Revenue Recognition Demystified

Overview

Presented by Steve Jeffery

This 90-minute session, comprised of a 60-minute presentation and a 30-minute Q & A, will cover issues related to Statement of Position 97-2 (SOP 97-2). The initial discussion will enable you to understand the background and the impact of Revenue Recognition. We’ll also discuss how an understanding of these principles can support better results when negotiating software deals. And, you’ll learn ways to recognize and defeat related ploys.

Topics include:

• Revenue Recognition background
• SOP 97-2
• The impact of Revenue Recognition
• Suppliers’ Revenue Recognition ploys
• Strategies to defeat those ploys
• Summary

Revenue Recognition is commonly discussed when contracts are being negotiated. Clearly, it is important to recognize the financial impact of revenue from a specific sale on the table. While the GAAP (Generally Accepted Accounting Principles) define revenue recognition, it fails to acknowledge how suppliers recognize the sale on its income statement.

By way of clarification, the following is an explanation of Revenue Recognition as defined by Wikipedia. “The Revenue Recognition principle is one of four main principles in the U.S.’s generally accepted accounting principles (GAAP). It is also the main difference between cash basis accounting and accrual basis accounting. In cash basis, accounting revenues are simply recognized when cash is received, no matter when and how the services were performed or goods delivered. In accrual basis, accounting revenues are recognized when they are (1) realized or realizable and (2) earned, no matter when cash is received.”