As I said in the introduction, the elimination of the election to use billed-basis accounting would essentially align the tax treatment of the designated professionals—these are, as you mentioned, lawyers but also accountants, dentists, medical doctors, veterinarians, and chiropractors—to the rules that are generally followed by most businesses and taxpayers.
I would categorize those two separately. For pro bono work that's not intended to be billed....
I guess I should explain the general rules. You can value inventory at the end of the year either at its fair market value or on an item-of-inventory by item-of-inventory basis at the lower of cost or fair market value. That's the choice that's available to taxpayers generally, and that's the default set of rules that is considered to provide the truest picture of a taxpayer's income. Pro bono work that is not intended to be billed would have a fair market value of essentially nil because there is no intention to bill for it and there is not going to be a recovery on that time, so it would be valued at nil for tax purposes.
For contingency fees, the taxation is a little bit more complicated. There is case law and Canada Revenue Agency administrative guidance to the effect that, even in the absence of section 34, which provides the election for billed-basis accounting, certain contingency fees where your return on your time is not guaranteed.... A classic example might be that whether or not you're going to get paid at the end of the day is determined by whether or not you win a court case or by how much of an award is given for it, and there's real uncertainty as to whether or not that will be received. There is case law to the effect in those situations.
There is no ascertainable fair market value to the work in progress, so it would not be taken into account for tax purposes. Otherwise, you have for contingency fees the requirement to come up with a reasonable estimate of what the fair market value is. You can tell what you think the value is. Again, if there is a complete contingency fee and you just have no idea, perhaps it's not taxable because it's too uncertain. If it is sufficiently certain, then you can arrive at a reasonable fair market value, and that can take into account anticipated writedowns, end fees, and time that you don't think you're going to bill and so on. If after the end of the year you decide that you were wrong, you can do a writedown of that value for tax purposes.
Lastly—you didn't ask this—the next step is if you have bad or doubtful debts. There are reserves for those as well, so you're not immediately taxed on them.