Amazon.com 2003 Annual Report Download - page 56

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Asset Retirement Obligations
In accordance with SFAS No. 143, Accounting for Asset Retirement Obligations, we establish assets and
liabilities for the present value of estimated future costs to return certain of our leased facilities to their original
condition. Such assets are depreciated over the lease period into operating expense, and the recorded liabilities
are accreted to the future value of the estimated restoration costs. Such amounts are not significant.
Accounting Changes
Inventories
Effective January 1, 2002, we prospectively changed our inventory costing method from the specific
identification method to the FIFO method of accounting. This change resulted in a cumulative increase in
inventory of $0.8 million, with a corresponding amount recorded to “Cumulative effect of change in accounting
principle” on the consolidated statements of operations. We received a letter of preferability for this change in
inventory costing from our independent auditors.
Goodwill and Other Intangibles
Effective January 1, 2002, we adopted SFAS No. 142, Goodwill and Other Intangible Assets, which requires
that purchased goodwill and certain indefinite-lived intangibles no longer be amortized, but instead be tested for
impairment at least annually. We evaluated our intangible assets and determined that all such assets have
determinable lives.
In accordance with Accounting Principles Board (“APB”) Opinion No. 20, Accounting Changes, the effect
of these accounting changes is reflected prospectively. Supplemental comparative disclosure, as if the change had
been retroactively applied, is as follows (in thousands, except per share data):
For the Years Ended December 31,
2003 2002 2001
Net income (loss):
Reported net income (loss) .................................... $35,282 $(149,132) $(567,277)
Goodwill amortization (1) ..................................... — — 172,159
Inventory costing change ...................................... — (801) 380
Adjusted net income (loss) ................................ $35,282 $(149,933) $(394,738)
Basic and diluted earnings (loss) per share:
Reported basic earnings (loss) per share .......................... $ 0.09 $ (0.39) $ (1.56)
Goodwill amortization (1) ..................................... — — 0.48
Inventory costing change ...................................... — (0.01) —
Adjusted basic earnings (loss) per share ...................... $ 0.09 $ (0.40) $ (1.08)
Adjusted diluted earnings (loss) per share ..................... $ 0.08 $ (0.40) $ (1.08)
(1) Includes $54 million, or $0.15 per share, for 2001, related to amortization of other intangibles that was
classified as goodwill effective January 1, 2002.
Fixed Assets
Fixed assets are stated at cost less accumulated depreciation, which includes the amortization of assets
recorded under capital leases. Fixed assets, including assets purchased under capital leases, are depreciated on a
straight-line basis over the estimated useful lives of the assets (generally two to ten years).
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