February 14, 2017 Articles

Common Revenue Recognition Accounting Issues in White-Collar Litigation

Tips for SEC’s issue du jour: How are companies violating U.S. GAAP to paint a rosier picture of their bottom line?

by Nicholas Czapor

White-collar litigation frequently involves allegations relating to how management accounted for or disclosed transactions in its financial statements. Because accounting for certain types of transactions can be complex and subject to professional judgment, it can be difficult for litigators to determine whether or not management followed accounting practices in accordance with United States Generally Accepted Accounting Principles (U.S. GAAP). That is particularly evident in the area of revenue recognition, where allegations have been made of earnings management to create an overly positive picture of a company's financial position.

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