The Right Way To Recognize Revenue by ManusiaBiasa3


									Article 12

                             The Right Way to
                   Recognize Revenue
              Learn the components of SAB 101 and mistakes to look out for.
                           AND CYNTHIA M. DAILY

More than half of the financial reporting frauds among
U.S. public companies from 1987 to 1997 involved over-
stating revenue, according to a study conducted by the
                                                                    “A     t the SEC, we take the quality of financial re-
                                                                    porting very seriously…. Transactions need to be
Committee of Sponsoring Organizations of the Treadway
                                                                    accounted for based on their true economics rather
Commission (COSO). Auditors have always focused on
                                                                    than just their form. And we need companies, their
possible revenue recognition overstatement in financial
                                                                    auditors, financial analysts and investors to focus
statements. Understanding the components of Staff Ac-
                                                                    on this as an integral objective of high quality,
counting Bulletin 101, Revenue Recognition in Financial
                                                                    transparent reporting, rather than trying to add
Statements—as well as the regulatory concerns the SEC
                                                                    bells and whistles to transactions purely to achieve
addressed in issuing it will help CPAs choose the most
                                                                    a different accounting treatment. If you try to paint
appropriate revenue recognition practices for their com-
                                                                    stripes on a horse just so you can call it a zebra,
panies and their clients. This article provides an overview
                                                                    watch out when the rain falls! And you better make
of SAB 101 and demonstrates to auditors how they can
                                                                    sure that horse doesn’t come back and kick you for
help improve companies’ accounting practices.
                                                                    trying to portray it as something it’s not.”

SAB 101—GENERAL REVENUE                                             —Lynn E. Turner, SEC chief accountant, from remarks at Hylton
RECOGNITION RULES                                                   Lecture Series in Accountancy, Critical issues in Accounting Fo-
                                                                    rum, Wake Forest University, April 25, 2000.
The SEC issued SAB 101 in December 1999 to provide
guidance to auditors and public companies on recogniz-
ing, presenting and disclosing revenue in financial state-        cifically, SAB 101 says transactions must meet the follow-
ments. The official implementation date for SAB 101 was           ing criteria before revenue is recognized:
the fourth quarter of fiscal years beginning after Decem-
ber 15, 1999, but the SEC extended compliance with the
new policies, making the quarter ending December 31,                • There is persuasive evidence of an arrangement.
2000 the first mandatory reporting period.                          • Delivery has occurred or services have been
   According to the SEC, SAB 101 spells out the criteria
for revenue recognition based on existing accounting                • The seller’s price to the buyer is fixed or deter-
rules, which say that companies should not recognize                  minable.
revenue until it is realized or realizable and earned. Spe-         • Collectability is reasonably assured.

                                                                      Article 12. The Right Way to Recognize Revenue

                                            EXECUTIVE SUMMARY

   • AMID CONCERNS ABOUT IMPROPRIETIES, the                         earned. Before revenue is recognized, the following
     SEC issued SAB 101, which provides guidance on rec-            criteria must be met: persuasive evidence of an ar-
     ognizing, presenting and disclosing revenue in finan-          rangement must exist; delivery must have occurred
     cial statements. The official implementation date is no        or services been rendered; the seller’s price to the
     later than the last quarter of fiscal years beginning af-      buyer must be fixed or determinable; and collectabil-
     ter December 15, 1999 (the quarter ending December             ity should be reasonably assured.
     31, 2000 is the first mandatory reporting period).
                                                                  • BESIDES READING SAB 101 FOR GUIDANCE, a
   • AUDITORS HAVE ALWAYS FOCUSED ON POS-                           company should look to EITF Abstracts which have
     SIBLE revenue recognition overstatement in review-             addressed revenue recognition and classification
     ing financial statements. By understanding some of             questions. If a company still has doubts, it should
     the problems companies face in complying with SAB              present its facts and position to the SEC before re-
     101, CPAs may be able to choose the most appropri-             cording transactions as revenue.
     ate revenue recognition practices for their companies
                                                                  • THE EITF HAS ISSUED THREE STATEMENTS
     and their clients.
                                                                    specifically addressing revenue recognition issues re-
   • SAB 101 IS BASED ON THE PRINCIPLE that in                      lating to barter transactions, reporting revenue gross
     companies’ financial reporting, revenue should not             as a principal vs. net as agent and software revenue
     be recognized until it is realized or realizable and           recognition.

   While these criteria are general, they provide guidance          Transactions the SEC staff specifically has said compa-
for revenue recognition relating to most traditional busi-       nies should disclose or discuss because they may contain
ness models. For companies that do not employ tradi-             problem areas are:
tional business models, such as e-commerce companies
and companies with a large percentage of Internet trans-           • Product shipments at the end of a reporting pe-
actions, however, SAB 101 provides additional guidance               riod that significantly reduce customer backlog
on these revenue recognition issues:                                 and might be expected to result in fewer ship-
                                                                     ments and lower revenue in the next period.
  •   Timing of approval for sales agreements.                     • Extended payment terms that will result in a
  •   “Side” arrangements to the master contract.                    longer collection period for accounts receivable
                                                                     (regardless of whether the revenue has been
  •   Consignment/financing arrangements.
                                                                     recognized) and slower cash inflows from oper-
  •   Criteria for delivery (bill and hold sale).                    ations, and the effect on liquidity and capital re-
  •   Layaway programs.                                              sources. (The fair value of trade receivables
  •   Nonrefundable, up-front fees.                                  should be disclosed in the footnotes to the fi-
  •   Cancellation or termination provisions.                        nancial statements when it does not approxi-
  •   Membership fees/services.                                      mate the carrying amount.)
  •   Contingent rental income.                                    • Changing trends in shipments into, and sales
                                                                     from, a sales channel or separate customer class
  •   Right of return.
                                                                     that could be expected to significantly affect fu-
                                                                     ture sales or returns.
   SAB 101 also requires disclosure of revenue recogni-            • More sales to a different class of customer, such
tion policies under APB Opinion no. 22, Disclosure of Ac-            as a reseller distribution channel that has a
counting Policies. For example, companies should disclose            lower gross profit margin than existing sales
changes in estimated product returns in financial state-             principally made to end users. Also, increasing
ments if material, and the management discussion and                 service revenue that has a higher profit margin
analysis section (MD&A) should note the following:                   than product sales.
                                                                   • Seasonal trends or variations in sales.
  • A favorable or unfavorable material effect on                  • A gain or loss from the sale of an asset(s).
  • The relationship between revenue and costs of
    revenue.                                                     MAKING THE GUIDANCE WORK
  • Analysis of reasons and factors for an increase              Finance executives typically implement a new accounting
    or decrease in revenue.                                      standard by discussing and analyzing its requirements


with their auditors. CPA Frank Candia, managing part-                   In the subsequent settlements, the courts ordered judg-
ner of Holtz Rubenstein & Co., LLP in Melville, New                  ments ranging from the imposition of fines and disgorge-
York, advises finance executives who have questions                  ment of ill-gotten gains to entry of temporary or
about whether their company’s transactions meet the eli-             permanent injunctions barring people from serving as of-
gibility requirements for revenue recognition to first read          ficers of public companies or practicing before the SEC as
SAB 101 and see if the transactions are similar to those             accountants.
discussed in the SEC’s FAQs. Besides reading SAB 101 for
guidance, a company should look to recent abstracts from
the emerging issues task force (EITF) which have ad-
dressed not only when revenue should be recognized, but                 Where to Go for More Help
also classification questions on whether revenue should
be recorded gross (the sales price and the cost of the prod-
                                                                        To further explain its position on SAB 101’s require-
uct) or net (just the gross margin.) If they still have
                                                                        ments to auditors and registrants, the SEC staff
doubts, Candia says, “The company should present its
                                                                        published frequently asked questions in October.
facts and position to the SEC prior to recording the trans-
                                                                        Answers are organized under these topics: transfer
actions as revenue.”
                                                                        of fide; substantial performance and acceptance;
   Many companies are trying to comply with SAB 101’s
                                                                        nonrefundable payments; accounting for certain
guidelines but must contend with ad hoc interpretations
                                                                        costs of revenues; refundable fees for services; esti-
by auditors and regulators. Some company executives
                                                                        mates and changes in estimates; fixed or determin-
say they do not know what is correct under the new stan-
                                                                        able fees; and implementing the guidance in SAB
dard. CPA Bob Johnson of Andersen’s Atlanta office (for-
                                                                        no. 101. The FAQs, as well as the full text of SAB
merly Arthur Andersen) says a lot of problems occur
                                                                        101, can be found at the SEC’s Web site at
when exceptions are made to a company’s revenue recog-
                                                               In 1999 the AICPA published a
nition policies. “Companies need to have a well-con-
                                                                        booklet titled “Audit Issues in Revenue Recogni-
trolled, monitored process to focus on exceptions,” he
                                                                        tion,” which provides an overview of authoritative
says. “When there are exceptions, the CFO must be in-
                                                                        accounting literature and auditing procedures for
volved and communicate with the external auditors.
                                                                        revenue recognition and identifies indicators of im-
Some transactions become complex arrangements and
                                                                        proper revenue recognition. In addition, FASB’s
could require reviewing authoritative accounting litera-
                                                                        emerging issues task force (EITF) is providing new
ture, and in the end, involve professional judgment of au-
                                                                        guidance on reducing revenue recognition impro-
ditors and finance executives in the absence of clear-cut
guidance.” Johnson believes it is essential that high-level
management be aware of these types of arrangements
and that the CFO work with the company’s auditors to
ensure that the most appropriate recognition takes place.                The SEC brought a case that is significant because it in-
                                                                     cluded allegations against the external auditors for failure
HOW TO AVOID TROUBLE                                                 to take appropriate action after discovering possible ille-
Several recently settled SEC civil suits in federal courts in-       gal conduct. The company, named in a federal suit over
volving alleged improprieties offer examples of how not              alleged overstatement of revenue for existing contracts,
to apply revenue recognition principles, some of which               failed to announce termination of contracts and inappro-
may seem obvious because companies intentionally                     priate recognition of fees subject to material contingen-
made reporting misstatements.                                        cies. Further, the SEC alleged the company attempted to
   Recent allegations against companies and their officers           cover up these recognition problems. The SEC amended
include activities that violate good accounting:                     the initial complaint to bring a civil injunction against one
                                                                     of the external auditors for violating Section 10A of the
  • Issuing press releases on the Internet regarding                 Securities and Exchange Act, which compels auditors to
    false and misleading projections of revenues.                    address possible illegal activity.
  • Improperly reporting revenues on sales of soft-                      Unfortunately the executives at another company did
    ware and improperly reporting revenues with                      not act soon enough to ward off revenue recognition
    side letters or material contingencies.                          problems. As a result, both the chief operating officer and
  • Recording sham barter deals which resulted in                    the chief financial officer at the software maker were re-
    material misstatement of revenue.                                placed when the company investigated improper ac-
  • Improperly recognizing revenue through                           counting practices. Taking quick action, the company
    fraudulent bill and hold transactions, recogniz-                 said it would file restated results of operations, although
    ing revenue with material contingencies and is-                  it did not indicate the extent of the restatement.
    suing press releases which materially                                For many companies, SAB 101 need not be cause for
    overstated revenues.                                             alarm, but rather a call to take a good, honest look at their

                                                                              Article 12. The Right Way to Recognize Revenue

 Exhibit 1: Who Needs Profits?
    Company Name            Stock price        Revenues       Net income      Retained earnings/      Market           Updated
                                                (000s)         (net loss)       (accumulated       capitalization     stock price
                                                                                    deficit)           (000s)            (000s)

                            As of 8-23-00      6 months       As of 6-30-00      As of 6-30-00      As of 8-23-00    As of 12-15-00
                                             ending 6-30-00

 iVillage                       7 1/8           $37,496        ($62,426)          ($255,314)          210,500             7/8

 Verticalnet                    46 1/2          $81,009        ($43,605)          ($116,378)         4,047,000           7 21/32                  24 7/8         $665,893        ($18,088)         ($1,205,662)        4,197,000           1 13/16

 Infospace                       26             $43,578       ($114,944)          ($213,457)         6,487,000           10 1/4

 Starmedia Network              8 1/8           $23,820        ($79,100)          ($228,386)          536,000            2 15/16

 Edgar Online                  3 13/32           $4,495         ($4,423)          ($13,332)            43,200            1 9/16                     36 1/2         $1,151,765     ($625,609)         ($1,507,637)        13,412,000          22 7/8

 CDnow                         2 61/64          $77,601        ($60,440)          ($234,776)           96,900            N/A*

 eToys                          4 1/4          $24,862†        ($56,957)          ($279,916)          518,500            1 1/32

 eBay                          56 1/16         $183,152         $17,878            $45,506           15,048,000            38

 *CDnow was purchased by Bertelsmann Music Group (BMG).
 †Quarter ending 6-30-00.

revenue recognition practices. For example, Delta Air                      In a now-famous 1998 speech, then SEC Chairman
Lines recently changed its method of recognizing sales of               Arthur Levitt illustrated several earnings management
frequent flier miles to credit card companies, hotels and               scenarios (see “Earnings Management and the Abuse of
other marketing partners. Previously, the company had                   Materiality,” JofA, Sep. 00, page 41). In the absence of net
recognized revenue as cash was received, but now Delta                  income, market capitalization is based on revenues as an
will show part of the revenue immediately and defer the                 indicator of future earnings potential. Essentially, many
rest until the consumer uses the miles. The change                      companies Wall Street scrutinized reported net losses and
brought about a cumulative adjustment in the year it                    net cash outflows. These companies then tried to meet or
occurred.                                                               exceed the Wall Street estimates or rumored numbers
   Some companies have complex business scenarios that                  through creative accounting.
may not have easy solutions. The SEC questioned Price-                     Earnings management is not new, but it draws magni- regarding its practice of reporting revenues at                fied media and investor attention in an environment
gross when reporting at net would seem more appropri-                   where the market punishes companies that do not meet
ate. Priceline serves as a “go-between” for many compa-                 their earnings estimates. Last spring software maker Mi-
nies selling third-party items via the Internet and receives            croStrategy, Inc. announced it was restating earnings for
a portion of the proceeds for its part in the transaction,              the last three years to comply with SAB 101. As a result,
similar to a consignment arrangement. Priceline’s portion               the company showed a net loss for that time period. Mi-
is not a fixed percentage commission, though. The                       croStrategy stock, which had been trading at $225 a share,
amount of profit varies depending on the company’s de-                  plummeted 62% in one day, and within just weeks
cision regarding the ultimate sale price. The SEC has ap-               dropped to $25 a share. In April, the company settled a
proved Priceline’s practice so far, but not everyone agrees             shareholder class action suit alleging fraud arising from
with that decision.                                                     revenue overstatement.
                                                                           A similar fall in stock price at another company shows
RUNNING SCARED                                                          just how sensitive the market is to changes in revenue expec-
In the 1990s, the stock market encouraged less than con-                tations. In October, Apple Computer’s stock price fell by al-
servative financial reporting from companies. Thanks to                 most half in 24 hours when the company said it would
the market’s policy of basing capitalization on revenues,               experience a 6% decline in revenue from the second to the
companies have, until recently, enjoyed strong stock                    third quarter. Surprisingly, this drop occurred even though
prices and market capitalization without having to make                 Apple still reported a net profit for the period.
hefty profits (see exhibit 1, below). With so much market                  If companies choose questionable accounting practices
emphasis on one line item, companies are tempted to in-                 to meet expectations of shareholders and analysts, then
flate revenues through “creative accounting.”                           they will get the attention of the SEC, which has no toler-


ance for earnings management practices that become                    ware. While it appears the task force addressed these is-
fraudulent financial reporting. In a June 2000 speech, SEC            sues in the context of Internet companies, any consensus
Commissioner Isaac Hunt said that “financial fraud con-               is intended to provide guidance for all companies. The
stituted almost one-fifth of the cases brought by the divi-           key points are summarized below.
sion of enforcement in the last year,” and about one-third                Issue no. 99–17. Some companies engage in barter
of these actions were for improper income recognition.                transactions that typically involve the exchange of adver-
Hunt added that “the commission is increasing its sanc-               tising: Company A advertises on company B’s Web site
tions against individuals who commit fraud on behalf of               and company B advertises on company A’s site. This is-
the corporation.” The SEC also has extended its sanctions             sue is limited to like-kind exchanges of advertising space
to include not just senior officials but others within the            on companies’ Web sites. In such an exchange, the com-
chain of command who knowingly are involved in the                    panies often report revenue and an equal related expense,
fraud.                                                                with the net effect of no change in net income or in cash
   In his Audit Risk Alert letter to the AICPA (October 13,           flows from operations. Consensus: The EITF has con-
2000), SEC Chief Accountant Lynn Turner spelled out the               cluded the amount of revenue and expense recorded
issues on which the SEC staff has been focusing its atten-            from an advertising barter transaction should be dis-
tion, and emphasized revenue recognition. He specifi-                 closed in the income statement. If fair value is not deter-
cally told auditors to be aware of changes in revenue                 minable, information on volume and type of advertising
growth trends, non-standard journal entries (particularly             should be disclosed.
at the end of the reporting period) and side agreements                   Issue no. 99–19. Many companies sell goods or services
that might affect proper revenue recognition ( see “Tim-              over the Internet without stocking the inventory them-
ing is of the Essence,” JofA, May01, page 78). In light of            selves. Instead, they employ independent warehouses to
the Hunt and Turner comments, companies with ques-                    store merchandise and ship to the customer upon request.
tionable revenue recognition practices do not want the                These companies may also offer services provided by an
regulators at their doors and are running scared.                     Internet service provider. Companies chose one of two
                                                                      ways to report revenue. The revenue is recognized:
    In October 1999, SEC chief accountant Turner sent a                 • At the gross amount charged. The cost of goods
letter to Timothy Lucas, FASB director of research and                    sold reflects the cost of the goods or services
technical activities, with a list of earnings management is-              sold to the customer plus the company s cost of
sues the SEC believed the EITF should address. Exhibit 2,                 executing the transaction.
page 46, presents only those issues relevant to revenue                 • At the net amount (reflecting only the commis-
recognition, and displays the priority level the SEC as-                  sion or net profit). Then the cost of goods sold
signed along with each issue’s EITF status. Although the                  reflects only the company’s cost of executing the
list was based largely on problems that arose at Internet                 transaction.
companies, many other companies now encounter these
situations as business models continue to evolve.                        Under either method, net income or gross profit is the
    FASB established the EITF in 1984 to help it identify             same. However, companies wishing to maximize reve-
problems affecting financial reporting and implementa-                nues to maintain executive compensation or enhance
tion of authoritative pronouncements. It charged the task             stock price prefer reporting revenue at the gross amount.
force with providing guidance so that all publicly traded             Consensus: If the company performs as an agent or bro-
companies handled like transactions similarly. In a per-              ker without assuming the risks and rewards of ownership
fect situation, the EITF would identify emerging diversity            of the goods, it should report sales on a net basis.
in practice or questionable application of GAAP before                   The EITF prepared a list of factors or indicators that
the SEC had to take action. Once the EITF reaches a con-              companies should review in deciding whether to report
sensus, it becomes GAAP and is considered a mandatory                 at gross or net. The task force noted that none of these in-
requirement under SAS no. 69 and the board will not take              dicators was presumptive or determinative, and that
further action.                                                       companies should consider the relative strength of each
    The EITF has reached a consensus on roughly half of               indicator. The EITF Abstract for this issue also includes
the issues the SEC raised in the letter. In fact, for the three       several examples of the applications of these indicators
issues the SEC identified as most important, the task force           that should be useful in practice.
has issued statements specifically addressing revenue                    Issue no. 00–3. Sometimes a company’s software re-
recognition: Issue no. 99–17, Accounting for Advertising              sides on its own (or a third party’s) hardware and the cus-
Barter Transactions, Issue no. 99–19, Reporting Revenue               tomer accesses and uses the software as needed over the
Gross as a Principal versus Net as an Agent, and Issue no. 00–        Internet or on a dedicated line (called “hosting”). With
3, Application of AICPA Statement of Position (SOP) 97–2,             this type of arrangement, the customer does not necessar-
Software Revenue Recognition, to Arrangements That Include            ily take possession of the software. Depending on the
the Right to Use Software Stored on Another Entity’s Hard-            complexity of the software, the arrangement may also in-

                                                                                        Article 12. The Right Way to Recognize Revenue

 Exhibit 2: Guidance From the EITF
 SEC Issue to Address                                        Priority (By SEC)         Where Found                EITF Status

 Advertising barter transactions                             Level 1                   Issue 99–17                Consensus*

 Gross vs. net revenue and display cost                      Level 1                   Issue 99–19                Consensus*

 Accounting for the costs of developing a Web site           Level 1                   Issue 00–2 and 00–20       Consensus* on 00–2, 00–20
                                                                                                                  (content) to be discussed further

 Accounting for shipping and handling revenues and           Level 2                   Issue 00–10                Consensus*

 Accounting for the costs of computer files that are         Level 2                   To be discussed            May ultimately be addressed in
 essentially films, music or other content                                                                        Issue no. 00–20 (below)

 Application of SOP 97–2 to arrangements that                Level 2                   Issue 00–3                 Consensus*
 include the right to use software stored on another
 entity's hardware

 Accounting for “point” and other loyalty programs           Level 2                   Issue 00–22                Discussed, but no consensus.
                                                                                                                  Further discussion expected

 Accounting by the holder of an instrument (not              Level 2                   Issue 00–8                 Consensus*
 defined as derivative instrument) with conversion or
 terms that are variable based on exercisability upon
 future events

 Accounting for coupons, rebates and discounts               Level 2                   Issue 00–14                Consensus*

 Accounting for service outages                              Level 3                   Classification addressed   Consensus*
                                                                                       indirectly in 00–14

 Accounting for advertising or other arrangements            Level 3                   To be discussed            Appears to be addressed in SAB
 where the service provider guarantees a specified                                                                101, related Q&A, and 00-22
 amount of activity

 Accounting for front-end and back-end fees                  FE–potential SEC staff    To be discussed            Appears to be addressed in SAB
                                                             announcement BE–                                     101, related Q&A, and 00–21
                                                             Level 3

 Income statement classification of rebates and other        Potential SEC staff       Issue 00–14                Consensus*
 discounts                                                   announcement

 Accounting for free or heavily discounted products          Potential SEC staff       Issue 00–14                Consensus*

 Accounting for access, maintenance and publication          Potential SEC staff       To be discussed            Appears to be addressed in SAB
 fees                                                        announcement                                         101, related Q&A, and 00–21

 Statement 131 disclosures about Internet portion of         No level assigned         Removed from agenda        N?A
 a company's business

 *When consensus is reached it becomes a GAAP requirement.

clude additional services and updates or enhancements.                             when the delivery has occurred and on the hosting ele-
Usually companies pay an initial fee, followed by addi-                            ment when services are performed.
tional periodic payments over the life of the arrangement.
   Essentially, the arrangements this issue addresses in-
                                                                                   REFLECT REALITY
volve two rights—to use the software and to store it on
the vendor’s or third party’s hardware. Arrangements                               In the late 1980s, new franchise businesses exploded, and
that do not allow customers to take possession of the soft-                        timing of revenue recognition from franchise fees became
ware at any time during the hosting period without sig-                            an issue. In the early 1990s, controversy surrounded some
nificant penalty (so they can run the software on their                            companies because of their practice of recording revenue
own or a third party’s hardware) are considered service                            when they shipped inventory to dealers even though the
contracts and fall outside the scope of both this issue and                        inventory could be returned. Companies relied on “new
SOP 97–2. Consensus: The EITF has concluded revenue                                business transactions” to justify the unjustifiable,
should be allocated to the software element and hosting                            prompting additional pronouncements from the SEC, the
element based on vendor-specific evidence of fair value.                           FASB and the EITF. While such pronouncements offer
Revenue should be recognized on the software element                               guidance, some critics argue they enable companies to en-


gage in questionable practices unless explicitly forbid-                            101 both reaffirms long understood revenue recognition
den. However, companies can easily resolve many                                     concepts and provides helpful guidance. Perhaps, more
recognition questions if they adhere to the principle that                          than anything else, continued good faith efforts by ac-
revenue should be realized or realizable and earned be-                             counting professionals are the best defense against reve-
fore it can be recognized.                                                          nue recognition problems.
   FASB’s Lucas contends that “it’s difficult to craft a rule
that doesn’t catch some of the wrong fish in the net.”
Companies must report transactions in a manner that re-
flects economic reality. The SEC is still deadly serious
about SAB 101, even if the recent stock market meltdown                             THOMAS J. PHILLIPS JR., CPA, PhD, is the director of the school of
                                                                                    professional accountancy and the KPMG endowed professor at Louisi-
lessens some of the importance of revenue recognition as                            ana Tech University, Ruston. His e-mail address is phillips@cab.latech.
a “hot issue.”                                                                      edu. MICHAEL S. LUEHLFING, CPA, PhD, is an associate professor of
                                                                                    accountancy at Louisiana Tech. His e-mail address is luehlfing@cab.
  Regardless of the market’s fixation on revenue, all                      CYNTHIA M. DAILY, CPA, is a doctoral candidate in ac-
companies ultimately need real not managed profits. SAB                             countancy at Louisiana Tech. Her e-mail address is

        From Journal of Accountancy, May 2001, pp. 78, 81-82, 85-87. © 2001 by the American Institute of Certified Public Accountants, Inc. Opinions of the
        authors are their own and do not necessarily reflect policies of the AICPA. Reprinted by permission.


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