Join Jim Stice for an in-depth discussion in this video Story of ZZZZ Best, part of Running a Profitable Business: Revenue Recognition.
- Barry Minkow started operating…his carpet cleaning business out of the Minkow family garage…when he was fifteen years old.…At its peak, six years later,…the company, called ZZZZ Best,…had a market value of over $200 million.…- On paper, Minkow himself was worth $109 million.…Minkow was a celebrity.…In February 1987 he was selected as one of the…Top 100 Young Entrepreneurs in the United States.…He spoke of making ZZZZ Best…the General Motors of carpet cleaning.…He talked of running for president one day.…- But in a July 1987 press release,…ZZZZ Best announced that Minkow had resigned as…Chief Executive Officer because of a severe medical problem.…
Shortly thereafter, ZZZZ Best filed a Chapter 11 bankruptcy.…The rapid growth of ZZZZ Best had been a fraud…and Barry Minkow was eventually sentenced…to 25 years in prison.…- The major aspect of this fraud involved…reporting fictitious revenue…from fire damage restoration jobs.…- For example, ZZZZ Best filed a registration statement…with the SEC in 1985 in which it claimed…
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