Amazon.com 2004 Annual Report Download - page 72

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The following table summarizes relevant information as if the fair value recognition provisions of SFAS No.
123, Accounting for Stock Based Compensation,asamended by SFAS No. 148, Accounting for Stock-Based
Compensation—Transition and Disclosure, had been applied to all stock-based awards (in thousands, except per
share data):
Year Ended December 31,
2004 2003 2002
Net income (loss)—as reported ..................................... $588,451 $ 35,282 $(149,132)
Add: Stock-based compensation, as reported .......................... 57,702 87,751 68,927
Deduct: Total stock-based compensation determined under fair value based
method for all awards .......................................... (81,166) (94,525) (148,083)
Net income (loss)—SFAS No. 123 adjusted ........................... $564,987 $ 28,508 $(228,288)
Basic earnings (loss) per share—as reported ........................... $ 1.45 $ 0.09 $ (0.39)
Basic earnings (loss) per share—SFAS No. 123 adjusted ................ 1.39 0.07 (0.60)
Diluted earnings (loss) per share—as reported ......................... 1.39 0.08 (0.39)
Diluted earnings (loss) per share—SFAS No. 123 adjusted ............... 1.33 0.07 (0.60)
The fair value for each stock option granted was estimated at the date of grant using a Black-Scholes option-
pricing model, assuming no dividends and the following assumptions:
Year Ended December 31,
2004 2003 2002
Average risk-free interest rate .............................................. 2.9% 2.5% 3.1%
Average expected life (in years) ............................................ 3.3 3.3 3.3
Volatility ............................................................... 57.9% 77.7% 81.8%
Restructuring Estimates
Restructuring-related liabilities include estimates for, among other things, anticipated disposition of lease
obligations. Key variables in determining such estimates include anticipated timing of sublease rentals, estimates
of sublease rental payment amounts and tenant improvement costs, and estimates for brokerage and other related
costs. We periodically evaluate and, if necessary, adjust our estimates based on currently-available information.
Additionally, we may determine that certain of the office space previously vacated as part of our 2001
restructuring, which we have been unable to sublease due to poor real estate market conditions, may be necessary
for our future needs. To the extent we elect to utilize this office space we will adjust our restructuring-related
liability and classify future payments to the corresponding operating expense categories on the consolidated
statements of operations. See “Note 8—Other Operating Expense (Income).”
Foreign Currency
We have the following internationally-focused websites: www.amazon.co.uk, www.amazon.de,
www.amazon.fr, www.amazon.co.jp, www.amazon.ca,and www.joyo.com. Net sales generated from
internationally-focused websites, as well as most of the related expenses directly incurred from those operations,
are denominated in the functional currencies of the resident countries. Additionally, the functional currency of
our subsidiaries that either operate or support www.amazon.co.uk, www.amazon.de, www.amazon.fr,
www.amazon.co.jp, www.amazon.ca, and www.joyo.com is the same as the local currency of the United
Kingdom, Germany, France, Japan, Canada, and China. Assets and liabilities of these subsidiaries are translated
into U.S. Dollars at period-end exchange rates, and revenues and expenses are translated at average rates
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