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A Comparative Analysis of Overstock and Amazon

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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


References: Amazon, Inc. (2009). 2008 Annual Report. Seattle, WA: Amazon, Inc., 2009. Amazon, Inc. (2008). 2007 Annual Report. Seattle, WA: Amazon, Inc., 2008. Amazon, Inc. (2007). 2006 Annual Report. Seattle, WA: Amazon, Inc., 2007. Amazon, Inc. (2006). 2005 Annual Report. Seattle, WA: Amazon, Inc., 2006. Amazon, Inc. (2009) Definitive Proxy Statements. Seattle, WA: Amazon, Inc. 2009. Amazon, Inc. (2008) Definitive Proxy Statements. Seattle, WA: Amazon, Inc. 2008. Antar, S. (2010, October 16). Does Overstock.com CEO Patrick Byrne know when to shut up, especially while the SEC investigates his company? Retrieved October 30, 2011, from Phil’s Stock World Web site: http:// www.philstockworld.com Boyd, R Cheng, A. (2006, May 11). Overstock cancels its share sale after SEC subpoena. Deseret News, pp. E4. Harvey, T. (2010, February 5). Overstock hit by another restatement. The Salt Lake Tribune. Hendrick, D. (2009, November 18). Online retailer fires auditor over accounting fight. SNL Kagan Media & Communications Report. Kanaracus, C. (2008, November 3). Overstock’s ERP woes force it to restate results. Computerworld, 42(44), pp. 7. Keahey, J. (2009, September 23). Overstock CEO and his critics differ over SEC probe. The Salt Lake Tribune. Kessler, S. (2011, October 13). Industry surveys computers: consumer services & the internet. Standard & Poor’s. Mergent, Inc. (2011). Mergent Online. Mims, B. (2006, March 1). Overstock to restate earnings. Knight Ridder Tribune Business News, pp. 1. Moving the market: Overstock.com corrects results back to 2002; losses are narrowed. (2006, March 1). Wall Street Journal (Eastern Edition), pp. 1. Overstock.com, Inc. (2009) 2008 Amended Annual Report. Salt Lake City, Utah: Overstock.com, Inc., 2009. Overstock.com, Inc. (2008) 2007 Amended Annual Report. Salt Lake City, Utah: Overstock.com, Inc., 2008. Overstock.com, Inc. (2007) 2006 Amended Annual Report. Salt Lake City, Utah: Overstock.com, Inc., 2007. Overstock.com, Inc. (2006) 2005 Amended Annual Report. Salt Lake City, Utah: Overstock.com, Inc., 2006. Overstock.com, Inc. (2009) 2008 Annual Report. Salt Lake City, Utah: Overstock.com, Inc., 2009. Overstock.com, Inc. (2008) 2007 Annual Report. Salt Lake City, Utah: Overstock.com, Inc., 2008. Overstock.com, Inc. (2007) 2006 Annual Report. Salt Lake City, Utah: Overstock.com, Inc., 2007. Overstock.com, Inc. (2006) 2005 Annual Report. Salt Lake City, Utah: Overstock.com, Inc., 2006. Overstock.com announces receipt of another SEC subpoena. (2009, September 17). PR Newswire. Overstock.com – President interview. (2006, March 1). CEO Wire. Overstock corrects its financial results. (2006, March 1). Deseret News, pp. E1. Overstock.com, Inc. (2009). Definitive proxy statement. Salt Lake City, Utah: Overstock.com, Inc., 2009. Overstock.com, Inc. (2008). Definitive proxy statement. Salt Lake City, Utah: Overstock.com, Inc., 2008. Overstock gets SEC subpoena. (2006, May 10). Wall Street Journal (Eastern Edition). Overstock.com shifting income. (2010, February 6). Deseret News, pp. A10. Q3 2008 Overstock Com Inc earnings conference call – final. (2008, October 24). Fair Disclosure Wire. SEC closes Overstock.com probe, will take no action. (2008, June 7). Financial Wire. Standard & Poor’s. (2011) Standard & Poor’s NetAdvantage. Taub, S
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