PeopleSoft's Accounting Draws Critics

On the other hand, the program raises questions about revenue recognition because one standard for when revenue can be booked is that the seller is certain it can collect, Brendel added. If a customer has rights to a refund, such collectability is not reasonably assured, he said.

Either way, "anything that creates uncertainty creates some risk," Brendel said.

Mulford, meanwhile, argued that at a minimum, PeopleSoft should have included an offsetting expense for part of the revenue to account for the probability of it having to be paid back. He called it a "fairly large leap" to say the probability of being acquired is zero.

The revenue recognition surrounding PeopleSoft's refund program is just the latest in a series of questions that have been raised about the company's accounting practices, which some have called aggressive. Some analysts also have criticized the way the company arrived at its latest pro forma revenue and earnings results. In particular, they have questioned whether PeopleSoft should have included deferred revenue from recently acquired J.D. Edwards and excluded a capitalized software expense tied to the J.D. Edwards acquisition, noting such changes are not typical of either PeopleSoft's prior acquisitions or other acquisitions in the software sector.

Although he has raised flags about the way PeopleSoft treated capitalized software, Sanford C. Bernstein analyst Charlie Di Bona said he was not so concerned about how the company recognized revenue under the refund program. Rather, the bigger issue raised by the refunds is how they affect the price Oracle is willing to pay for PeopleSoft. Di Bona has an underperform rating on PeopleSoft and his firm doesn't do banking business.

While others have said Oracle will have to raise its $19.50-a-share hostile takeover bid for PeopleSoft, Di Bona wondered if the value of PeopleSoft actually will go down because the refund program restricts Oracle's actions in an acquisition.