Informix Revenue Recognition Essay -- essays research papers

MEMORANDUMRe Group 2 - Case 2.1 bundle package Revenue Recognition Informix sightCompanies following GAAP can manage earnings by only if altering its accounting insurance policy to select those accounting principles that benefit them the most. Entities confirm a host of causal agents for selecting those principles that will paint the rosiest m 1tary picture. Some would deliberate that the market demands it, as reflected by the stock price punishment for companies that differ by as little as one penny per dowery from prior estimates. External market hales to meet the numbers conflicts with market pressure for transparency in financial report.Most fraudulent financial reporting schemes involve earnings management techniques, which inflate earnings, create an improved financial picture, or conversely, mask a deteriorating one. Premature taxation recognition is one of the most common forms of fraudulent earnings management and the case of Informix Software Inc. unfortunate ly illustrates closely this practice.The analysis of this case will shed come on issues like vInformixs revenue recognition policy prior to 1990 and its compliance with FASB Concept 5, FASB Statement 86, GAAP protocols.vInformixs reactions to AICPA SOP in changing the revenue recognition procedures and Informixs reason to prematurely and voluntarily implement the new policyvThe changes that took roll at Informix and the financial results reported during 1990Furthermore, we will also evaluate the software program sedulousness practices and the regulations in place at that time. We conclude with lessons learnt and recommendations towards identifying and discouraging non-GAAP revenue recognition practices.1986-1990 Revenue Recognition Policy at Informix Corporation tax revenue RECOGNITION POLICY BEFORE THE PROPOSED AICPA SOPPrior to 1990 the software industry had the FASB Statement of Financial Accounting Concept No.5 and the FASB Statement No. 86 to provide guidance in the revenue recognition concepts. The Accounting look Bulletin (ARB) No. 45 which discussed long-term construction type stick was also available but did not specify application for the software industry and so it was ignored. Before 1990 (refer exhibit 1) Informix recognized ... ...nbsp($1,503.00)($327.00)Net Income(Losses)$0.00 ($10,311.00)($11,146.00)($1,503.00)($327.00)Income per ploughshare Before Extraordinary Items$0.00 ($0.80)($1.00)($0.13)($0.05)Net Income (Loss) per Share (Fully Diluted)$0.00 ($0.80)($0.94)($0.12)($0.03)Total Assets$0.00 ($32,102.00)($17,173.00)($3,411.00)($573.00)Long-Term Obligations$0.00 $0.00 $0.00 $0.00 $0.00