In its SEC filing, Groupon said it sets aside a refund reserve by applying a financial model based on refund patterns from previous deals. The problem with this approach was that refund behavior started changing in late 2011 as the company introduced higher-priced deals, which required commensurately higher refund payouts when customers requested returns. Groupon was still modeling the size of its allowance on lower-priced deals.

via Groupon reveals lower revenue, admits internal controls ‘weakness’ – chicagotribune.com.