Using Case Materials to Research Professional Standards on Revenue Recognition Issues

2007 ◽  
Vol 22 (1) ◽  
pp. 89-104 ◽  
Author(s):  
Sudha Krishnan ◽  
Steven M. Mintz
Keyword(s):  
Initial Public Offering ◽  
Financial Statements ◽  
Professional Standards ◽  
Share Price ◽  
Net Income ◽  
Revenue Recognition ◽  
Generally Accepted Accounting Principles ◽  
Software Company ◽  
Accounting Principles ◽  
Public Offering

MicroStrategy, Inc. is a software company listed on NASDAQ. Since the company came out with an initial public offering (IPO) in June 1998, it has always been identified as a successful, growing company with positive net income. On March 20, 2000, the company announced that it would restate its financial statements for all years since its IPO. This announcement caused its share price to fall 60 percent in one day. The case summarizes management's actions and asks you to identify issues relating to revenue recognition policies under generally accepted accounting principles (GAAP).

scholarly journals Share Price Analyst With PBV, DER, And EPS At Initial Public Offering

The Winners ◽  
2016 ◽  
Vol 17 (2) ◽  
pp. 113
Author(s):  
Kriswanto Kriswanto
Keyword(s):  
Initial Public Offering ◽  
Financial Statements ◽  
Study Data ◽  
Share Price ◽  
Annual Reports ◽  
Net Profit ◽  
Ipo Pricing ◽  
Equity Ratio ◽  
Public Offering ◽  
Support Research

Underpricing and overpricing are commonly happened in stocks market. Underpricing happened when IPO pricing was lower than closing price in the first day stock been trade in the market. There were some measurements to be used, like Price to Book Value (PBV), Price Earning Ratio (PER), Earning Per Share (EPS), Debt to Equity Ratio (DER), Net Profit Margin (NPM), Size of Company (Size) and Company Age (Age). The type of research was quantitative with a comparative analysis which focused on the study of literature to support research by describing theories related to the title of the study, data collection of financial statements, and annual reports of companies going public as well as Fact Book published. This article used data from 78 companies that did IPOin 2010 to 2013. This research finds that some statistic used to show majority variables that influence to underpricing is PBV, PER, DER,and Size.

Jones Enterprises Real Estate Investment Trust: Comparing U.S. and Canadian Acquisition Accounting, Balance Sheet and Security Commission Reporting, and Initial Public Offering Location

2018 ◽  
Vol 33 (2) ◽  
pp. 35-42
Author(s):  
Natalie Tatiana Churyk ◽  
Alan Reinstein ◽  
Lance Smith
Keyword(s):  
Real Estate ◽  
Initial Public Offering ◽  
Financial Reporting ◽  
Balance Sheet ◽  
Accounting Students ◽  
Real Estate Investment ◽  
Generally Accepted Accounting Principles ◽  
Balance Sheets ◽  
Advantages And Disadvantages ◽  
Public Offering

ABSTRACT Based on a Big 4 real estate audit partner's client, this case introduces graduate research and advanced financial accounting students to acquisition accounting under U.S. generally accepted accounting principles (GAAP) and International Financial Reporting Standards (IFRS), provides a perspective on real estate investment trusts (REITs), and requires analyzing a U.S. versus Canadian (Ontario) initial public offering (IPO). Students list U.S. and Canadian advantages and disadvantages of REITs, record a portfolio purchase, prepare U.S. GAAP and IFRS balance sheets in order to grasp major REIT reporting differences, contrast the key provisions between U.S. and Canadian (Ontario) securities commissions' IPO reporting, and consider ongoing securities commissions' reporting options. Finally, students will recommend whether the IPO should be issued in the U.S. or Canada. Completing the case helps students: (1) grasp U.S. GAAP and IFRS acquisition accounting methods and different REIT presentations; and (2) recognize that the country selected for the IPO depends upon the issuer's circumstances and preferences.

ASIAN AMERICAN-FOUNDED VENTURES IN SILICON VALLEY: CHALLENGES, STRATEGIC PARTNERSHIP, AND PERFORMANCE

2010 ◽  
Vol 18 (04) ◽  
pp. 355-375
Author(s):  
DAVID Y. CHOI ◽  
DONG CHEN ◽  
WOO JIN LEE
Keyword(s):  
Initial Public Offering ◽  
Asian American ◽  
Silicon Valley ◽  
Share Price ◽  
Strategic Partnership ◽  
Strategic Partnerships ◽  
Ipo Performance ◽  
And Performance ◽  
Public Offering ◽  
The Impact

This paper examines the performance of Silicon Valley ventures with Asian-American founding teams. We review some challenges faced by these ventures, compare their performance with that of other ventures, and analyze the impact of strategic partnerships on their performance. Our results indicate that firms founded by Asian American entrepreneurs tend to require more time to reach initial public offering (IPO) status than do other ventures in Silicon Valley. Our results further show that, despite needing this extra time, Asian American-founded ventures significantly outperformed their counterparts in 12-month post-IPO share price gain. This superior short-term post-IPO performance suggests that Asian American firms, particularly those that lacked relationships with U.S.-based strategic investors, might have been undervalued prior to and at IPO.

R&D investment decisions of IPO firms and long-term future performance

2018 ◽  
Vol 17 (1) ◽  
pp. 78-108 ◽  
Author(s):  
Tatiana Fedyk ◽  
Natalya Khimich
Keyword(s):  
Stock Returns ◽  
Initial Public Offering ◽  
Investment Decision ◽  
Investment Decisions ◽  
Poor Performance ◽  
Net Income ◽  
Cross Sectional ◽  
Content Type ◽  
Public Offering ◽  
D Investment

Purpose The purpose of this paper is to link valuation of different accounting items to research and development (R&D) investment decisions and investigate how suboptimal R&D choices during initial public offering (IPO) are linked to future operating and market underperformance. Design/methodology/approach For firms with substantial growth opportunities, accounting net income is a poor measure of the firm’s performance (Smith and Watts, 1992). Therefore, other metrics such as R&D intensity are used by investors to evaluate firms’ performance. This leads to a coexistence of two strategies: if earnings are the main value driver, firms tend to underinvest in R&D; and if R&D expenditures are the main value driver, firms tend to overinvest in R&D. Findings The authors show that the R&D investment decision varies systematically with cross-sectional characteristics: firms that are at the growth stage, unprofitable or belong to science-driven industries are more likely to overinvest, while firms that are able to avoid losses by decreasing R&D expenditure are more likely to underinvest. Finally, they find that R&D overinvestment leads to future underperformance as evidenced by poor operating return on assets, lower product market share, higher frequency of delisting due to poor performance and negative abnormal stock returns. Originality/value While prior literature concentrates on R&D underinvestment as a tool of reporting higher net income, the authors demonstrate the existence of an alternative strategy used by many IPO firms – R&D overinvestment.

U.S. Gaap—A U.K. Actuary's Perspective.

1979 ◽  
Vol 23 ◽  
pp. 125-180
Author(s):  
S. Creedon
Keyword(s):  
Life Insurance ◽  
Financial Statements ◽  
Insurance Companies ◽  
Certified Public Accountant ◽  
Certified Public Accountants ◽  
American Institute ◽  
Generally Accepted Accounting Principles ◽  
Accounting Principles ◽  
The U.S ◽  
Public Accountant

Unlike his U.K. counterpart, who opines on a ‘true and fair view’, the more limited objective of the U.S. Certified Public Accountant is to certify that financial statements present fairly ‘in conformity with generally accepted accounting principles’. Generally accepted accounting principles, as applicable to proprietary life insurance companies, are set out in the American Institute of Certified Public Accountants Audit Guide ‘Audits of Stock Life Insurance Companies’ (1) (hereafter referred to as the ‘Audit Guide’). Despite being neither general in application nor universally accepted, it is these accounting principles which are commonly known as U.S. GAAP.U.S. GAAP are relevant to U.K. actuaries because:(a) Many actuaries work for, or with, life insurance subsidiaries of U.S. companies which are required to prepare financial statements in accordance with U.S. GAAP(b) More generally, on the grounds that developments in the U.S. often precede similar developments in the U.K., we should anticipate the possible development of U.K. generally accepted accounting principles (or even EEC GAAP).

scholarly journals Matching Cost Against Revenue at Royalty Expenses

2021 ◽  
Vol 11 (2) ◽  
pp. 171
Author(s):  
Muhammad Rifky Santoso
Keyword(s):  
Financial Statements ◽  
Generally Accepted Accounting Principles ◽  
Taxable Income ◽  
Accounting Principles ◽  
Directorate General ◽  
Matching Cost ◽  
Gross Income ◽  
Tax Court ◽  
Principle Of Matching

The recording of royalty expenses must not only be consistent but also complied with the principle of matching costs against revenue, especially in calculating taxable income. If all accounting principles are not met in recording the royalty expense, the tax authority will correct it  so that the royalty expenses cannot be deducted from taxable income. By using a case in a tax court in Indonesia, there is a taxpayer who does not meet the matching cost against revenue principle when recording royalty expenses. The taxpayer deducts these royalty expenses for the previous year in the current year because the amounts of these royalty expenses are known exactly in the current year. Even though the taxpayer's financial statements were audited and had an unqualified opinion, the Directorate General of Taxes (DGT) as the tax authority in Indonesia negated the royalty expenses as a deduction from taxable income. This paper finds that a net sales-based royalty fee scheme can be estimated at the end of the year and deducted from gross income without waiting for a certainty on the amount of royalty expense on invoices received in the coming year. The accounting records of the taxpayer are not proper so that some data or documents cannot be proven in the tax court. The method of recording in the financial statements with an unqualified opinion does not guarantee that the recording follows tax regulations, especially following Generally Accepted Accounting Principles (GAAP).

scholarly journals Analisis Kualitas Auditor, Leverage Dan Persentase Saham Initial Public Offering Terhadap Earnings Management Perusahaan Go Public

2019 ◽  
Vol 7 (2) ◽  
pp. 137
Author(s):  
Hasanuddin Hasanuddin
Keyword(s):  
Earnings Management ◽  
Multiple Regression ◽  
Initial Public Offering ◽  
Stock Exchange ◽  
Financial Statements ◽  
Business Continuity ◽  
Corporate Management ◽  
Dysfunctional Behavior ◽  
Public Offering ◽  
Personal Welfare

AbstractThe action of corporate management to intervene in the process of drafting financial statements is an act of dysfunctional behavior that will affect the enhancement of personal welfare management and The company's employees and the value of its leadership. This research aims to test and prove empirically the cause and influence of earnings management in the company that go public after the enactment of Accounting and Auditing Enforcement Release (AAER) by Security Exchange Commission (SEC). The variables tested were reputation Auditor, Leverage and stock percentage of Initial Public Offering (IPO) at the company that go Public on the Indonesia Stock Exchange from 2000 to 2004. The method of analysis used is multiple regression that previously done testing through several stages. Results show that the leverage variable significantly affects earnings management. This indicates that the debt that is the source of external funds used to finance the business continuity is strongly associated with earnings management. 

Beijing's Alibaba move signals shift on IPR

2015 ◽  
Keyword(s):  
New York ◽  
Initial Public Offering ◽  
Stock Exchange ◽  
Share Price ◽  
Online Retail ◽  
Content Type ◽  
Counterfeit Goods ◽  
York Stock Exchange ◽  
The Government ◽  
Public Offering

Subject Alibaba's involvement in trade in counterfeit goods, and the authorities' response. Significance At nearly 300 billion dollars in annual sales, China has the largest online retail market in the world. Some 80% of it is handled by the Alibaba Group. In September 2014, Alibaba launched on the New York Stock Exchange (NYSE), raising 25 billion dollars in what became the world's largest ever initial public offering (IPO). Four months later, Chinese regulators went public with allegations implicating Alibaba in the sale of vast quantities of counterfeit goods, sending its share price falling and bringing one of China's most prominent private firms into public confrontation with the government. Impacts The government and Alibaba will seek a mutually face-saving exit from their confrontation. The government will want to avoid critically undermining Alibaba, whose operations provide jobs for millions of people. The transition to a consumption- and innovation-led economy will require ever-greater protection of IPR. Retailers and wholesalers will need to review their business to minimise possible involvement with counterfeit or sub-standard products.

Do abnormal IPO audit fees signal IPO audit quality and post-IPO performance? A principal-agent analysis based on evidence from China.

2020 ◽  
Author(s):  
K. Hung Chan ◽  
Phyllis L. L. Mo ◽  
Weiyin Zhang
Keyword(s):  
Financial Performance ◽  
Agency Theory ◽  
Initial Public Offering ◽  
Audit Quality ◽  
Financial Statements ◽  
Audit Fees ◽  
Main Interest ◽  
Ipo Performance ◽  
Market Participants ◽  
Public Offering

We assess the unexplained information content of abnormal audit fees using a sample of initial public offering (IPO) audits in China. We find that abnormal IPO audit fees are positively associated with manipulation of pre-IPO real activities, suggesting lower audit quality for IPO financial statements. We further find that abnormal IPO audit fees are negatively associated with post-IPO financial performance. These results suggest a strong alignment of interests between the principal (pre-IPO shareholders), whose main interest is to gain listing status, and its agent (the auditor), who is willing to cooperate with the principal for extra economic rents (abnormal audit fees). Our findings that abnormal IPO audit fees are associated with lower audit quality and can help predict post-IPO financial performance have important implications for audit regulators, IPO market participants, and the applicability of agency theory in the context of IPO audits.

Do Revenues Matter More Than Earnings for Initial Public Offerings?

2021 ◽  
pp. 0148558X2110465
Author(s):  
Norman Massel ◽  
Jung Eun “JP” Park ◽  
Ken Reichelt
Keyword(s):  
Stock Returns ◽  
Initial Public Offerings ◽  
Initial Public Offering ◽  
Securities And Exchange Commission ◽  
Additional Analysis ◽  
Fiscal Year ◽  
Revenue Recognition ◽  
Public Offerings ◽  
Regulatory Scrutiny ◽  
Public Offering

We demonstrate that investors in initial public offering (IPO) firms value revenues and that the number of U.S. Securities and Exchange Commission (SEC) revenue recognition comment letters issued on the S-1 registration statement are positively associated with reported revenues. We also find that IPO managers report revenues opportunistically in the fiscal year just prior to the offer. In additional analysis, we find that discretionary revenues are associated with significantly higher first day IPO stock returns but significantly lower 1 year stock returns. Our results are consistent with the incentives of managers to report revenues opportunistically outweighing the higher monitoring and regulatory scrutiny pre-IPO.

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