Groupon’s accounting woes continue

Heidi Moore Apr 2, 2012

Kai Ryssdal: This is — for those keeping corporate books in this country — the start of a whole new quarter. A chance to impress Wall Street anew with dazzling earnings and strong outlooks.

Sadly, that’s not the case at Groupon, the discount coupon provider. One can only imagine they’d like a whole new start, going back to their initial public offering in November. Shares were down almost 17 percent today after announcing after the Wall Street close last Friday that it hadn’t set aside enough money for customers who ask for refunds. Kind of like a bank not reserving enough money for bad loans — and we know how that turns out.

The accounting snafu means Groupon lost more money last quarter than previously reported. Our New York bureau chief Heidi Moore reports.

Heidi Moore: Sometimes it seems as if you could live like a Rockefeller on Groupon discounts: 75 percent off massages, low rates on Nile River cruises, Kenyan safaris — even plastic surgery every week, if you want it. But Groupon’s accounting is a little shabby.

Anthony Catanach: That a company that’s so public, so out there, in the press, so visible, has been so unsophisticated about its financial reporting.

That’s Tony Catanach. He’s a Villanova business school professor who co-writes a blog called Grumpy Old Accountants. He’s very grumpy about Groupon.

Catanach: Groupon’s accounting problem is multi-dimensional. It’s got a lot of different facets.

The company overstated its revenues and was called out by regulators even before it went public. Groupon’s auditors at Ernst & Young just admitted that the company has weak financial oversight.

Here’s Francine McKenna, a noted accounting expert.

Francine McKenna: They just need to get their act together. It’s been a long road, and I think they still have a long way to go.

Groupon’s own shopping binge hasn’t helped. It grew its staff from 37 people to nearly 10,000. The company has a hard time keeping track of refunds and revenues, yet it managed to reap $700 million from investors in its IPO despite the red flags and losses.

Catanach: There’s this tension between doing what’s right and the money, as we might expect there would be.

Groupon says it’s still confident in its business. Catanach is now looking at the financial statements of Zynga, Facebook and LinkedIn. He’s curious to see what skeletons might be lurking there.

In New York, I’m Heidi Moore for Marketplace.

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