Revenue recognition and real estate companies: a preliminary analysis

Abstract

This paper offers a theoretical overview of the nature of revenue recognition through a literature review and empirical research. This is a pilot study intended to highlight the importance of the issue to property companies and offer a basis for further work, currently being undertaken by the authors. Revenue recognition — the point at which a firm is entitled to claim that a profit has been made — is theoretically and empirically unclear. This lack of clarity has repercussions for the production and interpretation of financial accounts. Property has been particularly affected due to the requirements enforced on certain companies by the regulators to restate published accounts. Moreover, since certain property companies have a stock market capitalisation that is below their net asset value, they are susceptible to any concerns over the accuracy of their reported revenue and turnover. Copyright © 2005 Henry Stewart Publications