Some years ago I worked for an American company as the founding European employee. We developed products with an average selling price of £200,000 and rapidly established ourselves as the market leader. However, the cost meant that the customers couldn't afford to buy as much as we wanted them to and we had to rethink our approach. We soon realised that the old concept of outright purchase and annual maintenance fees no longer worked, and moved to three-year term licences, effectively off-balance sheet leasing.

The impact on bookings was dramatic. The experienced salespeople persuaded their customers that they could afford to purchase three times the quantity of product for the same first-year outlay, effectively trebling our bookings. However, our goal was to manage revenue growth to a sustainable 20%, quarter-on-quarter. Deferred revenues grew rapidly, and within two years we had so much revenue recognised from previous bookings that the auditors insisted that we raised the numbers we reported to the Street.

Looking back, this was a glorious time and, in the current climate, unlikely to be repeated!

It was at this time that I first became aware of the US Generally Accepted Accounting Principles (GAAP). I soon came to realise that customers were easier to deal with than auditors and that the rules governing revenue recognition meant that a sale could result in cash in the bank but very little in the Profit & Loss account.

Now, as the recently appointed CEO of a British company, I have discovered that UK accounting standards appear to be far less onerous than those applied by my previous employers, all of which were American high-technology businesses. There has recently been a number of articles pointing out that several UK companies (Cedar, QSP Group & IDS Group) have seen their share price improve as a result of their adoption of the US GAAP policies on revenue recognition - despite their having to restate income historically. Why? Perhaps US investors seek the familiarity of GAAP compliant reporting? Does a standard approach make it easier for market analysts to make comparative valuations? (See the section titled "US GAAP - What does it really mean?" for a review of the practical issues surrounding US GAAP - as interpreted by several of the leading audit firms).