Amazon.com 2007 Annual Report Download - page 57

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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, 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. Amazon.com
serves three primary customer sets: consumer customers, seller customers and developer customers. We serve
consumer customers through our retail websites, which include www.amazon.com, www.amazon.ca,
www.amazon.de,www.amazon.fr,www.amazon.co.jp, www.amazon.co.uk, www.shopbop.com,www.endless.com,
and the Joyo Amazon websites at www.joyo.cn and www.amazon.cn. We serve seller customers by offering
programs and services that enable them to sell products on our websites and operate their e-commerce businesses
under their own brand name and website address. We serve developers by offering a suite of web services that
provide developer customers with direct access to Amazon.com’s robust technology platform in order to enable
them to build innovative applications on their own. In addition, we generate revenue through co-branded credit
card agreements and other marketing and promotional services, such as online advertising.
We have organized our operations into two principal segments: North America and International. See “Note
13—Segment Information.”
Principles of Consolidation
The consolidated financial statements include the accounts of the Company, its wholly-owned subsidiaries,
and those entities (relating primarily to the Joyo Amazon websites) 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,
income taxes, stock-based compensation, and contingencies. Actual results could differ materially from those
estimates.
Earnings per Share
Basic earnings per share is calculated using our weighted-average outstanding common shares. Diluted
earnings per share is calculated using our weighted-average outstanding common shares including the dilutive
effect of stock awards as determined under the treasury stock method.
Our convertible debt instruments are excluded from the calculation of diluted earnings per share as their
effect under the if-converted method is antidilutive. See “Note 4—Long-Term Debt.”
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