Financial statements in european countries, Accounting Basics

Q. Financial statements in European countries?

In a few European countries the financial statements contain secret reserves. These secret reserves occur from a company not reporting all of its profits when it has a very good year. The justification is that the stockholders vote on the amount of dividends they receive every year if all profits were reported the stockholders might vote to pay the entire amount out as dividends. By holding back some profits not merely are the creditors more protected but the company is as well more solvent and has more resources to invest in productive assets. Revenue isn't difficult to define or measure it is the inflow of assets from the sale of goods and services to customers measured by the cash expected to be received from customers. But the crucial question for the accountant is when to record revenue.

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