Amazon.com 2001 Annual Report Download - page 59

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
consecutive quarters, absent evidence to the contrary. The Company considers additional factors to determine
whether declines in fair value are other-than-temporary, such as the investee’s financial condition, results of
operations, operating trends and other financial ratios. The evaluation also considers publicly available
information regarding the investee companies, including reports from investment analysts and other publicly
available investee-specific news or general market conditions. For investments in private companies with no
quoted market price, the Company considers similar qualitative and quantitative factors and also considers the
implied value from any recent rounds of financing completed by the investee, as well as market prices of
comparable public companies. The Company generally requires its private investees to deliver monthly, quarterly
and annual financial statements to assist in reviewing relevant financial data and to assist in determining whether
such data may indicate other-than-temporary declines in fair value below the Company’s accounting basis.
Long-Lived Assets
Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate that
the carrying amount of the assets might not be recoverable. The Company does not perform a periodic
assessment of assets for impairment in the absence of such information or indicators. Conditions that would
necessitate an impairment assessment include a significant decline in the observable market value of an asset, a
significant change in the extent or manner in which an asset is used, or a significant adverse change that would
indicate that the carrying amount of an asset or group of assets is not recoverable. For long-lived assets to be held
and used, the Company measures fair value based on quoted market prices or based on discounted estimates of
future cash flows. Long-lived assets to be disposed of are carried at fair value less costs to sell.
Unearned Revenue
Unearned revenue is recorded when payments, whether received in cash or equity securities, are received in
advance of the Company’s performance in the underlying agreement. Unearned revenue is amortized ratably over
the period in which services are provided.
In instances where the Company receives equity securities as compensation for services to be provided
under commercial arrangements, the fair value of these securities, less the net amount of cash paid for them, is
then recorded as unearned revenue. Pursuant to Emerging Issues Task Force Issue No. 00-8, “Accounting by a
Grantee for an Equity Instrument to Be Received in Conjunction with Providing Goods or Services,” the
Company does not adjust unearned revenue to give effect to either increase or decrease in value of the equity
securities subsequent to their initial measurement (to the extent that such securities are either not subject to
vesting or forfeiture or, if subject to vesting or forfeiture, were not received or modified after March 16, 2000).
Income Taxes
The Company recognizes deferred tax assets and liabilities based on differences between the financial
reporting and tax bases of assets and liabilities using the enacted tax rates and laws that are expected to be in
effect when the differences are expected to be recovered. The Company provides a valuation allowance for
deferred tax assets for which it does not consider realization of such assets to be more likely than not.
Revenue Recognition
The Company generally recognizes revenue from product sales or services rendered when the following
four revenue recognition criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or
services have been rendered, the selling price is fixed or determinable, and collectibility is reasonably assured.
The Company evaluates the criteria outlined in EITF Issue No. 99-19, “Reporting Revenue Gross as a
Principal versus Net as an Agent,” in determining whether it is appropriate to record the gross amount of product
50