Accounting Error Halves Groupon Revenue

Submitted by Chris Gaetano on Mon, 09/26/2011 - 15:11

Online coupon site Groupon.com was forced to halve its stated revenues as a result of what the company said were accounting errors that forced it to restate its financial results, according to the New York Times.

Specifically, the company had to change how it was reporting its revenues: Before, all money collected from customers, including cash that it paid to its merchant partners, was reported as revenue. Its revised filings now only report net revenues, which exclude payouts to retail partners, said the Times. The revision comes only one month after the company was forced to undergo another correction, having to remove a metric that some said misrepresented company profits, reported the Times. Making this correction nearly halved Groupon.com’s revenues, from $1.52 billion to $688 million.

These revisions come as the company is seeking to go public, during which time it has faced significant resistance from the Securities and Exchange Commission, which reviews initial offering filings. Among other concerns, the commission raised questions about the company’s accounting methods and questioned claims made by firm leadership as to Groupon.com’s profitability, according to the Times.

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How can we have confidence?

Submitted by Nicholas (not verified) on Fri, 09/30/2011 - 10:18.

How can we have confidence in the audit reports of the big firms if they allowed such an obvious error in the reporting of Groupon's revenue. Even I (I never worked for a Big 4 firm) know that for a company like Groupon, the revenues collected is not the total revenue because it must pay out part of the revenue to vendors. So revenue is gross less payouts, net. Even I would be able to tell Groupon, "We must take these two GL accounts and combine them in the P&L".

How could a Big 4 firm allow this as the auditor?

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