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• To the extent that management has discretion over the firm's revenue recognition, an analyst should consider policies that recognize revenue later to be more conservative than policies that recognize revenue sooner.
• When comparing the performance of companies, an analyst can use the information in the financial statement disclosures to adjust the financial statements for differences in revenue recognition policies.
With regard to the implications of revenue recognition policies for financial analysis, Krome should agree with:
A)both of these statements.
B)only one of these statements.
C)neither of these statements.
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答案 B
Because revenue recognition often relies on judgment and estimates from management, it is not always possible to calculate the appropriate adjustments that would account for the differences between companies revenue recognition policies. An analyst should use the policies disclosed in companies financial statement footnotes to understand the degree to which their revenue recognition is conservative or aggressive. In general, recognizing revenue sooner is considered aggressive and recognizing revenue later is considered conservative.
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