"New e-Accounting Advisor Network Debuts," SmartPros, September 29, 2003 --- http://www.smartpros.com/x40720.xml 

Insynq Inc., a provider of Internet-delivered online accounting solutions and services, has launched an online advisor network to assist the accounting professional by supporting back-office processing requirements on a highly cost-efficient basis.

The e-Accounting Advisor Provider Network (http://eaccounting.cpa-asp.com) has created a new cost-effective resource for practices of all sizes to use to expand their practice, or to provide the opportunity of higher gross margins, Insynq announced. Through the use of business process outsourcers -- such as call centers, payroll and HR processing services -- professional practices are able to improve client services, expand their practices, and improve practice profitability.

"These accountants have gained a comprehensive solution that combines our online accounting technology services with business process outsourcing models," said Insynq president John Gorst. "e-Accounting is one of the few providers in the industry with a service model that encompasses online accounting applications, data management, document management and workflow tools."

Insynq will co-sponsor a series of seminars in the top 25 U.S. markets over the next four months for CPAs, accountants and bookkeepers that explain the online accounting model. These seminars will detail the outsourced accounting opportunity, and demonstrate the benefits of using business process outsourcers in support of practice initiatives.

A whistleblower should really wear a mask, ride a white horse, and have a native American partner to help track the piles of Kemosabi. The William Tell Overture also helps --- http://www.youtube.com/watch?v=qdQomfnCH_0

Bob Jensen's threads on whistleblowers are at http://www.trinity.edu/rjensen/FraudConclusion.htm#WhistleBlowing

Support for 'lone ranger'

By LOREN STEFFY
Houston Chronicle, September 25, 2007 ---

I'd like to dedicate this column to lone rangers.

That's the term that a Halliburton lawyer used in a legal proceeding this week to describe Anthony Menendez, a former director of technical accounting research and training at the oil-field-services company.

Menendez claims he was forced to resign from Houston-based Halliburton after he accused the company of using improper accounting to inflate earnings and "distort the timing of billions of dollars in revenue," according to his complaint.

Halliburton says the allegations are untrue.

Menendez is seeking protection under the Sarbanes-Oxley law, which was designed to shield corporate whistle-blowers from retribution.

Congress created that provision of the law after lawmakers found that in the corporate scandals of Enron and WorldCom, employees such as former Enron executive Sherron Watkins faced retaliation for raising concerns about harmful corporate practices.

It's often too easy for companies to dismiss such concerns as an annoyance, as the ranting of someone who's lost touch with reality.

Consider how Halliburton attorney Carl Jordan described Menendez before the judge: "He saw everything in black and white, and he thought he was always right, and everyone else was wrong."

It could be that Menendez misinterpreted the accounting details he questioned. It could be that the more people ignored his concerns, the more determined he became, spinning a web of false obsession into a conspiracy of his own imagination.

But shareholders dismiss such concerns at their own peril. It may not be a major accounting scandal. It may not even be material, in the legal sense, to Halliburton's operations. But something set Menendez off.

And it wasn't just him. A colleague testified on his behalf that company accountants questioned in 2005 how Halliburton was booking revenue for oil-field tools that were sitting in warehouses, yet to be delivered to customers.

Halliburton says it listened to Menendez's concerns and investigated them thoroughly. So did its outside auditors and the Securities and Exchange Commission.

Outside auditors, though, don't have a great track record in ferreting out accounting improprieties, and the SEC has proved far better at punishment than pre-emption.

'Critical' role

If the past seven years have taught us anything, it's that concerns such as Menendez's need to be heard. We've seen the painful consequences of corporate America's deaf ear.

"The role of the whistle-blower is critical because it keeps corporations and management in line and accountable to shareholders," said Philip Hilder, a Houston attorney who represents Watkins and who represented Menendez early in the case. "Whistle-blowers are the first line of defense in discovering fraud. Management in corporations ought to embrace them. To the extent that they uncover wrongdoing, the company can correct any potential problems before they go out of control."

What Menendez did wasn't easy. He challenged his superiors and in the process surrendered a job he liked and to which he'd like to return, according to what he told the Chronicle this summer.

Beyond right or wrong

It's never easy to put conscience ahead of livelihood. It's far easier for employees to keep quiet and let someone else worry about the problem.

In some ways, what matters in this case is not whether Menendez is right or wrong, but that he had the guts to speak up.

"Whistle-blowers tend to come forward out of principle," Hilder said. "It takes courage to buck the system."

That's why the Sarbanes-Oxley law was designed to shield whistle-blowers, though many still face retaliation.

"You need to set a scenario up where individuals feel comfortable and protected in providing information that may be detrimental to the entire company if it's not met head-on," Hilder said.

Money well spent

When the Menendez case is over, regardless of the outcome, Halliburton's shareholders will have benefited. Sure, Halliburton has spent some of their money to defend itself against claims that may be, as the company contends, without merit.

But it's money well spent. Investors will gain reassurance that accounting concerns weren't ignored.

It's easy to paint lone wolves as crazy. Sometimes they may even be wrong. But what if they're right?

Loren Steffy is the Chronicle's business columnist. His commentary appears Sundays, Wednesdays and Fridays. Contact him at loren.steffy@chron.com. His blog is at http://blogs.chron.com/lorensteffy/.

 

Bill-and-Hold Revenue Recognition Tale
Anthony Menedez phoned me several times indicating that he thinks his tale would be interesting for accounting students to study. I think it would be an interesting series of events for a case writer to put into an educational case. The focus of the case, in my viewpoint, should be on a comparison of the KPMG article (quoted below) with the actual bill-in-hold transactions at Halliburton to force students to decide whether KPMG auditors and  Halliburton did or did not violate GAAP on these issues.

A financial press article is also quoted below:
Jonathan Weil, "Halliburton's Accounting Might Make You Wonder," Bloomberg News, July 21, 2007

The case has two really interesting questions:

1. What is the proper accounting (and auditing) for these transactions?
2. Is "whistleblower protection" under the Sarbanes-Oxley law an oxymoron?

June 24, 2007 message from Anthony Menendez [menendez.anthony@gmail.com]

Professor Jensen-

Hello. My name is Tony Menendez. I have enjoyed much of the information you have so generously provided on the web covering accounting issues and financial fraud. I thought you might find my Sarbanes-Oxley whistleblower case interesting. Just in case you have extra time and an interest, I am providing you with my contact information and links to some information concerning my case. I hope you are enjoying retirement but have not given up providing your insight into the ever so important area of accounting and financial fraud.

Sincerely,

Tony (713) 822 3764

Here are a few links to information you can find on the web concerning my case:

http://www.bloomberg.com/apps/news?pid=20601039&refer=columnist_weil&sid=am_McfuM6i4o 

You can read Menendez's complaint in three parts (I, II, III) on the following website:
http://www.tpmmuckraker.com/archives/003500.php

Question
In accounting, what do the following terms mean and in what context?
bill-and-hold?
Ship-in-Place?

Answer
"Bill-and-Hold Transactions in the Oilfield Services Sector," John C. Christopher, KPMG LLP --- http://www.trinity.edu/rjensen/BillandHold.pdf

Determining and defining appropriate revenue recognition has been a primary focus of companies, regulators, standard setters, and auditors in recent years. Improper revenue recognition has been one of the leading causes of financial statement restatements. Perhaps no area of revenue recognition has received as much scrutiny as "bill-and-hold" transactions. Also known as "ship-inplace" transactions, these transactions generally refer to scenarios where revenue is recognized after a seller has substantially completed its obligations under an arrangement, but prior to the buyer, or a common carrier, taking physical possession of the goods.

Background In a recent interview, former SEC Chairman Arthur Levitt referred to recognizing revenue on bill-and-hold transactions as "hocus pocus accounting." He said, "Companies try to boost revenue by manipulating the recognition of revenue. Think about a bottle of wine.You wouldn't pop the cork on that bottle until it was ready. But some companies are doing this with their revenue --- recognizing it before the sale is complete, before the product is delivered to the customer, or at a time when the customer still has options to terminate, void, or delay the sale.

Although the bill-and-hold transaction is not a GAAP violation, unfortunately it has long been associated with incidents of financial fraud. In its October 2002 Report, the General Accounting Office (GAO) said that revenue recognition is the largest single issue involved in restatements. More than half of financial reporting frauds involve the overstatement of revenue, and restatements for revenue recognition have resulted in the largest drops in market capitalization compared with any other type of restatements. There remains an intense scrutiny around a company's revenue recognition principles for these types of transactions, and management and auditors should be unusually skeptical about the appropriateness of recording revenue for these transactions.

Bill-and-hold scenarios frequently arise in the oilfield services sector. It is important to note that the form. of these transactions is neither illegal nor unethical. In fact, most have very good business or economic purposes. For example, there is currently a trend in the oil and gas industry towards developing fields in the deep waters toward the Gulf of Mexico or other more remote locations throughout the world. Development plans for these large deepwater offshore fields. as well as remote onshore fields throughout the world, will commonly have long timelines; therefore, the oilfield service companies have long lead times for delivery of equipment and products. As the development plan gets under way, many of the original timelines and milestones will change along the way as information about the reservoir becomes better. However, many of the products that the oilfield services companies manufacture and deliver are extremely capital intensive and will be manufactured and ready for their fixed delivery dates without regard to any changes in the development plan. These products are generally very large built-tosuit equipment such as wellhead connection equipment and completion products.

There are certain criteria that companies must meet in order to recognize revenue on bill-and-hold transactions. These criteria relate to the risks of ownership. the commitment and request on the part of the buyer, the business purpose of the transaction, the delivery date, and the performance obligations, among others (these criteria are discussed in more detail in the next section). As an example, an oilfield services company may complete the manufacturing of the customer's requested products, have them shipped to a company-owned warehouse, determine a fixed delivery schedule to the customer's well site, obtain a legal acknowledgement from the customer that the risk of loss has been transferred, and have no additional obligations to perform such as installation of the equipment. All of this may take place prior to the particular point in the well development plan that calls for the installation of the product. In this example, the oilfield services company might (although only based on careful analysis of the SEC and FASB guidance related to bill-and-hold transactions) be able to recognize revenue immediately upon completing the manufacturing process and meeting all of the bill-and-hold revenue recognition criteria.

SEC and FASB Guidance on Revenue Recog'nition and Bill-and-Hold Arrangements
EITf- lssue 00.21: Multiple Elements in a bill-and-hold Arrangement

Companies must first apply the separation model described in ElTF lssue 00-21 , Revenue Arrangements with Multiple Deliveries, to determine the number of units of accounting in the bill-and-hold arrangement. Bill-and-hold arrangements in this industry can include both the sale of products and the performance of certain services, such as warehousing for the product if it is shipped to a company-owned warehouse. If the SEC staff's revenue recognition criteria (discussed in the next section) are met for the product element in the bill-and-hold arrangement, revenue may be recognized on the product element when the company has completed the product only if it is a separate unit of accounting, or if there are any services involved in the transaction (e.g., warehousing), and those services are inconsequential or perfunctory to one unit of accounting. The company may need to consider whether the services are a separate unit of accounting, if they are inconsequential or perfunctory, and whether there are other performance obligations yet to be performed in determining the appropriate revenue recognition policy for the entire arrangement.

Inconsequential or Perfunctory Element

According to SAB No. 104, Revenue Recognition, if the-undelivered element is both inconsequential or perfunctory and not essential to the functionality of the delivered element, it would be appropriate to recognize revenue on the arrangement at the time of delivery and accrue the cost of providing the services related to the undelivered element. However, if the undelivered element is neither inconsequential nor perfunctory or is essential to the functionality of the delivered element, the revenue for the delivered element should be deferred and recognized based on the accounting requirements of the undelivered element. The SEC's guidance on the determination of whether an element is inconsequential or perfunctory is related to whether that element is essential to the functionality of the delivered products.

In addition, remaining activities would not be inconsequential or perfunctory if failure to complete the activities would result in the customer receiving a full or partial refund or rejecting, or a right to a refund or to reject the products delivered. The SEC provided the following factors in SAB No.104, which are not all-inclusive, as indicators that a remaining performance obligation is substantive rather than inconsequential or perfunctory:

• The seller does not have a demonstrated history of completing the remaining tasks in a timely manner and reliably estimating their costs.
• The cost or time to perform the remaining obligations for similar contracts historically has varied significantly from one instance to another.
• The skills or equipment required to complete the remaining activity are specialized or are not readily available in the marketplace.
• The cost of completing the obligation, or the fair value of that obligation, is more than insignificant in relation to such items as the contract fee, gross profit, and operating income allocable to the unit of accounting.
• The period before the remaining obligation will be extinguished is lengthy.
• T he timing of payment of a portion of the sales price is coincident with completing performance of the remaining activity.

. . .

SEC Bill-and-Hold Criteria

The SEC has established specific criteria codified in SAB No. 104 that a seller of goods or equipment must meet to recognize revenue for a bill-and-hold transaction, including:

• The risks of ownership must have passed to the buyer.
• The buyer must have a commitment to purchase, preferably in written documentation.
•  The buyer, not the seller, must originate the request that the transaction be on a bill-and-hold basis.
• The buyer must have a substantial business purpose for ordering the goods or equipment on a bill-and-hold basis.
• Delivery must be for a fixed date and on a schedule that is reasonable and consistent with the buyer's purpose (this requirement will generally be difficult for an oilfield services company to meet due to the variable nature of the movement of timelines and milestones for oilfield development).
• The seller must not retain any significant specific performance obligations under the agreement such that the earnings process is not complete. The goods or equipment must be segregated from the seller's inventory and may not be subject to being used to fill other orders.
• The goods or equipment must be complete and ready for shipment.

The SEC emphasized that that the above criteria are not a simple checklist. A transaction might meet all of the criteria and still fail the revenue recognition guidelines . . .

Continued in article

Jensen Comment
Tony Menendez, while working for Halliburton, encountered what he considered a classic violation of GAAP for bill-an-hold transactions in Halliburton's oilfield operations. He says he first confronted his superiors in the company and then a KPMG auditor, who purportedly agreed with Tony on this issue. But Halliburton countered by saying that since "title passed," revenue could be recognized. The amount in terms of dollars was material in amount.

Since Halliburton did not restate its financial statements, or purportedly, its subsequent accounting for these transactions, Tony then took the added step of blowing the whistle with the SEC. The SEC purportedly turned it back to Halliburton for further internal investigation. Soon thereafter Tony Menendez became an unemployed whistle blower

Bill-and-Hold Revenue Recognition Tale
Anthony Menedez phoned me several times indicating that he thinks his tale would be interesting for accounting students to study. I think it would be an interesting series of events for a case writer to put into an educational case. The focus of the case, in my viewpoint, should be on a comparison of the KPMG article (quoted above) with the actual bill-in-hold transactions at Halliburton to force students to decide whether KPMG auditors at Halliburton did or did not violate GAAP on these issues.

By the way, Mr. Menedez is currently still unemployed and is considering applying for doctoral study in accountancy.

August 8, 2007 message from Anthony Menendez [menendez.anthony@gmail.com]

Please see attached. The very examples described by KPMG as bill-and-hold transactions at a company like Halliburton, were the same transactions, I also believed were bill-and-hold. Interestingly, Halliburton apparantly claims, that these transactions, are not, in fact bill-and-hold and thereby avoiding the bill-and-hold hold criteria which requires that the equipment is ready for its intended use, a fixed delivery date exists for the equipment, and that there are no ongoing obligations on the part of Halliburton ( e.g. installing the equipment and performing the necessary oilfield services, the typical services provided by an "oilfield service" company. Personally, I believe that Halliburton's claim is the most absurb argument I have ever seen and worse yet, I struggle to see how KPMG allows Halliburton to deviate from the very guidance it suggests to companies that are not "Halliburton" should apply. Enjoy.

Best Regards,
Tony

You can read Menendez's complaint in three parts (I, II, III) on the following website: ---
http://www.tpmmuckraker.com/archives/003500.php

Bob Jensen's threads on whistle blowing are at
http://www.trinity.edu/rjensen/FraudConclusion.htm#WhistleBlowing

Bob Jensen's threads on revenue reporting and frauds can be found at http://www.trinity.edu/rjensen/ecommerce/eitf01.htm

Here's an older example of bill and hold fraud
Death by Accounting
To get companies to participate in a flu vaccine stockpile the government is dangling tons of new funding. Cash in hand is usually a very strong incentive. But a Clinton administration SEC policy prevents the vaccine makers from recognizing the revenue until the vaccine is delivered to the doctors, countering the very purpose of a stockpile. The Department of Health and Human Services' National Vaccine Advisory Committee concluded in early 2005 that for the stockpile program to be successful, "the revenue recognition issue must be resolved as soon as possible." It all began in late 1999, when the SEC issued "Staff Accounting Bulletin 101," which it painted as a modest clarification "not intended to change current guidance in the accounting literature." But in reality it was a radical change to the way companies could book revenue from "bill and hold" orders. This change would, at its least, lead to hindrances for innovative new companies. At its worst, it would discourage production of lifesaving products like vaccines.
John Berlau, "Death by Accounting?" The Wall Street Journal, October 21, 2005 --- http://online.wsj.com/article/SB112985642561675193.html?mod=opinion&ojcontent=otep

SEC SAB 101 "Revenue Recognition in Financial Statements" --- http://www.sec.gov/interps/account/sab101.htm

From The Wall Street Journal Accounting Educators' Review on May 23, 2002

TITLE: SEC Broadens Investigation Into Revenue-Boosting Tricks; Fearing Bogus Numbers Are Widespread, Agency Probes Lucent and Others 
REPORTER: Susan Pulliam and Rebecca Blumenstein 
DATE: May 16, 2002 
PAGE: A1 
LINK: http://online.wsj.com/article/0,,SB1021510491566948760.djm,00.html  
TOPICS: Financial Accounting, Financial Statement Analysis

SUMMARY: "Securities and Exchange Commission officials, concerned about an explosion of transactions that falsely created the impression of booming business across many industries, are conducting a sweeping investigation into a host of practices that pump up revenue."

QUESTIONS: 
1.) "Probing revenue promises to be a much broader inquiry than the earlier investigations of Enron and other companies accused of using accounting tricks to boost their profits." What is the difference between inflating profits vs. revenues?

2.) What are the ways in which accounting information is used (both in general and in ways specifically cited in this article)? What are the concerns about using accounting information that has been manipulated to increase revenues? To increase profits?

3.) Describe the specific techniques that may be used to inflate revenues that are enumerated in this article and the related one. Why would a practice of inflating revenues be of particular concern during the ".com boom"?

4.) "[L90 Inc.] L90 lopped $8.3 million, or just over 10%, off revenue previously reported for 2000 and 2001, while booking the $250,000 [net difference in the amount of wire transfers that had been used in one of these transactions] as 'other income' rather than revenue." What is the difference between revenues and other income? Where might these items be found in a multi-step income statement? In a single-step income statement?

5.) What are "vendor allowances"? How might these allowances be used to inflate revenues? Consider the case of Lucent Technologies described in the article. Might their techniques also have been used to boost profits?

Reviewed By: Judy Beckman, University of Rhode Island 
Reviewed By: Benson Wier, Virginia Commonwealth University 
Reviewed By: Kimberly Dunn, Florida Atlantic University

--- RELATED ARTICLES --- 
TITLE: CMS Energy Admits Questionable Trades Inflated Its Volume 
REPORTER: Chip Cummins and Jonathan Friedland 
PAGE: A1 
ISSUE: May 16, 2002 
LINK: http://online.wsj.com/article/0,,SB1021494984503313400.djm,00.html 

Bob Jensen's threads on accounting theory are at http://www.trinity.edu/rjensen/theory.htm 

Bob Jensen's threads on accounting fraud are at http://www.trinity.edu/rjensen/fraud.htm 

"An Analysis of Restatement Matters: Rules, Errors, Ethics, For the Five Years Ended December 31, 2002," free from the Huron Consulting Group --- http://www.huronconsultinggroup.com//files/tbl_s6News/PDF134/112/HuronRestatementStudy2002.pdf 

********************
 Objective: Analyze issues relating to public companies that filed restated financial statements (10-K/ A's and 10-Q/A's) during the five-year period from January 1, 1998, through December 31, 2002.

Purpose: The purpose of our analysis was to identify common attributes within these restatements including the size of the companies, their industry, and ultimately the underlying accounting error that necessitated the restatement. Procedures:

• Performed a search of all 10K/A and 10Q/A filings in the Edgar database from 1998 through 2002 using the keywords "restate," "restated," "restatement," "revise," and "revised."

• Refined search to include only "restatements" defined as a restatement of financial statements that was the result of an error, as defined in APB 20. Our report excludes restatements due to changes in accounting principles and non-financial related restatements.

• Prepared a database and input relevant information for each restatement identified, including the following fields: Company Name; SIC Code; Annual Revenues (from most recent filing); Footnote Disclosure Describing the Restatement Issue; Classification of Restatement Issue; Restating 10K or 10Q; Auditor of Record (limited to amended annual financial statements). 
*******************

Filed restatements went from 158 in 1998 to 330 in Year 2002. Major accounting issues in all years seem to be Revenue Recognition, Reserves/Accruals/Contingencies, Equity, Acquisition Accounting, and Capitalization/Expense of Assets.

Note the following:

Not only have the number of restatements been on the rise, but also the number of public registrants is actually decreasing, which makes the restatement growth during the past few years even more dramatic.

From The Wall Street Journal's Accounting Educators' Reviews on September 26, 2003

TITLE: Heard on the Street: Analyst Gartner Aims to Convert Mistake Into Future Success 
REPORTER: Ken Brown 
DATE: Sep 19, 2003 
PAGE: C1 
LINK: http://online.wsj.com/article/0,,SB10639190653359500,00.html  
TOPICS: Debt, Financial Accounting, Revenue Forecast, Revenue Recognition

SUMMARY: "Gartner, Inc. makes money by analyzing technology companies and trends." This company issued a $300 million convertible bond to Silver Lake Partners, LP, a private equity firm specializing in technology, at the height of the technology boom, in the spring of 2000. Since the technology bust, that debt has been an onerous drag on the company, because of the debt-equity implications, interest charges, and a critical aspect of the deal: Gartner was required to issue a significantly increasing number of shares under the conversion feature as its share value fell from the fallout of the technology bust. The article discusses a plethora of accounting topics in debt and equity, earnings per share, and even the company's revenue recognition procedures.

QUESTIONS: 
1.) What is convertible debt? Describe the provisions of the agreement between Gartner, Inc. and Silver Lake Partners, LP.

2.) "...Because of the accounting treatment of the bond payoff, Gartner's shareholders' equity will go from negative to positive." In general, what are two possible ways to account for converting bonds into common stock?

3.) Access the company's June 30, 2003, quarterly and 2002 annual financial statements via their web site at www.gartner.com , by scrolling down the page and clicking on "investor relations." Using footnote disclosure about the convertible debt in Note 10 to the annual financial statements, the balance for the debt at 6/30/2003, and other information about the company's stock available in the financial statements, provide the journal entries that the company will record for the bond conversion under each of the two possible methods you gave in question 2. Which of these methods do you think the company will use?

4.) "For Gartner, the implications of putting the bond deal behind it could be major." Why does the author say that the company can extinguish debt without any further dilution of earnings per share beyond current disclosure? Will fully diluted earnings per share be affected by this conversion? Will basic earnings per share be affected? Explain.

5.) "Without any debt on its balance sheet, the company can use $167 million in cash...on hand" to buy back common stock. Why not just use the cash to pay off the debt? Who will receive cash under each of these alternatives? Will Silver Lake Partners receive any cash if they convert the bonds into stock? What would other stockholders' preferences be, do you think?

6.) Describe Gartner, Inc.'s business. Summarize Gartner's revenue recognition practices, as they are described late in the article. What does the author mean when he refers to "contract value"? Where in the accounting records would you find the amounts reported as "contract value" in the article?

7.) What is incremental revenue? Why do you think that "80% to 90% of each incremental dollar of research revenue can fall to the bottom line"? Why does this fact, combined with the changes in the company's capital structure, bode well for next year's earnings?

8.) The author states that revenue was down 2% in the second quarter from the first, and contract value was down 1% on the same basis. How can these results be described as "improvements over the past few quarters"? Why is appropriate to compare results for consecutive quarters, when we usually see comparisons of quarterly results to the same quarter one year earlier?

Reviewed By: Judy Beckman, University of Rhode Island 
Reviewed By: Benson Wier, Virginia Commonwealth University 
Reviewed By: Kimberly Dunn, Florida Atlantic University

SEC and EITF Initiatives on Internet Accounting

In this document the wording of the "Issues" and several short quotations are taken from the following online document:

U.S. retail and property service Homestore.com joins the list of companies investigating possible accounting irregularities. In a recently-filed Form 8-K, the company said that it expects to restate its nine-month financial results and reduce the revenue figure by as much as $95 million to better reflect the nature of on-line advertising transactions that should have been accounted for as barter transactions. http://www.accountingweb.com/item/68490

Some SEC Rulings in Staff Accounting Bulletin 104

SECURITIES AND EXCHANGE COMMISSION Corrected Copy 17 CFR Part 211 [Release No. SAB 104] Staff Accounting Bulletin No. 104 --- http://www.sec.gov/interps/account/sab104rev.pdf

The FASB wants accounting rules to be neutral in terms of decisions, but this is an impossible goal

Accounting rules are blamed for failure to stockpile children's vaccines
Although opinions differ, it appears that the Pediatric Vaccine Stockpile has become an innocent bystander wounded in the government's crackdown on deceptive accounting practices. Vaccine supply dwindles No one has accused the vaccine manufacturers of wrongdoing. However, they can no longer treat as revenue the money they get when they sell millions of doses of vaccine to the stockpile because the shots are not delivered until the government calls for them in emergencies. Instead, the vials are held in the manufacturers' warehouses, where they are considered unsold in the eyes of auditors, investors and Wall Street . . .The ranking Democrat on the Committee on Government Reform, Waxman said he is willing to sponsor legislation to carve out a legal exception that would allow companies to "recognize" revenue from sales to the vaccine stockpile — if such a radical step becomes necessary. One of the companies, however, said its problem is not with "revenue recognition" but with the details of managing the vaccine inventory. Other parties were reluctant to discuss possible solutions or who, if anyone, is to blame for the empty shelves. The SEC, which enforces accounting practices, would not speak on the record. HHS officials would not make available the person talking to the SEC on the matter. The department referred questions to its subordinate agency, the CDC, whose officials said important decisions about the stockpile are being made at the department level.
"Pediatric vaccine stockpile at risk Many drug makers hesitant to supply government," Washington Post via MSNBC, April 16, 2005 --- http://www.msnbc.msn.com/id/7529480/