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.
- UK Subsidiary of Foreign Company 84 1
- How to prove to HMRC that you was not self employed? 1,011 31
- Drop Down Boxes 232 4
- Any Scottish members out there? 13,637 504
- Any other payroll providers transferring from Sage to Moneysoft? 148 1
- Does anyone use quotation software? 587 8
- help needed with rti paye please 154 3
- Cash injection by shareholder 854 9
- Director selling assets to the company that were given to her 419 11
- Can't read my handwriting 814 19
- Undeclared rental income 420 7
- Home Use Costs in Company Accounts ? 345 7
- Sick pay 253 6
- Directors self assessment 177 2
- Employer's Helpline 225 1
- Employment Allowance Incorrectly Claimed for Domestic Payroll 137 2
- Commercial rental property - still Schedule A? 199 1
- Now Scotland has voted "No", when does England get to vote? 1,770 70
- Travel and Subsistence expenses while abroad 1,100 8
- Penalties for an amended p35 (2012/13) 152 2
- Raiders of the Lost Tax File 1,415
- Chartered Accountant in County Down N.Ireland 542
- National Insurance 442
- Non Resident 330
- Hands on experience of Digita 262
- Best way to take money from a business if you have unlimited EIS allowances? 256
- Does anyone use PS Financials accounting software out there? 169
- Umbrella pay services 145
- VAT on ESS via Apple, Google, Nokia - 124
- EPS Analysis - Change to EURO 123