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Ruger, Largest Gun Maker, Might See Profits Hit From Revenue Rule

04/11/2018

Summary

Ruger, the nation’s largest supplier of hunting and assault rifles, is set to see a 5% decline in their first quarter profits from adopting the new revenue accounting rules. The company will record $7 million in liabilities in their first quarter from sales promotions tied to free fire-arm perks that they provide to their customers. The revenue for their promotional activities will be recorded in a different reporting period than the one in which the revenue was recognized for other products or services in the same contract. These changes in revenue recognition cause an increase in one quarter report from sales and a decrease in another due to liabilities.

Key Points

  • The new accounting rules change the way companies recognize revenue
  • Ruger is set to see a decline in their first-quarter reports due to counting their liabilities in a different report than their revenue.
  • A decline in quarterly earnings could mean less cash available on hand for shareholders dividends, which are often paid on a quarterly basis. 

Discussion Questions

1. What impacts are Ruger seeing in their reports due to the accounting rule change?
2. How might these changes affect the company in the long-run?

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