ACC100 discussion question

W6DQ_Amazon.pdf

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USD $ in millions

Analysis of Inventory Dif�culty: Advanced

Inventory Accounting Policy

Inventories, consisting of products available for sale, are primarily accounted for using the �rst-in, �rst-out method, and are valued at the lower

of cost and net realizable value. This valuation requires Amazon.com to make judgments, based on currently available information, about the

likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected

recoverable values of each disposition category.

Amazon.com provides Ful�llment by Amazon services in connection with certain of the sellers' programs. Third-party sellers maintain

ownership of their inventory, regardless of whether ful�llment is provided by Amazon.com or the third-party sellers, and therefore these

products are not included in the inventories.

Amazon.com also purchases electronic device components from a variety of suppliers and uses several contract manufacturers to provide

manufacturing services for the products. During the normal course of business, in order to manage manufacturing lead times and help ensure

adequate supply, Amazon.com enters into agreements with contract manufacturers and suppliers for certain electronic device components. A

portion of Amazon.com's reported purchase commitments arising from these agreements consists of �rm, non-cancellable commitments. These

commitments are based on forecasted customer demand. If Amazon.com reduces these commitments, Amazon.com may incur additional costs.

Amazon.com also has �rm, non-cancellable commitments for certain products offered in the Whole Foods Market stores.

Source: Amazon.com Inc., Annual Report

Inventory Disclosure

Amazon.com Inc., Statement of Financial Position, Inventory

Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013

Inventories 16,047 11,461 10,243 8,299 7,411

Source: Based on data from Amazon.com Inc. Annual Reports

Item Description The company

Inventories Carrying amount (lower of cost or market) as of

the balance sheet date of inventories less all

valuation and other allowances. Excludes

noncurrent inventory balances (expected to

remain on hand past one year or one operating

cycle, if longer).

Amazon.com Inc.'s inventories increased from

2015 to 2016 and from 2016 to 2017.

Amazon.com Inc. (AMZN)

Inventory Accounting Policy

Inventory Disclosure

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