Join Jim Stice for an in-depth discussion in this video Story of SAB 101, part of Running a Profitable Business: Revenue Recognition.
- The preparation of financial reports…requires that the accountant exercise judgement.…There is some flexibility,…some estimation in the reported numbers.…- Earnings management is the strategic use…of this flexibility to boost reported numbers…in order to look better.…To banks, to potential investors, or for a manager's…internal performance evaluation.…- Outrageous earnings management can ruin…the usefulness of the financial statements.…The statements don't tell what happened.…Instead, they tell what management…wants you to think happened.…- Because the computation of net income…begins with total revenue,…the measurement of revenue is fundamental…in the practice of accounting,…and is a tempting target for earnings management.…
- Consider in the late 1990's,…internet usage was just taking off.…Investors were excited to put their money into…any company that had an internet connection.…- In this euphoric environment,…where investors were willing to pay billions…for companies reporting even a hint of…internet related revenues,…
But without recognizing revenue, a company can't hope to report any profit. Accordingly, company management is typically under great pressure to recognize revenue as soon as possible. Want to understand these concepts better? Join professors Jim and Kay Stice as they introduce the theory, practice, and implications of revenue recognition. Together they demonstrate how this seemingly innocent accounting topic can turn a reported profit into a reported loss, sometimes with multibillion dollar implications for company values.
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- Defining revenue recognition
- Timing revenue recognition
- Understanding multi-element transactions
- Valuing companies
- Reviewing the great revenue frauds and scandals of history