GroupOn And The SEC Financial Accounting Problem Case Study

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ZNEEV2311

Business Finance

Description

I want to write 1 & 1/2 - 2 page (single spaced) summary for the case attached, and it should be from your point of view.

Also I want you to add a point to support your writing that is in regard to the case. For example, if there are things that affected the company now regarding the issue in the case, please bring that up.

Don't forget to footnote and site the information from other sources.

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Explanation & Answer

Attached.

Running head: CASE SUMMARY GROUPON AND THE SEC

Case summary Groupon and the Sec

Student’s name:
Institutional affiliation:

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CASE SUMMARY GROUPON AND THE SEC

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Case summary Groupon and the Sec
According to the case, Groupon first released their financial statements prior to an IPO.
The filing entailed giving non-GAAP financial measures, flow charts, and adjusted consolidated
segmented operating income (ACSOI). The non-GAAP financial measure refers to exhibits of
forecasted as well as historical financial performance. The amount in the non-GAAP financials
excludes amounts or entails adjustments. Groupon went ahead to justify their use of the ACSOI
since they were incurring high operating costs due to high level of acquiring customers. They
argued that they were experiencing high acquisition costs, which were less than the retention
costs. However, they were positive that the expenses would reduce steadily in coming years.
according to the case, the use of the ACSOI helped Groupon to appear financially healthy than
was the case in real money value.
In comparing GAAP to the ACSOI standards, scholars began to evaluate the
effectiveness of using the non-GAAP financial measures. This was especially in the 1990s where
the non-GAAP technique became popular, putting emphasis on top line growth rather than the
earnings, which in every business industry is a key performance indicator. The case of Groupon
helped to elaborate why many e-commerce companies in the 1990s failed terribly. The failure of
the companies is highly attributed to poor accounting practices. The author takes note of the
“adjusted OIBDA” as a common financial practice that emerged in the 1990s. The OIBDA
referred to operating income before depreciation and amortization.
The SEC through the Chief accountant Lynn Turner presented comprehensive statement
on why these practices derailed accounting value. Lynn argued that the use of these practices
portrayed an inaccurate financial position of the firm, which derailed investors. Lynn
recommended using the “EBBS,” which is Earnings before bad stuff to replace the adjusted
earnings for amortization.
Although Lynn gave this position, the CEO of Groupon at the time, Mr. Andrew Mason
indicated that the company was doing great considering all the major performance indicators
were doing great for the company. He noted that they have growth, which is their main agenda;
all future investments, which accounted for the main ACSOI financials, were doing great; they
had a great team; and they were pulling away from competition. He argued that the investments
in future projects was promising to offer future benefit and thu...


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