Article ID | Journal | Published Year | Pages | File Type |
---|---|---|---|---|
9553334 | Journal of Accounting and Economics | 2005 | 27 Pages |
Abstract
I examine how revenue recognition timing affects attributes of reported revenue, using a sample of software firms that adopted Statement of Position 91-1 in the early 1990s. I find early recognition yields more timely revenue information, as evidenced by higher contemporaneous correlation with information impounded in stock returns. However, such early recognition diminishes the extent to which accounts receivable accruals map into future cash flow realizations and lowers the time-series predictability of reported revenue. Overall, the results suggest early revenue recognition makes reported revenue more timely and more relevant, but at the cost of lower reliability and lower time-series predictability.
Related Topics
Social Sciences and Humanities
Business, Management and Accounting
Accounting
Authors
Yuan Zhang,