According to Amazon Company.

Describe and apply the requirements of International Financial

Reporting Standards (I F R S) related to the financial reporting of current liabilities, provisions,
employee benefits, share–based payment, income taxes, revenue, financial instruments, and leases.

Amazon, as a global public company, adheres to International Financial Reporting Standards (IFRS) for
financial reporting where required, such as in jurisdictions outside the United States. The IFRS
framework provides specific requirements for the financial reporting of various items like liabilities,
provisions, employee benefits, share-based payments, income taxes, revenue, financial instruments, and
leases. Here’s a summary and application of the relevant IFRS standards:

1. Current Liabilities and Provisions (IAS 37)

Requirements:

 Current liabilities are obligations expected to be settled within the operating cycle or 12 months.

 Provisions are liabilities of uncertain timing or amount. They are recognized when:

1. There is a present obligation (legal or constructive).

2. It is probable that an outflow of resources will be required.

3. The obligation can be reliably estimated.

Application: Amazon reports current liabilities such as accounts payable and accrued expenses as part of
its operational activities. For provisions, Amazon must ensure these are disclosed separately, such as for
warranty obligations or legal claims.

2. Employee Benefits (IAS 19)

Requirements:

 Short-term benefits (e.g., wages, bonuses) are recognized as expenses when employees render
services.

 Post-employment benefits (e.g., pensions) require actuarial valuation.

 Termination benefits are recognized when committed to a formal plan.

Application: Amazon accounts for salaries, benefits, and pension obligations, disclosing defined
contribution or defined benefit plans for employees across jurisdictions.

3. Share-Based Payment (IFRS 2)

Requirements:

 Equity-settled payments are measured at fair value on the grant date and recognized over the
vesting period.
  Cash-settled payments are remeasured at fair value at each reporting date.

Application: Amazon provides stock options or restricted stock units (RSUs) to employees and
executives. These are recorded as expenses over the vesting period based on fair value calculations.

4. Income Taxes (IAS 12)

Requirements:

 Deferred tax assets/liabilities are recognized for temporary differences between accounting and
tax bases.

 Current tax liabilities are recognized for taxable profits in the period.

Application: Amazon recognizes income taxes payable and deferred tax liabilities arising from differences
like accelerated depreciation for tax purposes.

5. Revenue Recognition (IFRS 15)

Requirements:

 Revenue is recognized when control of goods or services transfers to customers, based on a 5-

step model:

1. Identify the contract.

2. Identify performance obligations.

3. Determine transaction price.

4. Allocate transaction price.

5. Recognize revenue upon satisfying performance obligations.

Application: Amazon applies IFRS 15 to recognize revenue from product sales, subscription services (e.g.,
Amazon Prime), and third-party seller services.

6. Financial Instruments (IFRS 9)

Requirements:

 Classification of financial instruments into amortized cost, fair value through profit or loss
(FVTPL), or other comprehensive income (FVOCI).

 Impairment is recognized using an expected credit loss model.

Application: Amazon classifies investments and hedging instruments under IFRS 9. It also calculates
expected credit losses for trade receivables.
7. Leases (IFRS 16)

Requirements:

 Lessees recognize right-of-use assets and corresponding lease liabilities for all leases unless
exempted (short-term or low-value leases).

 Lease payments are split into interest and principal.

Application: Amazon recognizes right-of-use assets for fulfillment centers, data centers, and office spaces
leased globally, along with related lease liabilities.

These IFRS requirements ensure transparency and consistency in Amazon's global financial reporting.
Their application is disclosed in Amazon's financial statements, detailing how they meet compliance
obligations.

According to Amazon Company. Describe Explain and analyze the effect of major differences between
IFRS and U.S. GAAP related to the financial reporting of current liabilities, provisions, employee
benefits, share–based payment, income taxes, revenue, financial instruments, and leases.

Amazon primarily prepares its financial statements in accordance with U.S. Generally Accepted
Accounting Principles (GAAP) but must consider International Financial Reporting Standards (IFRS) for its
global operations and subsidiaries. Significant differences exist between IFRS and U.S. GAAP regarding
the financial reporting of current liabilities, provisions, employee benefits, share-based payments,
income taxes, revenue, financial instruments, and leases. Below is an explanation and analysis of these
differences:

1. Current Liabilities and Provisions

 IFRS (IAS 37):

o Provisions are recognized when there is a present obligation with probable outflows
(>50%) and reliably estimable amounts.

o IFRS requires a best estimate for provisions, sometimes using a range of outcomes
weighted by probability.

 U.S. GAAP:

o Provisions (termed "contingencies") are recognized only if the outflow is probable (>70-
75%) and the amount is reasonably estimable.

o GAAP often prefers the low end of the range for estimation.

Effect on Amazon:
Under IFRS, Amazon might recognize provisions earlier or for larger amounts than under U.S. GAAP. This
could affect reported liabilities and profits, particularly in cases like legal disputes or warranty
obligations.

2. Employee Benefits

 IFRS (IAS 19):

o Actuarial gains and losses from defined benefit plans are recognized in Other
Comprehensive Income (OCI).

o Past service costs are expensed immediately.

 U.S. GAAP:

o Actuarial gains and losses can be deferred and amortized over time using the "corridor
approach."

o Past service costs are amortized over the remaining service life of employees.

Effect on Amazon:
Under IFRS, Amazon may report more volatile results in OCI for employee benefits. U.S. GAAP allows
smoothing, which results in less immediate income statement impact.

3. Share-Based Payment

 IFRS (IFRS 2):

o Fair value of equity instruments is determined at grant date and includes an estimate of
forfeitures.

o Cash-settled payments are remeasured at each reporting date until settlement.

 U.S. GAAP:

o Forfeitures are estimated upfront or recognized as they occur.

o Cash-settled payments are accounted for similarly, but practical expedients may differ.

Effect on Amazon:
Amazon's expense recognition under IFRS might differ due to stricter valuation and forfeiture
assumptions compared to U.S. GAAP.

4. Income Taxes

 IFRS (IAS 12):

o Deferred taxes are recognized on all temporary differences, including revaluation of

assets.
 o Uncertain tax positions are recognized if it is probable they will result in a liability.

 U.S. GAAP:

o Deferred taxes are not recognized on temporary differences related to certain items,
such as undistributed earnings of foreign subsidiaries.

o Uncertain tax positions are recognized if they are "more likely than not" to be sustained.

Effect on Amazon:
IFRS might result in higher deferred tax liabilities for Amazon due to broader recognition of temporary
differences.

5. Revenue Recognition

 IFRS (IFRS 15):

o The 5-step model focuses on transfer of control. Variable consideration is included only if
it is highly probable.

o Revenue may be allocated differently for bundled contracts.

 U.S. GAAP (ASC 606):

o Similar 5-step model but with more specific guidance on contract modifications and non-
cash consideration.

Effect on Amazon:
The overall impact is minimal since IFRS 15 and ASC 606 are converged. However, minor differences in
contract modifications or variable consideration treatment might affect revenue timing.

6. Financial Instruments

 IFRS (IFRS 9):

o Classification is based on the entity's business model and cash flow characteristics.

o Impairment follows the Expected Credit Loss (ECL) model.

 U.S. GAAP (ASC 326):

o Classification focuses more on intent (e.g., "held-to-maturity").

o Impairment is also based on expected losses but with differences in practical application.

Effect on Amazon:
Under IFRS, Amazon's financial instruments may see earlier recognition of credit losses compared to U.S.
GAAP.
7. Leases

 IFRS (IFRS 16):

o All leases (except short-term or low-value) are recognized on the balance sheet with a
right-of-use asset and lease liability.

 U.S. GAAP (ASC 842):

o Leases are categorized as finance or operating. Operating leases do not result in interest
expense and amortization expense separation.

Effect on Amazon:
IFRS requires a single model for lessees, whereas U.S. GAAP's dual-model may result in different expense
recognition patterns.

Summary of Impact on Amazon

1. Provisions and liabilities: IFRS results in earlier and potentially larger recognition of provisions.

2. Employee benefits: IFRS leads to more immediate recognition of actuarial changes in OCI.

3. Tax and financial instruments: IFRS may recognize higher deferred tax liabilities and earlier
credit losses.

4. Leases: IFRS may show higher liabilities and assets compared to U.S. GAAP due to the single-
model approach.

These differences impact key financial metrics like net income, EBITDA, and equity. For stakeholders,
understanding these variances is crucial for comparing Amazon’s IFRS and U.S. GAAP financials.

According to Amazon Company. Describe the IFRS that deal with disclosure and presentation
standards and discuss their various requirements.

The International Financial Reporting Standards (IFRS) related to disclosure and presentation standards
aim to ensure transparency, comparability, and consistency in financial statements. Amazon, like any
global entity, aligns with these IFRS when operating in jurisdictions requiring such reporting. Below are
the key IFRS that govern disclosure and presentation, along with their requirements:

1. Presentation of Financial Statements (IAS 1)

Objective:

 To prescribe the overall structure and content of financial statements, ensuring comparability
both with the entity’s prior periods and other entities.

Requirements:

1. Components of Financial Statements:

 o Statement of financial position (balance sheet).

o Statement of profit or loss and other comprehensive income.

o Statement of changes in equity.

o Statement of cash flows.

o Notes, including significant accounting policies.

2. Fair Presentation and Compliance:

o Financial statements must present a true and fair view of the entity's financial
performance and position.

3. Materiality and Aggregation:

o Material items must be disclosed separately; immaterial items may be aggregated.

4. Comparative Information:

o Comparative financial information must be presented for all amounts.

Application to Amazon:
Amazon discloses its financial position, profit performance, and equity changes clearly, complying with
IAS 1 requirements in jurisdictions where IFRS reporting is mandated.

2. Segment Reporting (IFRS 8)

Objective:

 To provide information about the entity’s business activities and geographical areas for better
understanding of financial results and risks.

Requirements:

1. Identification of Operating Segments:

o Segments are identified based on internal management reports reviewed by the chief
operating decision-maker.

2. Segment Disclosure:

o Revenue, profit, assets, liabilities, and other key measures for each segment must be
disclosed.

Application to Amazon:
Amazon reports segments like North America, International, and AWS (Amazon Web Services) to give
stakeholders insights into the performance of these core divisions.
3. Related Party Disclosures (IAS 24)

Objective:

 To ensure transparency in transactions and balances with related parties.

Requirements:

1. Disclosure of Relationships:

o Relationships between parent, subsidiaries, and other related parties.

2. Disclosure of Transactions:

o Nature, amount, and outstanding balances of transactions with related parties.

Application to Amazon:
Amazon discloses relationships with subsidiaries, joint ventures, and key management personnel,
ensuring compliance with IAS 24.

4. Earnings Per Share (IAS 33)

Objective:

 To provide consistent and comparable information about the earnings attributable to each share
of common stock.

Requirements:

1. Basic EPS:

o Net income attributable to ordinary shareholders divided by the weighted average

number of shares.

2. Diluted EPS:

o Adjusted for the effects of all dilutive potential ordinary shares.

Application to Amazon:
Amazon calculates and discloses EPS metrics, including potential impacts of stock options or convertible
securities.

5. Fair Value Measurement (IFRS 13)

Objective:

 To define fair value and prescribe consistent disclosure requirements for fair value
measurement.

Requirements:
 1. Fair Value Hierarchy:

o Disclosure of inputs used in valuation (Level 1, 2, or 3).

2. Key Information:

o Valuation techniques and inputs used for determining fair value.

Application to Amazon:
Amazon discloses the fair value of financial instruments, property, or other relevant assets using IFRS
13’s guidance.

6. Events after the Reporting Period (IAS 10)

Objective:

 To specify how events after the reporting period should be treated.

Requirements:

1. Adjusting Events:

o Events providing additional evidence of conditions existing at the reporting date.

2. Non-Adjusting Events:

o Significant events after the reporting period are disclosed but not adjusted in the
financial statements.

Application to Amazon:
Amazon reports events like acquisitions or regulatory changes that occur after the reporting period as
per IAS 10.

7. Disclosure of Financial Instruments (IFRS 7)

Objective:

 To ensure users understand the significance of financial instruments and the risks associated
with them.

Requirements:

1. Qualitative and Quantitative Disclosures:

o Information on risk exposures (credit, liquidity, market risks).

2. Hedging:

o Disclosures about hedge accounting policies and effectiveness.

Application to Amazon:
Amazon provides detailed disclosures on risks associated with its financial instruments, such as
derivatives used for hedging currency or interest rate risks.

8. Revenue from Contracts with Customers (IFRS 15 – Disclosure Sections)

Objective:

 To provide users with information about the nature, amount, timing, and uncertainty of revenue.

Requirements:

1. Disaggregated Revenue:

o Revenue must be categorized by product line, geography, or timing (e.g., point-in-time

vs. over-time).

2. Contract Balances:

o Disclose receivables, contract assets, and liabilities.

3. Performance Obligations:

o Information about unsatisfied performance obligations and when they will be fulfilled.

Application to Amazon:
Amazon categorizes revenue into product sales, subscription services, and third-party seller services for
greater transparency.

9. Leases (IFRS 16 – Disclosure Sections)

Objective:

 To provide transparency on the effects of leases on the financial position, performance, and cash
flows.

Requirements:

1. Lessee Disclosures:

o Right-of-use assets and lease liabilities.

o Maturity analysis of lease payments.

2. Lessor Disclosures:

o Information about leasing income and residual risks.

Application to Amazon:
Amazon discloses significant lease arrangements, such as for data centers and fulfillment centers.
Key Takeaways for Amazon

Amazon ensures compliance with IFRS disclosure and presentation standards to meet the expectations
of international investors and regulators. These disclosures:

1. Enhance transparency into Amazon’s financial performance and risks.

2. Ensure consistency across jurisdictions.

3. Support decision-making by providing detailed, accurate, and timely financial information.

Amazon’s robust reporting practices reflect adherence to these IFRS standards, contributing to its
reputation for financial integrity globally.

According to Amazon Company. Describe Explain the major differences between I F R S and U.S. G A A
P on certain disclosure and presentation issues.

Amazon operates globally and reports under U.S. GAAP for its consolidated financial statements but may
comply with IFRS requirements in jurisdictions where mandated. While both frameworks aim to enhance
transparency and comparability, they differ in key disclosure and presentation issues. Below is a detailed
explanation of the major differences between IFRS and U.S. GAAP on certain disclosure and presentation
issues and their implications for Amazon:

1. Financial Statement Presentation

 IFRS (IAS 1):

o Does not prescribe a specific format for financial statements but requires clear subtotals
and the classification of items (e.g., current vs. non-current assets/liabilities).

o Expenses can be presented by nature (e.g., depreciation, raw materials) or by function

(e.g., cost of goods sold, administrative expenses).

 U.S. GAAP:

o Requires a more standardized structure and typically classifies expenses by function.

o The concept of OCI (Other Comprehensive Income) exists but is less flexible in
presentation compared to IFRS.

Effect on Amazon:
Amazon follows U.S. GAAP’s rigid functional expense classification, but IFRS would allow it to experiment
with classification formats based on the nature of its expenses.

2. Segment Reporting
  IFRS (IFRS 8):

o Operating segments are identified based on internal reports reviewed by the chief
operating decision-maker (CODM).

o Requires segment disclosures for total assets if regularly reported to the CODM.

 U.S. GAAP (ASC 280):

o Similar approach but does not mandate disclosure of segment assets unless they are
provided to the CODM.

Effect on Amazon:
Under IFRS, Amazon might need to disclose additional information about its segment assets, such as for
AWS, North America, or International, which are key operating segments.

3. Related Party Disclosures

 IFRS (IAS 24):

o Requires disclosure of relationships with related parties, key management

compensation, and all transactions and balances with related parties, even if no
transactions occurred.

 U.S. GAAP:

o Requires disclosure only of material transactions with related parties and does not
explicitly require key management compensation disclosure in the notes to the financial
statements.

Effect on Amazon:
Under IFRS, Amazon would need to provide more detailed related-party disclosures, especially regarding
executive compensation or subsidiary relationships.

4. Fair Value Measurement

 IFRS (IFRS 13):

o Requires detailed disclosures about the valuation techniques and inputs used for fair
value measurement, including sensitivity analysis for Level 3 inputs.

 U.S. GAAP (ASC 820):

o Similar disclosure requirements but sensitivity analysis is not mandatory.

Effect on Amazon:
Amazon would face stricter requirements under IFRS for disclosing the uncertainty and sensitivity of fair
value measurements, which could apply to its financial instruments and investments.
5. Earnings Per Share (EPS)

 IFRS (IAS 33):

o EPS calculations explicitly require adjustments for all potential dilutive effects (e.g.,
share-based payments, convertible debt).

 U.S. GAAP (ASC 260):

o Similar approach but offers more detailed guidance on certain complex instruments,
such as contingently issuable shares.

Effect on Amazon:
While the impact is minimal, IFRS may lead to slight variations in how Amazon computes and discloses
diluted EPS, especially if it has complex equity instruments.

6. Revenue Recognition Disclosures

 IFRS (IFRS 15):

o Requires more detailed disaggregation of revenue into categories such as geography,

product lines, or timing of transfer of goods/services.

o Significant disclosures include contract balances, remaining performance obligations,

and judgment areas.

 U.S. GAAP (ASC 606):

o Similar requirements but allows more flexibility in how entities choose to disaggregate
revenue.

Effect on Amazon:
Under IFRS, Amazon might need to provide additional details about revenue by product category or
geographical region, which could increase the granularity of its disclosures.

7. Leases

 IFRS (IFRS 16):

o Requires a single lease accounting model for lessees, with most leases recognized on the
balance sheet. Disclosure includes maturity analyses and expense breakdowns (e.g.,
interest expense, depreciation).

 U.S. GAAP (ASC 842):

o Dual-model approach for lessees (operating vs. finance leases) results in different
presentation of lease expenses.
Effect on Amazon:
IFRS 16 may lead to more comprehensive disclosures for Amazon’s leased assets, such as fulfillment
centers and office spaces, compared to U.S. GAAP.

8. Provisions and Contingencies

 IFRS (IAS 37):

o Requires disclosure of provisions and contingent liabilities, including assumptions and

uncertainties used in measurement.

o Provisions are recognized earlier under IFRS due to the “probable” threshold (>50%).

 U.S. GAAP (ASC 450):

o Contingencies are disclosed only if the likelihood is "probable" (>70-75%) and can be
reasonably estimated.

Effect on Amazon:
Under IFRS, Amazon might recognize and disclose provisions for legal cases or warranty claims earlier
and with greater detail.

9. Events After the Reporting Period

 IFRS (IAS 10):

o Requires disclosure of both adjusting and non-adjusting events, with explanations of their financial
effects.

 U.S. GAAP:

o Similar treatment but typically less emphasis on providing extensive disclosures for non-adjusting
events.

Effect on Amazon:
IFRS may require Amazon to provide more detailed disclosures about post-reporting-period events, such
as acquisitions or regulatory developments.

Conclusion

While IFRS and U.S. GAAP share many principles, IFRS generally requires more detailed and transparent
disclosures across various areas. If Amazon were to adopt IFRS fully, it might face:

1. More extensive disclosures (e.g., related parties, segment assets, revenue disaggregation).

2. Earlier recognition and higher transparency in areas like provisions and contingencies.

3. Increased granularity in fair value and sensitivity disclosures.

These differences would affect how stakeholders perceive Amazon’s financial health and operational
dynamics, potentially leading to enhanced insights for international investors but also greater reporting
complexity.