Financial Reporting and Analysis – ACG6175 Date: 5/18/09 Revenue Recognition Problems in the Communications Equipment Industry 1 – In late 2000‚ Lucent announced that revenues would be adjusted downwards by $679 million as a result of revenue recognition problems. Yet the firms market capitalization plummeted by $24.7 billion. Why do you think the market reacted so negatively to Lucent’s announcements of the problems? There is usually a grey zone between aggressive accounting‚ which
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Revenue recognition on FASB and IASB convergence process I. CONVERGENCE OF U.S. GAAP AND IFRS Since 2002‚ Financial Accounting Standards Board (FASB) and International Accounting Standards Board’s (IASB) have been working toward “convergence” of US General Accepted Accounting Principles (GAAP) and International Financial Reporting Standards (IFRS). They have made significant progress in efforts to converge critical accounting standards such as those dealing with revenue recognition‚
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Issues With Revenue Recognition within the Software Industry The Isoft Example Financial Controller-SoftWarehouse Ltd This report has been prepared for the Board of Directors of SoftWarehouse Ltd for elucidation about the contentious issues that have given rise to the publication of the article concerning Isoft’s issues with revenue recognition. Finally‚ it will also assess whether or not these issues are likely to affect SoftWarehouse Ltd. TABLE OF CONTENTS Executive Summary: 3
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Recently in June 2010‚ the International Accounting Standards Board and the Financial Accounting Standard Board initiated a joint project and released an exposure draft named Revenue from Contracts with Customers. This exposure draft emphasizes the status of revenue in assessing financial statements and states that revenue is conclusive in assessing a company’s operating situation and developing prospects. This statement has a profound influence on accounting industry and has lead to a wide range
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How SAB affects Wareham’s revenue recognition? Accordingly to SAB 101‚ all of the following conditions should be accomplished to recognize revenue. During our analyses‚ we have identified several missing conditions in current situation‚ accordingly to information provided. * Evidence of Order Arrangement: SAB 101 requires an evidence to identify any transaction as a formal sales order. During our analyses we have found that in the sales transactions tested by Soma Desai‚ only the Technology
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EXECUTIVE SUMMARY Revenue Recognition and Wareham SC Systems‚ Inc. Wareham SC Systems‚ Inc. is a capital equipment and testing instrument manufacturer and supplier comprised of three divisions: the Glendale Division‚ the Advanced Technology Division and the Technical Devices Division (Anthony‚ Hawkins‚ & Merchant‚ 2011‚ p. 137). In 1999‚ Somai Desai‚ the company’s chief financial officer‚ received news that the Security Exchange Commision (SEC) issued a new set of revenue recognition and reporting
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company’s revenue. This paper explains the fraud occurred in recognizing the revenue and how it overstated the financial statements and increased the stock price. It also explains the fraud theory applied to the revenue recognition and the auditor’s failure in discovering the fraud and reports it to the SEC. This paper will provide methods that auditors should follow in auditing public companies and the best practices they should follow if the company changed the revenue recognition. Background
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Case 09-1: Velocity Cellular Page 1 D I S C U SS I O N M A T E R I A L S O b j e c t i v es o f t h e C a se This case gives students the opportunity to use accounting and auditing literature and professional judgment to research complex accounting issues effectively and efficiently. Specifically‚ students will be able to: Understand the application of the guidance in ASC 605-25‚ as amended by ASU 2009-13‚ to complex multiple-deliverable arrangements. Understand the application of the
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Q3: Should Apple lobby the FASB to change the revenue recognition rules for smartphones? In our opinion‚ Apple should lobby FASB to change the revenue recognition rules for smartphones‚ given the following reasons:- 1. Under “non-GAAP measures”‚ Apple’s performance looked much better than that under GAAP measures. Please find below a table1 summarizing the differences of key financial data between GAAP and non-GAAP measures for the fourth quarter of 2008:- Q4 2008 GAAP ($ billions) Non-GAAP
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community members. Although the company was mainly owned by his family any decision regarding material aspect was always discussed with the audit committee. Finally‚ outside auditors had given a clean opinion. (2) identifies the issues/questions in the case Nick goes and asks the CFO some questions regarding the first issue which is how
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