Making the Right Call in Revenue Recognition: Accounting Challenges and Judgments
White paper, January 2021
Revenue is a fundamental financial metric, but proper recognition and measurement of revenue is complicated, nuanced, and often subject to accountants’ judgment concerning contractual provisions. Understanding the significant judgment required for revenue recognition is critical when evaluating a company’s performance.
In an Analysis Group white paper, Vice President John Drum and affiliate T. Jeffrey Wilks (BYU Marriott School of Business) discuss the complex process of determining when and how to recognize revenue for financial reporting purposes. They illustrate several aspects of revenue recognition – milestone payments, purchase options, and bill-and-hold arrangements – using examples from contracts for the production and distribution of COVID-19 vaccines.