What kinds of risks does a firm like Amazon.com face with respect to safeguardin

Question

What kinds of risks does a firm like Amazon.com face with respect to safeguarding its assets? What types of controls do you think it already has in place to minimize these risks? Go to the firm’s website and click on “Investor Relations”. You’ll be able to find the firm’s annual report to help you answer these questions. Are any specific controls mentioned in the annual report? What depreciation method does Amazon use for property and equipment? What is the range of useful lives for buildings and for fixtures and equipment? Do these useful lives make sense? Find the heading Goodwill. What type of an asset is goodwill? Does Amazon write off this asset? Explain what the company does.

Explanation / Answer

Amazon.com, Inc is a Multinaltional National Business organisation having millions dollors worth of assets generally have certain controls to safegaurd their assets. Gereral risks associated with safegaurding assets are of mainly two types i.e (1) Physical loss and (2) Economic Loss or Financial loss

Physical loss is due to infringment, fraud, theft or through natural disasters, because of these acts, the company may lose assets and get heavy losses, To control these risks, the company already is in compliance with local laws to cover the loss due to fraud or infringement and it is mandatorily covering all its assets under an insurance to cover loss due to natutal disasters like earth quakes, cyclones etc.

Economic loss may be due to fluctuations in foreign currency, loss of market share and loss of intangibales. Amazon.com as its mentioned in its annual report that they have lot of competion from competitors who try to catch the share of Amazon by entering into cartels and other business combinations. Amagon mostly sells its products through debit card and credit cards, so which naturally involve much cost in the form of interest, bank commission. And also gets loss due to change in interest rates in different countries. Mostly foreign exchange risk related to foreign -denominated cash, cash equivalents adn marketabel securities.

Amazon , com following Straight line method of depreciation, taking life as 40 years. As regars with Goodwill of Amazon, mostly goodwill is associated with due to impairment of assets i.e difference between the asset carrying value and fair value. Goodwill is an intangible asset. It is being written off in a rational and systematic manner, that is being done by amazon and the loss of these intangible assets from its income.

Internal controls being folowed by Amazon are consistent to its management policies. Management is responsible for these controls and these controls are in consistant with reliable financial reporting

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