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Groupon Accounting Reveals Risks

Digital coupon company Groupon is struggling with financial statements.

Continuing its trend of corporate accounting gaffes, Groupon recently issued a restatement that has stakeholders worried about the risk in its business model, Bloomberg reports. The report, issued on March 30, backpedaled on

Continuing its trend of corporate accounting gaffes, Groupon recently issued a restatement that has stakeholders worried about the risk in its business model, Bloomberg reports. The report, issued on March 30, backpedaled on its fourth quarter sales total and revised its revenue to $492.2 million, a $14.3 million drop for Q4 2011. A material weakness in financial controls was also included in the restatement.

"This should have been highlighted by the auditors," Herman Leung, an analyst with San Francisco-based Susquehanna Financial Group, told the news outlet. "The business is growing so fast that it sounds like they don't have the proper financial controls to deal with the growth."

As Bloomberg notes, the company that went public in June has been having difficulty getting the record straight on its financial reports. To combat the issue, Groupon said it will be granting more oversight powers to its accounting firm, Ernst & Young, and will also be adding additional financial positions to its staff.

Writing for the Forbes blog, Kai Petainen warned that even if Groupon is able to address the material weakness, it may be "too little, too late" for some investors and consumers.

Comments

Topic Expert
Barrett Peterson
Title: Senior Manager, Actg Stnds & Analysis
Company: TTX
(Senior Manager, Actg Stnds & Analysis, TTX) |

A "material weakness" observstion by the auditors is a significant "highlight". The restatement gives pause regarding reliability of financial reporting - serious, and the soundness of the business model - potentially fatal.

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