SSAP9 - Stocks and long term contracts - Difference of opinion
I would be most grateful for any thoughts, comments and suggestions regarding the following.
The client is a housebuilder, developing large properties (£1m+).
The current development has just had its foundations laid, and steels put in place - basically the first stage has been completed.
Therefore the company has decided to make a claim for payment of £50,000 from the prospective buyer as a sort of stage payment and to ease the developers cash flow.
Whether the company says this is just a payment on account, a stage payment or an invoice, it will be subject to SSAP9 reporting requirements as the project will span at least two accounting periods. Therefore, if the attributable costs and overheads are less than the £50,000, a profit is reportable at the year end, and if the attributable costs are more, a loss should be recognised, and prudence and other principles state it should be immediate (or at the next financial reporting date, like SSAP9 would enforce).
IE value of work completed to date to sales (Cr Sales, Dr Debtors/Amounts recoverable on contracts), attributable costs of work completed to date moved from WIP to Cost of Sales (Cr WIP, Dr CoS), and payment made posted against Amounts recoverable on contract (Dr bank, Cr, Amounts Recov on Contract).
The company argues this is 'just' a payment on account, and therefore does not recognise it in the profit and loss account until the project is completed and the completion invoice is raised. IE perhaps wait two years (until it is completed) before reporting any profit for this development.
It know which I think is the correct option, however it is the FD who has suggested the alternative, and somewhat dismissed the idea of SSAP9. I do not know whether I am worrying too much about it's treatment, or whether the potential SSAP9 position has been overlooked.
Any thoughts highly appreciated.
- Finding mobile numbers for clients we have lost contact with 102 2
- 2 companies, one payroll 123 3
- Director Liability 49 1
- Freelance/Employee 359 9
- Salary Sacrifice andy subsistence payments 131 4
- How do I answer a W-8BEN-E question (USA IRS) 379 4
- exemptions from CIS 237 6
- Directors exempt from AE? 560 10
- Volontaire International en Entreprise (VIE) 183 5
- Xero Pain Points 634 20
- Impairment in value of subsidiary - allowable? 265 13
- The importance of Grammar 1,740 52
- Client Require Tax Return and Profit and Loss for Housing Benefit claim 216 2
- VAT - How hard is it? 1,678 56
- Tax Implications on Child Benefits 387 3
- How much do you pay for Xero? 297 3
- Client in dispute with Customer over cancellation charge 598 23
- Cut-off accounting question 395 8
- VAT reverse charge on consulting from EC 112 2
- VAT Reclaim 213 7
- Any knowledge of salesorder.com 393
- Chart of account segments; Balance sheet vs P&L 350
- Could and would anyone here carry out a hot file review of some non statutory audit work please? 333
- Goodwill and the Summer 2015 Budget 313
- Electric Car 265
- S222 Charge 230
- What is the best acounting software for online international retail business? 226
- Company Structure 207
- Travel and Subsistence Expenses 170
- IP trans to holding company 169