Medium-sized partnerships under threat from new accountancy rule
A new accounting guideline will hit architects' revenues and cause havoc to the way they manage their businesses, accountants have warned.
The Accounting Standards Board, the organisation that sets professional standards, has published new guidance that could cause serious problems for the accounts of many medium-sized partnerships.
Senior accountants have warned that architects will no longer be allowed to declare tax at intervals throughout a construction project, but will instead have to pay every time a contractor is paid.
The changes are part of the publication, Urgent Issues Task Force Abstract 40 - Revenue Recognition and Service Contracts, which advises on accounting for turnover derived from contracts for professional services.
'What this means is that the accounting bodies have come firmly off the fence regarding ongoing contractual work, ' Menzies Chartered Accountants' technical partner Andrew Cook told the AJ.
'Where currently work is carried out over a length of time, as in the case of architects, those offering a service might only do their accounting at significant stages, such as the submission of a planning application, ' Cook continued.
'But after this abstract comes into force, it will mean architects accounting as they go along, for example, related to the amount of time an architect spends on a drawing.
'As a result it's as unpopular among the accounting community as it is likely to be among architects, ' he added.
When the accounting standards board issues an order it immediately becomes general accounting practice.
Practices that submit accounts to Companies House that do not apply to generally accepted accounting practice are likely to face severe financial penalties.
The abstract insists that, as a matter of principle, there must be no difference between the accounting required for long-term contracts and other contracts for services.
The abstract concludes that revenue should therefore be gathered as the project continues, reflecting the architect's partial completion of the contract.