Groupon 2011 Annual Report Download - page 101

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GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
the year ended December 31, 2011 (in thousands):
For the year ended December 31, 2011, the Company recorded an adjustment to the original contingent consideration obligations recorded upon the
acquisitions. The adjustments were the result of using revised forecasts based on new information that did not exist at the time of the acquisition and updated fair
value measurements that adjusted the Company's potential earnout payments in future years related to the purchase of these businesses. For the year ended
December 31, 2011 the Company recognized a net benefit of $4.5
million in acquisition related expenses in the statement of operations due to the change in fair
value measurements using a Level 3 valuation technique. As of December 31, 2011, $4.2 million of contingent consideration is fixed as the certain operational
objectives and financial result criteria were met in 2011, and were paid in March 2012.
There was a change in the Company's method to value the common shares issued as contingent consideration to be settled in a variable number of shares in
the fourth quarter of 2011. As Groupon is now a public company, the actual stock price was used to value the liability versus private market data resulting in a
reclassification to Level 2. In addition, the Company changed the method for valuing one of its contingent liabilities to be settled in cash in the fourth quarter of
2011. The Company used an option model to value the liabilities versus an income approach that was used in the first three quarters of 2011. There were no other
changes to the Company's valuation techniques used to measure asset and liability fair values on a recurring basis during 2010 and 2011.
The Company's other financial instruments consist primarily of accounts receivable, accounts payable, accrued merchant payable, accrued expenses and
loans from related parties. The carrying value of these assets and liabilities approximate their respective fair values as of December 31, 2010 and 2011, due to
their short term nature. At December 31, 2010 and 2011, no material fair value adjustments were required for non-financial assets and liabilities.
13. INCOME TAXES
The components of pretax loss for the years ended December 31, 2009, 2010 and 2011 were as follows (in thousands):
The provision (benefit) for income taxes for the year ended December 31, 2009, 2010 and 2011 consisted of the following components (in thousands):
95
Fair Value
Balance as of December 31, 2010
—
Issuance of contingent consideration in connection with acquisitions
17,755
Change in fair value
(4,537
)
Reclass to Level 2
(1,988
)
Balance as of December 31, 2011
11,230
2009
2010
2011
United States
(1,093
)
$
(222,594
)
(42,775
)
International —
(
197,466
)
(211,290
)
Loss before provision for income taxes
(1,093
)
$
(420,060
)
(254,065
)