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This example shows how CTA2009/Part 15 Chapter2 operates to arrive at the profits/losses of a film production company (FPC) producing a film whose costs increase during production, with the final expenditure exceeding the original estimate.

An FPC is commissioned by a studio to make a film for an agreed budget of £15.2m and agrees to sell all the rights in the film to the studio for £15.5³¾. At the end of the first accounting period the FPC has spent £10³¾ and still expects to complete the film for £15.2m. In the second accounting period, the company spends a further £5.3³¾, i.e. it goes £100,000 over budget. The film is not eligible for Film Tax Relief (FTR).

The profits in each Accounting Period are calculated as follows.

Period 1

-	Period 1 total	Notes
Expenditure incurred by end of period	£10³¾	Out of total expected costs of £15.2m
Income treated as earned by end of period	£10.2³¾	Expected total income of £15.5³¾. The extent to which this is allocated to Period 1 mirrors the extent to which total expected costs fall within Period 1.\n£10.2 = £15.5³¾ x £10³¾/£15.2m
Profit	£0.2³¾	-

Period 2

-	Period 2 total	Increase compared to Period 1	Notes
Expenditure incurred by end of period	£15.3³¾	-	-
Increase in expenditure incurred over previous period	-	£5.3³¾	£15.3³¾ less £10³¾
Income treated as earned by end of period	£15.5³¾	-	-
Increase in income treated as earned over previous period	-	£5.3³¾	£15.5 less £10.2³¾
Profit	-	£²Ô¾±±ô	Ìý