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Strategies & Market Trends : Anthony @ Equity Investigations, Dear Anthony, -- Ignore unavailable to you. Want to Upgrade?

To: peter michaelson who wrote (61472)	10/26/2000 1:49:51 AM
From: chris431	Respond to of 122087

Amazon Faces Informal SEC Inquiry Isn't pro forma great? "However, that loss isn't in revenue. The stock loss, since it exists only on paper, is listed separately and isn't used in Amazon.com's ``pro forma'' financial statements, which Wall Street uses to rate Amazon's performance. Thus, Amazon.com gets the benefit of steady revenue, but can write off losses if need be without too much impact on the markets." Thursday October 26 12:48 AM ET dailynews.yahoo.com By MICHAEL J. MARTINEZ, AP Business Writer SEATTLE (AP) - Amazon.com (news - web sites) is facing a busy holiday season, one that may be complicated by inquiries from the Securities and Exchange Commission (news - web sites) about the company's accounting practices. Officials at the Internet retailer said the regulatory agency had questions about how it accounted for shares received from partner companies in exchange for services, such as featuring another company's Web site on Amazon's home page. Amazon.com characterized the SEC's interest as ``informal.'' A spokesman for the SEC would not comment on the matter, and would not confirm if a more formal probe would take place. The agency's questions, according to Amazon.com, are about how the company values each stock deal, especially with private companies that don't have a publicly traded stock to act as a barometer of the company's overall value. ``We believe we've held to the generally accepted accounting practices that the SEC requires,'' said Tim Stone, a spokesman for Amazon.com. ``They have some questions, and that's normal from our perspective.'' It matters to the SEC because Amazon lists the value of its investment in its partners as revenue, split up every quarter over the life of the contract. Thus, if a partner company gave Amazon stock worth $5 million as part of a two-year deal, Amazon would add $250,000 to its revenues for each quarter in the next two years, even if the stock or the value of the company were to fluctuate. All of that is standard practice. But if that $5 million in stock value was overestimated to begin with, that affects Amazon's bottom line, making its losses to date appear less than they were. That could have some small influence over how well Amazon's stock does. ``I could see why the SEC would be interested in this,'' said Tom Wyman, a financial analyst with J.P. Morgan in San Francisco. ``But I don't think it's going to blow up in (Amazon's) face.'' Neither does Amazon. ``We've been doing the accounting on these deals for a while now,'' Stone said. ``This is a New Economy and an old economy problem, and it's good that the SEC is addressing it.'' Stone added that it reviews its stakes in other companies every quarter and if there is a ``permanent impairment'' in their value - layoffs, closure or even just a long sojourn in the market's basement - then Amazon is required to post a loss. However, that loss isn't in revenue. The stock loss, since it exists only on paper, is listed separately and isn't used in Amazon.com's ``pro forma'' financial statements, which Wall Street uses to rate Amazon's performance. Thus, Amazon.com gets the benefit of steady revenue, but can write off losses if need be without too much impact on the markets. Buoyed by better-than-expected financial results announced late Tuesday, shares of Amazon.com closed up $2.31 on Wednesday to $31.88 in heavy trading on the Nasdaq Stock Market.