Ramsey - Recognizing Revenue There are several approaches that can be used to booking and reporting revenue, depending on how conservative a company is in their financial statements.
Following is from a Motley Fool Piece. This is excerpt. The link to the entire article is at the end of this piece
"Fortunately, the SEC has taken action to tighten the rules. These new rules, adopted last year, will finally go into effect starting in 2001. In the case of sales of goods, they will require that revenue recognition be delayed until a number of events have occurred:
There must be a bona fide purchase agreement between buyer and seller The product must have been delivered The buyer must have taken title to the product and assumed all risks and rewards of ownership The seller's price to the buyer must be fixed and determinable There can be no side agreement giving the buyer the right to return the product, or obligating the seller to either repurchase it or guarantee the resale value of it Collectability of the sales proceeds must be reasonably assured
It should be noted that other criteria apply to other types of revenue such as services, rental income, and licensing income."
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