Revenue Error: Real World Example

Revenue Error: Real World Example

🔴 "An error is the more dangerous in proportion to the degree of truth which it contains." Henri Frederic Amiel

Builder. ai, a UK start-up (founded a.o. by Microsoft, Quatar Invest. Authority), restated their 2023 revenue down to $140 million.

✍ Builder. ai also appointed a new auditor (BDO) after accusations of corporate governance issues.

🔎 As Builder. ai do not publish their financial statements, I used some deduction to illustrate the issue and possible root causes.

The basis is the five-step model of the IFRS 15 Revenue from Contracts with Customers:

1. Identifying the contract.
2. Identifying performance obligations.
3. Determining the transaction price.
4. Allocating the transaction price to performance obligations.
5. (Pattern of) satisfaction of performance obligations.

*Source: Financial Times.