Explain why the expense recorded in the first quarter

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Reference no: EM132220960

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Q1. The refund reserve amount for Groupon as of December 31, 2011, was $67.45 million, and on March 31, 2012, had increased to $81.56 million. Assume that the accrued expense for refund reserve was $100 million for the first quarter of 2012.

a. How much refund was issued in 2012?

b. Explain why the expense recorded in the first quarter does not equal the amount paid during the quarter.

Q2. In its initial S-1 filing, Groupon presented a non-GAAP performance metric called ACSOI. It was subsequently removed after the SEC objected.

a. Why did the SEC question the inclusion of ACSOI in Groupon's financial statements?

b. Non-GAAP metrics are common in some industries. These include: Value-at-Risk in the financial sector, same-store-sales in retail, revenue-passenger-miles for airlines, and order-backlog in the semiconductor industry. Explain two of these metrics and assess their value to financial statement users.

c. While the SEC allows the reporting of metrics identified in (b), it did question the use of ACSOI. What differences between the acceptable non-GAAP metrics in (b) and ACSOI were of concern to the SEC?

d. Do you agree with Groupon's contention that discretionary expenses, such as subscription acquisition costs, should be excluded from the financial measures of a company's performance?

Reference no: EM132220960

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