Discuss the Methods of Revenue Recognition Og Is Currently Using and Analyze Them Using Ifrs Criteria

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Sales and Marketing Commission is expensed in the first term of the contract, not over the life of the contract – large negative sum making the company seem unprofitable on the statement of earnings. Here, the cost is incurred before OG recognizes revenue. This explains the more than double in assets from (…. To ….) (look at deferred commissions).

Cash Flow: Large addition (Non-Cash) is the stock-based compensation. Qualified as an expense which makes the business seem unprofitable, even though in terms of cash, their operations are bringing in more cash than they are spending.

Not a long term situation, time to fix the problem. Will be valued lower, because all based on earnings. A lot of cash to invest in other profitable businesses, increase growth.

- Is there any other information the company could report that would be useful to have?

- Analyze OG’s quality of earnings.

Has to do with how the information is calculated.

Need to have good FR Quality in order to assess Q of E.

1: Is the Co’s performance faithfully represented in the F/S? Medium – show unprofitable, with positive cashflow.

2: Do the accounting policies chosen and the disclosures contribute to understanding the company? Not really, not very relevant by choosing to expense all the commission on the first term of the contract.

The current earnings are not a good predictor of future earnings – management may choose to change their accounting policies, making the company look profitable all of a sudden. It is hard to estimate the fundamental value of this company, negatively impacting its shares (selling at a discount)>

Look at the relationship between Net Income and the Cash Flow from Operations. Low Quality of Earnings because the CFO is much > NI, indicating their accrued expenses. Aggressive accounting policy.

Medium Financial Reporting Quality - not everything is disclosed, no notes

Low Earnings Quality – Income is very different than cash flow.

Seems as if the firm is involved in eranings managmenent, more specifically income minimization.

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