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Groupon and the SEC

Vaughan S. Radcliffe; Mitchell Stein; Alexis Gottschalk

Product #:9B12B002_P
Supplier:Ivey
Discipline:Accounting, Finance, General Management
Setting:United States, 2011
Details:Case (PDF) • 16 pages • 2012-02-13 (Rev: 2013-09-24)

Subjects:

Finance and investingLeadership and managing peopleAccountingManagement

Industries:

Information technology and telecom sector

Geography:

United StatesNorth America
Your Price:$9.71

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This case provides an opportunity to review Groupon Inc’s S1 filing made prior to an initial public offering. Groupon’s financial statements attracted a great deal of controversy due to revenue recognition policies that produced substantially higher revenues for the corporation, as well as non-GAAP earnings measures, especially ACSOI — an invention of the firm that served to exclude certain marketing expenses from the calculation of profit. Since marketing expenses were a very material expense for Groupon at a stage at which it was building its business, the effect of the use of ACSOI was as substantial as the effect of aggressive revenue recognition policies. Groupon backed down on both revenue recognition and the use of ACSOI following SEC inquiries into the corporation’s accounting policies.

Learning Objectives

The case can be used at a relatively early stage to illustrate the potentially profound effect of revenue recognition policies and the potentially incomplete picture provided by non-GAAP earnings measures. The case features real published financial statement data as well as SEC letters related to the agency’s investigation of Groupon’s accounting practices. Groupon is a well-known and highly publicized firm, and many students will have used “Groupons” and participated in the company’s promotions. The case provides an opportunity for students to address complex and practice-oriented financial accounting matters in the context of a company with which they are familiar and which they find appealing. The case presents these issues with rich institutional detail and actual public documents as a means of grounding case discussion.
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Case Study: Groupon and the SEC | Ivey Publishing