Photo: Kevin Krejci / Flickr, CC.
Groupon shares are down 10% in aftermarket trading following news that the company has revised its Q4 results.”The revisions reduced revenue for the period by $14.3 million and reduced net income by $22.6 million, or 4 cents a share,” reports MarketWatch.
From a company release:
“The revisions are primarily related to an increase to the Company’s refund reserve accrual to reflect a shift in the Company’s fourth quarter deal mix and higher price point offers, which have higher refund rates. The revisions have an impact on both revenue and cost of revenue. A more detailed explanation of the refund reserve is included in the Critical Accounting Policies and Estimates section of Groupon’s Annual Report on Form 10-K for the year endedDecember 31, 2011, filed today with the Securities and Exchange Commission (SEC).”
Cashflow for the period did not change. In a release, Groupon said its first quarter guidance would not change.
Groupon’s auditors, Ernst & Young, filed a “statement of material weakness” the SEC about Groupon.
Here’s what that means, according to Investopedia:
A material weakness, when reported by an auditor, simply suggests that a misstatement could occur. If a material weakness remains undetected and unresolved, a material misstatement could eventually occur in a company’s financial statements, which would have a tangible effect on a company’s valuation. For example, a $100 million overstatement in revenue would be a material misstatement for a company generating sales of $500 million annually.
Groupon has a history of weird accounting. It used to call itself profitable, booking marketing expenses as a capitol cost. It also had a funny way of counting its revenues for a while.