By Blake Larum, Senior Tax Manager
Senate Bill No. 483 was enacted into law on June 10, 2015. The tax is effective on July 1, 2015 for business entities with Nevada annual gross revenue in excess of $4 million. Gross revenue is defined as the total amount of revenue a business entity recognizes that contributes to the production of gross income exclusive of cost of goods sold and other expenses.
When you go to buy a car, yeah, you’re buying a massive computer system these days, but when it all boils down, you went to purchase a car, that’s why you went to the car lot not to Fry’s. The accounting rules for revenue recognition for sales involving multiple element arrangements, like buying a car with a computer, have recently become a whole lot easier. Many public companies like Apple early adopted these new accounting rules because they allow the company to accelerate the period of recognizing revenues. In Apple’s case…
In the midst of the buzz around the Groupon IPO in the last half of 2011, Groupon was forced to restate its pre-IPO revenues to nearly half of what was previously reported at the request of the SEC. Why? The SEC required Groupon to report its revenues at net proceeds (the amount a merchant actually pays Groupon to run an ad) instead of gross proceeds (the total out of pocket amount a customer actually pays to Groupon for an online coupon, which includes the merchant’s share). As we reflect on the lessons learned from this, it begs the question: What should you think about when reporting your revenues at gross vs. net?…
Is revenue the driver of your company’s business? Do your investors care more about the top line than the bottom line? For most technology companies I work with, revenue is the key driver of the business and investors care much less about net income than they do about net revenues. It is for this reason that I’m recommending that you write a revenue recognition policy. If you have no other policy in place, this is the policy to start with. Here’s a suggested roadmap to get started…