Detecting Accounting Fraud 1st Edition by Cecil Jackson

Exercise 34

Xerox's bundled sales were improperly recorded in its financial statements because: (a) all of the revenue streams for its leases should have been recorded over the life of the leases.
(b) Some of the revenue relating to the finance charges included in monthly lease payments over the life of the leases was recognized upon the signing of the lease agreements and delivery of the goods.
(c) The revenue (known as box revenue) related to making the equipment available to the customer-and paid over the life of the lease-was recorded in Xerox's financial statements in the period in which the lease agreements were signed and the equipment was delivered.
(d) Future lease payments should not be discounted when revenue is recorded.