Revenue Recognition Under IFRS (IAS -18)

CA. Amit Daga (Finance Controller CA. CS. CFA. CIFRS. M.COM. )   (9017 Points)

02 June 2009  

 

Why there is so much attention on Revenue Recognition
“Companies try to boost earnings by manipulating the  recognition of revenue
 
   before a sale is complete,
   before the product is delivered to a customer, or
   at a time when the customer still has options to terminate, void or delay the sale”
 SEC Chairman Arthur Levitt, “Numbers Game” Speech, September 28, 1998
 
 
Enron:- Admitted it improperly inflated revenues and hid debt through business partnerships.
Global Crossin:- Mis-stated revenues through the use of reciprocal transactions
AOL Time Warner:- The company employed fraudulent round-trip transactions that boosted its online advertising revenue to mask the fact that it also experienced a business slow-down. AOL time Warner paid $ 300 million to SEC.
Bristol-Myers:- The company improperly inflated revenues by as much as $1.5 billion through use of channel stuffing.
Computer Associates (CA):- CA routinely kept its books open to record revenue from contracts executed after the quarter ended in order to meet Wall Street quarterly earnings estimates. CA prematurely recognized $2.2 billion in revenue in FY2000 & 01. Paid $225 million as penalty