Amazon.com 2005 Annual Report Download - page 86

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AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
The significant components of deferred income tax expense/(benefit) attributable to income from continuing
operations for the year ended December 31, 2005 are as follows:
For the year ended December 31,
2005 2004 2003
(in millions)
Deferred tax expense/(benefit) exclusive of the effect of the items listed below . . . $188 $ 145 $ 43
Decrease in beginning-of-year balance of the valuation allowance ............. (90) (240) —
Tax benefit of net operating loss carryforwards ............................ (28) (162) (42)
Total deferred tax expense/(benefit) ................................. $ 70 $(257) $ 1
Deferred income taxes were:
December 31,
2005 2004
(in millions)
Deferred tax assets:
Net operating losses (1) ................................................... $123 $ 801
Assets held for investment ................................................. 239 273
Revenue items .......................................................... 34 29
Expense items, including stock-based compensation ............................ 105 128
Tax credits ............................................................. 24 6
Total gross deferred tax assets .......................................... 525 1,237
Less valuation allowance .............................................. (213) (874)
Net deferred tax assets ............................................ 312 363
Deferred tax liabilities:
Expense items .......................................................... (21) (7)
Net deferred tax ................................................. $291 $ 356
(1) Presented net of fully-reserved NOL deferred tax assets at December 31, 2005 totaling $493 million which
were attributed to stock-based compensation as of the adoption of SFAS No. 123(R). Total gross deferred
tax assets related to our NOLs at December 31, 2005 were $616 million (relating to approximately $1.9
billion of NOLs).
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 executive reviews our operating results in
assessing performance and allocating resources.
We allocate to segment results the operating expenses “Fulfillment,” “Marketing,” “Technology and
content,” and “General and administrative,” but exclude from our allocations the portions of these expense lines
attributable to stock-based compensation. Additionally, we do not allocate the line item “Other operating income
(expense)” to our segment operating results. 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.
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