I disagree. I believe Groupon should call this $760M number gross revenue, with recognizable net revenue being somewhat lower. (I'm not an accountant, but I'v

I disagree. I believe Groupon should call this $760M number gross revenue, with recognizable net revenue being somewhat lower. (I'm not an accountant, but I've had some exposure to these issues.) One of the key questions in proper revenue recognition is determining whether the company is, in essence, a principal or an agent. eBay, for example, reports net revenue, which is a percentage of its gross merchandise sales, as it only collects transaction fees for arranging exchanges between a buyer and seller. Groupon keeps a fraction of the total dollars customers send them, with the balance being distributed to the merchant when the customer redeems the coupon. A good discussion of the accounting standard is here: http://www.revenuerecognition.com/content/experts/9002.asp http://www.revenuerecognition.com/content/experts/9002.asp In the rather long article linked above, it mentions three indicators that can point to net revenue treatment as the most appropriate, each of which I think applies to Groupon: a) "The supplier is the primary obligor in the arrangement." In other words, the local merchant is ultimately responsible for delivering the product/service to the customer, not Groupon. b) "The amount the company earns per transaction is fixed (in dollars or as a percentage of the arrangement fee)." If I spend $100 on a "$25 off $50 deal," Groupon still makes its stated fee/percentage of the purchase price of the Groupon. They don't make anything on the incremental dollars I spent at a restaurant over and above the Groupon amount, for example. c) "The supplier has credit risk." This may not be directly applicable, but the gist of this indicator is whether it is the merchant or Groupon who is ultimately at risk to collect from the customer for the product/service. My guess is this risk lies with the merchant. (Imagine I use a Groupon for part of the cost of a meal; if I can't pay the balance, it's the restaurant that bears the loss, not Groupon.) These issues are always a judgment call (accounting is rarely as black and white as one assumes it to be). But to my mind, these factors indicate Groupon should likely call the $760M revenue figure gross, not net.