Amazon's Aggressive Income Statement

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Management at Amazon.com (AMZN Quote) has grown increasingly aggressive in setting key expense and revenue items -- giving the company's earnings a substantial, but possibly artificial, boost.

Last year's operating earnings of $180 million could have been reduced by more than a quarter if Seattle-based Amazon had merely maintained historical levels for income-statement items related to inventory, unpaid customer bills and advance payments to Amazon. To a large extent, these items, which exist at all retailers, are set according to management's own assumptions. Overly aggressive companies have been known to abuse them to make profits look stronger than they are. ...