The July 28, 2011 Wall Street Journal had a front page article on Groupon’s pre-IPO accounting tricks. It seems they are presenting an income statement and removing marketing costs. This is called. “adjusted consolidated segment operating income” or adjusted CSOI. One analyst said that he’s never seen this before and Groupon wants people to look at profit before any expenses.
And here I thought that with big companies, Sarbane Oxley and GAAP accounting you could count on a relative degree of honesty with the financial statements. I thought it was only in small businesses that you had to recast or adjust the financial statements to show what the business really looked like. I guess I was being naïve (or cynical).
Groupon and small business owners are alike in that they both want to inflate earnings to get a higher price. It’s like when business owners state that the business runs well without the owner (but they still are there 40+ hours a week and draw a salary they want counted as profit). Or, that the $87,000 of annual depreciation is a non-cash expense that’s really profit (if it is, then also consider principal payments on that equipment debt or anticipated capital outlays).
It seems the only difference between small businesses and large is the number of zeros.