The Complexity Of Revenue Recognition

1437 WordsNov 29, 20156 Pages
similar opinion of the complexity of revenue recognition to come up with its hypothesis, such as, First, “when revenue recognition is complex, managers are more likely to err when applying standards to transactions, increasing the likelihood of unintentional misreporting due to mistakes” and second, “complex accounting may allow managers to manipulate financial statements” evident of (p.73) Sherman, Loseman and Cardell (2015) believed that revenue recognition is the focus of SEC enforcement, as well as subject to a high level of risk of fraud and an area which proven for financial reporting misstatements (p.19) Whitehouse (2014b) identified companies that will see big changes are the high-tech sectors, companies selling a product with services attached, companies that generate revenue under licensing agreements (p.57). Whitehouse identified companies that will go through large changes , such as, software package with technical support and upgrades included, cell phone with service and data plans, equipment purchase that includes delivery and installation, new car comes with free maintenance and warranties for specified timeframe (p.57). Yeaton (2015) determined areas where companies would have to make necessary estimates and judgement to comply with the new requirements on realizing or recognizing revenue from contracts with customers (p.52). Stallworth and Degregorio (2004) indicated the role of internal auditors to fully understand the revenue management practice to

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