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Stocks should be stated at the lower of cost and net realisable value.
Long term contracts should be assessed on a contract by contract basis and turnover and related costs recognised as activity progresses.
Where the contract outcome can be assessed with reasonable certainty prudently calculated profit should be recognised in the profit and loss account as the difference between turnover and related costs.
In the balance sheet turnover in excess of payments on account should be classified as "amounts recoverable on contracts".
Any excess of payments on account should be classified as such within creditors.
The amount classified within stocks as long term contracts is costs incurred less amounts transferred to cost of sales less foreseeable losses and payment on account not matched with turnover.
Any foreseeable loss should be recognised immediately in the profit and loss account.
FRS 100 was issued in November 2012. The standard establishes rules on how to select the appropriate accounting framework for a particular entity. Depending on factors such as size and whether they are listed, UK entities will apply one of:
FRS 101 Reduced Disclosure Framework (EU-adopted IFRS, with some amendments in order to comply with the Companies Act and reduce disclosure requirements)
FRS 102 (One standard which will replace existing SSAPs, FRSs and UITF Abstracts)
A modified FRSSE
The new UK GAAP is effective for periods beginning on or after 1 January 2015, with earlier adoption permitted.