DATE: September 23, 2015
TO: Professor Stevens
FROM: Briana Nguyen
SUBJECT: Groupon, Inc., and Revenue Recognition Issues
PURPOSE
This report will explore the accounting treatment employed by Groupon, Inc. (“Groupon”) in its revenue recognition for fiscal years 2008 through 2010 as well as the first six months of 2011. Specifically, we will review the following in regard to its initial public offering (IPO) in accordance with FASB’s Accounting Standards Codification (ASC):
• Revenue recognition as a primary obligor
• Revenue recognition as a principal or an agent
• Revision of revenue recognition on gross basis to net basis and effect on revenue and net income
BACKGROUND
In November of 2008, Andrew Mason, Eric Leftkofsky, and Bradley Keywell
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For example, a spa may offer a service worth $80 for $40, and once the customer pays Groupon $40, they are able to go to the merchant to receive the service worth $80. When a deal is purchased by a subscriber, the gross profit is split between Groupon and the respective merchant: Groupon will keep $20 of what the customer has paid, and the remaining balance goes to the merchant. Striving to “become an essential part of everyday local commerce for consumers and merchants,” the company has made efforts to continue growing their subscriber base, their number of merchant clientele, the number and variety of products, as well as their acquisitions and business development …show more content…
ASC Section 606-10-55 provides that if an entity is a principal and it satisfies a performance obligation, revenue should be recognized in the gross amount that it “expects to be entitled in exchange for [the] goods and services transferred” (606-10-55-37). On the other hand, if the entity is the agent, revenue should be recognized “In the amount of any fee or commission to which it expects to be entitled in exchange for arranging for the other party to provide [the] goods and services” (606-10-55-38). The following indicators provide guidance on whether the entity is an
Although professor X, investor VC, and UND all had common ownership in Darwin and Thunderbird before the merger, none of them were identical owners and controlled the companies indeed before the merger. Hence, Phoenix should account for its acquisition of 100 percent of equity interests in Darwin and Thunderbird as a business combination. For the reasons noted above, since Professor X controlled Phoenix before the merger but did not control the combined entity after the merger, this merger is substantive and is not under common control. Additionally, the shareholder ownership percentages of Professor X, investor VC, and UND were not similar before the merger or after the merger. Therefore, Phoenix should not account for its acquisition of
If Pure-Train sells extended warranties to its customers for a fee, it indicates that a contract is separately priced. This implies that the extended warranties provide a warranty protection or product services that are not included in the acquisition price of the product covered by the contract (FASB ASC 605-20-25-1). FASB also states that extended warranty provides “coverage against the risk of certain specified claim costs for a specified period” (FASB ASC 605-20-25-2). For example, if the customer requests a covered service to be performed on the product that needs repair or service costs, such claim costs are considered repair costs (FASB ASC 605-20-25-2). Under the new rules, revenue from extended warranty contracts should be recognized in income over the period of the contract (FASB ASC 605-20-25-3).
The Interesting Keywords in Home Depot’s Financial Reports The income statement of the Home Depot was a very complex financial report. Unlike the income statements from the chapter, it is relatively detailed with very similar terms mentioned. If it had not been for the reading we have done thus far in the course, I would have had a very difficult time understanding Home Depot’s financial report. I thought it would be best to start by going through the table of contents rather than searching through the entire document.
Steamboat Ski & Resort Corporation was one of North America’s largest ski resorts located in Northwest Colorado, and it was doing well in the ski destination resort industry. However, the industry became more and more competitive which resulted in SSRC started losing share of Colorado skier market. Some other issues happened to SSRC including customers spending fewer of their vacation days skiing on the mountain, and repeating visit rate declined. The core issue facing Steamboat Ski & Resort Corporation is “How can the company continue to grow revenue in this increasingly competitive industry?”
Code section 731(a) controls the extent to which gain or loss shall be recognized to the partner by the partnership in a distribution of cash or other property. Any gain or loss recognized from a partner’s distribution is treated as gain or loss from the sale or exchange of a partnership interest, which is ordinarily a capital gain or loss. Beginning in 1995, marketable securities are treated as cash, which shall be taken into account at their fair market value as of the date of the distribution. Guidance to Taxpayer Taxpayer should have a better understanding about§721 so as to apply it more accurately and effectively. Firstly, gain shall be recognized to the partner to the extent that the money distributed exceeds the adjust basis in the
Furthermore, because of this mistake, you had violated the revenue recognition principle. You mentioned the amount of interest you would receive for the whole year, even though the revenue has only been acquired for 16 days. In addition, the accounts interest revenue, bank or accounts receivable was overstated by $7464.52. This
Groupon 's arrangements are for the most part not gainful to vendors. It more often than not deducts half from deals continues as commission for promoting a seller 's arrangements, far beyond the markdown offered to clients. This appears to be unsustainable over the long haul for independent companies with low
This changed when they decided to announce to the public that the agent's services were holding a cable on behalf of the business. Because the client relies on this particular assumption, they are also based on the existence of an agency relationship. This would make the principal, the store, entitled to recover damages from the customer caused by the agent.
The Financial Accounting Standards Board of the United States and the International Accounting Standards Board began the process with the adoption of the Norwalk Agreement of with the ambitious goal of implementing a single set of internationally accepted accounting principles by 2015. The IASB and the FASB came into the convergence project on revenue recognition from vastly different starting points. Both bodies came into the project with two main criteria for revenue recognition; however, this is where the similarities cease. IASB’s standards and framework provided that revenue would be recognized when 1) it is probable that any future economic benefit associated with the item will flow to or from the enterprise and 2) the item’s cost or value can be measured
1.0 Introduction and Identification of Problems BabbaCo, Inc. is an American based company founded by a mother of three and serial entrepreneur Jessica Nam Kim. It started off by offering infant-related products and managed to grow the business to a few hundred thousand dollars in revenue in less than a year’s time. Soon after, the young startup encountered the problem of low repeat sales. Thus, the entrepreneur started to rethink BabbaCo’s business model. With the revamp of the product offerings, it changed to a subscription-based business model with the introduction of Babba Box.
1.1 Explain the concept of the “customer experience” The concept of the customer experience is based on the idea of meeting the needs and expectations of the customer. It is also based on what the customer had got from purchasing the products and services, how good that service was/is and would they come back. The concept of the customer experience refers to the all the experiences the customer has with Salons Direct and is based on all dealings and opinions about us.
I. Introduction The dominant form of entertainment media in the U.S. for decades was cable television. However, now as technological innovations have revolutionized all aspects of consumer lifestyle, so too has it changed the way people seek entertainment. This has resulted in an entirely new industry altogether, video streaming. This is largely beneficial to consumers because it gives them control over their own preferences and time constraints that the cable TV industry just can not compete with. The industry for subscription-based streaming video on demand (SVOD) is interesting to study because it is a relatively new innovation, however it has skyrocketed to become a multi-billion dollar industry.
In my opinion, Apple Pay is one of the factors that caused PayPal’s split from eBay. Apple Pay is secure and simple to use as it operates NFC technology and able to be used in several locations that have contactless terminals. Without your fingerprint, Apple Pay will not make any online transaction. Even though, user lose it iphone/ipad/iwatch, they are able to close down the payment function and erase all its memories in the lost item via its Apple ID. Once again, all the payments made by Apple Pay are private as Apple doesn’t save any transaction information (Apple.com).
Memberships Sold = $250.00, $500.00, or $1000.00 15. Memberships Sold = $375.00, $750.00, or $1500.00 REFERRING NEW AFFILIATES (DOWNLINE COMMISSIONS) At Terrex Global, not only can you earn money by referring individuals to our digital marketing plans, but you can also earn money by referring new affiliates. If an affiliate you refer subscribes to a membership plan, we will pay you a 100% commission for his/her purchase (not including the invoice). We 've designed a simple, yet effective way to motivate our affiliates to motivate others to become an ambassador for our digital marketing plans!
In the case of hotels, suppliers create different consumer segments, we can relate to them as lower-end consumers, and higher-end consumers. Obviously, hotels cannot set the price that higher-end consumers are willing to pay, because all lower-end consumers will not be able to afford the good. Inversely, if hotels set the price that lower-end consumers are willing to pay, higher-end consumers gain huge consumer surplus, thus lowering the profit for the suppliers. In order to take the consumer surplus, hotels keep lower prices for some rooms in order to target lower-end consumers and offer some higher quality rooms (for example presidential suits) to target higher-end consumers. The difference in revenues providing different rooms and the same ones is seen below.