Do Quindell (QPP) shareholders really understand the company? Well perhaps they want to discuss with me revenue recognition?
In a supermarket revenue recognition is simple. I buy some milk for £1.50. I pay and at that point it goes into the P&L as a sale. The cash might arrive that second or three days later as my credit card company coughs up. But there is little debate about revenue recognition.
In a media business based on advertising I sell an advert and book that as revenue on the day as I issue an invoice. There should be little doubt although if an invoice has not been paid after three months I would make a provision against it so that while it appears as revenue there is an equal entry in my bad debt provision line on a P&L so there is no impact on profits. If I subsequently get payment I release the provision in the next accounting period so get a profit then albeit with no corresponding revenue. There can be some debates here but it is simple enough.
Now we come to Quindell. I refer you to the statement on page 47 of its 2013 annual report:
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