Selling-Price Estimates in Revenue Recognition and Earnings Informativeness

2011 ◽  
Author(s):  
Anup Srivastava
Keyword(s):  
Selling Price ◽  
Revenue Recognition ◽  
Earnings Informativeness

The Effects of Accelerated Revenue Recognition on Earnings Management and Earnings Informativeness: Evidence from SEC Staff Accounting Bulletin No. 101

2005 ◽  
Vol 80 (2) ◽  
pp. 373-401 ◽  
Author(s):  
Jennifer Altamuro ◽  
Anne L. Beatty ◽  
Joseph Weber
Keyword(s):  
Relevant Information ◽  
Cash Flows ◽  
Revenue Recognition ◽  
Unexpected Earnings ◽  
Future Performance ◽  
Earnings Informativeness ◽  
Earnings Benchmarks ◽  
Reported Earnings ◽  
Future Cash Flows

The SEC issued Staff Accounting Bulletin (SAB) No. 101 to address its concern that firms were masking true performance by managing earnings using accelerated revenue recognition. Critics of this Accounting Bulletin stated that it would eliminate industry-accepted revenue recognition practices and reduce the quality of reported earnings. The FASB's revenue recognition discussions echo these concerns stating that revenues recorded prior to the completion of the earnings process contain value-relevant information about future performance. This paper investigates these two hypotheses using a sample of firms that accelerated revenue recognition prior to SAB No. 101 adoption (SAB 101 firms) and a matched set of firms that were unaffected by this regulation (unaffected firms). Our earnings distribution tests indicate that SAB 101 firms are more likely to meet earnings benchmarks. Specifically, we find that, in the pre-adoption period, SAB 101 firms report fewer small negative and more small positive earnings than they do in the post-adoption period and than do unaffected firms in the pre-adoption period; SAB 101 firms report fewer small negative and more small positive earnings changes in the pre-adoption period compared to the post-adoption period. We also document that SAB 101 firms are more likely to have weaker corporate governance and more likely to have financial covenants, providing them with greater incentives to manage earnings. However, we find that the association between earnings and future cash flows and between unexpected earnings and earnings announcement period returns were higher for SAB 101 firms than for unaffected firms in the preadoption period, indicating higher earnings informativeness for SAB 101 firms. These associations declined for SAB 101 firms in the post-adoption period, suggesting that SAB No. 101 caused a decline in earnings informativeness. Overall, our results suggest that, although the revenue recognition practices targeted by SAB No. 101 have been used by some firms to manage earnings, the regulation's prohibition of revenue recognition prior to completion of the earnings process, on average, results in less informative earnings since these unearned revenues provide value-relevant information.

Does lifting the objective-price constraint in revenue recognition increase the value relevance of earnings and revenue?

2018 ◽  
Vol 26 (4) ◽  
pp. 545-570
Author(s):  
Hung-Yuan Lu ◽  
Sophia Wang
Keyword(s):  
Corporate Governance ◽  
Agency Costs ◽  
Audit Quality ◽  
Value Relevance ◽  
Information Environment ◽  
Selling Price ◽  
Revenue Recognition ◽  
Content Type ◽  
Accruals Quality ◽  
The Impact

Purpose This paper examines how managerial discretion and judgment in revenue recognition affect earnings and revenue value relevance. Specifically, the purpose of this paper is to assess the impact of lifting the objective-price constraint in revenue recognition on the value relevance of earnings and revenue by examining firms’ contemporaneous returns-earnings/revenue relation before and after the implementation of Accounting Standards Update (ASU) 2009-13. In addition, this paper examines how the change in earnings value relevance is conditioned by agency costs, corporate governance, information environment, and audit quality. This paper further examines whether earnings, revenue, and accruals quality change after the objective-price constraint is lifted. Design/methodology/approach This paper employs a difference-in-differences research design to examine whether earnings and revenue value relevance are enhanced or lowered more for a list of 107 US firms that applied selling price estimates in revenue recognition under ASU 2009-13 than for a list of 107 matched US firms that did not apply selling price estimates. Sub-sample analyses are employed to examine how agency costs, corporate governance, information environment, and audit quality condition the change in value relevance. Additional analyses examine the changes in earnings, revenue, and accruals quality using accruals, revenue accruals, discretionary revenue, absolute abnormal accruals, earnings/revenue predictability, and smoothness. Findings The empirical results suggest that lifting the objective-price constraint in revenue recognition improves earnings and revenue value relevance for positive earnings and that the effect of information usefulness dominates that of managerial opportunism. Change in the earnings value relevance is conditioned by the level of corporate governance, information environment, and audit quality. Evidence of no significant reduction in the earnings/revenue/accruals quality corroborates the main findings. Research limitations/implications The findings lend support to the new revenue standard (ASU 2014-09) that continues the use of the estimates of selling price in revenue recognition. Originality/value This study provides some of the first evidence that managerial judgment exercised in revenue recognition through the use of selling price estimates (i.e. lifting the objective-price constraint in revenue recognition) enhances earnings and revenue value relevance while such benefit does not come at a cost of reduced earnings/revenue/accruals quality.

Public Administration in the Field of Subsoil Use and Protection in Ukraine

2019 ◽  
pp. 169
Author(s):  
Nadiia Maksimentseva
Keyword(s):  
Public Administration ◽  
Phenomenological Study ◽  
Inductive Reasoning ◽  
Mineral Resources ◽  
Selling Price ◽  
Administrative Functions ◽  
The People ◽  
European Court ◽  
And Performance ◽  
Incoming Energy

Laws and regulations backing and governing public administration in subsoil use and protection in Ukraine is gradually gaining priority and importance given incoming energy security and resource self-sufficiency risks alerts for the State as one of the warrants for political and economic independence and guarantees for the people of Ukraine to enjoy and plenipotentiary implement its propitiatory rights set forth in the Constitution of Ukraine with regard to natural resources and benefits that constitute the genuine wealth of the nation. The article is written with the application of inductive reasoning and performance of various research methods, such as case studies, phenomenological study with some focus on nature and source of laws and administrative functions, grounded theory study; also a deep comparative analysis of domestic and overseas legal patterns is carried out. The article is devoted to the research of problems with regard to public administration in the field of subsoil use and protection in Ukraine. The author emphasizes that determination of public administration in the field of subsoil use and protection is a form of public managerial activities of public administration authorities (state authorities, local self-government bodies, self-governing public organizations with the respective competence). It is suggested that these activities are aimed at implementation of the policies in the field of geological exploration of mineral resources, mineral extraction, construction of underground and terrestrial facilities not related to the extraction of minerals, subsoil and environmental protection and they are based on the principles of interaction between subject and object of public administration, discretion, mutual responsibility, self-governance and decentralization when public services are provided. Also, the article presents many judicial practice of the European Court of Human Rights and Citizen, the Supreme Court in the field of public administration in the field of subsoil use and protection. In concluding notes amendments to Subsoil Code of Ukraine, methodology for calculating the initial selling price for the sale of special permit, selection procedures for open special permit tender bid winners and responsibility for subsoil use abandonment costs are suggested by the author.

Estimating the Cost of Car Warranty in Indonesia using the Gertsbakh-Kordonsky Method

2020 ◽  
Vol 2 (1) ◽  
pp. 33-40
Author(s):  
Anggis Sagitarisman ◽  
Aceng Komarudin Mutaqin
Keyword(s):  
Maximum Likelihood ◽  
Likelihood Estimation ◽  
Type A ◽  
Claim Data ◽  
Likelihood Method ◽  
Selling Price ◽  
One Dimensional ◽  
Warranty Period ◽  
Kolmogorov Smirnov ◽  
Warranty Costs

AbstractCar manufacturers in Indonesia need to determine reasonable warranty costs that do not burden companies or consumers. Several statistical approaches have been developed to analyze warranty costs. One of them is the Gertsbakh-Kordonsky method which reduces the two-dimensional warranty problem to one dimensional. In this research, we apply the Gertsbakh-Kordonsky method to estimate the warranty cost for car type A in XYZ company. The one-dimensional data will be tested using the Kolmogorov-Smirnov to determine its distribution and the parameter of distribution will be estimated using the maximum likelihood method. There are three approaches to estimate the parameter of the distribution. The difference between these three approaches is in the calculation of mileage for units that do not claim within the warranty period. In the application, we use claim data for the car type A. The data exploration indicates the failure of car type A is mostly due to the age of the vehicle. The Kolmogorov-Smirnov shows that the most appropriate distribution for the claim data is the three-parameter Weibull. Meanwhile, the estimated using the Gertsbakh-Kordonsky method shows that the warranty costs for car type A are around 3.54% from the selling price of this car unit without warranty i.e. around Rp. 4,248,000 per unit.Keywords: warranty costs; the Gertsbakh-Kordonsky method; maximum likelihood estimation; Kolmogorov-Smirnov test.                                   AbstrakPerusahaan produsen mobil di Indonesia perlu menentukan biaya garansi yang bersifat wajar tidak memberatkan perusahaan maupun konsumen. Beberapa pendekatan statistik telah dikembangkan untuk menganalisis biaya garansi. Salah satunya adalah metode Gertsbakh-Kordonsky yang mereduksi masalah garansi dua dimensi menjadi satu dimensi. Pada penelitian ini, metode Gertsbakh-Kordonsky akan digunakan untuk mengestimasi biaya garansi untuk mobil tipe A pada perusahaan XYZ. Data satu dimensi hasil reduksi diuji kecocokan distribusinya menggunakan uji kecocokan Kolmogorov-Smirnov dan taksiran parameter distribusinya menggunakan metode penaksir kemungkinan maksimum. Ada tiga pendekatan yang digunakan untuk menaksir parameter distribusi. Perbedaan dari ketiga pendekatan tersebut terletak pada perhitungan jarak tempuh untuk unit yang tidak melakukan klaim dalam periode garansi. Sebagai bahan aplikasi, kami menggunakan data klaim unit mobil tipe A. Hasil eksplorasi data menunjukkan bahwa kegagalan mobil tipe A lebih banyak disebabkan karena faktor usia kendaraan. Hasil uji kecocokan distribusi untuk data hasil reduksi menunjukkan bahwa distribusi yang cocok adalah distribusi Weibull 3-parameter. Sementara itu, hasil perhitungan taksiran biaya garansi menunjukan bahwa taksiran biaya garansi untuk unit mobil tipe A sekitar 3,54% dari harga jual unit mobil tipe A tanpa garansi, atau sekitar Rp. 4.248.000,- per unit.Kata Kunci: biaya garansi; metode Gertsbakh-Kordonsky; penaksiran kemungkinan maksimum; uji Kolmogorov-Smirnov.

A Case Study on the Revenue Recognition in Implant Industry

2018 ◽  
Vol 27 (4) ◽  
pp. 207-238
Author(s):  
Sungho Choi ◽  
Haewon Moon ◽  
Kwan Choi
Keyword(s):  
Revenue Recognition

Recognition Of Revenue In Mobile Phone Companies Under IFRS 15

2019 ◽  
Vol 118 (10) ◽  
pp. 181-196
Author(s):  
Layth Ali Hammadi Al-Tamimi ◽  
Abbas Alwan Sharif ◽  
Murtadha Mohammed Shani
Keyword(s):  
Mobile Phone ◽  
Financial Reporting ◽  
International Financial Reporting Standards ◽  
Administrative Staff ◽  
Reporting Standards ◽  
Revenue Recognition ◽  
Important Conclusion ◽  
Know How ◽  
Financial Reporting Standards

The aim of this research is to find out the adequacy and appropriateness of revenue recognition procedures in mobile phone companies and to know how well they comply with international financial reporting standards. The most important conclusion reached by the researcher is the lack of experience and know-how in the accounting and administrative staff working in most mobile phone companies. The most important recommendations of the research are the need to provide an efficient accounting and administrative staff with sufficient experience and know-how in the methods of recognizing revenues generated by mobile phone companies.

ACOUSTIC PANEL CHICKEN FEATHER WASTE ENVIRONMENTALLY FRIENDLY

2020 ◽  
Author(s):  
Ansarullah ◽  
Ramli Rahim ◽  
Baharuddin Hamzah ◽  
Asniawaty Kusno ◽  
Muhammad Tayeb
Keyword(s):  
Animal Feed ◽  
Environmentally Friendly ◽  
Selling Price ◽  
Chicken Feather ◽  
Chicken Feathers ◽  
The Road ◽  
Feather Waste ◽  
Chicken Feather Waste ◽  
Almost All ◽  
The Impact

Chicken feathers are the result of waste from slaughterhouses and billions ofkilograms of waste produced by various kinds of poultry processing. This hal is a veryserious problem for the environment because it causes the impact of pollution. Hasmany utilization of chicken feather waste such as making komocen, accessories,upholstery materials, making brackets to the manufacture of animal feed but from theresults of this activity cannot reduce the production of chicken feathers that hiscontinuously increase every year. This is due to the fact that the selling price of chickenmeat has been reached by consumers with middle to upper economic levels. This caneasily be a chicken menu in almost all restaurants and restaurants to the food stalls onthe side of the road. An alternative way of utilizing chicken feathers is to makecomposite materials in the form of panels. Recent studies have shown that the pvacmaterial can be utilized as a mixing and adhesive material with mashed or groundfeathered composites to form a panel that can later be used as an acoustic material.The test results show that the absorption of chicken feathers and pvac glue into panelscan absorb sound well with an absorption coefficient of 0.59, light. This result is veryeconomical so it is worth to be recommended as an acoustic material. Apart from theresults of research methods carried out is one of the environmentally friendly activitiesin particular the handling of waste problems

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