Groupon Financial Restatements

In: Business and Management

Submitted By JPegg1223
Words 748
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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…...

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