Fears among lawyers of tax increases caused by an accounting change that values work in progress (WIP) at selling price rather than cost are unfounded, according to Trevor Johnson of the Association of Taxation Technicians.
Writing in industry magazine The Tax Adviser, Johnson said that Application Note G was unequivocal. He said the note provides additional guidance on the recognition of turnover derived from long-term contracts, “but does not amend the requirements of the accounting standard SSAP9 [Statement of Standard of Accounting Practice 9]”.
SSAP9 is the accounting practice under which WIP is valued at the lower cost or its net realisable value.
Backing Johnson, Accounting Standards Board chair Mary Keegan said: “I couldn’t be clearer in my own mind that we haven’t changed SSAP9”.