Groupon Financial Restatements

In: Business and Management

Submitted By JPegg1223
Words 748
Pages 3
Groupon’s Financial Restatements

Jessica Pegg

ACC 537

May 12, 2013

Jeffrey Collins

Groupon has experienced some problems the buzz started around the anticipation of the company going public. Legalities surrounding expiration dates of coupons (Tribune Staff and News Services, 2012) and suspicions arising from use of an accounting method described as “Adjusted Consolidated Segment Operating Income” (Groupon, 2012), are just two problems facing the relatively new company. Financial misstatements have occurred with the company more than one time. Despite the effects this has had on their image in the business world, Groupon believes they have weathered the storm and created an invested customer base despite the hiccups they have faced along the way.

In late September 2011, Groupon restated its 2010 revenue figures due to "an error in presentation" discovered by regulators (Groupon, 2011). The accounting method, referred to as “Adjusted Consolidated Segment Operating Income,” excludes marketing costs – a major portion of their expenses (Gustin, 2012). This is an example of an accounting principle that needed to be changed. Excluding the marketing costs artificially inflates the net income figures and paints Groupon in a much more positive light than is reality. “Groupon restated its revenue after the Securities and Exchange Commission challenged its methodology” (De la merced, 2012).

In 2012, the coupon company was again charged with the duty of correcting their financial statements. This restatement reduced the revenue for the quarter by $14.3 million. According to Groupon, the revisions were made after discovering executives had failed to set aside enough money for customer refunds. It is believed that this stems from the large increase in higher priced deals on the site. The “Groupon Promise” refunds deals that leave…...

Similar Documents

Financial Statement Restatement

...Financial Statement Restatement When a company makes an error in accounting, the lasting effects can have a great impact on how the external and internal users of this information perceive the organization. The following is an analysis of the effects of inaccuracies in a Bank accounting for its allowance for loan losses. First National Community Bancorp Inc. (FNCB) in Dunmore, Pa., restated financial results for 2009 and two quarters in 2010 after an internal audit uncovered inaccuracies in its accounting for loans losses. The bank has $1.1 billion in assets and said in October 2010 that the financial statements previously filed with the Securities and Exchange Commission for the year ending Dec. 31, 2009 and the quarters ending March 31, 2010 and June 30, 2010 had to be restated (Stewart, 2011). The analysis of the internal audit found that accounting charges and loan-loss allowances that were previously recorded in 2010 should have been reported in 2009. As a result, the company restated its 2009 financial statement to reflect a loss of $44.3 million, a much larger loss than the $11.3 million loss it initially reported. This adjustment included a $10.1 million addition to the provision for loan and lease losses, $14.5 million additional charges related to other-than-temporary impairment in the securities investment portfolio and an $8.1 million goodwill impairment charge. For the quarter ending March 31, 2010, FNCB reported loss of $825,000 after initially......

Words: 542 - Pages: 3

Restatements the position of the obligor would be satisfied. Mattei v. Hopper – Contract with the choice of alternative performance – R 76, 77,228 - Plaintiff purchases real estate from defendant, contingent upon the plaintiff finding the leases are “satisfactory.” The court ruled that a real estate contract is NOT void ("neither illusory nor lacking in mutuality of obligation") when parties include a provision in the contract making one purchaser's performance dependent on his satisfaction with the prospective leases to be obtained. Opinion of satisfaction must be made in good faith. The promise was not illusionary because it was held to the reasonable person standard. CONTRACTS FOR THE SALE OF GOODS ARE SUBJECT TO THE UCC NOT COMMON LAW RESTATEMENTS!!! UCC 1-103:Construction of the UCC to Promote Its Purposes and Policies; Applicability of Supplemental Principles of Law (a) The UCC must be liberally constructed an applied to promote its underlying purposes and policies, which are: (1) To simplify, clarify, and modernize the law governing commercial transactions; (2) To permit the continued expansion of commercial practices through custom, usage, and agreement of the parties; and (3) To make uniform the law among the various jurisdictions (b) Unless displaced by the particular provisions of the UCC, the principles of law and equity, including the law merchant and the law relative to capacity to contract, principle and agent, estoppels, fraud,......

Words: 22394 - Pages: 90

Financial Restatement

...STEIN MART INC. RESTATEMENT The Effect of Restatement of Financial Statement for Stein Mart Inc. University of Phoenix Abstract Based on the recommendation from the Audit Committee, Stein Mart Inc. recently decided to restate their financial statements for three years, 2009, 2010 and 2011 due to errors in terms of the value of their inventory and determining the cost of their lease holdings. They stated that in addition to other errors, their inventory was overstated by approximately $3million dollars and their lease holdings were overvalued as well by approximately $5 million dollars. On March 23rd 2013 they filed the current financial statements making them compliant with NASDAQ’s rules, in order to continue trading their stock. Effect of Restatement of Financial Statement for Stein Mart Inc. Businesses are formed for various reasons, they come in various structures and they sell various services or products. The one thing all the businesses have in common is that they cannot remain in business unless they make a profit. Businesses are funded using private funds, borrowed funds or by issuing stock. Revenue is generated by selling products/services. This income is used to pay for wages, equipment, etc. The difference between the Revenue and Expenses is what determines if the business generated a profit or loss. To determine if a business is making a profit, financial statements are......

Words: 648 - Pages: 3

Financial Statement Restatement Paper

...Restatement of the Company Zynga is a social gaming company. Many of their games are seen on social media networks such as Facebook, or Google+. On August 11, 2011, Zynga restated their first quarter revenue to reflect an accounting error in their initial IPO (initial public offering) registration. Their second quarter revenue report was increased by 3% over what was reported in first quarter. The error was due to a previous policy estimate (Primack, August, 2011). Accounting Principles Involved In the first quarter, the company’s previous policy was to apply most current estimates of paying players to current period sales. The accounting department did not adjust the deferred revenue balance for revised estimates of related sales in previous periods. Zynga determined the adjustment of the deferred revenue ending balance was necessary according to ASC 250. March 31, 2011 financial statements were restated because Zynga found they had an internal control material weakness of financial reporting for the first quarter (Primack, August, 2011). Effects of Errors and Changes on Statements The effect of the error/change on the restatement was to increase revenue by $7.5 million, as well as an increase to a provision of income taxes by $2.5 million for January, February, and March 2011. In addition, Zynga decreased deferred revenue by $7.5 million as of the end of March 2011 (Primack, August, 2011). Stockholders The shareholders involved in Zynga include: o Kleiner Perkins......

Words: 327 - Pages: 2

Groupon Case

...Groupon Case 25 points This case is to be completed individually by each student in the class. No collaboration or discussion of the case with any other student in the class is permitted. The due date for the case is at the beginning of class on Monday, April 29, 2013 (the last day of class). Only hard copies of the case should be turned in. If you will be absent for class on that day, have somebody else in class turn it in or put it in the professor’s mailbox on the 5th floor of the RCB building. No email submissions of the case will be accepted. The two accounting standards pertaining to the case, SAB 101(SEC) and EITF 99-19 (FASB) have been posted on Desire2Learn in the same folder as the case. Students will receive an extra credit of 5 points for filling out a questionnaire about the case at the end of the semester.  The Case of Groupon’s Revenue Recognition: The Bottom Line on Top Line Revenues Groupon is the extraordinary company that has revolutionized the world of coupon marketing. In November 2008, at the age of 27, Andrew Mason, a music major from Northwestern University, launched Groupon – a name that is a blend of “group” and “coupon”. Gross billings increased from $30 million in 2009 to $713 million in 2010 (Pepitone 2011). In 2010, Forbes declared Groupon as the “fastest growing company ever (Steiner 2010). By 2011, the company had a subscriber base of over 150 million, gross billings of $1.2 Billion, and went public, raising $750 million in...

Words: 2332 - Pages: 10

Financial Statement Restatement Paper

...Financial Statement Restatement Paper Abstract Restatement of the financials for a company can affect a company tremendously, when it comes to the validity of the company’s financial success. A study was conducted on the company IEC and its financials. For the fiscal year of 2012, the company announced their restatement of their financials. The aftermath of the announcement are discussed. Also, the financial standing, prior to the restatement, is examined. The effects the error had on the company’s shareholders were also determined. On May 1, 2013, IEC Electronics Corp, a public company in the NYSE, (NYSE MKT:IEC) announced that it has filed a current report with the Securities and Exchange Commission (SEC) which it claimed that its consolidate financial statements for the fiscal year, ending September 30, 2012, the quarterly periods during fiscal 2012, and the quarter ended December 28, 2012 were restated due to an error in accounting for work-in-process inventory (IEC To Reinstate Financial Statements, 2013). This error resulted in an aggregate understatement of cost of sales and an aggregate overstatement of gross profit during all such Restated Periods of approximately $2.2 million (IEC To Reinstate Financial Statements, 2013). According to the complaint, on May 1, 2013, IEC announced that it would be forced to restate its consolidated financial statements for its fiscal year ended September 30, 2012, the quarterly periods during fiscal year 2012,......

Words: 666 - Pages: 3

Financial Statement Restatement Paper

...Financial Statement Restatement Paper Justina Kabanuk University of Phoenix ACC/537 Financial Accounting Steven Hall July 5, 2010 Financial Statement Restatement Paper Financial statement users depend on accurate financial statements from corporations to make proper decisions in regard to financial activities. In rare situations, financial statement users find that the information they had depended on for their decisions was not accurate. Companies required to restate their financial reports risk losing the trust and confidence of the financial statement users. is an example of a company that knows the effects of restating their finances all too well. Following is an overview of the issues that led to the most recent restatements of’s financial statements. Additionally discussed are the accounting principles involved, the effect of the errors and changes to the financial statements, and the effects on the company’s stockholders. In October 2008, publicly announced that it would be restating financial results for a five-and-a-half-year period. The needed revisions to’s Q1 2003 to Q2 2008 financial statements were estimated to reduce revenues by......

Words: 845 - Pages: 4

Financial Restatement

...Financial Statement Restatement Financial Accounting/ ACC537 Myrtle Clark Sheila Haskins April 14, 2014 In this paper I will discuss the restatement of Diamond Food Inc.’s financial statements. The errors in accounting principles involved and what effect it had on financial statements. How changes affected the stockholders. In February 2012, Diamond Foods Inc., issued a statement that they have to restate the financial statements for 2010 and 2011. Diamond Foods Inc., was forced by the audit company y to restate earnings after an extensive investigation. It was discovered that “internal controls were inadequate and that certain grower payments for the 2011 and 2010 crops were not accounted for in the correct periods” (Harris, 2012). After the investigation, the Board of Directors took control of the company. The board dismissed the CEO and CFO and placing them on administrative leave. The pending deal where Diamond Foods were to acquire the Pringles brand from Proctor & Gamble is also in jeopardy. This deal was at a value of $1.5 billion which would have given Diamond Foods Pringles potato chips and other products. Diamond Foods remained confident that the financial statements were accurate. the terms The contract between Diamond Foods and Proctor & Gamble, gave Proctor & Gamble an option to withdraw from the deal based on any problems with the financial statements of Diamond Foods. The audit committee investigation was then taken up by the......

Words: 584 - Pages: 3

Financial Restatement Paper

...Financial Statement Restatement Paper – Citizens First Bancorp, Inc. In 2009 Citizens First Bancorp, Inc. was forced to restate their earnings in the first and second quarters. The first quarter was revised due to “an accounting error on a $7.5 million impairment of its deferred tax valuation allowance” (Barba, R. October 20, 2009). The second quarter revision was a regulatory action by the Federal Deposit Insurance Corporation, which involved allegations of “inappropriate behavior at the company, including removing unfavorable appraisals from the loan files, in an attempt to avoid the recognition of additional loan losses” (Barba, R. October 20, 2009). Errors in accounting principles, along with the effects the restatements have on the company’s financials and stockholders are examined. The first quarter restatement involved the accounting error on deferred tax valuation. Citizens initially overstated their tax deferred asset allowance, and now “it must essentially write down the deferred tax asset, which it does by creating a “valuation allowance” on its balance sheet. That valuation allowance cuts into income reported to investors and can hit a portion of a bank’s regulatory capital, as well” (Alloway, T. November 4, 2010). The write down presented a problem for Citizens because of the financial crisis banks are being forced to hold more tier one capital. A good definition of Tier 1 capital is that it includes equity capital and disclosed reserves, where equity......

Words: 900 - Pages: 4


...ACTG 630 – Case Assignment Due: Wednesday, December 3 Please submit one assignment per group. No more than 3 students per group. Read “Growing Pains at Groupon” by Dutta, Caplan and Marcinko (2014) and complete the questions included in the Case Requirements section (beginning on page 238). Instructions for accessing the FASB Codification database: 1. Go to 2. User ID: AAA51526 3. Password: x43AYtX ISSUES IN ACCOUNTING EDUCATION Vol. 29, No. 1 2014 pp. 229–245 American Accounting Association DOI: 10.2308/iace-50595 Growing Pains at Groupon Saurav K. Dutta, Dennis H. Caplan, and David J. Marcinko GROWING PAINS AT GROUPON s an undergraduate music major at Northwestern University, Andrew Mason eagerly sought a version of rock music that would fuse punk with the Beatles and Cat Stevens. Little did he imagine that within ten years he would be the CEO of one of history’s fastestgrowing businesses. After Northwestern and faded dreams of rock stardom, Mason, a self-taught computer programmer, was hired to write code by the Chicago firm InnerWorkings. InnerWorkings was founded in 2001 by Eric Lefkofsky, who had built several businesses around call centers and the Internet. In 2006, Lefkofsky became interested in an idea of Mason’s for a website that would act as a social media platform to bring people together with a common interest in some problem— Saurav K. Dutta is an Associate Professor and Dennis H. Caplan is an Assistant Professor, both at......

Words: 6399 - Pages: 26


...harshly competitive climate. Could a big one—LivingSocial—actually be the next to wither away? Sources familiar with the company say they wouldn’t be surprised if the industry’s No. 2 player, trailing only Groupon, was sold to a larger company or liquidated piece by piece by spring 2014. They say LivingSocial has lacked the speed to adjust to a space that’s increasingly becoming more complex. Even worse for this nascent field, the marketplace has gotten a lot more crowded. Dozens of outfits from Yelp to marketing giants such as American Express and Bank of America—to even companies that enable retailers to set up their own offers—now provide innovative ways to link customers with local merchants. Forrester Research analyst Sucharita Mulpuru-Kodali says neither LivingSocial nor Groupon are too big to fail—even if the latter still has cash reserves in the billions from its 2011 initial public offering. “The daily deals space is saturated,” she says, “and it never provided tremendous value to merchants. And that was the fundamental flaw in the business model. They’ve survived over the last few years even when these truths were obvious because they’ve reduced the margins they ask of merchants, they extend the length of offers and they make more offers available at any time.” Groupon, in recent months, has been giving a bigger slice of voucher sales to deals-weary local businesses—a gesture meant to inspire loyalty to its platform. The lower merchant commissions were largely......

Words: 2740 - Pages: 11

Financial Statement Restatement Paper

...Financial Statement Restatement Paper ACC537 April 13, 2015 Financial Statement Restatement Paper Most companies in the world use accounting principles to help them manage their cash flows that occur on a daily basis. It would be impossible for large companies to function without having an accounting department that measures all the data and ensures the company is profitable. Every transaction that occurs in the company needs to be recorded in an appropriate account to reflect everything that the company does. With so many transactions that occur on a daily basis, companies are prone to making an error in their accounting practices. Most of the time, the errors that occur are not discovered until a few years down the road. This can have a negative impact on the company because they are reporting incorrect data. In this paper, I will discuss Bridgestone Education Inc and the errors that they found in their accounting principles. I will analyze the accounting principles involved in the error; the effect of errors and changes on the financial statement, and the effect the errors have on the stockholders. In the year 2014, Bridgestone Education Inc released a statement claiming that they are looking into the accounting practices of the previous years because they found an error in the reports. According to “Street insider” (2014), “Management has concluded that there are material weaknesses in internal control over financial reporting, as we did not maintain effective......

Words: 788 - Pages: 4

Rowing Pain at Groupon

...Accounting Association DOI: 10.2308/iace-50595 Growing Pains at Groupon Saurav K. Dutta, Dennis H. Caplan, and David J. Marcinko ABSTRACT: On November 4, 2011, Groupon Inc. went public with an initial market capitalization of $13 billion. The business was formed a couple of years earlier as an offshoot of ‘‘The Point.’’ The business grew rapidly and increased its reported revenue from $14.5 million in 2009 to $1.6 billion in 2011. Soon after going public, prior to its announcement of its first-quarter results, the company’s auditors required Groupon to disclose a material weakness in its internal controls over financial reporting that impacted its disclosures on revenue and its estimation of returns. This case uses Groupon to motivate discussion of financial reporting issues in ecommerce businesses. Specifically, the case focuses on (1) revenue recognition practices for ‘‘agency’’ type e-commerce businesses, (2) accounting for sales with a right of return for new products, and (3) use of alternative financial metrics to better convey the intrinsic value of a business. The case requires students to critically read, analyze, and apply authoritative accounting guidance, and to read and analyze communications between the Securities and Exchange Commission (SEC) and the registrant. Keywords: Groupon; revenue recognition; allowance for sales returns; e-commerce; non-GAAP metrics. GROWING PAINS AT GROUPON A s an undergraduate music major at......

Words: 4660 - Pages: 19

Financial Restatement Paper

...Financial Restatement Paper Financial Restatement Paper University of Phoenix ACC/537 After the introduction of the Sarbanes Oxley Act lots of companies have had to submit financial restatements in their financials. This paper is to examine the financial restatements that have been done by Kodiak Energy Inc. over the past several years due to incorrect reporting on the value of their stocks. Kodiak Energy entered into an agreement with to purchase land from Thunder River Energy in exchange for shares of stock in the Kodiak Energy Company. Kodiak Energy issued seven million shares reported to be worth $2.00 per share. The SEC decided to look into this arrangement and soon discovered that the shares offered by Kodiak Energy were worth $2.50 at the time of the purchase. Upon the findings by the SEC, Kodiak Energy offered to file a misstatement in order to acknowledge the misrepresentation of the worth of the shares. Kodiak Energy had filed their financials incorrectly 3 separate times each time with the incorrect values reported on their 10-K and 10-Q, and in response the SEC was not satisfied to allow a simple misstatement to be done to correct these errors. With the SEC continuing the investigation into the financial records of Kodiak Energy because they felt that they offered to file the restatement too quickly and were trying to hide that this was more than just an error on their part but was......

Words: 606 - Pages: 3

Restatements Paper Financial Accounting

...Groupon Inc. was forced to restate their revenue numbers on the financial statements before being able to offer an Initial Public Offer (IPO) in 2011. Groupon is a company that offers daily deals for local services of their customers. These deals can be bought one day and then used at a future date of the customer’s choosing. These offers are comprised of a set portion for the business owner and a markup commission value for Groupon. Previously Groupon would book the entire value of the sale as revenue and then back out the business owner’s portion of the sale and call the remainder as profit. The Securities and Exchange Commission (SEC) has refused this booking procedure and wants Groupon to state revenue as the total value of the sale minus the business owner’s portion of the sale. This brings up an interesting twist on how today’s service based economy can consider booking revenues opposed to a clearer manufactures revenue process. In a traditional manufacturing process it was reasonable to state the total sale numbers of the final products as revenue. I believe this process is acceptable under this traditional way because the timing between purchase of materials and sale of the finished product have different timing. This easily identifiable timing difference between sale and purchase of the product and its components drawls a clear line between the timing of booking revenue and expenses. The fact that the two bookings have different timing allows a company......

Words: 781 - Pages: 4