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Technology Stocks : Amazon.com, Inc. (AMZN)

AMZN 230.40

+1.9%

2:08 PM EST

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To: getgo234 who wrote (31145)	12/25/1998 10:01:00 PM
From: Dwight E. Karlsen	Read Replies (2) of 164684

getgo, GAAP accounting says that you don't recognize revenue without recognizing the Cost of Goods Sold. An unredeemed gift certificate could not, IMO be included in the sales number for Q4 1998, unless they use an estimated cost for the unpicked and unshipped book. It would not even be listed as "other income" like Glenn stated, IMO. Unredeemed gift certificates would be accounted for like this: When the certificate is purchased, debit Cash (asset), credit Unearned Revenue (liability). When the certificate is redeemed, Unearned Revenue is debited, and Sales credited. Inventory is credited, and Cost of Goods sold debited. That completes the accounting. In the same manner, it is totally illegal to recognize cost of goods sold without recognizing the revenue in the same quarter. Any company that did this would be getting a call from the IRS, with heavy penalties the likely result. With AMZN wanting to tally all certificates in the sales column for this quarter, I would guess that they will use an estimated Cost of Goods Sold number. I would guess that the IRS allows this.

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