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Groupon website was launched in November 2008 and its administrations, at first accessible in just a few cities of United States, now they have expanded both across the country and globally. It is a day by day bargain web-based marketing company that empowers clients to buy vouchers and coupons at discounted rates. It is at present the most prevalent rebate and promotion code site across the globe, associating a vast number of supporters with local merchants by offering services, products, things to do, travel, beauty & spa, and health & fitness. It sells coupons for the products and services offered by local merchants and small businesses. Therefore, the subscribers who receive emails about the deals can access it through its website and mobile applications are considered to be their customers, and the merchant partners are their suppliers. As stated in S-1, almost half of Groupon’s employees are sales representatives. As of December 31, 2011, Groupon had 2″,689 employees in our North America segment, of 1″,062 sales representatives and 1″,627 corporate, operational, and customer service representatives, and 8″,782 employees in there International segment, 4″,134 of the employees were sales representatives and 4″,648 corporate, operational, and customer service representatives. There sales representatives are there key employees since they are the one who handles there marketing, which includes editors, image designers, etc. Income for Groupon is the price tag paid by the clients to them. Although there are numerous organizations which have attempted to reproduce their methodology, but the client experience and significance of there arrangements, their dealer scale, and quality and image are their competitive advantages. Groupon has a contract with its subscribers. Groupon promises to bring discounted deals daily and in return subscribers agree to pay for that deals to the Groupon. Also, they have a contract with merchants. Groupon agrees to help merchants to inflate their revenues and merchants agree to pay 50% of the earned income to the Groupon. Groupon has agreement with both merchants and subscribers as all parties’ rights are identifiable, payment terms are recognizable, a contract has a commercial substance which affects the future cash flow of the Groupon and collection of payments are probable. Groupon is an agent who offers exclusive deals to their subscribers which helps their merchant partners to increase revenues. Therefore, the performance obligations of the Groupon are to provide exclusive deals to their subscribers and promote their merchant partners services to increase the volume of the customers and the revenues. They have variable consideration; therefore, they use the most-likely amount approach. They allocate standalone selling prices for the services they promote using adjusted market assessment approach and judgment. Groupon can recognize revenue at a single point in time because when subscribers buy the deals from the Groupon, Groupon has transferred physical possession and legal title to the customers. Hence, the customer has accepted the services offered and now bears risk and rewards of ownership of the services provided. Whereas, merchant partners can recognize revenue over time because Groupon pays out the percent of the amount which they agreed upon, after a particular time. Que 3Groupon offers awesome discounts and coupons, serves as an advertiser, generates sales, ensures minimum income and assists participatingcorporations with preparations. In alternate for its advertising offerings and income assistance, Groupon takes a reduce of all the sales made on the website. This amount is often round 50%, depending on the vendor. For example, count on a nearby salon is experiencing a limit in sales and decides to use Groupon to extend new customers. The salon proprietor decides to offer a discounted reduce and shade service, usually priced at $100, for $50. Groupon takes 50% of the income income as its service fee. The deal will generate $1″,500 in revenue from 30 new customers, and of that amount $750 goes to the salon and $750 goes to Groupon. Once a deal is advertised, customers who purchased the Groupon receive it regardless of how many have been purchased. In 2017, Groupon had 49.5 million energetic customers – an energetic clientis described as a unique person who has made a purchase all through the trailing twelve months. In its financial statements, Groupon identifies two kinds of income: gross billings and revenue. The gross billings quantity is the total earnings from the sale of goods and services, with the exception of taxes and refunds. Revenue represents the sum of transactions where Groupon acted as a market minus the element of the carrier or product provider. The corporation also receives direct revenue from income of merchandise inventory through its on line marketplaces. For the year ending December 31, 2017, Groupon pronounced $5.65 billion in gross billings and $2.84 billion in revenue. Net earnings in 2017 was $28.6 million. 4. The questions SEC asks Groupon about their revenue recognition policy is why they consider themselves as a primary obligor; even though they are not selling goods. They are most likely considered an agent that provide services. If, they believe themselves a primary obligor why are they not recording revenue for product and services separately and relevant to recognize revenue before the delivery of goods or services by a merchant to consumers. Moreover, SEC wants them to describe how they will protect their customers from redeeming Groupons if merchants bear a risk of closures and bankruptcies. Also, the SEC wants to know the variance between actual and estimated refunds. How they recognize revenue when subscribers redeem coupons through mobile apps, iPhone and iPad and how does it impacts gross profit. Lastly, does Groupon deduct the commission they have to pay to its partners’ to promote their deals via social media? 4b. Not done 5a. The main concern of the SEC was that the compnay was detailing income at the full size of the item sold through Groupon without subtracting the sum it paid back to the provider because they considered themselves a primary obliogor in the transaction. However, in the revised revenue recognition policy the company records the net amount it owns from the sale of coupons or vouchers after paying an agreed upon percentage of the purchase rate to the featured merchant with the exception of any applicable taxes. Hence, company is performing as an agent of the services provider in the transaction. In S-1, groupon recorded it’s consolidated revenue of $30.5 million and $713365 thousand at gross on December 31, 2009 and 2010 respectively. They restated revenues at net in 10K for $ 14540 and $312941 thousand on december 31, 2009 and 2010 respectively. Therefore, the revenue reported under 10K was more than 50% less than the revenue reported in S-1 statement. 6.As groupon has stated in the risk factor of there 10 k, “We may not maintain the revenue growth that we have experienced since inception.” To inflate it’s revenues Groupon recorded gross method in it’s fourth quarter of 2011, that means that they did not recored the deduction of the share ( 50% to merchants) they were supposed to. After the revision of Groupon’s 2011 fourth quarter, there was an reduction in revenue by $14.3 million and increase in net loss by $22.6 million. http://securities.stanford.edu/filings-documents/1048/GRPN00_01/20121029_r01c_12CV02450.pdf

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