Do you agree or disagree with the managers decision of when to ship goods to customers and
Question:
Do you agree or disagree with the manager’s decision of when to ship goods to customers and record the revenue? Explain your reasoning. Is there an accounting rule against this practice?
The manager's decision to delay shipments until the following year would be erroneous and would most certainly violate the principle of revenue recognition as well as the accounting policy of consistency. The correct decision would be to continue to ship against open orders and invoice customers accordingly. Within the language of IFRS 15, revenues must be recognized when the legal title of the good has been transferred (Wild & Shaw, 2021). The results of this action would cause inaccurate financial statements the following year. Early in the book, they discuss the importance of having accurate data on which to make good decisions, and this would directly contradict that idea.