Carrie Melendez
Financial Reporting II
May 2016 Financial Reporting Series Portfolio: Amazon
In 1995, owner and CEO of Amazon.com, Jeff Bezos, started his firm with the purpose of
selling books online. However, the intention for future business growth was to expand this
business in the world of e-commerce where all products from different retailers would be
available to Amazon consumers. Fast forward just over twenty years and now Amazon.com is
regarded as the juggernaut of the online retail world, and even makes it a tough competitor for
many brick and motor locations like Wal-Mart or Sears. While Amazon’s current share value is
valued at $560 per share, Amazon’s initial share value was not close to the value estimated today.
Stockholders’ Equity
According to an interview Jeff Bezos had with the Academy of Achievement, he obtained
the initial start-up capital primary from his parents, who “invested a large fraction of their life
savings”[Jef011] even though the Internet was still relatively new and his parents didn’t know
how it worked or was it was. Jeff added that “there was a 70 percent chance that they would lose
their whole investment, which was a few hundred thousand dollars, and they did it anyway… I
was giving myself triple the normal odds, because really, if you look at the odds of a start-up
company succeeding at all, it's only about ten percent. Here I was, giving myself a 30 percent
chance.”[Jef011]
Along with the initial start-up capital invested by Jeff Bezos’ parents, Amazon also
proceeded to gain large investments throughout its beginning years. It had raised about $8
Million from Kleiner Perkins Caufield & Byers in 1995. Then in 1997 Amazon became a publicly traded company to raise additional capital. Their initial public offer for a share was set
at $18.00 and the IPA raised $54 Million for Amazon.[Daw97] From the time Amazon became a
publicly traded company, its stock worth grew and a majority of their investors, especially
Kleiner Perkins Caufield & Byers received over 55% return on their investment. [htt]
When reviewing the stockholders’ equity on a company’s balance sheet, it is important to
take in all the different parts of the equity to know how a company is doing as a whole as well as
how it is doing amongst its competitors. In looking at Amazon in comparison to its e-commerce
competitors, EBay and Overstock.com, over the last couple of years, they appear to be in the lead
in some aspects of their equity, and lagging in others. This last fiscal year has shown that
Amazon’s total stockholders’ equity was at $13,384,000. They had gained over $2.5 Million
from the total stockholders’ equity in 2014 and over $3.6 Million compared to the total
stockholders’ equity from 2013. Amazon was also able to increase their retained earnings
between 2014 and 2015 by $596,000. [Goo162]
While Amazon done fairly well over the last couple years in relation to their
stockholders’ equity, one of their competitors, EBay saw a drastic decline between 2014 and
2015 by approximately $13.2 Million, while in their previous years they had consistently kept
their stockholders’ equity around $19.5 Million. It appears EBay lost much of their stockholders’
equity in relation to their retained earnings, which was only at $7.7 Million in 2015 when in all
previous years it maintained their retained earnings in the $19.5 Million range.[Goo161]
In comparing another similar competitor to Amazon, Overstock.com has been showing a
steady growth in the stockholders’ equity over the years. While it may not be as profitable as
Amazon, they have still been able to grow their total stockholders’ equity by about $1.27 Million
between 2014 and 2015, and by $17 Million since 2013. Unlike EBay and Amazon, Overstock has not been able to get their retrained earnings out of the red, and it appears that it has actually
moved farther into the red over the three years by almost $16,963. [Goo16] It is possible that
Amazon and EBay had a better head start in gaining a strong hold in their stockholders’ equity
because the internet market was still fresh in 1997 and 1998 compared to when Overstock
entered the market in 2002.
In searching for information on Amazon’s dividend policy, it was discovered that
Amazon is one of the top ten stocks available on the market that do not offer dividend payments
to their shareholders. Amazon’s competitor, EBay, as well as other major companies like Google
and Apple, also do not offer dividend payouts to their shareholders.[Tom11]
Income Measurement/Revenue Recognition
IAS, also known as the International Accounting Standards, was first created in 1973 by
the International Accounting Standards Committee (IASC) and then in 2001 it was taken over by
Comments
Content
Carrie Melendez
Financial Reporting II
May 2016 Financial Reporting Series Portfolio: Amazon
In 1995, owner and CEO of Amazon.com, Jeff Bezos, started his firm with the purpose of
selling books online. However, the intention for future business growth was to expand this
business in the world of e-commerce where all products from different retailers would be
available to Amazon consumers. Fast forward just over twenty years and now Amazon.com is
regarded as the juggernaut of the online retail world, and even makes it a tough competitor for
many brick and motor locations like Wal-Mart or Sears. While Amazon’s current share value is
valued at $560 per share, Amazon’s initial share value was not close to the value estimated today.
Stockholders’ Equity
According to an interview Jeff Bezos had with the Academy of Achievement, he obtained
the initial start-up capital primary from his parents, who “invested a large fraction of their life
savings”[Jef011] even though the Internet was still relatively new and his parents didn’t know
how it worked or was it was. Jeff added that “there was a 70 percent chance that they would lose
their whole investment, which was a few hundred thousand dollars, and they did it anyway… I
was giving myself triple the normal odds, because really, if you look at the odds of a start-up
company succeeding at all, it's only about ten percent. Here I was, giving myself a 30 percent
chance.”[Jef011]
Along with the initial start-up capital invested by Jeff Bezos’ parents, Amazon also
proceeded to gain large investments throughout its beginning years. It had raised about $8
Million from Kleiner Perkins Caufield & Byers in 1995. Then in 1997 Amazon became a publicly traded company to raise additional capital. Their initial public offer for a share was set
at $18.00 and the IPA raised $54 Million for Amazon.[Daw97] From the time Amazon became a
publicly traded company, its stock worth grew and a majority of their investors, especially
Kleiner Perkins Caufield & Byers received over 55% return on their investment. [htt]
When reviewing the stockholders’ equity on a company’s balance sheet, it is important to
take in all the different parts of the equity to know how a company is doing as a whole as well as
how it is doing amongst its competitors. In looking at Amazon in comparison to its e-commerce
competitors, EBay and Overstock.com, over the last couple of years, they appear to be in the lead
in some aspects of their equity, and lagging in others. This last fiscal year has shown that
Amazon’s total stockholders’ equity was at $13,384,000. They had gained over $2.5 Million
from the total stockholders’ equity in 2014 and over $3.6 Million compared to the total
stockholders’ equity from 2013. Amazon was also able to increase their retained earnings
between 2014 and 2015 by $596,000. [Goo162]
While Amazon done fairly well over the last couple years in relation to their
stockholders’ equity, one of their competitors, EBay saw a drastic decline between 2014 and
2015 by approximately $13.2 Million, while in their previous years they had consistently kept
their stockholders’ equity around $19.5 Million. It appears EBay lost much of their stockholders’
equity in relation to their retained earnings, which was only at $7.7 Million in 2015 when in all
previous years it maintained their retained earnings in the $19.5 Million range.[Goo161]
In comparing another similar competitor to Amazon, Overstock.com has been showing a
steady growth in the stockholders’ equity over the years. While it may not be as profitable as
Amazon, they have still been able to grow their total stockholders’ equity by about $1.27 Million
between 2014 and 2015, and by $17 Million since 2013. Unlike EBay and Amazon, Overstock has not been able to get their retrained earnings out of the red, and it appears that it has actually
moved farther into the red over the three years by almost $16,963. [Goo16] It is possible that
Amazon and EBay had a better head start in gaining a strong hold in their stockholders’ equity
because the internet market was still fresh in 1997 and 1998 compared to when Overstock
entered the market in 2002.
In searching for information on Amazon’s dividend policy, it was discovered that
Amazon is one of the top ten stocks available on the market that do not offer dividend payments
to their shareholders. Amazon’s competitor, EBay, as well as other major companies like Google
and Apple, also do not offer dividend payouts to their shareholders.[Tom11]
Income Measurement/Revenue Recognition
IAS, also known as the International Accounting Standards, was first created in 1973 by
the International Accounting Standards Committee (IASC) and then in 2001 it was taken over by