After reading extracts this from this release , my gut is telling me BIG may have been actually booking items from deferred revenue into P&L revenue, where there was probably no confirmed contract even in place.
Initially I had been inclined to think the issue was mainly with recognizing something as deferred revenue when it really wasn't even deferred revenue but rather in truth an advance which should have been recognized as a liability on balance sheet and hence this was distorting the operational cash earnings which influences how the market might value it (multiple of cash earnings) but the P&L itself was probably correct with its amortisation of earnings to revenue.
I am coming around to view the deception may have been much worse, in that they were not only booking amounts into deferred revenue (before they were signed off as contracts) but also beginning to amortise these amounts off to the P&L as revenue. If this is true, the deception is even greater and the misleading nature of the accounts to the markets much worse.
Ironic when you look at the words now .........they state their treatment was conservative where it was anything but conservative. I hope this isn't true but as time passes my guts tells me something isn't good , there must be something more to this or otherwise they would have been suspended for the time they have been now. It wouldn't take 2 months to fix a technical accounting issue around deferred income.
One thing is for sure that graph is totally and utterly misleading and deceptive under the Corporations Act.......based on what we now know along with those words used. The real reason the deferred balance was so large was not because of the amortisation of subscriptions over time to the P&L ( what is really standard accounting fare) but the recognition by BIG of deferred revenue in a total incorrect and false way.
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