Amazon's Accounting Practices and Frameworks
Added on 2020-03-16
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FinanceStatistics and Probability
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Contemporary Accounting Final AssignmentTerm 2, 2017MAJOR ASSIGNMENTMarks Worth: 50Student ID:..................................... Student name..............................................................
Major assignment instructionsThis assignment submission link provides a download link for the answer documentyou must useto answer the five questions making up this assignment. This assignmentmustbe submitted by 11:45pm on Friday of Week 12. Therefore, to successfully complete this assessment, you must:1.Download the attached answer document.2.Use this document to answer the five questions that are provided on the answer document.3.Submit the completed answer document by 11:45pm on Friday of Week 12.Please be mindful of the standard TurnItIn behaviour: any submission to TurnItIn after your first submission will take at least 24 hours to run.Amazon case study: Amazon Under FireThe following is a reproduction, with some paraphrasing, of a news article that recently appeared on Forbes.com. It highlights the difficulty corporations face in getting shareholders to reward their growth strategies. You should be aware, as hinted by this article, that although Amazon reports staggering revenue figures, its high cost margins mean that profits, when they are achieved, are relatively small.Amazon under fire: What happens when sales growth isn’t enough?The headline figure in Amazon.com's 2014 second-quarter earnings report looked great — a 23% jump in sales from the prior year, to $19.3 billion — but the underlying figures for the unprofitable online retailer brought out the pessimists on Wall Street.Amazon shares plummeted almost 11%, knocking $3.5 billion off the fortune of founder and CEO Jeff Bezos (now at $29.3 billion), after itlost 27 cents per share, much worse than the consensus estimate of 15 cents. The company’s perpetual lack of interest in turning a consistent profit and declining gross margins — which could fall further given the company’s ambitious investing in new areas — sparkedconcern among the analysts that watch the company.“[Investors] are less patient than before regarding ongoing margin pressure,” wrote Canaccord’s Michael Graham, who rates the stock a hold and dropped his price target to $340 after Thursday’s results.
UBS analyst Eric Sheridan argues that Amazon can keep growing revenue at a 20% annual clip, but that it might not be enough for the market. He thinks investors “will struggle to buy the stock until more gross profit drops to operating income.”...Raymond James’ Aaron Kessler dropped his rating to market perform despite remaining bullish on Amazon’s long-term prospects, mostlybecause he expects shares to be stuck in a trading range “given continued high levels of investment combined with slowing unit growth (especially international growth).”More of the same came from Barclays Capital analyst Paul Vogel. “Amazon has always operated at razor thin margins,” he wrote, “but rapid revenue growth and optimism on long-term margin upside has been able to sustain the stock.” That’s certainly true, as shares have returned almost 700% over the last decade. But Vogel worries that “[w]ith revenue growth decelerating and margins moving in the wrong direction, the stock could be in for a bumpy ride.”...Goldman Sachs’ Heath Terry offered a similar sentiment. Terry noted that the pressure on Amazon margins are “clearly testing investor patience,” but argued that Bezos’ focus on constant investments in areas like grocery deliveries will have a productive endpoint. “We believe, as they have historically, these investments will generate incrementally higher levels of revenue and operating cash flow growth, ultimately driving share price outperformance.”At the moment though, confidence that Bezos knows best isn’t running at an all-time high. With Friday morning’s 10.7% loss to $320.42, shares of Amazon are down nearly 20% for the year (Schaefer 2014).ReferencesSchaefer, S 2014, ‘Amazon Under Fire: What Happens When Sales Growth Isn't Enough?’, forbes.com, accessed August 1, 2014, fromhttp://www.forbes.com/sites/steveschaefer/2014/07/25/amazon-under-fire-what-happens-when-sales-growth-isnt-enough/.Question 1: There are several possible objectives for general purpose financial reporting. Explain what these objectives might be, and which one you think best applies to Amazon’s financial reporting (based on the
information in the case study). Make sure that you fully explain your answer.The main purpose of general purpose reporting framework is to prepare the financial statements in such a manner that it shows the trueand fair view of the company. The general purpose reporting framework has been developed to solve the issues that the company faceswhile preparing these statements and also the problems that are users faces while analysing them for taking important decisions. It isimportant for the companies to follow these standards and make sure that in case of any deviations, they need to provide properexplanation for the same in disclosures that they give for the company. It main objective to make this process of account preparationfree from all kind of errors and mistakes. In case of Amazon also the main objective of the company is to provide proper information tothe users through their financial statements so that they can take proper decision with regard to the company and its various policies.The company is considering making new investments and it is important that the companies must make proper disclosure about thesame in their annual reports. The company must follow all the accounting standards and accounting policies that would help themmaking all the disclosures accurately and very precisely (Kew & Stredwick, 2017). It is seen that on the basis of the same the companyneeds to follow the standard rules and regulations for the preparation of their financial statements and it is important to make sure thatthey are free from all kind of errors. The auditor must also check the same and on the basis of the same give a audit report that is infavour of the company and its accounts. It is helpful for the investors and helps them in taking major decisions with regard to thecompany and its accounts. This is the main purpose of the general purpose reporting framework that they must satisfy the needs of theend users.The general purpose financial declaration is a method for conveying reliable and precise data to clients about revealing an element. Thedocumenting entities are empowered to release their responsibility by giving instruments to their governing bodies and management. It helps in releasing the obligations of revealing elements by arching both at macro and the micro-economic degree. Another goal of general intention of financial reporting is to serve the necessities of the shareholders of documenting the entities like the probable investors, lenders, creditors with applicable financial data that would help them in the process of making decisions. It gives stage to surveying the prospects of elements for their future net cash flow and whether the administering management are adequately and
proficiently supervised. The general intention of financial documentation is coordinated principally taken into account for the investors, creditors and lenders and their goal is to give important financial data. The financial data about the documenting elements, for instance any claim against them and any economic assets are given through such reporting models. The impact in the exchange and any impact of transformationsin claims and economic resources are given out. Helpful information are given through such data that help the investors in the process of decision making. From the assessment of the case study of Amazon, it was explained that incorporable aims according to the general intention elements are associated to their financial performance. The current marginal pressure of Amazon is influencing the investors. The investors try to get the data about the company whether the positive cash flow are generated during the functions of the business and functioning profitably. This is so since decisions of the investors about anticipated cash flow is related with the investors, business vulnerabilities and entities. In this manner, Amazon is required to implement the general purpose objective with an aim of disclosing precise financial data to the investors. Financial statements of Amazon should consolidate applicable money related data and actual materials are to be perused with the financial reporting that are to be conveyed to the investors of the firm.
References:Kew, J. & Stredwick, J., 2017. Business Environment: Managing in a Strategic Context. second ed. London: Chartered Institute of Personnel and Development.Marker’s Comments: The marker will provide feedback here.Mark (10):0Exceeds Expectations(High Distinction) 85-100%Exceeds Expectations (Distinction) 75 - 84%Meets Expectations (Credit) 65 – 74%Meets Expectations (Pass) 50 – 64%Below Expectations (Fail) below 50%Demonstrates a balanced and veryhigh level of detailed knowledge of core concepts by providing a very high level of analysis. Utilises current, appropriate and credible sources.Demonstrates a balanced and highlevel of knowledge of core concepts by providing a high level of analysis. Utilises mostly current, appropriate and credible sources.Demonstrates a good level of knowledge of some of the core concepts by providing some level of analysis. Utilises some current, appropriate and credible sources.Demonstrates limited knowledge ofcore concepts by providing a limited level of analysis. Utilises few current, appropriate and credible sources.Demonstrates little, if any, knowledge of the core concepts with extremely limited, if any, analysis. Utilises little, if any, current, appropriate and credible sources.Quality of writing at a very high standard. Paragraphs are coherently connected to each other. Correct grammar, spelling and punctuation.Quality of writing is of a high standard. Paragraphs are mostly well structured. Few grammar, spelling and punctuation mistakes.Quality of writing is of a good standard. Few grammar, spelling and punctuation mistakes.Some problems with sentence structure and presentation Frequent grammar, punctuation and spelling mistakes. Use of inappropriate language.Quality of writing is at a very poor standard so barely understandable. Many spelling mistakes. Little or no evidence of proof reading.The assessment presents a detailed and focused summary of the ideas presented; drawing clear and well thought-out conclusions.The assessment presents a fairly detailed and focused summary of the ideas presented; drawing fairly clear and well thought-out conclusions.The assessment presents a somewhat detailed and focused summary of the ideas presented; providing some evidence of conclusions.The assessment provides limited detail with no clear summary of theideas presented; drawing limited conclusions.The assessment fails to provide any clear evidence of the ideas presented; drawing no clear conclusions.
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