From the course: Running a Profitable Business: Revenue Recognition

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Old accounting standards in a complex business world

Old accounting standards in a complex business world

From the course: Running a Profitable Business: Revenue Recognition

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Old accounting standards in a complex business world

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- 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…

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