You will probably have read in your press about the implications of UITF 40. The main area at issue is the treatment of “work in progress”.
The key points are:
- Where your right to consideration arises as time progresses, revenue has to be recognised by reference to the value of the work performed at accounting period end;
- Where your right to consideration only arises when an event outside your control occurs (for example where fees are dependent on a successful outcome), revenue should only be recognised when that ‘critical event’ occurs (i.e. the case is won).
On a related point, it has now been clarified that legal aid fees cannot be left out of account until the year in which they are taxed or otherwise assessed. We are aware of many cases where this can cause problems.
In our opinion, UITF 40 is unlikely to have a material impact in the majority of cases, but it does need separate study and discussion.
E-mail: mark@malthouse.com or steve@malthouse.com
Date:11 July 2006
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