Minding One's Own Business

BY CHUCK BARNEWOLT

I find it ludicrous that your article, “Software Revenue Recognition on the Rise” (Dec. 07, page 50) not only insinuates but even goes so far as to actually state that companies are changing their business practices because of SOP 97-2. While the accounting profession, of which I am part, is indeed an honorable one, our profession should in no way dictate, or limit, how we, as businessmen, conduct business with our customers.
 
Chuck Barnewolt
Raleigh, N.C.
 
Authors’ reply: While we certainly agree that the accounting for a transaction should not drive the related business decision(s), we do ­believe that it is critical that a company’s ­decision makers are made aware of the ­accounting consequences involved in sales arrangements. A clear precursor to being able to provide useful and accurate guidance to a company’s decision makers is an understanding of the facts and circumstances ­involved in a given transaction or product ­offering. Once this information has been gathered and the ­applicable accounting treatment has been ­derived, an accountant can then provide a company’s decision makers with the tools to understand which direction is most beneficial for their particular entity. Similar to profit margin analyses, cash flow analyses, and various other financial metrics, it is reasonable to expect an assessment of the timing of revenue recognition, as well as the cost of compliance, to be considered as part of the set of factors a decision maker considers. Armed with this insight, a decision maker can be comfortable in knowing that they have the full picture associated with an arrangement or type of arrangements, and have been empowered to pursue the best course of action.
 
Greg Regan, CPA,
and Tim Regan, CPA
San Francisco

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