Arthrocare makes a medical gizmo that cuts soft human tissue using radio frequency energy. But the Securities & Exchange Commission has a new accounting rule that's going to take a piece out of ArthroCare's hide—along with that of other companies that depend on licensing revenue. The SEC wants ArthroCare to kick the habit of booking licensing and royalty fees from multiyear contracts all at once when the contract is signed. Beginning in the fourth quarter licensing fees will have to be recognized over the life of an agreement; royalty fees, too, provided they're part of the deal.
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