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Can you elaborate about how revenue recognition has bitten smart people? I wasn't familiar with the term until you mentioned it but I think I have a handle on it now.

I'm guessing an example would be counting a prepaid yearly plan signup as the full year's revenue immediately instead of only counting it as revenue a month at a time as the service is delivered.

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Your example is a good one. Another example would be if you have 99.99% up-time guarantee, but don't provide it and have to provide refunds or discounts.

Groupon had troubles with revenue recognition. When it sold the coupons, it would count the full coupon as revenue even though 50% belonged to the merchant.

Oil producers have to pipe the oil to a refinery. The oil producer actually sells the barrel of oil to the pipeline and buys it back on the other end. Then the oil producers takes that barrel and sells it to the refiner. The oil producer has sold that 1 barrel twice.

However, as patio11 mentions, this isn't basic bookkeeping.

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