Join Jim Stice for an in-depth discussion in this video Old accounting standards in a complex business world, part of Running a Profitable Business: Revenue Recognition.
- The SEC Staff Accounting Bulletin, SAB 101,…it was a bombshell.…This set of rules reframed the entire discussion…of revenue recognition.…Remember that the SEC released SAB 101…as a backlash against rampant revenue-recognition…abuses in the late 1990s.…Because startup technology companies…wanted to increase their credibility…and perceive economic footprint…by reporting as much revenue as possible.…And because these internet-related transactions…were a new business development.…In the late 1990s, the whole area…of revenue recognition became almost a circus.…
The wild west, a rodeo.…For example, one internet company would say to another,…"Hey, you place some adds on our website…"and we will bill you $10 million.…"But you don't have to pay us…"because we will place some adds on your website…"and you can bill us $10 million.…"No cash changes hands and nothing really happens…"from an economic standpoint…"but both of us get to report revenue of $10 million."…So, it was from the middle of this kind of nonsense…that SAB 101 arose.…
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