Reasonable Expectation

Have written about Nortel on a number of occasions. Came across this March, 2001 Financial Post article. It was all so predictable…

Analysts query Nortel sales
Financial Post, March 1, 2001, p. C1

The industry practice of recording revenue on reasonable expectation of payment may have contributed to the sudden revision of Nortel Network Corp.’s growth forecast earlier this month, analysts and accountants said yesterday.

They say the practice is near foolproof in cases where the customer is an established venture, but can become perilous when telecommunications equipment makers compete aggressively for the business of startup phone and Internet companies…

John Hughes, the [Ontario Securities Commission’s] manager of continuing disclosure said corporations “in a perfect world” would attach notes to revenue statements detailing any payment uncertainties.

As it is, said Peter Martin, a principal in the accounting standards department of the Canadian Institute of Chartered Accountants, any reference to positive payment problems is “scant at best”…

Analysts say the problem is exacerbated by the telecommunications sector’s propensity to provide funding to new companies to enable them to purchase goods, with exposure to so-called vendor financing reaching epic proportions during the economic boom of the late 1990s and the first half of 2000.

International Accounting Standards Committee response, by 2014…


About brucelarochelle
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