Groupon 2011 Annual Report Download - page 77

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GROUPON, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. DESCRIPTION OF BUSINESS
Groupon, Inc., together with the subsidiaries through which it conducts business (the "Company"), is a local commerce marketplace (www.groupon.com)
that connects merchant partners to consumers by offering goods and services at a discount. The Company, which commenced operations in October 2008,
creates a new way for local merchants to attract customers, while providing consumers with savings and helping them discover what to do, eat, see and buy in the
places they live and work. Each day, the Company emails its subscribers with discounted offers for goods and services that are targeted by location and personal
preferences. Consumers also access deals directly through the Company's website and mobile application.
The Company, based in Chicago, Illinois, was founded by Andrew D. Mason, the Company's CEO, Eric P. Lefkofsky, the Company's Executive Chairman,
and Bradley A. Keywell, one of the Company's directors, evolved from a business they founded called The Point (www.thepoint.com), which is a web platform
that enables users to promote collective action in support of social, educational and other causes. The Point originally was established as a limited liability
company ("ThePoint"). Effective January 15, 2008, The Point converted its legal form to a corporation organized and existing under the General Corporation
Law of the State of Delaware, and merged with and into ThePoint.com, a newly-
established corporation ("ThePoint.com"). ThePoint.com subsequently changed
its legal name to Groupon, Inc.
The Company has organized its operations into two principal segments: North America and International. See Note 14 " Segment Information. "
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The consolidated financial statements include the accounts of the Company and its subsidiaries. All intercompany accounts and transactions have been
eliminated in consolidation. The Company's consolidated financial statements were prepared in accordance with United States generally accepted accounting
principles (“U.S. GAAP”) and include the assets, liabilities, revenues and expenses of all wholly1owned subsidiaries and majority1
owned subsidiaries over
which the Company exercises control and variable interest entities for which the Company has determined it is the primary beneficiary. Outside stockholders'
interests in subsidiaries are shown in the consolidated financial statements as “Noncontrolling interests.”
Investments in entities in which the Company does not
have a controlling financial interest are accounted for under either the equity method or cost method of accounting, as appropriate.
Use of Estimates
The preparation of financial statements in conformity with U.S. GAAP requires estimates and assumptions that affect the reported amounts and
classifications of assets and liabilities, revenues and expenses, and the related disclosures of contingent liabilities in the consolidated financial statements and
accompanying notes. Estimates are utilized for, but not limited to, stock1
based compensation, income taxes, valuation of acquired goodwill and intangible
assets, customer refunds, contingent liabilities and the depreciable lives of fixed assets. Actual results could differ materially from those estimates.
Cash and Cash Equivalents
The Company considers all highly1
liquid investments with an original maturity of three months or less from the date of purchase to be cash equivalents.
Cash equivalents are carried at cost, which approximates market value. The Company's cash equivalents primarily include holdings in money market funds and
overnight securities.
Restricted Cash
The Company had $0.3 million and $0.2 million of restricted cash recorded in prepaid expenses and other current assets and other non-
currents assets,
respectively, at December 31, 2010. The Company had $12.1 million and $0.7
million of restricted cash recorded in prepaid expenses and other current assets
and other non-currents assets, respectively, at December 31, 2011. The carrying value of restricted cash approximates fair value.
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