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Subject: Re: Use this for some balance sheet work----info Ozestock Author: Steve Bonkers. [ Next Thread | Previous Thread | Next Message | Previous Message ] Date Posted: 21:01:36 02/09/02 Sat In reply to: Steve Bonkers. 's message, "Use this for some balance sheet work----info Hotcopper" on 05:53:54 01/01/02 Tue Bonkers An accounting practise that was used by a corporation I once worked for was "Revenue Recognition", which I believe ERG were pulled up on last FY. The way it was applied at my old employer was as follows: You have a contract worth say $1M, with say 60% costs and 40% profit. Lets say you are half way through the project but are yet to recieve any payment. It has cost $300k to date, so there should be $500k owing(includes $200k profit). Even though not a cent has been received this project will be recorded on the books at a $200k profit! As time goes on and it is realised that this job will only make a profit of $100k overall, it then becomes a loss making project until the end of the project, because $200k has incorrectly been booked as profit already. It is so easy to hide poor performance on projects with incorrect profit estimations using this accounting method, and so dangerous when the project nears completion and the truth becomes obvious. It is no wonder that USA accounting procedures are coming under question. My old employer was listed on the London Exchange but the accounting was done by the yanks. Anyhow ERG should have true results this FY as it took the hit last FY for changing this procedure, and we as shareholders also took the hit big time. I hope havent confused anyone too much and have enlightened some to the dangers of believing that all financial reports are true and accurate. R/Sparx [ Next Thread | Previous Thread | Next Message | Previous Message ]