Amazon.com 2008 Annual Report Download - page 64

AMAZON.COM, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
Foreign Currency
We have the following internationally-focused websites: www.amazon.co.uk, www.amazon.de,
www.amazon.fr, www.amazon.co.jp, www.amazon.ca, and www.amazon.cn. Net sales generated from
internationally-focused websites, as well as most of the related expenses directly incurred from those operations,
are denominated in the functional currencies of the resident countries. Additionally, the functional currency of
our subsidiaries that either operate or support these international websites is the same as the local currency of the
United Kingdom, Germany, France, Japan, Canada, and China. Assets and liabilities of these subsidiaries are
translated into U.S. Dollars at period-end exchange rates, and revenues and expenses are translated at average
rates prevailing throughout the period. Translation adjustments are included in “Accumulated other
comprehensive income (loss),” a separate component of stockholders’ equity, and in the “Foreign currency effect
on cash and cash equivalents,” on our consolidated statements of cash flows. Transaction gains and losses arising
from transactions denominated in a currency other than the functional currency of the entity involved are
included in “Other income (expense), net” on our consolidated statements of operations. See “Note 11—Other
Income (Expense), Net.”
Gains and losses arising from intercompany foreign currency transactions are included in net income. In
connection with the remeasurement of intercompany balances, we recorded gains of $23 million, $32 million and
$50 million in 2008, 2007 and 2006.
Recent Accounting Pronouncements
In September 2006, the Financial Accounting Standards Board (FASB) issued SFAS No. 157, Fair Value
Measurements, which defines fair value, establishes a framework for measuring fair value in accordance with
generally accepted accounting principles and expands disclosures about fair value measurements. For financial
assets and liabilities, SFAS No. 157 was effective for fiscal years beginning after November 15, 2007, and
interim periods within those fiscal years. See “Note 2—Cash, Cash Equivalents, and Marketable Securities” for
further discussion. In February 2008, the FASB issued Staff Position (FSP) No. 157-2 which delays the effective
date of SFAS No. 157 one year for all nonfinancial assets and nonfinancial liabilities, except those recognized or
disclosed at fair value in the financial statements on a recurring basis. FSP 157-2 is effective for us beginning
January 1, 2009.
Those assets and liabilities measured at fair value under SFAS No. 157 in Q1 2008 did not have a material
impact on our consolidated financial statements. In accordance with FSP 157-2, we will measure the remaining
assets and liabilities beginning Q1 2009. We do not expect the adoption of SFAS No. 157, as amended by FSP
157-2, will have a material impact on our consolidated financial statements.
In December 2007, the FASB issued SFAS No. 141 (R), Business Combinations, and SFAS No. 160,
Noncontrolling Interests in Consolidated Financial Statements. SFAS No. 141 (R) requires an acquirer to
measure the identifiable assets acquired, the liabilities assumed and any noncontrolling interest in the acquired
entity at their fair values on the acquisition date, with goodwill being the excess value over the net identifiable
assets acquired. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary should be reported as equity
in the consolidated financial statements. The calculation of earnings per share will continue to be based on
income amounts attributable to the parent. SFAS No. 141 (R) and SFAS No. 160 are effective for financial
statements issued for fiscal years beginning after December 15, 2008. Early adoption is prohibited. We do not
expect the adoption of SFAS No. 141 (R) and SFAS No. 160 will have a material impact on our consolidated
financial statements.
56