Accounting Research: Groupon

Accounting Research: Groupon
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Accounting Research: Groupon
Adjusted Segment Consolidated Operating Income (ACSOI) is basically a controversial non-GAAP metric used in accounting. ACSOI metric amortizes acquisition as well as marketing costs over a number of accounting periods. It is worth mentioning that the Adjusted aspect of this metric inflates the reported net income of an organization in the latest accounting period. A company can use this metric with the rationale that marketing and subscriber acquisition costs have value long into the company’s future; hence, it is important for them to be spread out over time.
Groupon would prefer to use ACSOI instead of GAAP earnings because ACSOI measures the fiscal health of the company, leaving out future operating expenditures as well as noncash charges. On page 3 of its filing of June 2, 2011, Groupon points outs that it believes ACSOI is a vital metric of the performance of its business given that it does not include costs which are non-cash or otherwise costs that are not indicative of future operating expenditures. SEC’s view on Groupon’s use of ACSOI was that the metric was non-conventional and does not keep to the Generally Accepted Accounting Principles (GAAP). According to the Securities and Exchange Commission, ACSOI metric actually excludes important expenses, for instance the crucial online marketing expenditures aimed at attracting new customers to the company. This is non-GAAP accounting which the SEC did not like. The SEC also had questions regarding how Groupon accounted for its profits as well as revenue with the use of this controversial metric. Eventually, Groupon bowed to pressure from the Securities and Exchange Commission and removed the unconventional ...