Running head: FINANCIAL STATEMENT DISCLOSURES 1

Financial Statement Disclosures

Student’s Name

Institutional Affiliation
FINANCIAL STATEMENT DISCLOSURES 2

Financial statement footnotes relates to additional information which is attached to

companies’ annual reports to help in explaining how the figures revealed at financial statements

are arrived at. To facilitate analysis of financial statement disclosures, Amazon.com Inc. was

selected. The notes included to its published financial statements for the year ending 31

December 2018 include the business description and accounting principles adopted during

preparation of reports; analysis of restricted cash, marketable securities, cash and cash

equivalents; property and equipment; goodwill, acquisitions and intangible assets acquisitions;

debt and other long-term liabilities analysis; contingencies and commitments; analysis of equity

stockholders; Income taxes; segment information and quarterly results (Amazon Annual Report,

2019).

Included in its consolidated financial statement is Amazon’s wholly-owned subsidiaries,

accounts of Amazon.com and the companies which primarily benefit from the entity.

Intercompany transactions and balances are eliminated in preparation of consolidated financial

statements. Amazon.com financial reports prepared in accordance with Generally Accepted

Accounting Principles which requires various assumptions and estimates which in turn affects

the amounts of revenues, expenses, liabilities and assets reported. Various estimates were made

in respect to goodwill and acquired intangible assets valuations, income taxes, and valuation of

inventory, contingencies and commitments among others.

Amazon.com financial reports footnotes also include their revenue generating activities

which include retailing, third party selling, sales of advertising services and subscription

services. Included in the reports of the Amazon.com was restriction or rather pledges of their

marketable securities, cash and cash equivalents as security for leased property. The presentation

of gross property and equipment amortization and accumulated depreciation was revised to take
FINANCIAL STATEMENT DISCLOSURES 3

account of in-service property and equipment as well as fully depreciated equipment. The useful

life 2016, 2017 and 2018 acquired intangible assets ranged from 1 to 7 years. Included in the

goodwill is the Whole Foods Market, Ring and PillPack acquisitions in the Souq and Northern

America. It additionally takes into consideration of foreign exchange rate changes. Accumulated

amortization and the original cost of the intangible assets is excluded in consolidated financial

statements and the economic life estimated for the intangibles is 5 years (Amazon Annual

Report, 2019).

2.5% of the debts were issued November, 2012 with 2.66% as the effective interest rate.

Effective interest rate of 2.73%, 3.43%, 3.9%, 4.93% and 5.12% for the years 2019, 2021, 2024,

2034 and 2045 respectively. Included in the debts is 2025 notes issued in 2017 worth $872

million related to Whole Foods Market acquisition in 2017. As at 31 December 2017 Accrued

expenses include current lease obligation of $7.7 billion and $5.5 billion. Meanwhile, $9.6

billion capital lease obligation as at 31 December 2018 was recorded under long-term liabilities.

Commitments exclude accrued tax contingencies amounting to $3.5 billion. Contingencies

include various claims which include law suit filed by Australian copyright collection society in

2013 among others. In the year 2018, the related tax benefit reduced statutory corporate tax in

the U.S. from 34% to 19%.

Footnotes helps in explaining perceived inconsistencies or rather irregularities which

might have been encountered in the year financial statements are published. These notes serve

important function of supplementing financial information by providing clear analysis of

company details which are not revealed in the body of the statements (Meiryani, 2019). Financial

disclosures provide further explanation by communicating pertinent information which is not

disclosed in the reports. It is meant to influence the decision of investors by ensuring they fully
FINANCIAL STATEMENT DISCLOSURES 4

understand all components of financial statements to prevent misinterpretation. Financial

disclosures ensures fair presentation by ensuring readers apprehend financial performance of

company thus giving the investors more confidence on available financial reports.

References

Amazon Annual Report. (2019). Retrieved 15 March 2020, from

https://ir.aboutamazon.com/static-files/0f9e36b1-7e1e-4b52-be17-145dc9d8b5ec

Beuselinck, C., Deloof, M., & Manigart, S. (2013). Financial Reporting, Disclosure, and

Corporate Governance. Oxford Handbooks Online. doi:

10.1093/oxfordhb/9780199642007.013.0013

Meiryani, A., (2019). Full Disclosure In Financial Reporting. [online] Ijstr.org. Available at:

<https://www.ijstr.org/final-print/june2019/Full-Disclosure-In-Financial-Reporting.pdf>

[Accessed 15 March 2020].