What’s the Deal with Groupon’s Adjusted CSOI?

According to Bloomberg, Groupon’s operating income and other accounting trickery habits are being studied by the U.S. Securities and Exchange Commission, part of a routine review of the site’s IPO. Nothing out of the ordinary there.

But Groupon seems pretty transparent about the unreliability of their methodology. I guess this is to say “don’t rely on this information, we’re kind of making some of these numbers up” so investors can’t say they weren’t warned.

Check out this June 2, 2011 SEC filing:

Our use of Adjusted CSOI has limitations as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• Adjusted CSOI does not reflect the significant cash investments that we currently are making to acquire new subscribers;

• Adjusted CSOI does not reflect the potentially dilutive impact of issuing equity-based compensation to our management team and employees or in connection with acquisitions;

• Adjusted CSOI does not reflect any interest expense or the cash requirements necessary to service interest or principal payments on any indebtedness that we may incur;

• Adjusted CSOI does not reflect any foreign exchange gains and losses;

• Adjusted CSOI does not reflect any tax payments that we might make, which would represent a reduction in cash available to us;

• Adjusted CSOI does not reflect changes in, or cash requirements for, our working capital needs; and

• other companies, including companies in our industry, may calculate Adjusted CSOI differently or may use other financial measures to evaluate their profitability, which reduces the usefulness of it as a comparative measure.

Because of these limitations, Adjusted CSOI should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. When evaluating our performance, you should consider Adjusted CSOI alongside other financial performance measures, including various cash flow metrics, net loss and our other GAAP results.

Better yet, AQPQ explains the math behind ACSOI:

Groupon acknowledges that it is losing money when profits and losses are measured in accordance with Generally Accepted Accounting Principles (GAAP). The firm claims, however, that its profits and losses are more meaningfully measured by a metric they call Adjusted Consolidated Segment Operating Income (ACSOI).

How does this number differ from profits and losses that are measured in accordance with GAAP? ACSOI apparently includes all of the revenues, but only some of the expenses, that are recognized by GAAP. By excluding certain significant expenses, Groupon manages to convert its losses into profits.

So what is the SEC going to find? Accounting methods already confessed to by the perps? Big deal.

According to Bloomberg, Groupon’s operating income and other accounting trickery habits are being studied by the U.S. Securities and Exchange Commission, part of a routine review of the site’s IPO. Nothing out of the ordinary there.

But Groupon seems pretty transparent about the unreliability of their methodology. I guess this is to say “don’t rely on this information, we’re kind of making some of these numbers up” so investors can’t say they weren’t warned.

Check out this June 2, 2011 SEC filing:

Our use of Adjusted CSOI has limitations as an analytical tool, and you should not consider this measure in isolation or as a substitute for analysis of our results as reported under GAAP. Some of these limitations are:

• Adjusted CSOI does not reflect the significant cash investments that we currently are making to acquire new subscribers;

• Adjusted CSOI does not reflect the potentially dilutive impact of issuing equity-based compensation to our management team and employees or in connection with acquisitions;

• Adjusted CSOI does not reflect any interest expense or the cash requirements necessary to service interest or principal payments on any indebtedness that we may incur;

• Adjusted CSOI does not reflect any foreign exchange gains and losses;

• Adjusted CSOI does not reflect any tax payments that we might make, which would represent a reduction in cash available to us;

• Adjusted CSOI does not reflect changes in, or cash requirements for, our working capital needs; and

• other companies, including companies in our industry, may calculate Adjusted CSOI differently or may use other financial measures to evaluate their profitability, which reduces the usefulness of it as a comparative measure.

Because of these limitations, Adjusted CSOI should not be considered as a measure of discretionary cash available to us to invest in the growth of our business. When evaluating our performance, you should consider Adjusted CSOI alongside other financial performance measures, including various cash flow metrics, net loss and our other GAAP results.

Better yet, AQPQ explains the math behind ACSOI:

Groupon acknowledges that it is losing money when profits and losses are measured in accordance with Generally Accepted Accounting Principles (GAAP). The firm claims, however, that its profits and losses are more meaningfully measured by a metric they call Adjusted Consolidated Segment Operating Income (ACSOI).

How does this number differ from profits and losses that are measured in accordance with GAAP? ACSOI apparently includes all of the revenues, but only some of the expenses, that are recognized by GAAP. By excluding certain significant expenses, Groupon manages to convert its losses into profits.

So what is the SEC going to find? Accounting methods already confessed to by the perps? Big deal.

Have something to add to this story? Give us a shout by email, Twitter, or text/call the tipline at 202-505-8885. As always, all tips are anonymous.

Related articles

Friday Footnotes: KPMG’s Illinois Loot; Deloitte’s State Contracts; EY Poaches PwC Tech Partners | 7.31.20

As new pot licenses delayed indefinitely, global accounting firm pockets $7M from state to rank applicants [Chicago Sun-Times] KPMG was awarded nearly $7 million in no-bid contracts [in Illinois] to grade applications for new recreational pot licenses. State officials didn’t open the contracts up to competitive bidding to speed up the process. But as it […]