Making sense of revenue recognition: revenue "mis-recognition," the leading cause of restatement, has been soaring, likely due to the myriad of more than 200 pronouncements by standard-setters. FASB has revenue recognition on its agenda--for 2007.(revenue recognition)

Financial Executive, July, 2006 by Cheney, Glenn A.

Three thousand years ago, revenue recognition was not a problem. You traded so many goats for so many sacks of wool. When you got home, you looked at what you had. It was your revenue.

But then somebody invented money, turning goats and wool into slugs of cast iron and copper. Then somebody invented bookkeeping, and then accounting, and the next thing you know, goats, wool and coins have been replaced by derivatives, securitizations, stock options and 10-Ks. Suddenly, some mighty big companies aren't exactly sure what their revenues are, and every once in a while somebody ends up in jail because of it.

The symptoms of revenue recognition problems show up in financial statements. For a while, the revenue recognition line says one thing, but a few...

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