UK software vendors slammed for 'poor' accounting

UK software companies have failed to adopt US standards for recording sales, despite the high-profile accounting scandals which have plagued tech firms based in that market.

This is one of the conclusions of Ernst & Young's annual software revenue recognition report, which is published today. E&Y claims 40 per cent of publicly traded software firms in the UK have 'poor' or 'very poor' accounting policies.

The nod across the Atlantic is due to the greater experience US software companies have had with booking sales, according to comments by an E&Y partner in today's FT.

Despite public failures by the likes of Enron and WorldCom, tech giants such as Computer Associates have pioneered ways of booking revenue. At first these may have been met with opposition or suspicion but have slowly won over many shareholders and onlookers.

E&Y says that, in line with US GAAP rules, there should be four criteria for revenue recognition:

- persuasive evidence of a contract
- evidence of delivery and acceptance of a contract
- collectability of revenue is 'probable'
- fixed and determined seller's fee