Revenue Recognition at Amazon.com

In 2014, an equity analyst is assigned to cover Amazon.com, a U.S. online retailer that began selling only books but that has grown into providing a vast selection of items across categories as varied as electronics, toys, beauty products and office supplies. The company prides itself on offering a unique, personalized experience for its customers not only by selling directly but also by working with third party retailers and by offering web services (such as computing, storage, database and networking solutions, among others) and new technology (such as the Kindle reading device and a smartphone). The analyst must evaluate each of the company's revenue streams to understand how each part of its business model is translated to the financial statements. After developing an understanding of the company and the industry in which it operates, she must analyze the financial statements, especially the revenue recognition note and note on segmented reporting. Using this as a starting point, she can then assess the company's performance based on key metrics and develop a list of questions to ask at the next earnings conference call.