It’s a dynamic time to be a GTer (unless you work in the U.K.), as Grant Thornton International announced this week that its network of firms around the world combined to reach a record $5.45 billion in revenue for the financial year that ended on Sept. 30, 2018. Global revenue grew 9.4% in U.S. dollar […]
You can breathe a sigh of relief, Green Dot Nation—Deloitte remains the largest accounting firm in the world. We thought maybe, just maybe, PwC would overtake Deloitte for the No. 1 spot this year, but PwC’s global revenue of $41.3 billion for the fiscal year that ended June 30, 2018 fell short of Deloitte’s global […]
[Updated with quote from Grant Thornton spokesperson.] The Purple Rose of Chicago put out a very skimpy press release this morning announcing that the U.S. firm’s revenue hit $1.8 billion for the fiscal year that ended July 31, 2018, up 3.4% over last fiscal year. And … that’s pretty much it. Not even a mention […]
The Purple Rose of Chicago earned $1.45 billion in the U.S., beating last year's haul of $1.35 bil. Judging by Mike McGuire's canned quote, everything is on the up and up: “Our financial results are a direct reflection of the value we’re providing to our clients,” said Mike McGuire, chief executive officer of Grant Thornton […]
The PCAOB posted 26 new inspection reports today, none of which were all that remarkable. But we did take a peek at MaloneBailey's, where we found this little nugget from Issuer C: In this audit, the Firm failed to perform sufficient procedures to determine whether the issuer properly recognized revenue. The issuer manufactured custom products […]
Not one to be left out of the "we made a metric shit ton of money this year, guys" party, Grant Thornton announced today the highest revenue in the firm's 90 year history. Considering a dollar could buy you a month's worth of groceries, a house, and a horse 90 years ago1, that's not saying […]
EY recently reported global combined revenue of $27.7 billion, or approximately eleventy bazillion in OMGdollars. Just how much of that do partners see? Unfortunately, we don't have US numbers, so UK numbers will have to do: Partners in the UK firm will receive an average £727,000 share in profits, an increase of 12% on last […]
The PCAOB would like to see auditors get better at a lot of things; showing their work, testing controls, auditing in general. In particular, they would like to see auditors get better at auditing revenue because revenue is so dang important to the big picture here, people. "Revenue is one of the largest accounts in […]
Colin linked to KPMG's celebratory tweet in the roundup this morning but he failed to point out the best part. The celebration at KPMG was short-lived when they realized even if they made more money than ever, they still aren't making as much money as everyone else: KPMG International (KPMG) today announced record-high aggregated revenues […]
Eddie Nusbaum & Co. put up a good number, $4.2 billion to be precise. That's 10.4% (USD) greater than last time around. That's pretty good. So good, the firm reports in its press release that "Grant Thornton led the six largest global accounting organizations in reported revenue growth rate for 2012." And that appears to be true. […]
Everyone's favorite tattoo parlor, Grant Thornton, has announced its revenues for the fiscal year ended, July 31, 2012 and things went pret-tay, pret-tay, pret-tay good. The $1.212 billion was so good, in fact, that it was a record for the firm and CEO Stephen Chipman says everything is going to plan: Grant Thornton’s strategy is […]
The Wall St. Journal reports: Groupon Inc. GRPN +3.84% said it was revising lower the financial results it reported for its fourth quarter, after discovering the company had to set aside more money for customer refunds. The online-coupon site, which went public in November, said its auditor, Ernst & Young, discovered a "material weakness in its […]
You may have heard that the company that encourages people to go broke by saving money, Groupon, filed a S-1 with the SEC last week to go public. It’s been a matter of hot debate as to whether this company is the real deal or simply another house of coupons. One matter that has several people sc is how the company accounts for its revenue. A reader dropped us this note yesterday:
I am not one to bring up accounting questions on your blog as its not your web site’s background [Ed. note: Uh, you mean, accounting?]. I was wondering if you could post one question and make an exception as it relates to Groupon. How on earth did Groupon get away with Gross Revenue treatment and not net revenue? All my accounting friends from the Big 4 and even people who do not work on the Groupon audit at E&Y are stumped. All the literature points to net revenue which means they would not report gross revenue of 900 million but rather 200 million or so which represents their cut. Given how companies are valued on multiple of revenue this seems like a big issue. Any help would be appreciated by your readers.
Now it’s not exactly clear what our reader is referring to (feel free to comment below if you understand) but here’s a clip from the S-1:
Sorry for the squishiness. As you can see, Groupon is reporting revenue for 2010 of over $700 million (not sure about $900 million). They have a cost of revenue (aka cost of goods sold) of over $400 million with a “gross profit” of $279 million. Now, if you’re thinking “gross profit” should be “net revenue” you’re not alone.
From CNBC, there appears to be a debate over semantics:
Groupon accounts for its revenue differently than say eBay, and in a way that some say is misleading to potential investors. The company defines revenue as “the purchase price paid by customers.” Then there’s the issue of “the cost of revenue,” leaving the company with what it calls “gross profit,” which is “the amount of revenue we retain after paying an agreed upon percentage of the purchase price to the featured merchant.”
Here’s the thing: Many companies like eBay […], which also take a fee for transactions, would consider that “gross profit” number a “net revenue number.” UCLA Anderson School’s accounting lecturer Gordon Klein says the S-1 uses terms in a way he’s never used them before, and this unusual accounting tells him that investors should “run from the stock.” Others say this is a non-issue: Wedbush securities analyst Lou Kerner says that the company has done a totally adequate job outlining its accounting approach. Kerner says whether the company reports its revenue before or after direct costs should have zero impact on investors evaluation of the company.
And co-founder Andrew Mason admits that Groupon does things a little differently. Under a section entitled “We don’t measure ourselves in conventional ways” he writes, “we track gross profit [as a metric], which we believe is the best proxy for the value we’re creating.” But that’s all the explanation he gives. Later the filing states, “We believe gross profit is an important indicator for our business because it is a reflection of the value of our service to our merchants.” And under “How we measure our business” things are equally vague:
Gross profit. Our gross profit is the amount that we retain after paying our merchants an agreed upon percentage of the purchase price to the featured merchant. We believe gross profit is an important indicator for our business because it is a reflection of the value of our service to our merchants. Gross profit is influenced by the mix of deals we offer. For example, gross profit can vary depending on the category of product or service offered in a particular deal. Likewise, gross profit can be adversely impacted by offers that we make for the principal purpose of acquiring new subscribers or establishing our brand and building scale in a new market.
Throughout the S-1, the term “gross profit” is used 52 times. If you’re used to reading SEC Filings, the term may throw you off but ultimately the numbers are what theyare and the terms used seem secondary. If you believe “gross profit” is a bullshit metric for this business, fine that’s one thing but if they choose to use slightly unorthodox terminology, does that mean investors should ‘run from the stock’? Personally, I don’t happen to be customer of any of the banks underwriting this thing, so this of little consequence but accountants like to sweat the details, so feel free to make a case either way in the comments.