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lecture7 - ACCT 3220/Sep 8 2010 SECs focus on revenue...

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ACCT 3220/Sep 8, 2010 1 SEC’s focus on revenue recognition SEC quotes regarding revenue recognition: (Improper revenue recognition) is the "recipe of choice for cooking the books." SEC Enforcement Division's Chief Accountant Walter Schuetze (C)ompanies try to boost earnings by manipulating the recognition of revenue. Think about a bottle of fine wine. You wouldn't pop the cork on that bottle before it was ready. But some companies are doing this with their revenue -- recognizing it 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, September 28, 1998
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ACCT 3220/Sep 8, 2010 2 This SAB (101) fulfills a commitment that Chairman Levitt made in his September 1998 speech that the staff would issue three staff accounting bulletins to address earnings management problems. The staff previously issued two staff accounting bulletins: one in August addressing materiality in the preparation of financial
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