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Accounting Irregularity Analysis for Groupon

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Accounting Irregularity Analysis for Groupon
Steven Simpson
ACCT 310-V2WW
Professor Margaret Callender
February 15, 2014

Issues Groupon (GRPN) is an internet based company that was founded in 2008. Groupon acquires new customers via advertising and word of mouth through sites such as Facebook and Twitter, and then Groupon has the new customers sign up to receive daily coupon offers from local merchants through their email. Groupon then sells coupons for steeply discounted local merchant offerings directly to customers interested in the daily deals and receives a percentage of the coupon’s value from the merchant (Roos, 2014, pp. 1-2). Groupon seemed to take the internet world by storm and by Q1 of 2011 it had an impressive $644.7 million in revenues, which almost equaled the entire revenue for 2010 (Edwards, 2011). On June 2, 2011, Groupon, Inc. took its first step toward becoming a public company by filing a Form S-1 Registration Statement Under The Securities Act of 1933 with the Securities and Exchange Commission (Groupon, Inc., 2011). When reviewing the Form S-1, the SEC found several accounting irregularities that it questioned. One of the accounting irregularities was Groupon’s reporting an internally used measure of profitability that it calls the Adjusted Consolidated Segment Operating Income, a term abbreviated to adjusted CSOI (Weil, 2011). The adjusted CSOI took the operating income and added online marketing expenses, stock-based compensation, and acquisition-related expenses back when applicable. For the fiscal year ending on December 31, 2010 this added online marketing expenses of $241,546,000, stock-based compensation of $36,168,000 and acquisition-related expenses of $203,183,000 to Groupon’s operating loss of $420,344,000 to produce a positive adjusted CSOI of $60,553,000. For Q1 of 2011 the result added $179,903,000 of online…...

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