Groupon 2011 Annual Report Download - page 26

could be required to restate our financial results. In addition, if we are unable to successfully remediate this material weakness and if we are unable to produce
accurate and timely financial statements, our stock price may be adversely affected and we may be unable to maintain compliance with applicable stock
exchange listing requirements.
We are not currently required to comply with Section 404 of the Sarbanes-
Oxley Act of 2002, and are therefore not currently required to make an
assessment of the effectiveness of our internal controls. However, we will need to evaluate our internal controls over financial reporting in connection with
Section 404 of the Sarbanes Oxley Act for the year ending December 31, 2012, and our auditors will be required to attest to our internal controls over financial
reporting starting with our annual report for the year ending December 31, 2012. This assessment will need to include disclosure of any material weaknesses in
our internal control over financial reporting identified by our management, as well as our auditors' attestation report on our internal controls over financial
reporting. We are in the early phases of compiling the system and processing documentation needed to comply with such requirements. We may not be able to
complete our evaluation, testing and any required remediation in a timely fashion. During the evaluation and testing processes, if we identify one or more
material weaknesses in our internal control over financial reporting, we will be unable to assert that our internal control over financial reporting is effective. If we
are unable to assert that our internal control over financial reporting is effective, or if our auditors are unable to express an opinion on the effectiveness of our
internal control over financial reporting, we could lose investor confidence in the accuracy and completeness of our financial reports, which could have a
material adverse effect on the price of our Class A common stock.
We may have exposure to greater than anticipated tax liabilities.
Our income tax obligations are based on our corporate operating structure, including the manner in which we develop, value, and use our intellectual
property and the scope of our international operations. The tax laws applicable to our international business activities, including the laws of the United States and
other jurisdictions, are subject to interpretation. The taxing authorities of the jurisdictions in which we operate may challenge our methodologies for valuing
developed technology or intercompany arrangements, which could increase our worldwide effective tax rate and harm our financial position and results of
operations. In addition, our future income taxes could be adversely affected by earnings being lower than anticipated in jurisdictions that have lower statutory tax
rates and higher than anticipated in jurisdictions that have higher statutory tax rates, by changes in the valuation of our deferred tax assets and liabilities, or by
changes in tax laws, regulations, or accounting principles. We are subject to regular review and audit by both U.S. federal and state and foreign tax authorities.
Any adverse outcome of such a review or audit could have a negative effect on our financial position and results of operations. In addition, the determination of
our worldwide provision for income taxes and other tax liabilities requires significant judgment by management, and there are many transactions where the
ultimate tax determination is uncertain. Although we believe that our estimates are reasonable, the ultimate tax outcome may differ from the amounts recorded in
our financial statements and may materially affect our financial results in the period or periods for which such determination is made.
The enactment of legislation implementing changes in the U.S. taxation of international business activities or the adoption of other tax reform policies could
materially affect our financial position and results of operations.
The current administration has made public statements indicating that it has made international tax reform a priority, and key members of the U.S.
Congress have conducted hearings and proposed a wide variety of potential changes. Certain changes to U.S. tax laws, including limitations on the ability to
defer U.S. taxation on earnings outside of the United States until those earnings are repatriated to the United States, could affect the tax treatment of our foreign
earnings, as well as cash and cash equivalent balances we currently maintain outside of the United States. Due to the large and expanding scale of our
international business activities, any changes in the U.S. taxation of such activities may increase our worldwide effective tax rate and harm our financial position
and results of operations.
The implementation of the CARD Act and similar state and foreign laws may harm our business and results of operations.
Groupons may be considered gift cards, gift certificates, stored value cards or prepaid cards and therefore governed by, among other laws, the CARD Act,
and state laws governing gift cards, stored value cards and coupons. Other foreign jurisdictions have similar laws in place, in particular European jurisdictions
where the European E-
Money Directive regulates the business of electronic money institutions. Many of these laws contain provisions governing the use of gift
cards, gift certificates, stored value cards or prepaid cards, including specific disclosure requirements and prohibitions or limitations on the use of expiration
dates and the imposition of certain fees. For example, if Groupons are subject to the CARD Act and are not included in the exemption for promotional programs,
it is possible that the purchase value, which is the amount equal to the price paid for the Groupon, or the promotional value, which is the add-
on value of the
Groupon in excess of the price paid, or both, may not expire before the later of (i) five years after the date on which the Groupon was issued or the date on which
the customer last loaded funds on the Groupon if the Groupon has a reloadable feature; (ii) the Groupon's stated expiration date (if any); or (iii) a later date
provided by applicable state law. We and several merchant partners with whom we have partnered are currently defendants in 16 purported class actions that
have been filed in federal and state court claiming that Groupons are subject to the CARD Act and various state
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