Aggressive revenue recognition occurs when companies (a) prematurely recognize revenue or (b) recognize bogus sales.
Here are some ways companies have recognized bogus revenue:
(1) shipping product the customer didn’t order
(2) shipping empty boxes to customers
(3) relaxing the credit policy and making sales to people who can’t pay
(4) recognizing revenue when the product has been consigned
(5) bill-and-hold sales
(6) recognizing revenue for sales of nonexistent inventory
(7) recognizing revenue for transactions that lack commercial substance
(8) grossing up revenue
(9) boomerang transactions
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