My chosen company is Amazon, and their stock ticker is AMZN on Nasdaq. The
company was founded in July 1994 in Seattle by Jeff Bezos, who started the company after
leaving his Wall Street job. They are an e-commerce retailer with additional entities
including tv and music streaming, web services, grocery stores, e-readers and tablets, and
prescription drug delivery. They have two headquarters - one in Seattle and one in
Arlington, VA.
Property and Equipment are recorded on the balance sheet following this procedure:
"Property and equipment are stated at cost less accumulated depreciation and amortization.
Incentives that we receive from property and equipment vendors are recorded as a
reduction to our costs.Property includes buildings and land that we own, along with
property we have acquired under build-to-suit lease arrangements when we have control
over the building during the construction period and finance lease arrangements.
Equipment includes assets such as servers and networking equipment, heavy equipment,
and other fulfillment equipment. Depreciation and amortization is recorded on a straight-
line basis over the estimated useful lives of the assets (generally the lesser of40years or
the remaining life of the underlying building,three yearsprior to January 1, 2020 andfour
yearssubsequent to January 1, 2020 for our servers,five yearsfor networking
equipment,ten yearsfor heavy equipment, andthreetoten years for other fulfillment
equipment). Depreciation and amortization expense is classified within the corresponding
operating expense categories on our consolidated statements of operations. “ (SEC.gov,
2021). The straight-line method based on the useful life of the property and equipment is
the way to go for depreciation purposes. The IRS assumes a five-year life on computer
equipment as it’s usually obsolete after that time, but buildings and land are clearly going
to be useful and in service for far longer. If Amazon were to depreciate their networking
equipment over a life that exceeds its estimated probable service life, this would create an
automatic salvage value. The same would be true if Amazon were to use a declining
balance method of depreciation. (Levy, 2016).
References
Levy, H. (2016, September). Depreciable asset lives – the forgotten estimate in GAAP.
The CPA Journal. https://www.cpajournal.com/2016/09/08/depreciable-asset-lives/
SEC.gov. (2022, February 4).
https://www.sec.gov/ix?doc=/Archives/edgar/data/1018724/000101872422000005/
amzn-20211231.htm
