Ironically, GAAP numbers are easier to game than what Groupon is reporting. For example, if Groupon were to slash their marketing budget in order to meet their earnings estimates, you'd see better net income but a minimal change in CSOI.
It's just strange for this to be so controversial.
"if Groupon were to slash their marketing budget in order to meet their earnings estimates, you'd see better net income"
Accounting is supposed to be about measuring things that are more tangible to act as a reality check against projections and optimism. It's supposed to be about where the company is at now and where it's been in the past -- not just for potential investors, but for current investors who might want to compare against their previous projections. Predicting the future is left as an exercise for the reader.
Marketing expenditures, particularly for new companies in new markets, are based on projections. If Groupon is trying to attract investors based on its current profits, then slashing the marketing budget might be a reasonable course of action. But I doubt it is; they are trying to attract investors based on its potential for profits in the future, and part of that growth story involves spending a lot on marketing. With that in mind, slashing their marketing budget (or for that matter, pretty much any other part of their budget) would not make any sense, and would likely turn off investors (even if unsophisticated).
If everybody is so familiar with GAAP, the SEC's case is much weaker. They're arguing that investors will be too unsophisticated to differentiate between this new, weird accounting measure and the usual standards.
It's just strange for this to be so controversial.