Join Jim Stice for an in-depth discussion in this video The MicroStrategy story, part of Running a Profitable Business: Revenue Recognition.
- MicroStrategy sells business intelligence software.…The early foundation of MicroStrategy's product line…was its corporate data mining program.…The program comes through terabytes of data…in an unwieldy corporate database…looking for interesting relationships.…- This data mining program was very successful.…And MicroStrategy doubled its revenues each year…from 1994 through 1998, growing from 1994 revenues…of 5 million to 1998 revenues of 106 million.…- The company went public in June of 1998…with shares opening at 12 dollars per share…and ending the first day of trading at 21 dollars per share.…
- With its rapid past revenue growth…and rapid expected future revenue growth,…MicroStrategy share price eventually reached…333 dollars per share.…- But a substantial amount of this apparent rapid…revenue growth was due to overly aggressive…revenue recognition practices.…- Subsequent S.C.C. investigation confirmed…that MicroStrategy had overstated its revenue,…and the inquiry incurred a number of questionable practices.…
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.
- Defining revenue recognition
- Timing revenue recognition
- Understanding multi-element transactions
- Valuing companies
- Reviewing the great revenue frauds and scandals of history