4. In the months leading up to Groupon’s IPO, the SEC posed a number of questions regarding Groupon’s choice of accounting principles for revenue recognition. Specifically, the SEC referred to the requirements in FASB’s ASC 605-45-45.

a. Compare the amount of revenue reported in the original and amended S-1s. What caused the difference?

b. Which of the two amounts do you think Groupon preferred? Why did they prefer it?

c. In correspondence with the SEC following its initial S-1 filing, how did Groupon justify its method of reporting revenue?

d. With reference to ASC 605-45-45, which of Groupon’s arguments were weak, and why?

5. Groupon had recognized revenue for the sale of high-ticket items in late 2011. Purchasers of the Groupons have a right of return, as specified in the ‘‘Groupon Promise,’’ prominently featured on its website.

a. Assess the U.S. GAAP requirement for recognition of revenue when right of return exists, specified in ASC Section 605-15-25, in the context of Groupon’s business model. 

b. Do you agree with Groupon’s accounting? Why or why not?

c. What could Groupon have done differently, and how would the financial statements have been affected?

6. Groupon’s restatement of 2011 fourth-quarter financials resulted in a reduction of $14.3 million of revenues and a decrease of $30 million of operating income. However, its operating cash flow was unaffected. Explain how this is possible.

Answer rating: 100% (QA)

a Compare the amount of revenue reported in the original and amended S1s What caused the difference Answer 2009 Original Revised Variance Percentage variance Revenue 304 145 159 52 Cost of sales 195 4... View the full answer