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Creative accounting
Jul. 8th, 2013 10:11 amOne of the things investors are always careful of when looking at balance sheets is spotting how "optimistic" a company is when it comes to booking revenue.
IF we read here: http://www.betaalphapsi.pdx.edu/?p=3213
we see that one of Autonomy's naughty habits was that it "would sell its software to resellers, who would then go on to sell it to another party. Autonomy would recognize the revenue of selling to VARs even though no end user is in place, often near financial closing periods. This process is called channel stuffing."
Governments, of course, would never resort to such creative accounting.
Oh, hold on. What about this:
http://www.thetimes.co.uk/tto/business/economics/article3797087.ece
Here we see that the UK govt has recognized £3.2bn which it thinks it will get from "wealthy Britons with Swiss bank accounts as part of an unprecedented co-operation deal to claw back unpaid tax."
That £3.2bn came in very useful for Mr Osborne in this year's budget. Unfortunately, none of the money has been collected. Worse, it's beginning to look as if the estimate is significantly on the high side; that the actual amount might be as low as £950m.
To count as cash something which is no more than a "best guess" and which hasn't yet been collected strikes me as dubious in the extreme. If a company did that and subsequently got into trouble, I think that the directors would be in serious danger of prosecution.
IF we read here: http://www.betaalphapsi.pdx.edu/?p=3213
we see that one of Autonomy's naughty habits was that it "would sell its software to resellers, who would then go on to sell it to another party. Autonomy would recognize the revenue of selling to VARs even though no end user is in place, often near financial closing periods. This process is called channel stuffing."
Governments, of course, would never resort to such creative accounting.
Oh, hold on. What about this:
http://www.thetimes.co.uk/tto/business/economics/article3797087.ece
Here we see that the UK govt has recognized £3.2bn which it thinks it will get from "wealthy Britons with Swiss bank accounts as part of an unprecedented co-operation deal to claw back unpaid tax."
That £3.2bn came in very useful for Mr Osborne in this year's budget. Unfortunately, none of the money has been collected. Worse, it's beginning to look as if the estimate is significantly on the high side; that the actual amount might be as low as £950m.
To count as cash something which is no more than a "best guess" and which hasn't yet been collected strikes me as dubious in the extreme. If a company did that and subsequently got into trouble, I think that the directors would be in serious danger of prosecution.
