Comparative Analysis of Amazon and Nike
An analysis of Amazon’s balance sheet as of 31 st December, 2019 reveals that the company had cash and short-term investments of 55.34B. On the other hand, the company’s total investments and advances amounted to 711M, with other long-term investments also totaling to 711M. In 2018 financial, the company had reported cash and short-term investments of 41.68B (Market Watch, 2020). This shows that the company’s short-term investments have been increasing over the past year, a good indication that the company is more focused on investing its profits. Conversely, as of 31 st May 2019, Nike’s balance sheet posted short-term investments of 197M, while long-term investments were zero. An analysis of Nike’s short-term investments reveals that they have been declining since 2016. In 2016 financial year, the short-term investments amounted to 2.319B, in 2017 they increased 2.371B, while in 2018 and 2019 they dropped to 996M and 197M, respectively (NASDAQ, 2019). Similarly, the company has not posted any long-term investments over the years. This is an indication that the company is keen on investments, and that it is not performing well in terms of short term investment, and there is the need for the company’s management to start focusing on both long-term and short-term investments. Overall, the information shows the actual figures of the investments the two companies had made as of when the balance sheets were prepared.
Nevertheless, after a close look at the balance sheet for Amazon, and particularly on the investment section, Amazon fully complied with the FASB codification rules. As mentioned in assignment one, the balance sheet for Amazon followed all the FASB codification rules. The investment section for has notes which shows the company’s cash and short-term investments over the period between 31 st December, 2018, and 31 st December, 2019. From the notes, the company’s cash and short-term investments grew by 26.63% within that period. This is a requirement under Regulation S-X of FASB codification. Regulation S-X rule covers the annual financial reports of companies including the cash flow statement, balance sheet, income, and explanation of company operations and commends on the company’s future outlook (Brenner & Watkins, 2012) . Regulation S-X expands “financial statements” to comprise all notes to the statements as well as all associated schedules. Nonetheless, the balance sheet of Nike does not show any notes on the investment sections, which means that the company has not complied with the FASB regulations fully, particularly Regulation S-X rule.
Delegate your assignment to our experts and they will do the rest.
However, it can be said that the two companies have complied with the Accounting Series Release (ASR), as they have followed the rules and guidelines in all components of corporate accounting including auditing policies, requirements, disclosure mandates, and measures concerning filing financial statements with SEC, as publicly operated firms (Brenner & Watkins, 2012) . The two companies have their balance sheets audited every year, because they prepare them annually, and they have disclose their investments in their balance sheets, allowing the public to view them. Similarly, both firms have also complied with the Interpretive Releases (IR) rule. The companies’ investment sections can be easily interpreted based on the overall analysis of the balance sheets. Thus, any person looking at the balance sheets can understand the financial reporting of the two companies and interpret them in a meaningful way, allowing them to make decisions based on the information provided. Therefore, it can be concluded that the two companies are aware of the FASB codification rules, and while Amazon has strictly adhered to them, Nike has not followed these rules in preparing its balance sheet, especially on the investment section of the balance sheet.
References
Brenner, V. C., & Watkins, A. L. (2012). Introducing students to the FASB Codification System. The Accounting Educators' Journal , 21 (1).
Market Watch. (2020). Quarterly Financials for Amazon.com Inc. https://www.marketwatch.com/investing/stock/amzn/financials/balance-sheet/quarter
NASDAQ. (2019). NKE Company Financials. https://wwwold- qc.nasdaq.com/symbol/nke/financials?query=balance-sheet
