4. In the months leading up to Groupons IPO, the SEC posed a number of questions

regarding Groupons choice of accounting principles for revenue recognition. Specifically,

the SEC referred to the requirements in FASBs ASC 605-45-45.

a. Compare the amount of revenue reported in the original and amended S-1s. What

caused the difference?

b. Which of the two amounts do you think Groupon preferred? Why did they prefer it?

c. In correspondence with the SEC following its initial S-1 filing, how did Groupon justify

its method of reporting revenue?

d. With reference to ASC 605-45-45, which of Groupons arguments were weak, and why?

5. Groupon had recognized revenue for the sale of high-ticket items in late 2011. Purchasers

of the Groupons have a right of return, as specified in the

Groupon Promise,

prominently featured on its website.

a. Assess the U.S. GAAP requirement for recognition of revenue when right of return exists,

specified in ASC Section 605-15-25, in the context of Groupons business model.

b. Do you agree with Groupons accounting? Why or why not?

c. What could Groupon have done differently, and how would the financial statements

have been affected?

6. Groupons restatement of 2011 fourth-quarter financials resulted in a reduction of $14.3

million of revenues and a decrease of $30 million of operating income. However, its

operating cash flow was unaffected. Explain how this is possible.