Summer 2005 Newsletter Content More of the same? Around the world Hot tips Inside out? Sweet sacrifice Simple trust Done and dusted? Open immediately File under E An Inspector calls CO still OK Open for business High PHI Arctic chills Duty calls Pensions Fuelling around WIP round Win some, lose some Take it and go? Party talk Work less, earn less Making adjustments

WIP round Remember Enron? They booked income before they had earned it - in a massive way - and created an enormous corporate collapse, bringing down their accountants with them and shaking up the whole financial regulation system in the US, with knock-on effects here. One of the less predictable ripples is the introduction of a new accounting rule which is supposed to stop people taking account of income before they've done the work. It demands that revenue in your profit and loss account should relate to the extent you've earned the money for doing the job. That seems straightforward and reasonable, but it's led to a big argument between the professionals. The problem is that earnings from carrying out services - say, accountancy, architecture, legal advice - have traditionally been booked when a bill is rendered, which may be at various points during the contract, but may not be until the job is complete. Until then, you carry forward 'work in progress' (WIP) at what it has cost you to half finish the job. WIP doesn't include any profit, and it doesn't include the value of the time of an owner - a sole trader or partner - only the staff. The new accounting rule requires you to bring in income to match the work you have done. That means an Enron should leave income out, but architects and accountants should probably show revenue earlier. That's all very well, but if the accounts are showing the revenue, you have to pay tax on it - and it doesn't make any difference to the way the cash comes in. The accountancy boffins are still arguing about the details of this new rule, and the Revenue have been asked to say what they think - but it seems likely to accelerate tax charges for people affected. If you want to know more, we will be happy to discuss it with you.