Growing Pains at Groupon

23 Pages Posted: 23 May 2013 Last revised: 5 Mar 2014

See all articles by Saurav K. Dutta

Saurav K. Dutta

State University of New York (SUNY) at Albany

Dennis Caplan

State University of New York (SUNY) at Albany

David Marcinko

Skidmore College

Date Written: April 22, 2013

Abstract

On November 4th 2011, Groupon Inc. went public with an initial market capitalization of $13 billion. The business was formed a couple of years earlier as an off-shoot 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 which impacted its disclosures on revenue and its estimation of returns.

This case uses Groupon to motivate discussion of financial reporting issues in e-commerce 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 SEC and the registrant.

Keywords: Groupon, revenue recognition, allowance for sales returns, e-commerce, non-GAAP

Suggested Citation

Dutta, Saurav K. and Caplan, Dennis and Marcinko, David, Growing Pains at Groupon (April 22, 2013). Issues in Accounting Education, February 2014, Vol. 29: 1, p 229-245. , Available at SSRN: https://ssrn.com/abstract=2268629

Saurav K. Dutta (Contact Author)

State University of New York (SUNY) at Albany ( email )

135 Western Ave
Building, Room 109
Albany, NY 12222
United States

Dennis Caplan

State University of New York (SUNY) at Albany ( email )

135 Western Ave
Building, Room 109
Albany, NY 12222
United States

David Marcinko

Skidmore College ( email )

815 North Broadway
Saratoga Springs, NY 12866-1632
United States

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