The SEC always reviews S-1 filings before a company is allowed to register and sell its shares publicly. So they questioned Groupon on its Form S-1 filing, including its prominent use of a financial measurement which called “Adjusted CSOI”. Thus, in this situation, Groupon relied on the ACSOI metrics for its accounting standard, because the company found it more profitable under Non-GAAP metrics than GAAP in terms of its net income and operating income in the financial report. In addition, online marketing expenses, like expenses companies providing Internet marketing services, are always excluded in operating income by using the ACSOI metrics.
Based on the GAAP metrics, Groupon measured its net income a lost approximately $413.4 million …show more content…
Groupon decided to use Non-GAAP metrics to measure the company’s performance which was also called Adjusted Consolidated Segment Operating Income (ACSOI). Non-GAAP financial measurement included earnings before interest, taxes, depreciation and amortization, adjusted EBITDA, funds from operations, adjusted earnings or adjusted earnings per share, and net debt. This metrics comes out earnings are “earnings before all the bad stuff”. ACSOI includes all of the revenues except some common expenses including: marketing expenses, acquisition-related costs, stock compensation costs, interest and tax expense. In addition, ACSOI is even more aggressive because it ignored some significant expenses related to the Groupon’s business like the online marketing expenses.
c. 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? Why?
We don’t agree with Groupon’s methods. Discretionary expenses should be included in financial measurement of its performance.
In the response of Groupon why they excluded marketing expenses from the ACSOI …show more content…
In the case of Groupon, a large amount of subscribers were acquired from online market. ACSOI is a measurement for management to assess the performance of the business as it excludes certain non-cash expenses and discretionary online marketing expenses that are incurred to acquire new subscribers. Therefore, those numbers for marketing cost cannot be ignored in financial measurement; it is used to convince new users and customers. The management of Groupon chose to report revenue under this method in its first S-1 filing in order to exposes greater revenue is
Based on the GAAP metrics, Groupon measured its net income a lost approximately $413.4 million …show more content…
Groupon decided to use Non-GAAP metrics to measure the company’s performance which was also called Adjusted Consolidated Segment Operating Income (ACSOI). Non-GAAP financial measurement included earnings before interest, taxes, depreciation and amortization, adjusted EBITDA, funds from operations, adjusted earnings or adjusted earnings per share, and net debt. This metrics comes out earnings are “earnings before all the bad stuff”. ACSOI includes all of the revenues except some common expenses including: marketing expenses, acquisition-related costs, stock compensation costs, interest and tax expense. In addition, ACSOI is even more aggressive because it ignored some significant expenses related to the Groupon’s business like the online marketing expenses.
c. 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? Why?
We don’t agree with Groupon’s methods. Discretionary expenses should be included in financial measurement of its performance.
In the response of Groupon why they excluded marketing expenses from the ACSOI …show more content…
In the case of Groupon, a large amount of subscribers were acquired from online market. ACSOI is a measurement for management to assess the performance of the business as it excludes certain non-cash expenses and discretionary online marketing expenses that are incurred to acquire new subscribers. Therefore, those numbers for marketing cost cannot be ignored in financial measurement; it is used to convince new users and customers. The management of Groupon chose to report revenue under this method in its first S-1 filing in order to exposes greater revenue is