This guidance relates to accounting periods before the
issue by the Accounting Standards Board (ASB) of Urgent Issues Task
Force (UITF) Abstract 40 in March 2005. UITF 40 applies for
accounting periods ending on or after 22 June 2005. Further
guidance is at BIM74200 onwards. See in particular Appendix 2
paragraph 1 in BIM74275 in relation to the ICAEW’s guidance
TAX30/98 (see BIM74130).
If the client is in a precarious financial position and unlikely to be able to pay for the work it is equally unlikely that the work-in-progress has any real value. As with stock, it is necessary to consider each item of work-in-progress to confirm that its net realisable value exceeds its costs and, if not, to write it down to that value. In the case of work-in-progress there is normally only one 'customer' for the work so the net realisable value will depend on an assessment of what that customer can be expected to pay for it. However, the concept cannot be taken too far. What is needed is not an assessment of what the customer will pay for the work in its current state; the assumption that the work will be completed needs to be made.
In some cases it may not be possible to arrive at a value for work-in-progress. Mason v Innes  44TC326 established that an author cannot have work-in-progress at least before he has entered into a contract with a publisher for the book and HMRC accept this.