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Intermediate Accounting - Research Paper Example

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Intermediate Accounting

The following illustration provides a simplified view of the business model followed by Groupon: Comparison of this business model of Groupon with Wal-Mart reveals some fundamental differences in the approach followed by the two businesses. First of all, as mentioned earlier, the virtual operating style of Groupon through internet is a primary factor which distinguishes the extent to which both companies can target their respective customers. Based on the differences identified in the business model for Groupon in comparison with the approach followed by Wal-Mart, it is possible to determine how these differences influence the risks identified by Groupon in its financial statements under management discussion and analysis and also the translation of these risks into financial reporting of the company. Before initiating a discussion as to how risks faced by Groupon would influence its business model, it is pertinent to understand that the success of the business model of the company largely rests on the revenue generating ability of the company through acquiring new subscribers to purchase coupons offered by the company. Since the company has only one product to offer, i.e. coupons, therefore any unfavourable changes in the circumstances may eventually lead to the disruption of whole business model. First of all, the company has expressly stated in its Form S - 1 that, “We may not maintain the revenue growth that we have experienced since inception.” (Groupon Incorporation 11). Although, the company would take measures to ensure that such a risk may not materialize in future; however, if such a situation is faced by the company where revenue growth becomes difficult, the business model may be affected severely, as there is no contingency plan for the company due to lack of its diversity in operations. Realizing the significance of influence this risk may have on the business model of the company, it has been mentioned that, “If we fail to retain our existing subscribers or acquire new subscribers, our revenue and business will be harmed.” (Groupon Incorporation 12). In addition to this, it is also important to note that apart from growth in subscribers to the business, the retention and growth of merchants for the business is also a risk factor. The company has expressly stated that if it fails to retain or grow the number of merchant it deals with, the revenues may shrink considerably in the future and therefore place impact on the whole business (Groupon Incorporation 13). Apart from this, it is also pertinent to understand that Groupon is not alone in its market; in fact there are other competitors who are improving their customer base and market standing. The company, in this regard, states that it operates in a highly competitive environment where competitors may pose a significant threat to the operations and growth opportunities for Groupon in the future (Groupon Incorporation 13). Issues regarding Revenue Recognition for Groupon The table presented as follows include information pertaining to revenues, cost of sales, other operating expenses and net profit / loss of the company for the financial years 2009 and 2010. Under each year, both gross and net based revenue recognition by the company has been presented so as to make the comparison possible between ...Show more

Summary

Groupon – Case Study Differences in Groupon’s Business Model in Comparison with Wal-Mart and its Impact on Business Risks and Financial Reporting Groupon works as an online business entity offering discount coupons which can be used its customers for purchasing discounted merchandise and other items from companies based in the United States…
Author : polly96
Intermediate Accounting Research paper essay example
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