This paper reports descriptive evidence about how managers attempt to manage earnings, based on a sample of 515 earnings-management attempts obtained from a survey of 253 experienced auditors (and also analyzed by Nelson et al. 2002). The authors classify attempts first according to primary approach: expense recognition, revenue recognition, issues...
One of the primary goals of Sarbanes-Oxley Sarbox is to ensure that companies are reporting accurate revenue numbers. Consequently, revenue recognition policies have been under particular scrutiny. A survey of 400 public and private companies found that more than half (55%) of all public companies, have changed revenue recognition policies...
Should exchanges or barter (non-monetary exchanges, that is no cash or cash equivalents are exchanged) transactions of products or services be recorded as revenues and expenses? The basic issue is whether the earnings process has been completed. Measurement is the next issue: Should revenue and expense be recognized at the...
Educating salespeople on acceptable structures is fast becoming a necessity as regulators crack down on questionable sales practices and irregularities in booking revenue. CA, for example, has been embroiled in an accounting scandal that involved improper booking of $2.2 billion in revenue. Six executives, including the former head of worldwide...
Complex contracts that require the separate delivery of multiple goods and/or services are increasingly commonplace. Contracts with multiple deliverables raise questions about the appropriate level of disaggregation for each deliverable separate earnings processes, and the amount and timing of revenue recognition for the separate deliverables. Revenue recognition guidance in current...
RevenueRecognition.com in association with International Data Corporation IDC surveyed 400 business leaders about compliance processes, ongoing risks, and costs. The survey was conducted by email and all responses were on an anonymous basis. More than 75% of respondents are CFOs, Controllers, senior finance executives, and compliance leaders. The results of...
A survey of the Financial Accounting Standards Board's advisory group, the Financial Accounting Standards Advisory Council, identified revenue recognition as FASB's top issue for the fourth consecutive year. The United States has no general-accounting standard on revenue recognition. Practices have developed for certain industries and for certain transactions, but answers...
This paper focuses on a sample of 261 companies that disclosed at least one material weakness in internal control in their SEC filings after the effective date of the Sarbanes-Oxley Act of 2002. Based on the descriptive material weakness disclosures provided by management, it is found that poor internal control...
This document serves as a benchmarking tool for revenue recognition disclosures in the pharmaceutical industry. The first section of this document accumulates the Critical Accounting Policies disclosed in Annual Reports of selected companies (generally their Management Discussion & Analysis section) and is followed by a section displaying the Revenue Policies...
This document serves as a benchmarking tool for revenue recognition disclosures in the pharmaceutical industry. The first section of this document accumulates the Critical Accounting Policies disclosed in Annual Reports of selected companies (generally their Management Discussion & Analysis section) and is followed by a section displaying the Revenue Policies...
With most companies having completed their first internal control attestation - and thus, with less demanding focus on Sarbanes-Oxley Section 404 at least in the short run - attention for many is shifting to revenue recognition. The topic is still a main priority for standard-setters and regulators, as well as...
In the wake of the passage of Sarbanes-Oxley, exporters are faced with new accounting complexities. In particular, the legislation raises the issue of when exporters may recognize revenue for goods shipped to another party. For exporters looking to recognize their sale of goods at point of export, an insurance policy...
Government mandated financial compliance requirements, such as Sarbanes-Oxley SOX, are driving large investments in corporate accounting infrastructure, SOX Ethics Program Training, and Business Process Management BPM initiatives. Finance Management is driving corporate-wide changes that also must train and work closely with their front-line Sales and Project Management organizations to ensure...
The SEC issued Staff Accounting Bulletin SAB No. 101 to address its concern that firms were masking true performance by managing earnings using accelerated revenue recognition. Critics of this Accounting Bulletin stated that it would eliminate industry-accepted revenue recognition practices and reduce the quality of reported earnings. The FASB's revenue...
On 10 March 2005 the Urgent Issues Task Force UITF of the Accounting Standards Board ASB of UK issued UITF Abstract 40 which provides clarification as to how professional firms should recognize revenue arising from contracts for services. The abstract is far more prescriptive than the draft issued on 30...
The purpose of this white paper is to provide financial accounting and reporting guidance for the impacted revenues, including: Interpretation and examples of revenue recognition polices and the accrual options available to local governments and recommend revenue classification for financial statement presentation. It focuses on the distribution of these impacted...
The primary issues associated with improper revenue recognition may be grouped into four broad categories, as follows: fraudulent revenue recognition, revenue recognized prior to delivery, revenue recognized for fees that are not fixed or determinable, and revenue improperly classified and presented in the income statement. This paper includes a detailed...
This paper reveals about a report that recently surveyed 118 business leaders about how they are responding to the challenges of compliance. The survey was conducted by email and all responses were on an anonymous basis. More than 85% of respondents are CFOs, Controllers, and other senior finance executives. A...
In sum, the consequences of improper revenue recognition in corporate financial statements can be catastrophic. Courts have found that corporate financial statements that improperly recognize revenue and fail to conform to GAAP constitute presumptively false and misleading statements and violate Rule 10b-5.14 But distinguishing what is permitted from what is...
Users of financial statements continue to be challenged to interpret the revenue line in company financial statements. Revenue might well be the largest number in the financial statements, but it is often the least well explained. This article explores some of the difficulties surrounding revenue recognition under International Financial Reporting...
