Amazon.com 2011 Annual Report Download - page 51

equity-method investment activity and the carrying value of those investments. We regularly evaluate these
investments, which are not carried at fair value, for other-than-temporary impairment. We also consider whether
our equity method investments generate sufficient cash flows from their operating or financing activities to meet
their obligations and repay their liabilities when they come due.
We record purchases, including incremental purchases, of shares in equity-method investees at cost.
Reductions in our ownership percentage of an investee, including through dilution, are generally valued at fair
value, with the difference between fair value and our recorded cost reflected as a gain or loss in our equity-
method investment activity. In the event we no longer have the ability to exercise significant influence over an
equity-method investee, we would discontinue accounting for the investment under the equity method.
Equity investments without readily determinable fair values for which we do not have the ability to exercise
significant influence are accounted for using the cost method of accounting and classified as “Other assets” on
our consolidated balance sheets. Under the cost method, investments are carried at cost and are adjusted only for
other-than-temporary declines in fair value, certain distributions, and additional investments.
Equity investments that have readily determinable fair values are classified as available-for-sale and are
included in “Marketable securities” in our consolidated balance sheet and are recorded at fair value with
unrealized gains and losses, net of tax, included in “Accumulated other comprehensive loss.”
We periodically evaluate whether declines in fair values of our investments below their book value 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. Additionally, we assess whether we have plans to sell the security or it is more likely
than not we will be required to sell any investment before recovery of its amortized cost basis. Factors considered
include quoted market prices; recent financial results and operating trends; implied values from any recent
transactions or offers of investee securities; credit quality of debt instrument issuers; other publicly available
information that may affect the value of our investments; duration and severity of the decline in value; and our
strategy and intentions for holding the investment.
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 when 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, 2011 or 2010.
Accrued Expenses and Other
Included in “Accrued expenses and other” at December 31, 2011 and 2010 were liabilities of $788 million
and $503 million for unredeemed gift certificates. We reduce the liability for a gift certificate when redeemed by
a customer. If a gift certificate is not redeemed, we recognize revenue when it expires or, for a certificate without
an expiration date, when the likelihood of its redemption becomes remote, generally two years from the date of
issuance.
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