AMZN: $0 R&D??? $51MM R&D Tax Credit!!! Making Money The Old Fashioned Way…

Susan Strausberg of 9W Search has pointed out that  the recent 10-Q filing of Amazon (AMZN) contains $0 in R&D expenses, though it does contain almost $1.6 billion in “technology and content” expenses. She finds this surprising to say the least. I agree.

Other large technology companies use the standard XBRL tag for R&D, and report substantial amounts, as you would expect. Amazon, in contrast, uses its own tag, which is described as capturing:

Payroll and related expenses for application development, editorial content, merchandising selection, and systems support; and costs associated with computing, storage and telecommunications infrastructure.

My plain reading of that is that these are bog standard expenses, and not research and development. If I was an infomediary, I wouldn’t lump that in with R&D. Microsoft has Microsoft Research, and Google is basically a free-standing computer science department that happens to own some fantastically valuable IP and know what to do with it.

Amazon? They sell stuff on the internet. Are there ongoing Kindle development expenses? I haven’t heard of a new Kindle tablet announcement in a while. Did Amazon develop any of the Kindle IP themselves, or did they buy the whole package from a third-party? So at one level, I think Amazon not using the R&D tag is appropriate, and anyone that remapped that expense to R&D is making a mistake.

On the other hand, Amazon in the same filing says they are claiming $51 million retroactively for an R&D tax credit. So here to me is where things get interesting, since I don’t know how you can claim an R&D tax credit without doing any R&D worthy of showing up on your financial statements.

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6 thoughts on “AMZN: $0 R&D??? $51MM R&D Tax Credit!!! Making Money The Old Fashioned Way…

  1. I did a quick scan through AMZN’s filings since the start of XBRL usage by the SEC. I didn’t see any usage of the R&D tag, so the claim of an R&D credit is the true anomaly, not the breakout of a particular class of operating expenses.

  2. Dave

    Thanks for your observation about the Amazon potential R&D Tax Credit being granted, for a firm that does not report R&D expenses the same way as most of its peers.

    The creation and use of a unique extension ( such ast AMAZON did ) is counter to the goal of the SEC which is to improve the ability to comapare line items in order to identify to spot anomalies for deeper analysis.

    As Robo Co Craig Davis has stated “anomaly detection” of line items s one of the major goasl of the use of XBRL by the SEC. .

    Marc Strausberg

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