![]() ![]() This is likely advantageous to Best Buy as they can have more flexibility with how they capitalize costs and may be able to use this flexible to manage earnings.Īmazon’s revenue recognition policy is as follows: revenue is only recognized from product sales or services rendered when there is evidence of a sale arrangement, the product has been delivered or the service has been provided, the selling price is fixed, and the funds are reasonably likely to be collected. Best Buy lists broad categories with broad ranges while Amazon is very specific. Overall, my takeaway is that Amazon has a much more defined life for long term than Best Buy. AMZ uses 10 years for heavy equipment while BB uses the same 2-15 year flexible period. Amazon uses 5 years for furniture and fixtures, while BB uses 2-15 for fixtures and equipment. Amazon uses 3 years for servers while BB uses 2-15 years. The only real red flag I could think of is that Amazon uses 2 years of life for software, compared to 2-7 years for Best Buy. Income statement quality seemed quite good, and asset quality was as well. There were not many red flags concerning Amazon’s accounting quality. In addition, we believe granting stock-based compensation to employees at all levels across the Company results in motivated, customer-centric people who think and act like owners because they are owners.” Clearly manipulating numbers to make this stock-based compensation more valuable is in the best interests of managers whose compensation follows this plan. According to the Proxy Statement from the 2018 Annual Shareholder’s Meeting, Amazon states that “under our compensation philosophy, we have prioritized stock-based compensation that vests over an extended period of time. That being said, employees with stock options would stand to gain more from an increase in the value of their stock options.įor similar reasons, I also believe that Amazon managers have an incentive to manipulate accounting numbers to influence executive compensation. According to the plan, limits are only set on the number of shares that can be issued as employee compensation, not on the dollar value of said shares. I believe that Amazon managers have an incentive to manipulate accounting numbers to influence stock price after reading the stock compensation plan attached to the 10k. The report will dive into four main areas of intrigue:īy examining these four different parts of Amazon’s business, I will be able to offer a strong recommendation to buy Amazon due to near 100% upside. ![]() This report provides an in-depth analysis of Amazon. ![]()
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