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January 01, 2006
Accounting for Information System Assets
I'm no accountant, but I wonder how well modern accounting methods have kept up with businesses like this. Is there any accounting statement I can look at to learn that Amazon has an infrastructure that can ship 31 items per second during the heaviest season of the year? The information systems alone are an enormous asset to Amazon. I went to Hoover's to see what I could find and they sent me to Amazon's site to read Amazon's financial statements (causing me to wonder along the way, what's the value add of Hoover's in that transaction, but that's another story). Anyway, I found the following portion of a Balance Sheet for the quarter ended September 30, 2005:
source: Amazon.com
Again, I am no accountant, but I can't find any category here that would include the amazing asset of an infrastructure that can record 41 order items per second in a season in which 108 million items were ordered. I know this is a high level statement, but I suspect even if I drilled down under Fixed assets, net, I wouldn't find any information that would help me understand this business.
I may be missing the point, but are accounting standards WAY out of date? Are they more appropriate for mining companies and steel manufacturers for which fixed plant and equipment was a major asset component?
Wouldn't IS get more respect if companies had to report their IS infrastructure to the SEC?
Is this a widely recognized accounting problem and I'm just late to the party? What's happening in the accounting profession? Does anyone know?
Posted by DavidK at January 1, 2006 04:40 PM | Permalink