Articles - Articles December 8 2013 6:22 PM Chapter 7 Tesla...

Info icon This preview shows pages 1–3. Sign up to view the full content.

Articles December 8, 2013 6:22 PM Chapter 7 Tesla Wants You To Know About its Strict Revenue Recognition Even more Model S sedans delivered to customers than the 4,900 recognized on books o Isn't counting all due to strict revenue recognition policy How/when you claim revenue on books can impact profits reported Recognizing revenue at the heart of countless scandals Auto manufacturers: revenue recognized when finished cars handed over to dealers for sale Tesla motors doesn't have any dealers o Handles process from factory to customer Even if a car received, was not recognized if paperwork was incorrect o As a result, many vehicles not accounted for as revenue Formal results statement lets market know that sales are even better than they look Sends across message about strict accounting Revenue Recognition Leading Cause of Restatements Median number of days U.S. public companies taken to file restatements of financial results is 255 (from release of original financial statements) Longest period was 1,184 days, quickest being 23 days Longer periods could be related to stock compensation and income statements (tax audit) Shorter periods from goodwill and receivables issues Most frequent explanations were problems with revenue recognition accounting and income taxes More than 1/3 companies didn't offer reason for restatement (small errors) o "often no reason given for restatement, not something to brag about" 24 companies said management identified issue, 13 said comments by SEC's division of corporation finance, 10 said external auditor uncovered How to Account for a Virtual Good Market regulators demanding more details about how companies account for virtual goods (clothing, food, tools, etc. sold online) Virtual goods doubled amount sold since 2009 in 2011 ($2.3B) Sale of virtual good represents a service, not sale of actual good Normally provided over a period of time SEC frequently asking companies for enhanced disclosure about virtual goods accounting policies o Time period over which they are recognizing revenue from sale of a good Recognition period could be associated with expected life of game, user, or virtual good Also would like to see companies disclose more about how virtual goods are purchased (virtual currency, pre-paid player balances, traditional purchase method?) Is company being charged processing fees by platform? Does it face any legal or regulatory requirements to refund customer purchases? Chapter 8
Image of page 1

Info icon This preview has intentionally blurred sections. Sign up to view the full version.

Smithfield Foods Earnings: Costs Weigh Heavily World's largest hog farmer and pork processer making strides in effort to expand sales of branded pork products, which carry higher profit margins than fresh pork cuts Smithfield Foods Inc. reported lower earnings as pork processor o Selling itself to a Chinese meat producer o Higher costs, weaker exports Growth prospects at home constrained by sluggish sales in mature and consolidated market
Image of page 2
Image of page 3
This is the end of the preview. Sign up to access the rest of the document.
  • Fall '08
  • KENNEDY
  • Capital Expenditure, Generally Accepted Accounting Principles

{[ snackBarMessage ]}

What students are saying

  • Left Quote Icon

    As a current student on this bumpy collegiate pathway, I stumbled upon Course Hero, where I can find study resources for nearly all my courses, get online help from tutors 24/7, and even share my old projects, papers, and lecture notes with other students.

    Student Picture

    Kiran Temple University Fox School of Business ‘17, Course Hero Intern

  • Left Quote Icon

    I cannot even describe how much Course Hero helped me this summer. It’s truly become something I can always rely on and help me. In the end, I was not only able to survive summer classes, but I was able to thrive thanks to Course Hero.

    Student Picture

    Dana University of Pennsylvania ‘17, Course Hero Intern

  • Left Quote Icon

    The ability to access any university’s resources through Course Hero proved invaluable in my case. I was behind on Tulane coursework and actually used UCLA’s materials to help me move forward and get everything together on time.

    Student Picture

    Jill Tulane University ‘16, Course Hero Intern