ipl-logo

Groupon Inc. And Revenue Recognition Issues

1640 Words7 Pages

DATE: September 23, 2015
TO: Professor Stevens
FROM: Briana Nguyen
SUBJECT: Groupon, Inc., and Revenue Recognition Issues

PURPOSE
This report will explore the accounting treatment employed by Groupon, Inc. (“Groupon”) in its revenue recognition for fiscal years 2008 through 2010 as well as the first six months of 2011. Specifically, we will review the following in regard to its initial public offering (IPO) in accordance with FASB’s Accounting Standards Codification (ASC):
• Revenue recognition as a primary obligor
• Revenue recognition as a principal or an agent
• Revision of revenue recognition on gross basis to net basis and effect on revenue and net income
BACKGROUND
In November of 2008, Andrew Mason, Eric Leftkofsky, and Bradley Keywell …show more content…

For example, a spa may offer a service worth $80 for $40, and once the customer pays Groupon $40, they are able to go to the merchant to receive the service worth $80. When a deal is purchased by a subscriber, the gross profit is split between Groupon and the respective merchant: Groupon will keep $20 of what the customer has paid, and the remaining balance goes to the merchant. Striving to “become an essential part of everyday local commerce for consumers and merchants,” the company has made efforts to continue growing their subscriber base, their number of merchant clientele, the number and variety of products, as well as their acquisitions and business development …show more content…

ASC Section 606-10-55 provides that if an entity is a principal and it satisfies a performance obligation, revenue should be recognized in the gross amount that it “expects to be entitled in exchange for [the] goods and services transferred” (606-10-55-37). On the other hand, if the entity is the agent, revenue should be recognized “In the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the other party to provide [the] goods and services” (606-10-55-38). The following indicators provide guidance on whether the entity is an

Show More
Related
773 Words | 4 Pages

This changed when they decided to announce to the public that the agent's services were holding a cable on behalf of the business. Because the client relies on this particular assumption, they are also based on the existence of an agency relationship. This would make the principal, the store, entitled to recover damages from the customer caused by the agent.

Read More
651 Words | 3 Pages

Although professor X, investor VC, and UND all had common ownership in Darwin and Thunderbird before the merger, none of them were identical owners and controlled the companies indeed before the merger. Hence, Phoenix should account for its acquisition of 100 percent of equity interests in Darwin and Thunderbird as a business combination. For the reasons noted above, since Professor X controlled Phoenix before the merger but did not control the combined entity after the merger, this merger is substantive and is not under common control. Additionally, the shareholder ownership percentages of Professor X, investor VC, and UND were not similar before the merger or after the merger. Therefore, Phoenix should not account for its acquisition of

Read More
653 Words | 3 Pages

If Pure-Train sells extended warranties to its customers for a fee, it indicates that a contract is separately priced. This implies that the extended warranties provide a warranty protection or product services that are not included in the acquisition price of the product covered by the contract (FASB ASC 605-20-25-1). FASB also states that extended warranty provides “coverage against the risk of certain specified claim costs for a specified period” (FASB ASC 605-20-25-2). For example, if the customer requests a covered service to be performed on the product that needs repair or service costs, such claim costs are considered repair costs (FASB ASC 605-20-25-2). Under the new rules, revenue from extended warranty contracts should be recognized in income over the period of the contract (FASB ASC 605-20-25-3).

Read More
884 Words | 4 Pages

1.0 Introduction and Identification of Problems BabbaCo, Inc. is an American based company founded by a mother of three and serial entrepreneur Jessica Nam Kim. It started off by offering infant-related products and managed to grow the business to a few hundred thousand dollars in revenue in less than a year’s time. Soon after, the young startup encountered the problem of low repeat sales. Thus, the entrepreneur started to rethink BabbaCo’s business model. With the revamp of the product offerings, it changed to a subscription-based business model with the introduction of Babba Box.

Read More
245 Words | 1 Pages

Groupon has always sought the volume, it is time to start looking for the qualitative. Groupon must offers tools for merchants to help them manage their business, and raise customer service because there is future in deals involving major brands. It is time to form a commercial team to stop rushing the merchant to sign a contract on the sly by well advising them on the Groupon 's benefits to help the merchant to prosper in their activities. The value perceived by the consumer is more important because they have a reference price. Groupon has to set up a sales team that will be specifically responsible for monitoring with merchants and that must verify all elements of the contracts.

Read More
1638 Words | 7 Pages

Furthermore, because of this mistake, you had violated the revenue recognition principle. You mentioned the amount of interest you would receive for the whole year, even though the revenue has only been acquired for 16 days. In addition, the accounts interest revenue, bank or accounts receivable was overstated by $7464.52. This

Read More
524 Words | 3 Pages

Steamboat Ski & Resort Corporation was one of North America’s largest ski resorts located in Northwest Colorado, and it was doing well in the ski destination resort industry. However, the industry became more and more competitive which resulted in SSRC started losing share of Colorado skier market. Some other issues happened to SSRC including customers spending fewer of their vacation days skiing on the mountain, and repeating visit rate declined. The core issue facing Steamboat Ski & Resort Corporation is “How can the company continue to grow revenue in this increasingly competitive industry?”

Read More
136 Words | 1 Pages

Groupon 's arrangements are for the most part not gainful to vendors. It more often than not deducts half from deals continues as commission for promoting a seller 's arrangements, far beyond the markdown offered to clients. This appears to be unsustainable over the long haul for independent companies with low

Read More
519 Words | 3 Pages

This will allow Groupon to ensure that sustained partnerships enable merchants to realize a benefit from leveraging Groupon by turning one-time deal hunters into returning buyers. Lastly, Groupon will shift its revenue model from a standard 50/50 split of voucher revenues to a model in which it receives a variable percentage based upon the operating margin. Essentially, Groupon’s revenue model will shift from “fee for service” to “value-based reimbursement”.

Read More
732 Words | 3 Pages

Groupon also offers travel experiences in two different ways. Those ways are either bookings or as a voucher. Another that stood out for me was Groupon new concept that they came up with is called pull (). Pull allows a customer to search thousands of deals that they can buy and use instantly. Customer who want to use the service they need go to the smartphone and select nearby.

Read More
275 Words | 2 Pages

The weakness of Groupon is that its business model is very easy to copy. While Groupon is one of the first in the industry and has be so successful, and its business model will enable many other companies such as Google offers and AmazonLocal to engage in the industry and will also trying to gain market shares of the industry. According to the exhibits 4 and 5, Groupon does not stop to grow from 2008 to 2011 and the business seems profitable. Some local competitors coming in the industry may destabilize its leadership in the field. Obviously this is happening already and the current reputation and visibility increasingly among Internet users enjoying by Groupon is being treating even though the website is properly developed and the business

Read More
1293 Words | 6 Pages

1.1 Explain the concept of the “customer experience” The concept of the customer experience is based on the idea of meeting the needs and expectations of the customer. It is also based on what the customer had got from purchasing the products and services, how good that service was/is and would they come back. The concept of the customer experience refers to the all the experiences the customer has with Salons Direct and is based on all dealings and opinions about us.

Read More
1898 Words | 8 Pages

I. Introduction The dominant form of entertainment media in the U.S. for decades was cable television. However, now as technological innovations have revolutionized all aspects of consumer lifestyle, so too has it changed the way people seek entertainment. This has resulted in an entirely new industry altogether, video streaming. This is largely beneficial to consumers because it gives them control over their own preferences and time constraints that the cable TV industry just can not compete with. The industry for subscription-based streaming video on demand (SVOD) is interesting to study because it is a relatively new innovation, however it has skyrocketed to become a multi-billion dollar industry.

Read More
809 Words | 4 Pages

In my opinion, Apple Pay is one of the factors that caused PayPal’s split from eBay. Apple Pay is secure and simple to use as it operates NFC technology and able to be used in several locations that have contactless terminals. Without your fingerprint, Apple Pay will not make any online transaction. Even though, user lose it iphone/ipad/iwatch, they are able to close down the payment function and erase all its memories in the lost item via its Apple ID. Once again, all the payments made by Apple Pay are private as Apple doesn’t save any transaction information (Apple.com).

Read More
777 Words | 4 Pages

In the case of hotels, suppliers create different consumer segments, we can relate to them as lower-end consumers, and higher-end consumers. Obviously, hotels cannot set the price that higher-end consumers are willing to pay, because all lower-end consumers will not be able to afford the good. Inversely, if hotels set the price that lower-end consumers are willing to pay, higher-end consumers gain huge consumer surplus, thus lowering the profit for the suppliers. In order to take the consumer surplus, hotels keep lower prices for some rooms in order to target lower-end consumers and offer some higher quality rooms (for example presidential suits) to target higher-end consumers. The difference in revenues providing different rooms and the same ones is seen below.

Read More

More about Groupon Inc. And Revenue Recognition Issues

Related Topics

Open Document