Running a Profitable Business: Revenue Recognition

Learn how revenue recognition—a seemingly innocent accounting topic—can turn a reported profit into a reported loss, sometimes with multibillion-dollar implications.

Introduction

• Welcome

1. Controversy over Revenue Recognition

• Groupon story
• Defining revenue recognition
• Who cares about revenue recognition?
• Traditional revenue recognition criteria

2. Timing of Revenue Recognition

• Story of two brothers on a consulting project
• Before cash collection
• At the same time as cash collection
• After cash collection

3. Complication of Multiple Element Transactions

• Buying an iPhone
• Satisfying contractual obligations to customers
• Valuing the components
• Recognizing revenue
• The practical impact

4. Controversial History of Revenue Recognition Accounting Standards

• Story of SAB 101
• Old accounting standards in a complex business world

5. Revenue Recognition and Valuation of Start-Ups

• The MicroStrategy story
• Using price-to-sales ratios
• Valuing a Chinese state-owned telecom company

6. Famous Frauds and Scandals

• Story of ZZZZ Best
• Channel stuffing, brick shipping, and lying

Conclusion

• Wrap-up