A Comparative Analysis of Overstock and Amazon

Financial Reporting, Analysis and Ethics:
A Comparative Analysis of Overstock.com and Amazon

Robert Baird
BU7545
Fall 2011
Financial Reporting, Analysis and Ethics:
A Comparative Analysis of Overstock.com and Amazon

Robert Baird
BU7545
Fall 2011

Table of Contents | | | Executive Summary | 2 | | | Company and Industry Information | 3 | | | Accounting Issues | 6 | | | Accounting Policies and Disclosure Practices | 9 | | | Financial Statement Analysis | 10 | | | Corporate Governance | 13 | | | Conclusion | 15 | | | References | 18 | | | Appendices | 21 |

Executive Summary This paper covers the accounting errors related to freight costs that led Overstock.com in 2006 to restate its financial statements for 2002, 2003, 2004 and quarterly reports for 2004 and 2005, and the subsequent SEC investigation in which they were cleared of wrongdoing. It also covers a second restatement from 2009, in which the financial statements for 2009 and 2008 were restated and another SEC investigation related to those restatements. The paper details a glaring problem for Overstock related to its accounting controls and even the company’s admittance in its annual report that it does not have an appropriate number of qualified accounting professionals able to produce financial statements that are free of material errors. Overstock is compared against a direct competitor, Amazon, who although is a much larger company that Overstock, has become the standard in the industry against which all other companies are judged. The financial statements and financial ratios from 2006-2008 of both Amazon and Overstock are shown in comparison with one another to offer some insight into the strengths and weaknesses of each company and to evaluate their performance, and include consolidated statements of operations and consolidated balance sheets from 2005-2008 and common-size statements of operations and balance sheets for each

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