Join Jim Stice for an in-depth discussion in this video Traditional revenue recognition criteria, part of Running a Profitable Business: Revenue Recognition.
- [Voiceover] Traditionally, revenue has been recognized,…or recorded when two criteria have been met.…First, the selling company has done…what they promised to do.…The work is done, or substantially done,…and second, the selling company has received…from the buying company…a valid promise of payment.…These traditional Revenue Recognition Criteria…acknowledge the two-way nature of any transaction.…The seller has to do something - the work;…and the buyer has to do something - pay,…or provide a valid promise to pay.…Well, let's look at two examples.…
One to illustrate each of these two traditional criteria.…So first, let's talk about…the California State University System.…The California State University System includes…more than 20 campuses, serving over 400,000 students…in California.…These universities typically collect tuition…at the start of the semester,…but the universities don't do the work,…providing educational services,…until the semester progresses.…"The California State University GAP Reporting Manual,"…
Jim Stice
Earl Kay Stice
Released
10/26/2015But 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
Skill Level Appropriate for all
Duration
Views
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Introduction
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Welcome1m 41s
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1. Controversy over Revenue Recognition
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Groupon story2m 57s
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Defining revenue recognition5m 32s
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2. Timing of Revenue Recognition
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Before cash collection2m 38s
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3. Complication of Multiple Element Transactions
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Buying an iPhone2m 8s
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Valuing the components4m 27s
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Recognizing revenue6m 20s
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The practical impact3m 11s
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4. Controversial History of Revenue Recognition Accounting Standards
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Story of SAB 1013m 14s
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5. Revenue Recognition and Valuation of Start-Ups
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The MicroStrategy story3m 17s
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Using price-to-sales ratios4m 39s
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6. Famous Frauds and Scandals
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Story of ZZZZ Best3m 38s
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Conclusion
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Wrap-up2m 33s
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Video: Traditional revenue recognition criteria