Revenue Recognition Research Articles

Revenue Recognition Issues The Principal-Agent Obligation

The purpose of this paper is to review the mechanism of revenue recognition for principal and agent. As we known, agent is a part of principal in business. Its because agent do their business according to principal’s mechanism, and as a extension of the principal. Finally, this paper explain about how the agent get their revenue source and how to recognized it.

PERHITUNGAN PSAK 23 (PENDAPATAN OPERASIONAL , NON OPERASIONAL) DAN PELAPORAN KEUANGAN PERUSAHAAN PADA PT JASA MARGA (PERSERO) TBK

PSAK number 23 is described and explained about revenue recognition that can be used for companies.
 The collection method in this study is a qualitative research method with case studies.
 Implementation of operational, non-operational, and application revenue recognition with the Company's financial statements. PT Jasa Marga uses the cash basis method as a basis for revenue recognition, revenue is only calculated based on cash receipts and disbursements, with basic cash usage. PT Jasa Marga implements Minimum Service Standards (SPM) to obtain normal income and activities carried out by the company can run well.

An Alternative Model in Financial Reporting to Reduce Flaws and Injustice with Stakeholders

Seemingly, a formidable ethical challenge to financial reporting is the phenomenon of fallacious and discretional financial reporting as currently in practice. Such untruthful reporting intensified during the first decade of the 21st century when many of the personnel got involved to increase their personal benefits and the result was a wide-spread financial fiasco in the form of MCI WorldCom, Enron, Well Fargo, and Tesco accounting scandal, to mention a few. Most of the scandals were cause by false reporting, withholding information about financial troubles, revenue and earnings inflation, discretional revenue and expense recognition, use of off-balance-sheet items, artificial increase of cash flow and profits, backdating of sales contracts and accounting for vendors allowances and financing. The research in hand is an attempt to discuss such issues in the light of ethical and moral values that are not only recommended teachings of Islam, but also accepted business ethics in the civilized world. Islamic ethical guidelines for business encompass discipline and rules as enjoined in the divine sources of Shar¯ı‘ah - Qur’¯an and Sunnah (sayings of or the approved actions by the holy Prophet Muhammad PBUH). Implementation of these guidelines to make financial reporting ethical should be acceptable to the entire world, at personal, organizational, and society levels for broad based benefits of the mankind.

Особенности определения доходов авиакомпаний

The article describes the types of revenue, the features of its recognition and documentation at airlines.

True and Fair View of Financial Reporting Practices: Accountants’ Perspective

The purpose of this case article is to bridge the gap between theory and practice of financial reporting by analyzing the reporting practices from an accountant’s perspective. True and fair financial reporting is the basic requirement for achieving the objectives if Islamic financial system. Importantly, what causes the accountants to mismark the financial status of the companies has been spotlighted. It depicts the impact of aggressive revenue recognition, outright fraud, failing to accrue liability, misclassification of operating and non operating income and expenses, understatement and capitalization of expenses on financial statements. The management manipulates financial statements to have good impression about its performance and to shoe profitability, better return on assets, return on equity and debt ratios Study provides evidence for the mechanics used for manipulation and provides valuable input for the motives for aggressive reporting and outright fraud. It highlights the importance of accounting model to help and trace the manipulated financial statements for efficient investment decisions. The results of the study cannot be generalized to all countries because of difference in the adoption of international accounting standards, international financial reporting standards, generally accepted accounting principles and AAOFI standards in some cases.

Bright lines vs. blurred lines: When do critical audit matters influence investors' perceptions of management's reporting credibility?

The Public Company Accounting Oversight Board will soon require auditors to disclose critical audit matters (CAMs) to highlight areas of financial statements which are subject to a higher risk of material misstatement. Concurrently, the Financial Accounting Standards Board and the International Accounting Standards Board continue their efforts to converge both sets of accounting standards, and the newly converged revenue recognition standard contains a relatively limited amount of implementation guidance. I hypothesize and find that CAMs lower investors' perceptions of management's reporting credibility when the financial statement area discussed by CAMs is governed by precise, but not an imprecise, accounting standards. The emphasis of risks via CAMs is incongruent with investors' expectations about the ability of precise standards to reduce financial reporting risks. The results from this experiment with nonprofessional investors provide insights about the interaction between CAMs and accounting standards.

Setting International Public-Sector Accounting Standards: Does ‘Public’ Matter? The Case of Revenue from Non-Exchange Transactions

This paper investigates accounting for non-exchange revenue, an issue which has a strong relevance in public sector accounting, but which is rarely encountered in the private sector. The IPSASB consultation paper ‘Accounting for Revenue and Non-exchange Expenses’ is analyzed to illustrate that the specificities of the public sector are not necessarily taken into account when developing public sector accounting standards. Our analysis is informed by literature on the political nature of accrual accounting in public sector entities. The paper highlights the territorializing role of the IPSASB, the mediating role attributable to the consultation paper, and the potential adjudicating and subjectivizing roles of a future public sector accounting standard on revenue recognition.

The impact of accounting regulation on non-profit revenue recognition

PurposeThe purpose of this paper is to examine the requirement that non-profit organizations recognize unconditional promises to give as assets and revenues in the year promises are received as mandated by Statement of Financial Accounting Standards (SFAS) No. 116.Design/methodology/approachUsing the adoption of SFAS No. 116 and financial information reported on Internal Revenue Service Form 990, the study examines the requirement that non-profit organizations recognize unconditional promises to give as assets and revenues in the year promises are received. Combining insights derived from a model developed by Dechow, Kothari and Watts (1998) with the rationale applied by the Financial Accounting Standards Board (FASB) in mandating recognition treatment, it adopts the view that information about promises to give is relevant if it useful in assessing probable future cash inflows. The study also employs relative tests of predictive ability to assess competing specifications.FindingsThe study finds that recognizing unconditional promises to give as assets and as revenues in the year received improves predictions of next period’s cash inflows. It also finds that accrual-based contribution revenue consistently provides information content that is incremental to cash-based contribution revenue.Research limitations/implicationsThis paper has implications for several other lines of research as well. First, an ancillary concern expressed by many organizations in the non-profit sector was that the recognition of multi-year promises to give would adversely affect trends in long-term giving. In this regard, another promising line of inquiry would be to empirically test the Standard’s impact on the time-series properties of contributions and short- and long-term giving trends. Second, future research might consider conducting tests after partitioning by NTEE/NAICS classification, as well as substituting or supplementing the SOI data with financial statement data. Third, future research might consider applying the approach used in this study to other industries or groups for which market prices are not readily ascertainable. Data constraints, including the calculation of cash flow information indirectly from the balance sheet, impose limitations on this study.Practical implicationsThis study documents that by recognizing unconditional promises to give as assets and revenues in the period received, donors, creditors and other users gain useful information about probable future cash inflows – a fundamental element of the accrual process and one of several important factors used to evaluate an organization’s ability to sustain future operations. This information is valuable to stakeholders and practitioners who rely on this information to make informed decisions. It is also helpful to standard setters in establishing guidelines that improve the usefulness of financial reporting for non-profits.Originality/valueThe paper contributes to existing literature by operationalizing, in a non-profit setting, a model that describes the relationship among revenues, accruals and cash flows. It fills a gap in the accrual literature regarding the relevance of non-profit revenue accruals. The study is the first to employ a relative information content approach to assess non-profit standards, which provides useful input to policy makers and end users. It affirms that many of the key conventions and elements embodied in the FASB Concepts Statements apply to non-profits as well, which heretofore has not been studied extensively. The results are also consistent with Accounting Standards Update 958, Not-for-Profit Entities, which requires that non-profits provide users with information about liquidity, including how they manage liquid resources needed to meet cash requirements for general expenditures within one year of the date of the statement of financial position.

Perceptions Regarding the Impact of IFRS 15 - Illustrative Examples Step by Step

As users' needs become larger, entities need to adapt their provided information. Thus, financial reporting suffers permanent changes. One of the recent changes that occurred at entities that report in line with the International Financial Reporting Standards, applicable from 2018, highlights the IFRS 15 revenue recognition approach, which amends IAS 18 and is based rather on a related approach transfer of control than on the commonly used risk transfer and benefit approach. The areas that best reflect these changes are telecommunications, software development, real estate investment and construction. In this paper it is emphasized the impact of the new IFRS 15 standard on income recognition, highlighting various illustrative examples.

Bank earnings management using commission and fee income

PurposeThe purpose of this paper is to investigate whether banks use commission and fee (CF) income to manage reported earnings as an income-increasing or income smoothing strategy.Design/methodology/approachThe authors employ the regression methodology to detect real earnings management.FindingsThe authors find that banks use CF income for income smoothing purposes and this behaviour persists during recessionary periods and in environments with stronger investor protection. The implication of the findings is that bank non-interest income which achieves diversification gains to banks is also used to manipulate reported earnings.Research limitations/implicationsThe findings show that real earnings management is prevalent among banks in Africa. Further research into earnings management should examine real earnings management among non-financial firms in developing regions.Practical implicationsFrom an accounting standard setting perspective, the evidence suggests the need for national/international standard setters to adopt strict revenue recognition rules that ensure that banks or firms report the actual fees they make, and to discourage banks from delaying (or deferring) the collection of fee income to manage or smooth reported earnings opportunistically.Originality/valueThis study contributes to the positive accounting theory (PAT) literature which examines the accounting and non-accounting decisions that influence managers’ choice of accounting methods in financial reporting. Extending the PAT, the authors show that certain conditions can incentivize managers to engage in earning management such as during recessions and weak institutional quality or weak investor protection.

Pengakuan Pendapatan dan Biaya dalam Kaitannya dengan Penentuan Laba Perusahaan Ekspedisi (Studi Kasus pada PT. EMKL Jelutung Subur)

Revenue and cost recognitions is the most important thing to be done by an entity, time and the recognition method must be based on the rules from Financial Accounting Standards. Revenue and cost recognition which is done by PT. EMKL Jelutung Subur located on Pangkalpinang, Bangka Belitung province is done by using the accrual basis, and it can be seen with its influences to company profits every year. This research is useful to get a data and information for preparing this thesis and improving my knowledge and also for comparing between theories accepted against facts applied in the field. The result of this research shows that PT. EMKL Jelutung Subur has implemented one of the revenue and cost recognition method (accrual basis) continually, so that profit accuracy is accountable to be used for developing this kind of expedition business in order to become a better company. The accuracy is evaluated because all revenues received and cost spent have clear evidence and found in the period of time. The evaluation shows there is one thing that miss from revenue and cost recognition done by PT. EMKL Jelutung Subur, that is charge to the customers who use the storage service temporary, because some customers keep their goods for a long time in the warehouse, and it will increase the costs of loading, warehouse maintenance, damaged goods and decreasing a quantity of goods. If the storage service is charged to the customers, PT. EMKL Jelutung Subur will earn additional revenue to cover all the expenses above

Earnings Management: The Misapplication Of Accounting Rules And Standards.

This paper discuses earnings management and also explores the role accounting standard played. The plethora of financial scandal and earnings restatements in recent years has left many investors questioning whether reported earnings can ever be free of earnings management, earnings manipulation, earnings smoothing and restatements. The paper looks at the role auditors and other external factors play in earnings management and revenue recognition. The paper finds that some of the improprieties relating to earnings management stems from an outdated accounting standards, complex corporate financing arrangements, preservation of executive compensation incentives and corporate pressure to meet earnings projections.

The Spillover Effect of SEC Comment Letters through Audit Firms: Evidence from Subjective Accounting Areas

This study examines the spillover effect of SEC comment letters on an auditor’s other clientele. We focus our examination on goodwill, a frequent comment letter topic that garners significant auditor attention. We find that when companies receive an SEC comment letter with goodwill-related comments, their auditors are more likely to increase their scrutiny of this audit area among their other clientele in the same office as evidenced by an increased likelihood of recording impairment charges among their clients that exhibit goodwill impairment risk. Cross sectional analyses suggest that the spillover effect is more pronounced when the comment letter recipient subsequently recognized a goodwill impairment. We observe a similar spillover effect among an auditor’s clientele in the same industry and with changes to companies’ goodwill footnote disclosures. We corroborate these findings using another frequent comment letter topic – revenue recognition – and the likelihood of revenue-recognition related changes in accounting estimates.

The market discount of property developers’ shares and accounting policies

PurposeThe purpose of this paper is to answer the fundamental question about why the shares of property developers are traded at market discounts by focusing on property developers from Hong Kong, Malaysia and Singapore.Design/methodology/approachIt measures market discount using market-to-book ratio (MTB) and specifies the relations between MTB and the hypothetical determining factors (revenue recognition policy, investment property measurement policy, related party (RP) transaction disclosures and economic rent) in the presence of relevant control variables.FindingsThis study finds that aggressive revenue recognition and investment property measurement policies increase market discounts, but that RP transactions generally contribute positively to reduce the market discounts of property developer shares. Specifically, RP transactions are value-enhancing only if property developers adopt a conservative revenue recognition policy, because markets sensibly see RP transactions that are part of an aggressive revenue recognition policy as earnings management for tunnelling by controlling shareholders, and hence react with discounts. It is also observed that when property developers generate insufficient profit to cover their cost of equity, this generally leads to their shares being traded at market discounts. However, an aggressive revenue recognition policy can reduce market discount if early recognition contributes positively to economic rent.Practical implicationsThis study provides valuable evidence of the economic consequences (market discounts) of accounting choices on recognition and measurement, and the disclosure of accounting information. This is crucial to managers of property developers in managing their firm values when exercising accounting discretion.Originality/valueThis study provides empirical evidence on market discounts as they relate to property developers, which has been limited (past studies focus on property investment companies and real estate investment trusts).

Corporate governance quality and premature revenue recognition: evidence from the UK

Purpose Since 2005, wide-ranging concerns have been raised about misleading revenue recognition practices, especially during and after the 2008–2009 global financial crisis. There is a lack of research into the relationship between corporate governance (CG) mechanisms and premature revenue recognition (PRR). The paper aims to discuss these issues. Design/methodology/approach This paper uses a generalised least squares regression analysis of a sample of 854 FTSE 350 firm–year observations. Stubben (2010) discretionary revenue (DR) model is used to measure PRR as it is considered less biased, better specified and more likely to reduce measurement error than accrual models. Findings The results suggest that the size of audit committees plays an effective role in constraining PRR. Moreover, PRR is more likely to be curbed in the presence of small boards comprising a higher proportion of non-executive directors. Additional tests reveal that the relationship between board size and PRR is non-linear. Research limitations/implications The findings address the concerns of corporate firms, capital providers, UK regulators and standard-setters regarding misleading revenue recognition practices and should be considered while setting new governance reform recommendations in response to changing economic conditions. Originality/value This is the first study that adopts the DR model of Stubben (2010) to capture PRR and examines its association with CG internal mechanisms. Moreover, the paper considers an important time period – from 2005 to 2013 – in which many significant developments took place.

Pirate Wireless: Revenue Recognition in the Telecommunications Industry

AbstractPirate Wireless is a telecommunications company with stores and offices all over the globe. Jim Bayley is an extremely busy professional who enters into a contract with Pirate Wireless for the ultimate purchase of a smartphone with one‐year warranty, voice and data services, Cryptonite encryption software, and an extended warranty. The case requires students to act as Assistant Controller of Pirate Wireless Corporate and determine the appropriate revenue recognition for Pirate Wireless's contract with Jim Bayley. This mandates a thorough review of the five steps of revenue recognition set forth in Revenue from Contracts with Customers, the jointly converged standard issued by the Financial Accounting Standards Board (FASB) and the International Accounting Standards Board (IASB) in May 2014. The FASB's Accounting Standards Codification 606 is effective for all U.S. public entities for fiscal years ending after December 15, 2017. The IASB's International Financial Reporting Standards (IFRS) 15 applies to an entity's first annual IFRS financial statements for a period beginning on or after January 1, 2018. This case is appropriate for an undergraduate or graduate level Intermediate Accounting course.

Revenue Recognition (Topic 606) at Salesforce.Com, Inc

This case uses an array of carefully selected and excerpted revenue recognition related information contained in Salesforce.com's January 31, 2019, 10-K. Maria, the fictional protagonist, is seeking to understand those disclosures as part of her preparation for an upcoming job interview with the company. As such, she is relying on those disclosures to provide insights as to the company's main product/service lines, the events that signal when and how much revenue the company has earned (i.e., the essence of its business model), along with the related official generally accepted accounting principles (GAAP) criteria pertinent to the valuing and timing of recorded revenues. Excerpt UVA-C-2428 Rev. Jun. 5, 2020 Revenue Recognition (Topic 606) at Salesforce.com, Inc. After her previous review of the revenue recognition information provided by General Dynamics and Ford Motor Company (Ford) in their recent 10-K reports, Maria had become intrigued by the Financial Accounting Standards Board's (FASB's) latest revenue recognition and disclosure requirements. Prior to the FASB's issuance of its comprehensive new revenue recognition guidance and its follow-on official addendums and interpretations (all currently published as Accounting Standard Codification [ASC] 606, and often referred to simply as Topic 606), companies had to consider a myriad of revenue recognition rules, from various sources, with potentially contradictory and/or ambiguous requirements. Moreover, Maria had learned that many, if not most, of the known financial reporting frauds or misstatements in the recent past had pertained to companies' misreporting revenues. In general, those guilty companies had “pushed the envelope” in finding rationales for recording more revenues sooner than they should have. Topic 606 was largely intended to clarify what companies could do in reporting revenues for fiscal years beginning in 2018. One knowledgeable pundit summed up the arrival of Topic 606 onto the contemporary financial reporting scene in a particularly poignant way, stating, “The new accounting rules are considered by many to be the biggest change to accounting standards in the last 100 years. Noncompliance is a huge risk. Revenue recognition errors are the biggest reason for earnings restatements. Earnings restatements can lead to firings, fines, and even jail time.” The convergence of two desires were motivating Maria to take another look at some examples of the now-in-force revenue recognition practices. First of all, she was interested in companies that operated in the software-as-a-service (SaaS) industry sector. Second, she had an interview with Salesforce.com, Inc., next week, and she wanted to be well prepared. In particular, she had heard it expressed that the revenue recognition practices and related disclosures of a company were an informative window into a company's business model. She wanted to be well-versed on that for her interview. Before heading to San Francisco for her corporate interview, she assembled some important revenue-related information from the company's most recent 10-K, filed with the US Securities and Exchange Commission (SEC) (see Exhibits 1–3). Maria's Tasks . . .

An Effective Digital System for Intelligent Financial Environments

A good set of the financial system could take care of all accounting entries and their impacts on the whole intelligent financial environment. The total flow of money and total expenditures will be reflected here. The intelligent financial system can improve the utilization of data, increase the work efficiency of financial personnel, and increase the security of financial processing services. This system could help the managers make their important financial decisions, financial budgeting, and so on. They can know about the financial conditions at any time. Based on the collection and processing of financial data, we design and analyze the related financial system to carry out the intelligent property of the financial environments. The system extends the quality of financial reporting, SOX compliance, and internal controls in a financial system, including credit management, revenue recognition, bad debts allowance. Once there is an early warning in the financial system, our proposed enhanced system could give a fast early response, and bridge a positive linkage about the planning department, finance department, and top managers, which could avoid potential exposure to bad debts. This system guarantees that the credible customers are selected, and avoid the potential risk of bad debts are incurred by a loose credit limit. It strengthens the preventive control over aging receivables management and detects the potential risk of bad debts in the earlier system alert.

The Effect of New Revenue Recognition Standard on Telecom Firms’ Financial Reporting : Focusing on Regulatory Accounting

The Effect of New Revenue Recognition Standard on Telecom Firms’ Financial Reporting : Focusing on Regulatory Accounting

Tryb rozpoznawania przychodów z umów o budowę zgodnie z MSSF 15 „Przychody z umów z klientami”

Objective: To conduct an analysis of the methodology used to recognise revenue from construction contracts as per IFRS 15 “Revenue from contracts with customers.” An auxiliary goal is to compare and contrast IFRS 15 and the superseded IAS 11 “Construction contracts”.Research Design & Methods: A critical analysis of Polish and foreign professional literature and International Financial Reporting Standards. The article also draws on the author’s personal experience with implementing IFRS 15.Findings: IFRS 15 provides a five-step revenue recognition model which introduces two new important elements: 1) in the case of multiple deliverables – the obligation to split the contract into separate performance obligations, 2) the obligation to determine if transfer of control over the goods provided or services rendered takes place at a specific point in time or over a period of time.Implications / Recommendations: Implementation of IFRS 15 requires coordination of financial management with operating activities as well as a focus on forecasting and budgeting supported by IT systems which are tailored to the needs of construction project management.Contribution: IFRS 15 is a standard indicating the prospective orientation of financial accounting. It emphasises the key role of forecasts and budgets in the preparation of financial statements. It also integrates financial and management accounting.