Beware of Disappearing Revenue in an Acquisition

Because of a quirk in an accounting rule, some buyers might see a steep drop in revenue in periods immediately following an acquisition – often a dramatic and surprising turn of events to buyers, especially nonaccountants. This possible revenue loss is particularly relevant to software and technology companies, because they tend to collect upfront payments for goods and services that will be delivered in the future. This article explains the issue and provides advice about mitigating the impact of the accounting rule.