Groupon Business Model

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Prepare a report that addresses Groupon's revised revenue numbers from those provided in their original S-1 registration with the SEC. The report should briefly

Describe the purpose of the SEC's S-1 Registration Statement.

SEC's S-1 Registration Statement

SEC's S-1 is a documented public offering which a business enterprise whether of any level has to declared and delivered to individual or groups whom the organization offers securities. This document involve legal declaration of financial conditions as well as risk factors associated and exits as threats to organization. The document do involve the operational results to demonstrate organization actual situation as well as management dealing at any position in organization. S-1 statements can also be used as focus to demonstrate registration. The extension to SECs S-1 is possible upon certain non-financial disclosures under S-K form while financial disclosure are induced in Form S-X(US Securities and Exchange, 2019).

Describe Groupon's business model.

Groupon Business Model

Groupon Business Model is based on aspects of two sided market bringing local customer and merchants close together to set up businesses. The concept involve mutual support venturing. The basic business revenues of Groupon is based on bulk transportation of logistics and travelling. According to estimation, the company earned more than $2.8 Billion in 2017. The model includes using resources of yellow pages, newspapers, electronic and print media other tools. They attracts both customers and merchants. The company has developed their personal relations which they eventually utilize to strategize allocation of marketing against resources of sales. Moreover, their particular focuses remain on acquisitions as well as distribution.

Identify and clarify the revenue recognition accounting issue faced by Groupon.

Groupon Revenue Recognition Accounting Issues

The revenue recognition accounting of company is based on the fixed or determinable. Groupon electronically delivering and supplying the products at discounted packages has made the major revenue(US Securities and Exchange, 2019). The major problems were that, the method are violating the settled accounting principles. Groupon operating performance was pictured as distorted. When they were actually in loss, the company demonstrated the constant operating profits. The company's balance sheet were demonstrating profits, while the revenues were flat. The IPO data instead pushed back multiple times during some months. These aspects revealed the declining revenue growth and increasing issues due to falsely pictured growth owing major burdens on accounting false practices.

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Describe Groupon's revenue recognition before and after the revision. Discuss the magnitude of the effect of the restatement on revenue and net income.

Groupon Revenue Revision

Groupon concept of recognition of revenue is unique due to specific aspects. It is based on two factors or major considerations to enlighten the concepts of revenue growth. Groupon has recognized that until the product can be claimed against significant amount of cash, there could have no recognition of business assets. The second and foremost necessary aspect of recognition is based on revenue uselessly recognized unless it is being earned(US Securities and Exchange, 2019). The substantial benefits are considered when they accomplish with the purpose they are entitled to benefit.

Evaluate Groupon's pre and post revision accounting based on ASC revenue recognition criteria in place at the time (see ASC 605-45). What justifications existed for Groupon's pre- revision revenue recognition?

Groupon Pre and Post Revision Accounting

Groupon mainly relying on the idea of offering certain vouchers to its customers via email. Through these vouchers, the customers are offered various discounts. Under ASC 605-45, the revenue recorded as vendor and not agent because they are not providing the services, rather just working to attract customer like agents working on commissions providing discounts. The $50 voucher for any styling which could be up to $100 was entitled in the voucher. The merchant through this was planned to get $30 sharing $20 with Groupon. In a change on Oct 7, 2011; the company changed footnotes disclosure of revenues recognized as being earned as agent deducting the company's payment excluding the taxes(US Securities and Exchange, 2019). The Groupon is recording the net revenue based on concept of acting as agent.

Evaluate Groupon's pre and post revision accounting based on current ASC revenue recognition criteria (see ASC 606). How might your recommendation of accounting treatment differ under the new guidance?

ASC 606 Recognition Revenue Criteria Recommendation

The ASC 606 revision revenue enforce that there should have good being specified to customer. Moreover, the product or service being entitled as principal to satisfies performance obligation, the reward revenue entity should be transferred in exchange to products or services in gross amount. My recommendation here is that, the company as being working only as agent should focus to promote or advertise the product. The revenues should be incurred in specific domains and the entity record should separately demonstrate the gross product price and net profit(Deloitte, 2019).

Evaluation Based on Report

Groupon among the major brands came up with a unique idea which was well received in the market. The purpose of this marketing was to attract merchant and local customers. However, the accounting practices which can be essential for growth evaluation should record a proper entry. In case of Groupon, there was essential flaws on the entries records and it was particularly violating the accounting principle which were already set and established. This in turn were portraying a false picture of growth. The overall shares of the profit between the local merchant and Groupon was 60%-40%. Particularly focusing on the accounting issues, the false recordings of entries were demonstrating false picture of growth.

After times when there were flat revenues being record; the real situation get highlighted. The company at first were having two ways; the gross revenues and net profits. However, the misstatements in the entries created an illusion. These misstatements can either be fraud or errors. Mainly, the major accounting frauds and scandals are done through accounting entries. These frauds are termed as white collar crime. The accounting policies were not properly applied in the situations. It can also be assumed that Groupon income statement issues were mixture of both. Some part was played by errors while rest was due to aims of fraud.

The auditors of Groupon though claimed that issues arises due to weakness of the internal control system. However, certain red flags were clearly demonstrating the negligence. The use of ACSOI in the IPO was one of the example. The case is briefly being analyzed and one of the other reasons being found that company's major expense of marketing was also excluded. As it was major base of company's expense; the exclusion of it from the accounting sheets was formidable for the company. The evaluation is mainly based on the standard of ASC 605-45 and ASC606 based on which revenue recognition was developed.

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