So, UITF40. What is it good for ?
By now I am sure we all know what this is about.
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Can this be deployed as best practice for accounting periods prior to 22/6/2005? I am looking at off setting some other unrelated adjustments enforced by our auditors to maintain overall profit levels. I see this as an opportunity to counteract these adjustments at close out. Our year end is 30 April.
"... a seller may obtain a right to consideration when some, but not all, of its contractual obligations have been fulfilled. Where a seller has partially performed its contractual obligations, it recognises revenue to the extent that it has obtained the right to consideration through its performance."
If I am preparing a tax return or set of accounts I have no right to consideration until the work has been completed and agreed by the client. If a client decided to leave before I have completed the assignment I will not get paid. Even if I have completed almost all of the work on the assignment.
Therefore I MAY have obtained a right - but I really don't think so.
Therefore I do not plan to follow UITF40 in respect of the clients for whom I simply prepare accounts and tax returns which are not completed at the balance sheet when preparing my practice accounts.
If there is no right to receive payment then I cannot recognise the income - simple!
Simon really has bigger problems than UITF 40 if his clients ask him to do work, supply their books and records to him, and then have no liability if they decide to leave before the job is finished.
Some sound practice management and good engagement letters will solve that problem, as they will most UITF 40 problems for most people.
I've said this before, and I'll say it again. Bar those with serious contractual problems becasue they work for the government (lawyers mainly) UITF 40 simply should not be an issue for most businesses and if it is, it's a lack of will power to impose reasonable business terms. That does not require tax relief.
we have all operated on the accruals method of accounting. Who ever prepares a set of accounts for a client without an accountancy accrual? Surely we professionals should likewise accrue for future income in the same manner. UITF 40 just sets it out in rather a more certain way than your average accrual calculation.Globally, taking the accounts we prepare and our own accounts, all the fee debits will equal all the credits. That seems entirely fair.
In writing about the lack of any form of relief against the extra charge generated by following UITF 40 for professional firms (as was given to barristers for the change to the cash basis), I came to the conclusion that really none was needed. Barristers cannot sue for their fees, accountants can. The accounting profession needs a wake up call - invoice regularly (to reduce that WIP), and then collect in your debts!
Try this alternative address. Mark's URL took me to it.
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