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Amazon Inc.’s Consolidation Process and Tax Benefits

Amazon, Inc. is a global company that has developed particularly as a result of acquisitions. For instance, Amazon, Inc. purchased Whole Foods Marketplace in 2017, and the company’s revenues are now part of Amazon’s consolidated financial statements. Amazon’s corporate structure allows for consolidation by using a hierarchal framework, with varying reporting channels for different subsidiaries. The present paper will apply theoretical information on consolidation to Amazon, Inc. by describing its corporate structure, the consolidation process, and tax benefits resulting from consolidation.

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Framework in Use

Amazon, Inc. uses a direct ownership framework, which means that it owns the stock of acquired companies directly. From a consolidated viewpoint, the corporate structure of Amazon, Inc. is hierarchal, with a group of Senior Vice Presidents and Chief Executive Officers reporting to Amazon, Inc. CEO Jeff Bezos (Dudovskiy, 2018). This means that Amazon includes a variety of acquired entities that have independent organizational structures but report to senior officers positioned at the top of Amazon, Inc.’s hierarchy.

For example, Amazon Web Services is one of the subsidiaries of Amazon, Inc. The company also has a hierarchal corporate structure, with CEO Andrew Jassy governing various business departments, including Marketing, Engineering, Public Sector, and others. As the CEO of Amazon Web Services, Jassy reports directly to Amazon, Inc. CEO Jeff Bezos (Dudovskiy, 2018). However, Amazon Web Services is considered to be a distinctive line of business, and thus the same pattern does not apply to other subsidiaries.

Another example is Whole Food Market, which was acquired by Amazon in 2017. The company has an independent leadership structure, which can be defined as geographical and hierarchal. John Mackey is the Chief Executive Officer of Whole Foods Market, supported by regional Presidents and global departmental Vice Presidents (Whole Foods Market, 2018). As the company is part of the retail business line, it is likely that its leadership reports to Amazon, Inc.’s Senior Vice President in International Retail, who then reports directly to Jeff Bezos. Therefore, Amazon, Inc/ Maintains a hierarchal corporate structure in all circumstances, but the chain of command depends on the line of business of a particular subsidiary.

Consolidation Impact

The consolidation impacts the flow of accounting information into the consolidated financial statement by merging the financial outcomes of the parent company and its subsidiaries. For example, in Amazon, Inc. a consolidated financial statement represents united incomes, sales, revenues, assets, and other financial outcomes of Amazon and its subsidiaries. The consolidation process is usually performed by the IFRS 10 requirements and consists of three key steps.

Firstly, the financial statements of all involved entities are combined into one (Hoyle, Schaefer, & Doupnik, 2015). This entails combining the like items, such as assets, income, and cash flows. Secondly, the parent company’s investment into and their share of equity in each subsidiary are eliminated (“IFRS 10”, 2017). This allows avoiding incoherencies in expenses, investments, and equity as represented in consolidated financial statements. Lastly, intragroup assets and transactions between different group entities are eliminated in full (Hoyle et al., 2015). Thus, if Amazon, Inc. had a transaction with Whole Foods Market after the acquisition, the changes in expenses, liabilities, and income as a result of this transaction would be eliminated from the consolidated financial statement.

The steps described above were designed to ease the consolidation process in different companies by providing a unified framework. However, the application of this framework to practice can differ across companies (Hoyle et al., 2015). For instance, multinational companies would also need to ensure that all subsidiaries conform with unified accounting and reporting standards and use the same reporting currency before beginning the consolidation process.

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To improve consolidation, Amazon, Inc. collects financial information of entities based on geographical location before producing a consolidated financial statement. There are three key financial reporting segments evident in Amazon, Inc.’s reporting structure: North America, International, and Amazon Web Services. Therefore, the financial information of subsidiary companies would first be merged into segments and then consolidated.

Question C

Consolidation of financial statements could bring significant advantages with regards to income tax. Hope, Ma, and Thomas (2013) reported that in firms who only disclosed financial information in consolidated statements and opted to avoid disclosing geographic earnings, worldwide taxation rates were lower. By consolidating financial statements, companies can achieve various tax deductions. For example, Amazon, Inc. has received tax benefits “relating to excess stock-based compensation deductions and accelerated depreciation deductions” (“2017 Annual Report”, 2018, p. 23). Therefore, the consolidation of financial statements enabled Amazon, Inc. to qualify for these deductions and decrease its U.S. taxable income.


Overall, consolidation of financial statements is an important topic that can present numerous challenges to accounting. Amazon, Inc. uses consolidation to provide financial information about the group, including its subsidiaries, as well as to earn tax benefits with regards to income tax. As a multi-national corporation, Amazon, Inc. has a hierarchal structure with various divisions and reporting channels governing its subsidiaries. The example of Amazon, Inc. can be used to exemplify consolidation processes and challenges that apply to similar companies.


2017 annual report. (2018). Web.

Dudovskiy, J. (2018). Amazon organizational structure. Web.

Hope, O. K., Ma, M. S., & Thomas, W. B. (2013). Tax avoidance and geographic earnings disclosure. Journal of Accounting and Economics, 56(2-3), 170-189.

Hoyle, J. B., Schaefer, T. F., & Doupnik, T. S. (2015). Advanced accounting (12th ed.). New York, NY: McGraw-Hill Education.

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IFRS 10 — Consolidated financial statements. (2017). Web.

Whole Foods Market. (2018). Leadership team. Web.

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