Travel booking websites (like Expedia, Travelocity, and Priceline) make their money by charging a customer an amount (say, $ 1,000) that is larger than the amount they pay the airline or hotel that provides the actual service to the customer (say, $900). Many of these sites record the entire $ 1,000 as revenue while booking an expense for $900. This method of accounting shows a net profit of $100 on the transaction. Companies such as Priceline (now part of Booking Holdings), for example, would show a very large revenue number offset by a very large expense number with the resulting net profit left to cover any remaining expenses. Other sites only book the net amount ($100 in this example) as revenue. To illustrate, the 2019 annual report from Expedia notes, "For our primary transaction-based revenue sources ... we have determined that net presentation (the amount billed to a traveler less the amount paid to a supplier) is appropriate for the majority of our revenue transactions . . . . " Expedia does not show the amount paid by the customer to the traveler provider, only the amount it stands to collect as the spread between end-use customer and provider.

INSTRUCTIONS:
a. Comment on the two different approaches to revenue recognition.
b. Discuss the Stock Price to Revenue measure used to value Internet startup companies and consider why those companies might not want their shares valued by a more traditional Stock Price to Earnings measure.
c. How do users of financial statements get regulators such as the SEC to work with companies on their reporting strategies?