Amazon.com 2003 Annual Report Download - page 29

Finally, we want to emphasize that we do not believe that our reported net income for the year ended
December 31, 2003 should be viewed as a material positive event or should be considered predictive of future
results. As we discuss in Item 8 of Part II, “Financial Statements and Supplementary Data—Note 1—Description
of Business and Accounting Policies—Foreign Currencies,” had it not been for our decision to settle
intercompany balances denominated in foreign currencies, we would have reported a small net loss for 2003.
Also, as our financial reporting currency is the U.S. Dollar, our total revenue, profit, and free cash flow has
significantly benefited each of the past two years from weakness in the U.S. Dollar in comparison to the
currencies of our faster-growing international websites. While we believe that our increasing diversification
beyond the U.S. economy through our fast growing international businesses benefits our shareholders, it is
important to evaluate our growth rates after the effect of currency changes. For example, although we grew 34%
during 2003, holding currency exchange constant with the prior year our growth would have been 28%. In the
future, this trend may reverse, and our consolidated U.S. Dollar revenue growth rates would be less than our
local-currency growth rates.
For a description of, and additional information about, each line item summarized below, refer to Item 8 of
Part II, “Financial Statements and Supplementary Data—Note 1—Description of Business and Accounting
Policies.”
Forward-Looking Statements
This Annual Report on Form 10-K includes forward-looking statements within the meaning of the Private
Securities Litigation Reform Act of 1995. All statements other than statements of historical fact, including
statements regarding industry prospects and future results of operations or financial position, made in this Annual
Report on Form 10-K are forward-looking. We use words such as anticipates, believes, expects, future, intends
and similar expressions to identify forward-looking statements. Forward-looking statements reflect
management’s current expectations and are inherently uncertain. Actual results could differ materially for a
variety of reasons, including, among others, the rate of growth of the economy in general and of the Internet and
online commerce, customer spending patterns, world events, the amount that we invest in new business
opportunities and the timing of those investments, the mix of products sold to customers, the mix of net sales
derived from products as compared with services, competition, risks of inventory management, the degree to
which we enter into commercial agreements and strategic transactions and maintain and develop commercial
relationships, foreign exchange risks, seasonality, international growth and expansion, and risks of fulfillment,
throughput, and productivity. These risks and uncertainties, as well as other risks and uncertainties that could
cause our actual results to differ significantly from management’s expectations, are described in greater detail in
Item 1 of Part I, “Business—Additional Factors That May Affect Future Results,” which, along with the
following discussion, describes some, but not all, of the factors that could cause actual results to differ
significantly from management’s expectations.
Critical Accounting Judgments
The preparation of financial statements in conformity with GAAP requires estimates and assumptions that
affect the reported amounts of assets and liabilities, revenues and expenses, and related disclosures of contingent
assets and liabilities in the consolidated financial statements and accompanying notes. The SEC has defined a
company’s critical accounting policies as the ones that are most important to the portrayal of the company’s
financial condition and results of operations, and which require the company to make its most difficult and
subjective judgments, often as a result of the need to make estimates of matters that are inherently uncertain.
Based on this definition, we have identified the critical accounting policies and judgments addressed below. We
also have other key accounting policies, which involve the use of estimates, judgments and assumptions that are
significant to understanding our results. For additional information see Item 8 of Part II, “Financial Statements
and Supplementary Data—Note 1—Description of Business and Accounting Policies.” Although we believe that
our estimates, assumptions, and judgments are reasonable, they are based upon information presently available.
Actual results may differ significantly from these estimates under different assumptions, judgments, or
conditions.
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