1. (4pts) Based on the Business description section (beginning on p. 68 of the S-1 dated June 2, 2011), describe what product Groupon sells and how the company makes money. Who are its customers? Who are its suppliers? What are the company's competitive advantages, if any?
2. (4pts) Even though the revenue recognition steps we covered in class and in the textbook were integrated in U.S. GAAP in 2016, imagine that these rules were in place in 2011. Based solely on the Business description, how would you apply these rules to recognize revenue for Groupon? Write an ideal revenue recognition policy for Groupon that incorporates the five steps.
3. Now look at the company's revenue recognition policy in the financial statements, which begin on page F-1 of the company's S-1.

a) (3pts) Describe how Groupon determined when and how much revenue to recognize.

b) (3pts) Explain how Groupon's revenue recognition policy differs from the revenue

recognition policy you proposed in answering question 2.

Now look at the SEC's letter to Groupon, dated June 29, 2011. See paragraphs 62 to 67 regarding Groupon's revenue recognition policy.

a) (3pts) What does the SEC question about Groupon's revenue recognition policy?

b) (3pts) What is the relevance of point 63 vis--vis point 62?

1. Finally, look at Groupon's 10-K for 2011. This 10-K was issued after the company changed its revenue recognition policy, the SEC approved the new accounting policy, and the company conducted its initial public offering.

a) (3pts) How does this new revenue recognition policy address the SEC's critique?

b) (3pts) How much did the company's reported revenue change as compared to what was

reported in the S-1?

In what ways had Groupon inflated its revenue? Why were Groupon's previously reported

revenue (the reported revenue in its S-1 dated June 2, 2011) misleading to investors? How is the change in Groupon's revenue recognition policy beneficial to investors?