On February 28, the day investors expected NCO Group Inc. to release earnings results for fourth-quarter 2004, the provider of business-process outsourcing services instead issued some bad news: it was delaying the release of its financials and changing one of its revenue-recognition policies. In January, the Horsham, Pa., firm received word that the Securities and Exchange Commission was taking issue with its policy.

NCO is not alone. The SEC has brought more enforcement actions related to revenue recognition than to any other area. In most cases, the actions have less to do with fraud than with confusion about the existing patchwork of regulations. According to a study released last summer, 76 percent of senior finance executives say there is a need for a comprehensive statement on how revenue should be recognized. "There has never been a comprehensive assessment," says Edward Nusbaum, CEO of Grant Thornton LLP and a member of the Financial Accounting Standards Board's advisory council. "There has been piecemeal guidance put together by industry."

In 2002, FASB convened a project to research the issue, but it has yet to release any formal findings. A spokesperson at FASB says only that work is ongoing and that there is no timetable for guidance. At issue: how to construct a wide-ranging policy that can be applied across the board, instead of detailed rules that govern revenue recognition across a variety of scenarios.

Instructing companies on how to determine a transaction's fair market value for sales that include multiple components is particularly complicated. Jennifer Haslip, a CPA who is the CFO of Universal Technical Institute, a for-profit technical training school based in Phoenix, says she wonders how companies will find appropriate market benchmarks for their transactions. "When you start to break apart the individual transactions of different companies, it gets complex," she says.

Greg Walker, CFO of Magma Design Automation, a software company based in Sunnyvale, Calif., says the rules need to be simplified. "They are too open to interpretation, too complicated," he explains, "and the basic outcome is that they generate a lot of unnecessary audit fees."

Nusbaum says he anticipates possible preliminary recommendations from FASB by the end of the year.—Kate O'Sullivan

Secret Rewards

Companies have always enjoyed the enticements that states dish out to lure them to relocate. What they don't like is the backlash that can occur when the public feels a company is getting a cushy deal.

A law proposed in Georgia could change that, at least in the Peach State, by keeping such incentives as state grants and tax credits secret.

Although not likely to pass, the bill raises the question of how much information about deals between states and businesses should be made public. "It comes down to the need to balance the right of the public to know how their resources are being spent and the right of taxpayers to keep their affairs private," says Don Griswold, a partner in the Washington, D.C., office of law firm McDermott Will & Emery LLP. He says that the deals are often kept pretty quiet.

However, legislation that shields details about incentives could be bad for businesses. How? It would prevent rival states from upping the ante on what Georgia offers. During negotiations, it's likely that relocation-minded companies would rather have competing states play with open hands.—Joseph McCafferty

A License to Print Money?

Are financial printers consistently exceeding the initial estimates they give clients? The answer seems to be yes—particularly for such transactions as initial public offerings, mergers, or debt offerings.

Consider a few examples. When Alibris, an Emeryville, Calif.-based online bookseller, filed an S-1 in preparation for an IPO it later withdrew, its printer estimated that the work would cost from $75,000 to $100,000. According to CFO Steve Gillan, the final bill was more than $250,000. Another company attempted to negotiate a "fixed" price with its printer of $140,000. After the job was completed, the company got an invoice for $230,000.

In yet another case, a work proposal reviewed by CFO magazine indicated that the final invoice would be in the $200,000 to $250,000 range. The actual tally: more than $770,000.

"The attitude seems to be that when you're going public, there's a huge influx of cash, so who cares about overpaying on some bill?" says one controller whose printing bill greatly exceeded the estimate. "But from my perspective, that's the shareholders' money."

These are not isolated cases, says John Wert, president of The Maverick Group Financial Print Consultants LLC, a New York­based firm that, in collaboration with the Institute of Management and Administration, advises companies on managing their financial- printing costs. "In almost every case, the issuer's bill goes well beyond the initial estimate," he says. (Three companies dominate the financial-printing market: R.R. Donnelley, Merrill, and Bowne.)

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