Long term contract work in progress: Can we resolve the conflict?

Article Abstract:

In Britain, the Companies Act of 1985 requires the valuation of current assets at production costs or lower net realizable values, while long-term contracts for work in process are valued at cost plus profit to date. The conflict inherent in these accounting and valuation standards is discussed. Eventually, the British court system will need to resolve this conflict. It is suggested that in deciding this question the court system must consider:the information required by readers of audited financial statements, the financial management needs of corporate executives, the economic consequences of the standard adopted, the uniformity of accounting treatment (given the standard adopted), and the internal reporting consistency of the accounting standard. Each of these aspects of the conflict is discussed in detail.

Valuation, Assets (Accounting), Great Britain

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Ethical guidelines

Article Abstract:

New amendments to the Statements of Ethical Guidelines have been published by the Institute of Chartered Accountants of Scotland. The amended statements are presented in their entirety. Statement 4, which replaces the existing Statement 4 and incorporates existing Statement 13, broadens the rules regarding the way in which Scottish accounting firms may describe their activities. The new Statement 7 relaxes the ban on receiving contingency fees. Statements 11 and 12 replace the current statements regarding management consulting and data processing services offered by Scottish accounting firms. Statement 5 has repealed the ban on direct mailing activities, allowing Scottish accountants to use direct mail promotions beginning in 1987.

Ethical aspects, Accountants, Business ethics

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A 'true and fair' view and the treatment of long-term contract work in progress

Article Abstract:

The Institute of Chartered Accountants of Scotland's Statement of Standard Accounting Practice Number 9 (SSAP 9), 'stocks and work in progress', issued in 1975 is discussed with regard to work in progress under long-term contracts. Although SSAP 9 allows attributable profits to be included in the carrying value of work in progress, the Companies Act of 1985 expressly prohibits such inclusion. The balance sheet treatment of long-term contract work in progress under SSAP 9 and the legal aspects of such treatment with regard to the Companies Act is discussed at some length.

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