The securities and exchange commission

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The Securities and Exchange Commission (“SEC”) reviews a company’s financial statements to ensure that they conform to U.S. GAAP before allowing the company to conduct an initial public offering and list on a major U.S. stock exchange. As part of its review, the SEC may write letters to the company to ask for justification for its particular accounting choices and policies. The company must write back with satisfactory explanations before it may conduct the initial public offering. In some cases, the company must change its accounting choices and policies to satisfy the SEC’s critique.

In June 2011, Groupon Inc. began the process of conducting an initial public offering by filing a form S-1 with the SEC. (The Form S-1 has the same sections as a 10-K, but in a different order and with some additional disclosure.) The SEC questioned the company’s revenue recognition policy in a series of correspondences. Ultimately, Groupon changed its revenue recognition policy and financial statements in response to these critiques.

In this paper, you will examine Groupon Inc.’s business, its revenue recognition policy, the SEC’s critique, and the change in Groupon Inc.’s revenue recognition policy. Address the following questions:Based on the Business description section (beginning on p. 68 of the S-1 dated June 2, 2011, Groupon S-1 2011-06-01.pdfActions ), describe what product Groupon sells and how the company makes money. Who are its customers? Who are its suppliers? What are the company’s competitive advantages, if any?
Even though the revenue recognition steps we covered in class and in the textbook were integrated in U.S. GAAP in 2016, imagine that these rules were in place in 2011. Based solely on the Business description, how would you apply these rules to recognize revenue for Groupon. Write an ideal revenue recognition policy for Groupon that incorporates the five steps.
Now look at the company’s revenue recognition policy in the financial statements, which begin on page F-1.
Describe how Groupon determined when and how much revenue recognize.
Explain how Groupon’s revenue recognition policy differs from the revenue recognition policy you proposed in answering question 2.
Now look at the SEC’s letter to Groupon, dated June 29, 2011, Groupon SEC letter 2011-06-29.pdfActions . See paragraphs 62 to 67 regarding Groupon’s revenue recognition policy.
What does the SEC question about Groupon’s revenue recognition policy?
What is the relevance of point 63 vis-à-vis point 62?
Finally, look at Groupon’s 10-K for 2011, Groupon 10-K 2011.pdfActions . This 10-K was issued after the company changed its revenue recognition policy, the SEC approved the new accounting policy, and the company conducted its initial public offering.
How does this new revenue recognition policy address the SEC’s critique?
How much did the company’s reported revenue change as compared to what was reported in the S-1?
Which means of accounting manipulation had Groupon used to inflate its revenue?

Sample Solution

The questionnaire was distributed online. After completing the questionnaire, team leaders provided a list with their team members; the latter were randomly selected and further contacted by the researchers. The questionnaire was designed and applied in Dutch; for the current study the questionnaire was back translated.
Independent & dependent variables
The study aims to test the relationship between transformational – respectively transactional – leadership, LMX, and psychological safety, proposing that LMX mediates the relationship between leadership style and psychological safety. Therefore transformational, respectively transactional, leadership are the independent variables of the study; LMX is the mediator; and psychological safety is the dependent variable. Respondents’ demographics will be used as control variables.
Plan for data analysis
Data will be analysed using SPSS analysis software. Descriptive analysis will be performed for exploring the characteristics of the study population.
Even though psychological safety is a notion that lies mostly in the individual perception, it is best observed at team level (Edmonson, 2004). The study dataset contains data collected from team leaders and team members. Given the data clustering (as shown by table), multilevel regression analyses will be performed.
Level Operational (N)
Regression Respondent
2 team leader 90
1 healthcare professionals 514

Prior to performing the regression analyses, data will be tested for ensuring that the normal distribution condition is met. As well, correlation matrices will be used for deciding the control variables to be used.
The mediation will be tested using the causal steps method. As explained by MacKinnon et al. (2012), this method has four steps:
1) testing for significance the relationship between independent (i.e. transformational, respectively transactional leadership) and dependent variable (i.e. psychological safety);
2) testing for a significant relationship between the independent (i.e. transformational, respectively transactional leadership) and mediator (i.e. LMX);
3) testing for significance the relationship between mediator (i.e. LMX) and dependent variable (i.e. psychological safety) when controlling for the independent variable (i.e. transformational, respectively transactional, leadership);
4) assessing whether the relation between the independent variable (i.e. transformational, respectively transactional, leadership) and the dependent varible (i.e. psychological safety) is weaker when the

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