DISAPPEARING REVENUE IN BUSINESS COMBINATIONS

Did you know that accountants can perform magic tricks with numbers? In some situations, they can make future revenue disappear from a company, never to be recognized. This magic trick is unique and only applied when one business is acquired by another. Under United States Generally Accepted Accounting Principles (US GAAP) pertaining to business combinations, the assets acquired and liabilities assumed in the transaction, including deferred revenues, are required to be recorded at fair value, unless an exception exists under US GAAP. In US GAAP, deferred revenue represents any prepayment made by a customer for future goods or services. To learn more visit: https://www.boulaygroup.com/blog/disappearing-revenue-in-business-combinations/