Groupon Case Study

Accounting manipulation can be defined as when officers of an organization intentionally publish wrong statement their financial information to favourably represent the firm’s financial performance. The accuracy and transparency of Groupon’s financial statements clearly is suspect. Back in 2011, Groupon’s misstatement on accounting information was exposed. According to accounting professors Ketz and Catanach, Groupon disobey Generally Accepted Accounting Principles(GAAP) in disclosing its revenue and also advised that Groupon should correct the errors they made by recalculate the firm’s revenue. The reason why they would have done the revenue misstatement is because that’s the first indication of a firm’s income or a management

Groupon was also accused of stating marketing expenses as a capital and gross revenue as their net revenue. They should have substracted the money owed to merchants from the coupons they were selling but they didn't do that. This shows that Groupon artificially boost up their revenue numbers by reporting gross figures. Groupon had also been criticized for practicing aggressive accounting, the firm then changed their accounting practices twice before its initial public offering(IPO) after been questioned by Securities and Exchange Commission and accounting experts. Groupon’s continuing accounting issues have sparked concerns about its management and internal controls that have determined the company since it went public last year. Groupon’s management and public relations department have made these situations worse by not responding well. The management team made some promising statements about the company’s potential, even during the IPO quiet period. Management team did not really understand the cause of these problems and the output of these issues. Professor Catanach also stated that Groupon showed positive cash flow to investors by providing an aggregate cash flow statement that lacks many contents required in reports filed with the Securities and Exchange Commission. It remains a doubt based on the statement, where is the cash coming from. As a result of this omission, the company could be increasing its cash flow by stretching out payment terms with their vendors thus upsurge current liabilities. This is a major concern because liabilities is an important information for