In the past several days I have done cursory research on around 50 companies and ended up finding two companies where I actually started reading their most recent annual reports.
I only made it through a small portion of each company’s most recent annuals before deciding that I was not interested in doing further research into them for various reasons and I wanted to share something that I found with you.
The most recent company I stopped research on I found what seems to be a giant red flag. The following is a direct quote from its most recent annual, emphasis is mine.
“We record revenue from certain license agreements upon cash receipt as a result of collectability NOT being reasonably assured.”
That is the first time I have seen any company I have researched say they will record revenue when NOT being reasonably assured of the collectability of said revenue.
My question to you since I know most of you have being doing this far longer than I have, is how common is the above situation and shouldn’t that be some kind of problem with auditors, regulators, and authorities?
I am going to continue looking for another company to research but wanted to ask you about this as I thought it could be something to learn from.
I will post some more links in the coming days as well.