Accounting AMAZON PDF

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Analysis of Amazon's financial statements ...

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Introduction

Part 1 · Selecting a company We chose this company because it is a company that is contemporary to our times, it has been the prove of the success in the new branch of the business that is the online business or e-commerce, it is a great company that operate in cooperation with many industries like electronic companies, consumer staples, department stores, high-end department stores, food delivery business, book stores, grocery stores, health care companies, independent sellers, being the third party between de seller and the buyer, as we already know it is one of the principal online stores and it operate in many countries. In this investigation we are interested in knowing the financial process of evolution of the company since the beginning of the company as pioneers in the industry to these days that has an extraordinary expansion in the way of selling and with the collaboration with other stores and industries. Actually according to Independent’s website, Amazon’s profits surged past Wall Street predictions for the first quarter of 2018, pushing company shares to an all-time high., being this an interesting point for the analysis of its financial situation. Also we decided to analyze Amazon because it took us by surprise that its CEO Jeff Bezos was ranked one of the richest persons on the world.

Part 2 Company Background 1. Company's name, postal address and internet address: Amazon.com, Amazon, 2121 7th Avenue Seattle, Washington 2. The year in which Amazon was founded and the state in which it is incorporated: Company based in Seattle, Washington that was founded by Jeff Bezos on July 5, 1994. 3.

The company's independent audit firm:

Ernst & Young has been the external audit firm since 1998 4. The company's primary lines of business: The Company operates through three segments: North America, International and Amazon Web Services (AWS). The Company's products include merchandise and

content that it purchases for resale from vendors and those offered by third-party sellers. It also manufactures and sells electronic devices.

5. Size of the company, accompanied by an explanation of the company characteristics that provide a measure of its size The Company's North America segment primarily consists of retail sales of consumer products (including from sellers) and subscriptions through North America-focused Websites, such as www.amazon.com, www.amazon.ca and www.amazon.com.mx. The North America segment includes export sales from its North America-focused Websites. The International segment primarily consists of retail sales of consumer products (including from sellers) and subscriptions through internationally-focused Websites, such as www.amazon.com.au, www.amazon.com.br, www.amazon.cn, www.amazon.fr, www.amazon.de, www.amazon.in, www.amazon.it, www.amazon.co.jp, www.amazon.nl, www.amazon.es and www.amazon.co.uk. The International segment includes export sales from these internationally-focused Websites (including export sales from these sites to customers in the United States, Mexico and Canada). The AWS segment consists of sales of compute, storage, database, and other service offerings for start-ups, enterprises, government agencies and academic institutions.

6. The ticker symbol for Amazon and the stock exchange on which its shares are listed The ticker symbol is AMZN, and it is listed in NASDAQ 100, S&P COMPOSITE 100, S&P 500

Membership of the company's Board of Directors, · Name

Current Position

Jeffrey Bezos Chairman of the Board, President, Chief Executive Officer Brian Olsavsky

Chief Financial Officer, Senior Vice President

Andrew Jassy Chief Executive Officer of Amazon Web Services Jeffrey Wilke

Chief Executive Officer - Worldwide Consumer

David

Senior Vice President, General Counsel, Secretary

Zapolsky Jeffrey Blackburn

Senior Vice President - Business Development

Shelley Reynolds

Vice President, Worldwide Controller, Principal Accounting Officer

Patricia Stonesifer

Lead Independent Director

Tom Alberg

Independent Director

John Brown

Independent Director

Jamie Gorelick

Independent Director

Daniel Huttenlocher

Independent Director

Judith McGrath

Independent Director

Jonathan Rubinstein

Independent Director

Thomas Ryder Independent Director Wendell Weeks

Independent Director

Part 3: Overview of the annual report 1. Inside the Amazon’s annual report we could locate the different six sections mentioned in the guide, the only deviation is presented in the financial highlights were instead of a summary of 10 years or more, there is just presented a summary of the last 5 years since the year 2013 to 2017, all the rest of the section are distributed along the annual report with the same characteristics as described before.

2. Review from the most recent year-end balance sheet of the company : o

The amount of total current assets: $60,197,000,000 (increase)

o

The amount of total non-current assets: $71,113,000,000 (increase)

o

The amount of total current liabilities: $57,883,000,000 (increase)

o

The amount of total non-current liabilities: $45,718,000,000 (increase)

o

The amount of total stockholders' equity: $27,709,000,000 (increase)

3. Review from the most recent year's income statement: o

Total (operating) revenues: Increase

o

Cost of goods sold: Increase

o

Total expenses (before income taxes): Increase

o

Any non-operating (or extraordinary) gains and losses: Increase

o

Earnings per common share: Increase

4. Review from the statement of cash flows for the most recent year: o

The company uses the direct method of presenting the cash flow statement.

o

Net cash inflow (outflow) from operating activities: Increase

o

Net cash inflow (outflow) from financing activities: Increase

o

Net cash inflow (outflow) from investing activities: Increase

o

Net increase (decrease) in cash during the year. Increase

By these analysis we can can observe that the company had a general increase

Part 4: The Business Environment 1. Find and read two recent articles about your company. Write a short summary (100-150 words) of each article, and briefly explain what you learned from the article about the company's business environment. Be sure to provide a reference citation for each article. In the article published 2 may, 2018 in “El Financiero” called “Amazon analyzes to offer discounts to expand system of payment” talks about how the retail company proposes to reduce the pay in the payment system to the merchants. It means that Amazon is willing to reduce the rentability of its payment system for the purpose of extent its use. The article mention the business of a credit card and the commissions that it gives, according to the article a typical transaction with a credit card represents the 2% in the finance sector. According to a person to so much of the matter said: “The merchants online that were using Amazon's service were paying approximately 2.9 per cent of every transaction with credit card more 30 cents, which were distributed between the company, the issuers of the cards and the networks of payment. As part of the experiment of reduce the payments system, Amazon offers to negotiate lower commissions with the merchants who assume long-term commitments to use the service”. According to a person to so much of the matter. Amazon can export the commissions that it has negotiated with the banks and the networks of payment because, as PayPal, it acts as a facilitator of payments. It means that it joins smaller merchants the cost to help to lower them of accepting electronic payments. From this article we learned that Amazon is always in constant change, as the founder says he is so worried about what the consumers want even if they do not know what they want; this is a new opportunity for the company to have more consumers and obviously high profits; also about the business environment we consider that Amazon is taking advantage offering all kind of products and is helpful to avoid to go the the mall/supermarket. With its payment system it is even more attractive to the consumers, and with this propose we think that their sales will be even higher than now. In the second article that was published recently (6 may, 2018) “How Amazon Plans To Dominate The Private Label Market” gives us the new perspective of Amazon, as the leader in the specialty retail, now is trying with the dog dry food because the 68% of american people who owns a pet seems as a good market. Another mentioned point is that this new label brand is private and the consumers prefer it because it is cheaper than the national brands. According to the article “Amazon is getting into pet products in a serious way after its AmazonBasics line of pet carriers and beds generated some $2m in sales last year, according to a report by One Click Reta il. Now Wag dog food

joins the party in the estimate $30b pet food market, which accounts for the largest share of the $72.1b Americans spent on their pets last year. Wag dog food competes in the premium dog food segment, with meat being its primary ingredient and lentils added as binder instead of grains, as is typical in mass brands. Priced at $44.99 for a 30 lb. bag, it undercuts the price of Blue Wilderness brand, another meat-first, grain-free line, which sells for $49.99 for a 24 lb. bag on Amazon. Both brands are delivered via Prime”. In our opinion; the company is taking presence slowly in almost all the industries of the market, it offers a vast quantity of different products that are in our hands with a click. Amazon gives to itself the opportunity to try to enter in different markets, taking in reference the profits. The business environment for us, seems to have online all the products that as consumers we need, implementing if is necessary its own brand like in this case; a key point that is true is that as consumers we are almost looking to obtain the best price, the best offer or the best product at the best price; and if the company create its own products with the same or high quality than the national at a lower price, it will definitely change the market and change the way we consume.

Part 5: The Auditors 1. Using both library and electronic resources, do research on the accounting firm that audits your company. Find and document the following: ➢ The name of your company's auditors (accounting firm), and the city in which the audit opinion was signed. Ernst & Young LLP Seattle, Washington ➢ The size of the accounting firm [uses multiple measures, indicate the source(s) of your data, and briefly explain why you chose each measure]. Ernst and Young LLP is a global leader in assurance, tax, transaction and advisory services. The insights and quality services that deliver help build trust and confidence in the capital markets and in economies the world over. They develop outstanding leaders who team to deliver on their promises to all of their stakeholders. In so doing, they play a critical role in building a better working world for their people, for their clients and for their communities. According to its official page ey.com the accounting firm says “EY refers to the global organization, and may refer to one or more, of the member firms of Ernst & Young Global Limited, each of which is a separate legal entity. Ernst & Young Global Limited, a UK company limited by guarantee, does not provide services to clients”.

In addition, an article published the 4 December, 2017 called “EY named Best Accounting Firm and Best Overall Advisory Firm at HFM US Hedge Fund Services Awards” said that “EY is a leader in serving the global financial services marketplace”. Also described the Public Accounting Firm, where said that nearly 51,000 EY financial services professionals around the world provide integrated assurance, tax, transaction and advisory services to their asset management, banking, capital markets and insurance clients. In the Americas, EY is the only public accounting organization with a separate business unit dedicated to the financial services marketplace. Created

in

2000, the Americas Financial

Services

Organization today includes more than 11,000 professionals at member firms in over 50 locations throughout the US, the Caribbean and Latin America. EY professionals in their financial services practices worldwide align with key global industry groups, including EY’s Global Wealth & Asset Management Center, Global Banking & Capital Markets Center, Global Insurance Center and Global Private Equity Center, which act as hubs for sharing industry-focused knowledge on current and emerging trends and regulations in order to help their clients address key issues. Their practitioners span many disciplines and provide a well-rounded understanding of business issues and challenges, as well as integrated services to their clients. With a global presence and industry-focused advice, EY’s financial services professionals provide high-quality assurance, tax, transaction and advisory services, including operations, process improvement, risk and technology, to financial services companies worldwide. Talking about the measures, in another article called EY reports strong global revenue growth in 2017, published 5 september, 2017; showed a wide measures about the performance of the company at the end of 2017. EY announced combined global revenues of US$31.4b for the financial year ended 30 June 2017. Overall, financial year (FY) 2017 revenue grew by 7.8% in local currency (versus FY16). All EY service lines delivered strong growth in FY17: Assurance grew 4%; Advisory 10.4%; Tax 7.9% and Transaction Advisory Services (TAS) 15.5%. With the launch of its Vision 2020 plan in 2013, EY has been on a journey to adapt and transform to respond to the trends shaping the world: globalization and the rise of the emerging markets; demographic shifts; advancing technology; and increased

regulation. Since the Vision 2020 launch, EY has recorded strong 8.8% compound annual growth. We choose these measures because the company has a grew in almost all of their specialized areas as advisory, Tax (7.9%) and Transaction Advisory Services and a grew in revenue in local currency (7.85%) and assurance (4%), we can affirm that is true that the EY company is the leader in serving the global financial services, this grew in those areas it is the result of a digital transformation, the strategic acquisitions expanded its professional skills and capabilities particularly in the areas of RPA, digital, cyber, analytics, supply chain, digital tax administration and strategy. An interesting increase is in headcount by a 7.3% it is an important percentage where its approach is to talent development and giving more people the opportunity to develop “hot” skills, particularly as it introduces more robotics and AI. The company try to build a better working world, we consider this continued growth across geographies another strong growth is in the geographic area achieved strong growth, with Asia-Pacific achieving the highest growth rate of 11.3%. Europe, Middle East, India and Africa (EMEIA) achieved 8.6%; the Americas 7%; while Japan was marginally down by 2% over FY16. At the end, we choose this percentages to emphasize the importance of the technology in a company and how an investment in it can give us better results in our performance, we have to be in constant change, adapting us to the necessities of the clients and the world. 2. Read two recent articles about this audit firm. Then write a short summary (100150 words) of each and indicate what you learned about the audit firm and the public accounting profession from reading it. Be sure to include a complete reference citation for each article. In the first article called “EY receives 2018 SAP® Pinnacle Award for Customers’ Choice Partner of the Year” that was published in 2 may, 201. The article share the announce that EY has received the 2018 SAP Pinnacle Award as the Customer's’ Choice Partner of the Year, it is known that this enterprise is the leader in its market, and it has been recognized for provide an improve their operational performance, it has won because has demonstrated to deliver results in using industry innovation to transform their businesses. Tim Fuller, EY Global SAP Go-to-Market Leader, said “We are honored to receive the SAP Pinnacle Award for the fifth consecutive year. These accolades reflect the commitment and drive of our consultants and technology professionals to deliver innovative and exceptional client service, including leveraging the EY wavespace™ network of global growth and innovation centers – through which we collaborate with

clients to help transform their businesses. These citations further underline the strategic importance of EY SAP services as a growth engine in our Advisory practices and beyond.” We consider that this audit company it is very developed; it has received this award for 5 years, and the constant innovation permits it to adapt to the necessities of their customers. We find EY useful and for us is surprisingly that even this kind of enterprises that are for audit, need to create innovations to transform the business. The article 2, called “Signature of Financial Services ERNST and YOUNG Develops Application to Audit BlockChain” published 26 april, 2018 that talks about the recent pilot test that the enterprise will do of the BlockChain Analyzer, it consists in a tool to audit different blockchains, this with the purpose of give a complete service to the clients or customers who use the Distributed Ledger Technology (DLT). with this tool the auditors can carry out a detailed examination of the information or to realize a conciliation of the transactions. Paul Brody, global leader in innovation of blockchain in EY; expressed: “To understand the foreign exchange offices and the criptomonedas is the first step to establish our capacity of development of tools that allow us to analyze diverse business contracts based in blockchain. EY Blockchain Analyzer will be used by the auditor to examine the transactions that are executed in a blockchain and this way to supply the major client comprehension of the financial functions”. In this article, told us about how the enterprise is creating tools to make easy the way of they developed their work and to reduce the margin of error in blockchain. We think that this is why this enterprise is the leader in its market; it is worried for innovate, for give the best service to its consumers, and trying to improve their tools and ways of work. They do the best. Part 6: Industry Background 1. Do research on the industry in which your company operates. If it does business in more than one industry, study at least the major industry in which it operates. Nowadays Amazon is part of a vast kind of industries; but it operates the retail industry or online shopping, but it is specialized in the retail (Nowadays; it is changing the retail industry). 2. Based on your research, write a synopsis (approx. 500-750 words) about the major trends and developments that are occurring the industry. Be sure to cite the source(s) you used to get this information.

The industry of retail is changing, definitely it does; according to the research in the past, it was the retailer who determined what a customer should want to buy and how they should shop. Today, it’s the customer who is defining the shopping experience. Walter Loeb from the article “This Is What The Retail Industry Is Talking About Now” ...