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.
- Can I take action against my accountant for incompetence? 3,607 70
- Do I need a smartphone? 649 22
- Incorporated when they should not have 192 7
- Help with HMRC investigation 66 2
- IHT 205 partnership and business interests 70 2
- Tax position re this lease? 344 8
- Reasonable excuse for not filing returns....Death? 312 5
- AWeb - download file 107 2
- pension paid by company? 315 8
- Why would they want his purchase invoices?? 727 17
- Late annual return 106 1
- Charity work 207 10
- Company Director In Prison 367 8
- Subcontractor and CIS Deductions made by Contractor 222 12
- HMRC Agents Line 124 2
- Managing Employee Expenses 174 6
- Has anyone read the implications of the Lisbon treaty? 1,684 60
- inheritance tax 563 14
- donations to school via self employed business (registered charity) 164 5
- Is compensation for surrender of a lease subject to VAT 74 1
- Property exchange - 8-year legal delay following fall-out 672
- Have you staged yet for auto enrolment? 498
- Cancelled 424
- Cancelled 363
- SAGE Payroll Data for Import to MS Dynamics AX 361
- Probiz 333
- Free-standing washing machine - unfurnished lettings 322
- Phishing emails purporting to be from CIPFA? 242
- Is this UK incapacity benefit taxable in UK or Jersey? 214
- Another HMRC computer glitch? 197