Amazon.com 2007 Annual Report Download - page 61

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
sheets as “Other assets” and our share of the investees’ earnings or losses as “Remeasurements and other” on our
consolidated statements of operations. Losses from equity-method investees were not significant for any period
presented.
All other equity investments consist of investments for which we do not have the ability to exercise
significant influence. Under the cost method of accounting, investments in private companies are carried at cost
and are adjusted only for other-than-temporary declines in fair value, distributions of earnings, and additional
investments. For public companies that have readily determinable fair values, we classify our equity investments
as available-for-sale and, accordingly, record these investments at their fair values with unrealized gains and
losses, net of tax, included in “Accumulated other comprehensive income (loss),” a separate component of
stockholders’ equity.
We generally invest our excess cash in investment grade short to intermediate term fixed income securities
and AAA-rated money market mutual funds. Such investments are included in “Cash and cash equivalents,” or
“Marketable securities” on the accompanying consolidated balance sheets and are reported at fair value with
unrealized gains and losses included in “Accumulated other comprehensive income (loss).” The weighted
average method is used to determine the cost of Euro-denominated securities sold, and the specific identification
method is used to determine the cost of all other securities.
We periodically evaluate whether declines in fair values of our investments below their cost are other-than-
temporary. This evaluation consists of several qualitative and quantitative factors regarding the severity and
duration of the unrealized loss as well as our ability and intent to hold the investment until a forecasted recovery
occurs. Factors considered include quoted market prices, if available; recent financial results and operating
trends; other publicly available information; implied values from any recent purchase/sales offers of investee
securities; or other conditions that may affect the value of our investments. At December 31, 2007, gross
unrealized losses on our marketable securities were $3 million and were determined to be temporary based on
our assessment of the qualitative and quantitative factors discussed above.
Long-Lived Assets
Long-lived assets, other than goodwill, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount of the assets might not be recoverable. Conditions that would
necessitate an impairment assessment include a significant decline in the observable market value of an asset, a
significant change in the extent or manner in which an asset is used, or any other significant adverse change that
would indicate that the carrying amount of an asset or group of assets may not be recoverable.
For long-lived assets used in operations, impairment losses are only recorded if the asset’s carrying amount
is not recoverable through its undiscounted, probability-weighted future cash flows. We measure the impairment
loss based on the difference between the carrying amount and estimated fair value.
Long-lived assets are considered held for sale when certain criteria are met, including: management has
committed to a plan to sell the asset, the asset is available for sale in its immediate condition, and the sale is
probable within one year of the reporting date. Assets held for sale are reported at the lower of cost or fair value
less costs to sell. Assets held for sale were not significant at December 31, 2007 or 2006.
Accrued Expenses and Other
Included in “Accrued expenses and other” at December 31, 2007 and 2006 were liabilities of $240 million
and $183 million for unredeemed gift certificates. We recognize revenue from a gift certificate when a customer
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