Jack
Financial accounting expertise to the fore. Thank you for that.
Similar to Kicks, I try various but more infrequent analysis aimed at trying to confirm progress, market uptake, future profitabilityetc etc. Not as sophisticated as his efforts, but enough to provide me with a level of comfort.
Do have one question (which may impact the timeline on revenue and receipts reporting) where you may be able to provide some insight. Nuheara launched the IQ Buds with a 30 day money back guarantee. They now refer to it as a Risk Free trial. Nothing untoward with the concept which is widely used. That said, I personally believe that through last year, the returns were higher than they would have expected or desired. We know that the product requires the user to customise the settings. It is not a unbox, fit and use product. There was a period during the year where the reviews intimated a degree of customer dissatisfaction. What level, who knows ? But I think it was material and hopefully the incidence rate is declining given their efforts to educate.
The financial reporting question revolves around the time of invoicing. I cannot imagine a Company being comfortable with say, invoicing 1000 widgets on despatch, this yielding a Revenue number. Then, within 30 days, accepting 200 returned widgets for credit with a Revenue decline, particularly during a financial closing period.
In your opinion, in cases where the incident of returns is abnormally high or highly uncertain, would a company create a suspense account to store invoices (as part of the Revenue build) until the return period is past. Would this be permitted in terms of accounting standards / conventions, and if such could this lead to the legitimate understatement of sales.
Niggling question for me. Any insights.
Thanks
Rokewa
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