How do you account for promised orders, can it be shown as revenue?

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Request for Question Clarification by omnivorous-ga on 28 Sep 2005 06:07 PDT

Tink2313 --

Researchers don't know what country you're in.  Do you want GAAP, IASB
or other country accounting principals?

Best regards,

Omnivorous-GA

In my day in accounting, you had to have a contract and have fulfilled
a defined portion of it to recognize that portion of it to book that
as revenue, say, a construction contract that defined that that 10%
was fulfillled when the foundation was completed, and so on.
If you are making and selling widgets, you can only book revenue when
you have delivered under a contracted order.  A "promised order" is
not an order.  An order is a promise to pay if the goods are
delivered.  You cannot show revenue = income until you have a
receivable.

Myoarin --

You may be interested to know that computer companies used to book
orders as sales as late as the 1970s.  It was one of the series of
scandals that afflicted Datapoint.  Changes in FASB rules have pretty
well quashed that practice.

Best regards,

Omnivorous-GA