SSAP 9 Stocks and Long-term Contracts

SSAP 9 (Revised September 1988) (PDF)

SSAP 9 gives guidance on the accounting treatment of both stocks (inventories) and long-term contracts.

The determination of profit for an accounting period involves the allocation of costs to reporting periods. As part of this process, the cost of unsold or unconsumed stocks is?to the extent that it is believed to be recoverable?carried forward until the period in which the stock is sold or consumed.

Separate consideration needs to be given to long-term contracts. Owing to the length of time taken to complete such contracts, to defer recording turnover and taking profit into account until completion may result in the profit and loss account (income statement) reflecting not so much a fair view of the results of the activity of the company during the period but rather the results relating to contracts that have been completed in the period. It is therefore appropriate to take credit for ascertainable turnover and profit while contracts are in progress in accordance with the guidance given in SSAP 9.

SSAP 9 is effective for accounting periods starting on or after 1 July 1988. If put into effect as expected in 2003, the proposed standard in FRED 28 'Inventories & Construction and Service Contracts' will supersede SSAP 19.