Question
Amazon.com, Inc., a global e-commerce and technology giant, adheres to the Conservatism Principle in its financial reporting policies. During 2023, the company faced a significant
Amazon.com, Inc., a global e-commerce and technology giant, adheres to the Conservatism Principle in its financial reporting policies. During 2023, the company faced a significant increase in product returns due to customer dissatisfaction with the quality of certain electronic devices. Although Amazon estimates the potential future returns to be $100 million, it recognizes a provision of $150 million to cover potential losses from returns and associated costs. Discuss the rationale behind Amazon's conservative approach to recognizing provisions for product returns. Assess the implications of this conservative accounting treatment on the company's financial statements and stakeholders' perception.
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