Amazon.com 2002 Annual Report Download - page 42

Other Gains (Losses), Net
Other gains (losses), net consisted of the following (in thousands):
Years Ended December 31,
2002 2001 2000
Foreign-currency gains (losses) on 6.875% PEACSÏÏÏÏÏÏÏ $(103,136) $ 46,613 $ Ì
Gains (losses) on sales of Euro-denominated investments,
netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 2,227 (22,548) Ì
Other-than-temporary impairment losses on equity
investments ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (8,101) (43,588) (188,832)
Gains on sales of equity investments, netÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ 13,044 Ì Ì
Gains from terminations of commercial contractsÏÏÏÏÏÏÏÏÏ Ì 22,400 6,033
Net gains from acquisition of investments by third parties Ì 784 40,160
Warrant remeasurements and other ÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏÏ (307) (5,802) Ì
$ (96,273) $ (2,141) $(142,639)
Equity in Losses of Equity-Method Investees
Equity in losses of equity-method investees represents our share of losses of companies in which we
have investments that give us the ability to exercise signiÑcant inÖuence, but not control, over an investee.
This inÖuence is generally deÑned as an ownership interest of the voting stock of the investee of between
20% and 50%, although other factors, such as representation on our investee's Board of Directors and the
eÅect of commercial arrangements, are considered in determining whether the equity method of
accounting is appropriate. Equity-method losses were $4 million, $30 million and $305 million for 2002,
2001 and 2000, respectively. Our basis in equity-method investments was less than $1 million, and
$10 million at December 31, 2002 and 2001, respectively. As equity-method losses are only recorded until
the underlying investments are reduced to zero, we expect, absent additional investments, equity-method
losses in future periods to be insigniÑcant.
Income Taxes
We have provided for current and deferred U.S. federal, state and foreign income taxes for the
current and all prior periods presented. Current and deferred income taxes were provided with respect to
jurisdictions where certain of our subsidiaries produce taxable income. As of December 31, 2002, we have
recorded a net deferred tax asset of $3 million, which consists primarily of certain state jurisdiction net
operating loss carryforwards. We have provided a valuation allowance for the remainder of our deferred tax
asset, consisting primarily of net operating loss carryforwards, because of uncertainty regarding its
realization. The increase in the valuation allowance on the deferred tax asset was $196 million and
$492 million for 2002 and 2001, respectively.
At December 31, 2002, we had net operating loss carryforwards of approximately $2.5 billion related
to U.S. federal, state and foreign jurisdictions. Utilization of net operating losses, which begin to expire at
various times starting in 2010, may be subject to certain limitations under Sections 382 and 1502 of the
Internal Revenue Code of 1986, as amended, and other limitations under state and foreign tax laws.
Additionally, approximately $180 million of capital loss carryforwards begins to expire in 2005.
Approximately $1.2 billion of our net operating loss carryforwards relates to tax deductible stock-based
compensation in excess of amounts recognized for Ñnancial reporting purposes. To the extent that net
operating loss carryforwards, if realized, relate to stock-based compensation, the resulting tax beneÑts will
be recorded to stockholders' equity, rather than to results of operations.
Net Loss
Net loss was $149 million, $567 million and $1.41 billion for 2002, 2001 and 2000, respectively. Year
over year improvements during 2002 and 2001 result from a variety of factors, including growth in net
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