Amazon.com 2000 Annual Report Download - page 46

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1—DESCRIPTION OF BUSINESS AND ACCOUNTING POLICIES
Description of Business
Amazon.com, Inc. (Amazon.com or the Company) is an Internet retailer of consumer products and a
business platform for business-to-consumer and business-to-business online commerce. The Company sells
products worldwide, with its principal geographic market segments in North America, Europe and Asia. The
Company was incorporated in July 1994 and began operations in July 1995. Amazon.com lists millions of
unique items in a variety of consumer product categories and through its marketplace services, Amazon.com
Auctions and zShops, the Company’s business platform allows virtually any business or individual to sell
products to Amazon.com’s customer base. The Company maintains several Web sites including
www.amazon.com, www.amazon.co.uk, www.amazon.de, www.amazon.fr, www.amazon.co.jp and
www.imdb.com.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company and its wholly owned
subsidiaries. All significant intercompany balances and transactions have been eliminated.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period. Estimates are used for, but not
limited to, the accounting for doubtful accounts, inventory reserves, depreciation, amortization, sales returns,
unearned revenue, taxes and contingencies. Actual results could differ from those estimates.
Business Combinations
For business combinations that have been accounted for under the purchase method of accounting, the
Company includes the results of operations of the acquired business from the date of acquisition. Net assets of
the companies acquired are recorded at their fair value at the date of acquisition. The excess of the purchase
price over the fair value of tangible and identifiable intangible net assets acquired is included in goodwill in the
accompanying consolidated balance sheets.
For business combinations accounted for under the pooling of interests method of accounting, the assets,
liabilities and stockholders’ equity of the acquired entity are combined with the Company’s respective accounts
at recorded values and the consolidated financial statements are restated to reflect the historical results of the
pooled entity. The historical results of the pooled entity reflect its actual operating cost structures and, as a
result, do not necessarily reflect the cost structure of the newly-combined entity and may not be indicative of
future results.
Cash and Cash Equivalents
Effective April 1, 2000, the Company changed its policy for determining which investments are treated as
cash equivalents and now classifies all highly liquid instruments with an original maturity of three months or
less as cash equivalents. Previously, such instruments were included in ‘‘Marketable securities.’’ The Company
believes this change is preferable because it results in a presentation that is consistent with practice in the
Company’s industry and because it results in a better reflection of the Company’s liquidity. The consolidated
financial statements presented in this Form 10-K reflect this change.
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