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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Note 1—DESCRIPTION OF BUSINESS AND ACCOUNTING POLICIES
Description of Business
Amazon.com, Inc., a Fortune 500 company, opened its virtual doors on the World Wide Web in July 1995
and today offers Earth’s Biggest Selection. We seek to be Earth’s most customer-centric company, where
customers can find and discover anything they might want to buy online, and endeavor to offer customers the
lowest possible prices.
Amazon.com and its affiliates operate retail websites, including: www.amazon.com, www.amazon.co.uk,
www.amazon.de, www.amazon.co.jp, www.amazon.fr, www.amazon.ca, and www.joyo.com. We have organized
our operations into two principal segments: North America and International. The North America segment
includes the operating results of www.amazon.com and www.amazon.ca. The International segment includes the
operating results of www.amazon.co.uk, www.amazon.de, www.amazon.fr,www.amazon.co.jp, and
www.joyo.com. In addition, we operate other websites, including www.a9.com and www.alexa.com that enable
search and navigation; www.imdb.com, a comprehensive movie database; and Amazon Mechanical Turk at
www.mturk.com which provides a web service for computers to integrate a network of humans directly into their
processes.
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries,
and those entities (relating to www.joyo.com) in which we have a variable interest. Intercompany balances and
transactions have been eliminated.
Use of Estimates
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
liabilities in the consolidated financial statements and accompanying notes. Estimates are used for, but not
limited to, valuation of investments, receivables valuation, sales returns, incentive discount offers, inventory
valuation, depreciable lives of fixed assets, internally-developed software, valuation of acquired intangibles,
deferred tax assets and liabilities, stock-based compensation, restructuring-related liabilities, and contingencies.
Actual results could differ materially from those estimates.
Business Acquisitions
We acquired certain companies during 2005 for an aggregate cash purchase price of $29 million. Acquired
intangibles totaled $10 million and have estimated useful lives of between one and three years. The excess of
purchase price over the fair value of the net assets acquired was $19 million and is classified as “Goodwill” on
our consolidated balance sheets. The results of operations of each of the acquired businesses have been included
in our consolidated results from each transaction closing date forward. The effect of these acquisitions on
consolidated net sales and operating income during 2005 was not significant.
In 2004, we acquired all of the outstanding shares of Joyo.com Limited, a British Virgin Islands company
that operates an Internet retail website in the People’s Republic of China (“PRC”) in cooperation with a PRC
subsidiary and PRC affiliates, at a purchase price of $75 million, including a cash payment of $71 million (net of
cash acquired), the assumption of employee stock options, and transaction-related costs. Acquired intangibles
were $6 million with estimated useful lives of between one and four years. The excess of purchase price over the
fair value of the net assets acquired was $70 million and is classified as “Goodwill” on the consolidated balance
sheets. The results of operations of Joyo.com have been included in our consolidated results from the acquisition
date forward.
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