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HMRC internal manual

Business Income Manual

HM Revenue & Customs
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Stock: valuation: professional work-in-progress: general principles

Valuing professional work-in-progress follows GAAP

The proper valuation of professional work-in-progress depends on the correct application of generally accepted accounting practice to the facts.

A proper basis of valuation must take into account the particular circumstances of the individual firm. Different firms in what may appear to be the same line of business may properly adopt different bases of valuation if their circumstances are different. For example, Firms A and B may both describe themselves as ‘estate agents and chartered surveyors’ but this does not necessarily mean that they must adopt the same basis for valuing work-in-progress. If Firm A does mainly surveying and valuation work and Firm B does mainly property sales then a basis of valuation that is acceptable for A may well not be acceptable for B.

Uncompleted contracts for services should be valued in accordance with section 23 of FRS102. Briefly, this means that revenue for service contracts are to be accounted for under what is known as the ‘percentage of completion’ method. In very simple terms, this means that if a contract is in progress at the year end, then the supplier of services would include the proportion undertaken to that date in its accounts a revenue.