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The aim of this paper is to investigate the gap between cost-based and time-based revenue recognition schemes in the accounting of ship-owning corporations, and to propose cost-based revenue recognition (as in general accounting practice) in connection with the performance obligations.

For a comparative analysis of time-based (traditional approach) and cost-based schemes, a sample of dry bulk ships is selected and voyage estimations are performed by certified professional shipbrokers (Fellow of the Institute of Chartered Shipbrokers) (data collection and voyage estimation by practitioner). Performance obligations are also defined by certified shipbrokers (i.e. survey and expert opinion) and certified public accountant based on common shipping business practice and accounting practice in general.

Empirical results indicate the significant gap between two alternative schemes. Cost-based revenue recognition accelerates the revenue recognition (benefit of shipowner), and it enables comparability among other industries since cost-based allocation is the common practice in accounting (matching principle, Generally Accepted Accounting Principles).

It is obviously impossible to observe all kinds of freight market transactions for all different kinds of vessel particulars. The sample size does not undervalue the current study since the central idea of this paper is not the verification of the cost-based recognition in all possible transactions.

The proposed approach debiases the existing recognition practice as well as improving the speed of revenue recognition. In the existing practice, time-based recognition is still based on voyage estimations (time estimation). Voyage estimations conventionally answer two questions: “What is the cost of the voyage?” and “What is the duration of the voyage?” Therefore, the proposed approach does not require any additional work done. Common practice also clarifies the cost-based schedule for revenue recognition.

This paper addresses the unconventional accounting practice and its incomparability problem for the first time. To the best of the authors’ knowledge, this paper is also the first study on accounting economics of the shipping business. This paper proposes a practical solution to the debate raised by Financial Accounting Standards Board 2014-09 regulation on accounting standards by utilizing a staging approach and cost-based revenue allocation.

This paper examines how managerial discretion and judgment in revenue recognition affect earnings and revenue value relevance. Specifically, the purpose of this paper is to assess the impact of lifting the objective-price constraint in revenue recognition on the value relevance of earnings and revenue by examining firms’ contemporaneous returns-earnings/revenue relation before and after the implementation of Accounting Standards Update (ASU) 2009-13. In addition, this paper examines how the change in earnings value relevance is conditioned by agency costs, corporate governance, information environment, and audit quality. This paper further examines whether earnings, revenue, and accruals quality change after the objective-price constraint is lifted.

This paper employs a difference-in-differences research design to examine whether earnings and revenue value relevance are enhanced or lowered more for a list of 107 US firms that applied selling price estimates in revenue recognition under ASU 2009-13 than for a list of 107 matched US firms that did not apply selling price estimates. Sub-sample analyses are employed to examine how agency costs, corporate governance, information environment, and audit quality condition the change in value relevance. Additional analyses examine the changes in earnings, revenue, and accruals quality using accruals, revenue accruals, discretionary revenue, absolute abnormal accruals, earnings/revenue predictability, and smoothness.

The empirical results suggest that lifting the objective-price constraint in revenue recognition improves earnings and revenue value relevance for positive earnings and that the effect of information usefulness dominates that of managerial opportunism. Change in the earnings value relevance is conditioned by the level of corporate governance, information environment, and audit quality. Evidence of no significant reduction in the earnings/revenue/accruals quality corroborates the main findings.

The findings lend support to the new revenue standard (ASU 2014-09) that continues the use of the estimates of selling price in revenue recognition.

This study provides some of the first evidence that managerial judgment exercised in revenue recognition through the use of selling price estimates (i.e. lifting the objective-price constraint in revenue recognition) enhances earnings and revenue value relevance while such benefit does not come at a cost of reduced earnings/revenue/accruals quality.

The purpose of this paper is to answer the fundamental question about why the shares of property developers are traded at market discounts by focusing on property developers from Hong Kong, Malaysia and Singapore.

It measures market discount using market-to-book ratio (MTB) and specifies the relations between MTB and the hypothetical determining factors (revenue recognition policy, investment property measurement policy, related party (RP) transaction disclosures and economic rent) in the presence of relevant control variables.

This study finds that aggressive revenue recognition and investment property measurement policies increase market discounts, but that RP transactions generally contribute positively to reduce the market discounts of property developer shares. Specifically, RP transactions are value-enhancing only if property developers adopt a conservative revenue recognition policy, because markets sensibly see RP transactions that are part of an aggressive revenue recognition policy as earnings management for tunnelling by controlling shareholders, and hence react with discounts. It is also observed that when property developers generate insufficient profit to cover their cost of equity, this generally leads to their shares being traded at market discounts. However, an aggressive revenue recognition policy can reduce market discount if early recognition contributes positively to economic rent.

This study provides valuable evidence of the economic consequences (market discounts) of accounting choices on recognition and measurement, and the disclosure of accounting information. This is crucial to managers of property developers in managing their firm values when exercising accounting discretion.

This study provides empirical evidence on market discounts as they relate to property developers, which has been limited (past studies focus on property investment companies and real estate investment trusts).

The purpose of this study is to examine the association between revenue-based earnings management in the periods immediately before and after firms’ initial public offerings (IPOs) and regulatory scrutiny by the United States Securities and Exchange Commission (SEC) during review of IPO firms’ registration statements.

This paper uses conditional discretionary revenues (Stubben, 2010) as its measure of earnings management, and revenue recognition comments delivered by the SEC as its measure of regulatory scrutiny. The authors use ordinary least squares regression (OLS) models, as well as a supplemental count model, to assess the association between conditional discretionary revenues and revenue recognition comments delivered by the SEC.

This study finds evidence of a positive association between earnings management measures in the pre-IPO period and the number of revenue recognition comments received by those firms during the SEC’s review. Furthermore, this study provides evidence that greater numbers of comments are associated with declining earnings management measures in the post-IPO period. However, the evidence suggests that these associations apply only to income-decreasing earnings management.

This paper extends the IPO earnings management literature by using conditional discretionary revenues as the measure of earnings management, and contributes to a nascent research stream in the accounting literature by investigating the SEC’s comment letter process and its association with, and impact upon, earnings management in the IPO process.

This study examines the market valuation of the unearned revenue liability reported by a sample of newspaper and magazine publishers. The evidence indicates that stock prices behave as if the unearned revenue liability represents an economic asset overall. It is further shown that the market valuation of the unearned revenue “asset” is increasing in the magnitude of advertising relative to circulation revenue. After controlling for advertising revenue inflows, reported unearned revenue is negatively related to stock price, indicating that the economic asset is valued in part on its liability characteristics. These results have direct implications for the FASB's current deliberations on revenue and liability recognition.

The purpose of this study is to explore the degree of compliance of a sample of European Union (EU) listed groups with the International Financial Reporting Standard 15 (IFRS 15) mandatory disclosures in two specific sectors, namely, telecommunication and construction.

To carry out this research, the authors selected 22 annual reports for the year 2018. The authors created and completed a datasheet based on a close review of the IFRS 15 disclosure requirements. A content analysis of the selected annual reports was then performed.

The results show that the sampled groups do not fully comply with the IFRS 15 mandatory disclosures and the degree of compliance differs between the two investigated sectors.

To the best of the authors’ knowledge, this study explores, for the first-time, the degree of compliance with the IFRS 15 mandatory disclosures, by focusing on a cross-country sample of EU listed groups.

This paper aims to examine the concerns that high‐tech “new economy” companies employ aggressive revenue recognition practices to boost stock prices.

The authors test empirically the hypothesis that revenue is more value relevant than other key performance measures traditional earnings and operating cash flows, especially in the case of high‐tech firms with losses.

Test results from this study demonstrate the association between stock prices and reported revenues, both before and after year 2000 the stock market meltdown.

The study limits its scope on the high‐tech new economy sector. The findings may not be applicable to other industries.

An important implication of the findings is that the association between stock prices and revenue is presumably the underlying reason for aggressive revenue recognition.

This paper provides empirical evidence demonstrating the association between stock prices and revenues, which is very valuable to policy makers and market participants.

The purpose of this paper is to examine the requirement that non-profit organizations recognize unconditional promises to give as assets and revenues in the year promises are received as mandated by Statement of Financial Accounting Standards (SFAS) No. 116.

Using the adoption of SFAS No. 116 and financial information reported on Internal Revenue Service Form 990, the study examines the requirement that non-profit organizations recognize unconditional promises to give as assets and revenues in the year promises are received. Combining insights derived from a model developed by Dechow, Kothari and Watts (1998) with the rationale applied by the Financial Accounting Standards Board (FASB) in mandating recognition treatment, it adopts the view that information about promises to give is relevant if it useful in assessing probable future cash inflows. The study also employs relative tests of predictive ability to assess competing specifications.

The study finds that recognizing unconditional promises to give as assets and as revenues in the year received improves predictions of next period’s cash inflows. It also finds that accrual-based contribution revenue consistently provides information content that is incremental to cash-based contribution revenue.

This paper has implications for several other lines of research as well. First, an ancillary concern expressed by many organizations in the non-profit sector was that the recognition of multi-year promises to give would adversely affect trends in long-term giving. In this regard, another promising line of inquiry would be to empirically test the Standard’s impact on the time-series properties of contributions and short- and long-term giving trends. Second, future research might consider conducting tests after partitioning by NTEE/NAICS classification, as well as substituting or supplementing the SOI data with financial statement data. Third, future research might consider applying the approach used in this study to other industries or groups for which market prices are not readily ascertainable. Data constraints, including the calculation of cash flow information indirectly from the balance sheet, impose limitations on this study.

This study documents that by recognizing unconditional promises to give as assets and revenues in the period received, donors, creditors and other users gain useful information about probable future cash inflows – a fundamental element of the accrual process and one of several important factors used to evaluate an organization’s ability to sustain future operations. This information is valuable to stakeholders and practitioners who rely on this information to make informed decisions. It is also helpful to standard setters in establishing guidelines that improve the usefulness of financial reporting for non-profits.

The paper contributes to existing literature by operationalizing, in a non-profit setting, a model that describes the relationship among revenues, accruals and cash flows. It fills a gap in the accrual literature regarding the relevance of non-profit revenue accruals. The study is the first to employ a relative information content approach to assess non-profit standards, which provides useful input to policy makers and end users. It affirms that many of the key conventions and elements embodied in the FASB Concepts Statements apply to non-profits as well, which heretofore has not been studied extensively. The results are also consistent with Accounting Standards Update 958, Not-for-Profit Entities, which requires that non-profits provide users with information about liquidity, including how they manage liquid resources needed to meet cash requirements for general expenditures within one year of the date of the statement of financial position.

Since 2005, wide-ranging concerns have been raised about misleading revenue recognition practices, especially during and after the 2008–2009 global financial crisis. There is a lack of research into the relationship between corporate governance (CG) mechanisms and premature revenue recognition (PRR). The paper aims to discuss these issues.

This paper uses a generalised least squares regression analysis of a sample of 854 FTSE 350 firm–year observations. Stubben (2010) discretionary revenue (DR) model is used to measure PRR as it is considered less biased, better specified and more likely to reduce measurement error than accrual models.

The results suggest that the size of audit committees plays an effective role in constraining PRR. Moreover, PRR is more likely to be curbed in the presence of small boards comprising a higher proportion of non-executive directors. Additional tests reveal that the relationship between board size and PRR is non-linear.

The findings address the concerns of corporate firms, capital providers, UK regulators and standard-setters regarding misleading revenue recognition practices and should be considered while setting new governance reform recommendations in response to changing economic conditions.

This is the first study that adopts the DR model of Stubben (2010) to capture PRR and examines its association with CG internal mechanisms. Moreover, the paper considers an important time period – from 2005 to 2013 – in which many significant developments took place.

The purpose of this paper is to present the views and challenges from a range of accounting professionals, regulators and preparers with the introduction of a standardised approach to accounting for customer loyalty programmes (CLPs). It aims to highlight the ambiguities of the classification of commercial transactions, particularly the nature and timing of revenue recognition.

Comment letters in response to the exposure draft D20 CLPs are analysed together with an exposition of the effect of International Financial Reporting Interpretations Committee (IFRIC) 13 on an early adopter, Qantas airlines.

Despite limited support for the consensus view advocated in D20, the International Accounting Standards Board (IASB) has upheld the deferred revenue approach consistent with the anticipated outcome of the IASB and Financial Accounting Standards Board revenue recognition project.

The paper analyses the characteristics and views of lobbyists using the IFRIC process. The use of other discourse methodologies may present issues of power within this process.

The paper highlights how the implementation of IFRIC interpretations has the potential to alter reported financial results.

The paper highlights the lobbying process and interpretation process at an international level. It also illustrates how companies can engage accounting interpretations to manage earnings, particularly in times of economic challenges.