Exploring Corporate Governance Around the World

By Allison Garrett, Senior Vice President for Academic Affairs at Oklahoma Christian University

Tuesday, October 25, 2005

Revenue Recognition Policies and SOX: New Study

A new study of CFOs and high-ranking finance executives at more than 400 companies has found that Sarbanes-Oxley affected the revenue recognition policies of more than half. Adjustments to revenue recognition policies ranged from minor changes, to significant changes. Aggressive revenue recognition policies were one of the major governance risks at public companies.

Revenue recognition has become a more complicated topic in recent years because of innovative new business models and uncertainties regarding how to account for revenue associated with the new business models. Twenty-four percent of survey respondents from public companies noted that the changes in business models were the major factor impacting revenue recognition policies, with Staff Accounting Bulletins 101 & 104 ranking second at 17%, and SOPs 97-1 and 98-9 ranking third at 14%, tied with Sarbanes-Oxley, also at 14%.


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