Groupon Will Dump Controversial ACSOI Accounting in Amended IPO Filing

So there are three adjustments to this accounting method that make it different from normal operating profits:

1. Online Marketing -- They excluded about $180mm of their $208mm Q2'11 advertising budget. Ostensibly because this cost should be capitalized as an investment in customer acquisition. This isn't entirely insane, but is abnormal. I would have broken it out into a sort of lifetime customer value section, so that investors could understand why these costs are justified. As it stands, we don't get a good idea of whether these marketing costs will pay off.

2. Stock Compensation -- This should absolutely NOT be excluded. Even though stock based compensation is a non-cash transaction, it is still an expense for services delivered in this quarter. There was ~$18mm excluded here.

3. Aquisition Related -- This isn't well explained in the filing. It's related to the loss Groupon had to take because of the earn-out conditions of one of their acquisitions. At first glance, this appears to be a one-time, ~$200mm cost applicable to 2010 only and might be reasonable to exclude (but it's still a warning flag, considering the outright BS in point 2).

In short: be wary of companies that fudge their numbers. There's already plenty of ways to tweak their finances under GAAP, and in this case, it looks like Groupon got caught trying to take a few too many cookies out of the jar.

Trying to mask the reality is never a good thing...

I am guessing they are getting the shit grilled out of them on their roadshow and I doubt it will help when these numbers come out showing huge losses.