The Securities and Exchange Commission has begun to scrutinize the inventive accounting methods daily deals site Groupon used to tabulate earnings for its IPO filing. The method Groupon employed leaves out expenses like marketing costs, a source familiar with the SEC’s questions told reporters.
These accounting methods have reminded some analysts of the specious practices that preceded the dot-com bubble. “The more we get into a bubble, the more we have analysts wanting to use numbers giving a sense of momentum,” John Coffee, a Columbia University law school professor told reporters. “In social media, there are signs of a bubble and that creates some nervousness at the commission.”
Groupon isn’t the only Internet company that has drawn attention for creative accounting. Zynga, an Internet gaming company that filed its IPO in July, used a system that measured all revenues from virtual goods and advertisements as though payment was collected as soon as each sale was made.
Read more at The Wall Street Journal.
