Amazon.com 2012 Annual Report Download - page 41

At December 31, 2012, we had $3.7 billion of debt, including the current portion, primarily consisting of
fixed rate unsecured debt in three tranches: $750 million of 0.65% notes due in 2015; $1.0 billion of 1.20% notes
due in 2017; and $1.3 billion of 2.50% notes due in 2022. The fair value of our debt will fluctuate with
movements of interest rates, increasing in periods of declining rates of interest and declining in periods of
increasing rates of interest. Based upon quoted market prices and Level 2 inputs, the fair value of our debt was
$3.7 billion at December 31, 2012.
Foreign Exchange Risk
During 2012, net sales from our International segment accounted for 43% of our consolidated revenues. Net
sales and related expenses generated from our international websites, as well as those relating to www.amazon.ca
(which is included in our North America segment), are denominated in the functional currencies of the
corresponding websites and primarily include Euros, British Pounds, Japanese Yen, and Chinese Yuan. The
functional currency of our subsidiaries that either operate or support these websites is the same as the
corresponding local currency. The results of operations of, and certain of our intercompany balances associated
with, our internationally-focused websites are exposed to foreign exchange rate fluctuations. Upon consolidation,
as exchange rates vary, net sales and other operating results may differ materially from expectations, and we may
record significant gains or losses on the remeasurement of intercompany balances. For example, as a result of
fluctuations in foreign exchange rates during 2012, International segment revenues decreased $853 million in
comparison with the prior year.
We have foreign exchange risk related to foreign-denominated cash, cash equivalents, and marketable
securities (“foreign funds”). Based on the balance of foreign funds at December 31, 2012 of $5.1 billion, an
assumed 5%, 10%, and 20% negative currency movement would result in fair value declines of $255 million,
$515 million, and $1.0 billion. All investments are classified as “available for sale.” Fluctuations in fair value are
recorded in “Accumulated other comprehensive income (loss),” a separate component of stockholders’ equity.
We have foreign exchange risk related to our intercompany balances denominated in various foreign
currencies. Based on the intercompany balances at December 31, 2012, an assumed 5%, 10%, and 20% adverse
change to foreign exchange would result in losses of $10 million, $20 million, and $40 million, recorded to
“Other income (expense), net.”
See Item 7 of Part II, “Management’s Discussion and Analysis of Financial Condition and Results of
Operations—Results of Operations—Effect of Exchange Rates,” for additional information on the effect on
reported results of changes in exchange rates.
Investment Risk
As of December 31, 2012, our recorded basis in equity investments was $140 million. These investments
primarily relate to equity and cost method investments in private companies. We review our investments for
impairment when events and circumstances indicate that the decline in fair value of such assets below the
carrying value is other-than-temporary. Our analysis includes review of recent operating results and trends,
recent sales/acquisitions of the investee securities, and other publicly available data. The current global economic
climate provides additional uncertainty. Valuations of private companies are inherently more difficult due to the
lack of readily available market data. As such, we believe that market sensitivities are not practicable.
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