Faculty Publications

Title

Valuation consequences of regulatory changes in revenue recognition: Evidence from advertising barter sales

Document Type

Article

Keywords

Equity valuation, Price-to-sales ratio, Regulation, Revenue recognition

Journal/Book/Conference Title

Advances in Accounting

Volume

26

Issue

2

First Page

177

Last Page

184

Abstract

This study compares the valuation of advertising barter sales recognized under APB Opinion No. 29, relative to transactions recorded under EITF Issue No. 99-17. EITF 99-17 was the FASB's response to the perception that Internet-related firms were overstating revenue. The results indicate an inverse relation between price-to-sales ratios and the amount of advertising barter recorded under APB 29 by e-tailing firms. In contrast, we find no evidence of a discount for similar transactions recognized under EITF 99-17. This change in value relevance is consistent with increased credibility of recorded revenue. These results have implications for revenue recognition practices and accounting regulation. © 2010 Elsevier Ltd.

Original Publication Date

12-1-2010

DOI of published version

10.1016/j.adiac.2010.04.002

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