Amazon.com 2002 Annual Report Download - page 63

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS Ì (Continued)
information available to the Company, such as the Company's knowledge of the industry and knowledge of
speciÑc information about the investee, the Company determines the estimated fair value of the securities
received. To the extent that equity securities are subject to forfeiture or vesting provisions and no
signiÑcant performance commitment exists upon signing of the agreements, the fair value of the securities
is determined as of the date of the respective forfeiture or as vesting provisions lapse.
The Company periodically evaluates whether the declines in fair value of its investments are other-
than-temporary. This evaluation consists of a review of qualitative and quantitative factors by members of
senior management. For investments with publicly quoted market prices, the Company generally considers
a decline to be an other-than-temporary impairment if the quoted market price is less than its accounting
basis for two 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
Ñnancial condition, results of operations, operating trends and other Ñnancial ratios. The evaluation also
considers publicly available information regarding the investee companies, including reports from
investment analysts and other publicly available investee-speciÑc 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 Ñnancing
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 Ñnancial statements to
assist in reviewing relevant Ñnancial 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, other than goodwill, 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 signiÑcant decline in the
observable market value of an asset, a signiÑcant change in the extent or manner in which an asset is used,
or a signiÑcant 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 recognizes an impairment loss
only if its carrying amount is not recoverable through its undiscounted cash Öows and measures the
impairment loss based on the diÅerence between the carrying amount and fair value. Long-lived assets
held for sale are reported at the lower of cost or fair value less costs to sell.
Other Assets
Other assets consist primarily of fees incurred in connection with the issuance of the Company's debt.
These fees are amortized ratably as a component of interest expense over the life of the underlying debt.
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 eÅect to either increases or decreases
54