Amazon.com 2004 Annual Report Download - page 90

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
due to uncertainty about their future realization. If in the future we determine that the remaining $530 million of
NOL deferred tax assets is more likely than not to be realizable, substantially all would be credited to
“Stockholders’ Deficit” rather than the income statement since they primarily relate to tax-deductible stock-based
compensation in excess of amounts recognized for financial reporting purposes. The majority of our NOLs expire
after 2016. In addition, utilization of NOLs 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.
We also have approximately $70 million of deferred tax assets relating to approximately $225 million
capital loss carryforwards that expire in 2005 and thereafter. Due to uncertainty regarding future realization, we
have provided a full valuation allowance for this portion of our deferred tax asset.
We have not provided for U.S. deferred income taxes or foreign withholding taxes on non-U.S. subsidiaries’
undistributed earnings totaling $20 million as of December 31, 2004 because these earnings are intended to be
permanently reinvested in operations outside of the United States.
Note 12—SEGMENT INFORMATION
We have organized our operations into two principal segments: North America and International. We
present our segment information along the same lines that our chief operating decision maker reviews our
operating results in assessing performance and allocating resources.
Direct segment operating expenses include the operating expenses “Fulfillment,” “Marketing,” “Technology
and content,” and “General and administrative,” but not “Stock-based compensation” or “Other operating income
(expense).” A significant majority of our costs for “Technology and content” are incurred in the United States
and most of these costs are allocated to our North America segment. There are no internal revenue transactions
between our reporting segments.
North America
The North America segment consists of amounts earned from retail sales of consumer products (including
from third-party sellers) through www.amazon.com and www.amazon.ca,from North America focused
Syndicated Stores and mail-order catalogs, and from non-retail activities such as North America focused
Merchant.com, marketing, and promotional agreements.
International
The International segment consists of amounts earned from retail sales of consumer products (including
from third-party sellers) through internationally-focused websites, such as www.amazon.co.uk,www.amazon.de,
www.amazon.fr,www.amazon.co.jp,and www.joyo.com,from internationally-focused Syndicated Stores and
from non-retail activities such as internationally-focused marketing and promotional agreements. This segment
includes export sales from www.amazon.co.uk, www.amazon.de, www.amazon.fr,www.amazon.co.jp,and
www.joyo.com (including export sales from these sites to customers in the U.S. and Canada), but excludes export
sales from www.amazon.com and www.amazon.ca.
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