Amazon.com 2015 Annual Report Download - page 53

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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 opened its virtual doors on the World Wide Web in July 1995. We seek to be Earth’s most customer-centric
company. In each of our segments, we serve our primary customer sets, consisting of consumers, sellers, developers,
enterprises, and content creators. We serve consumers through our retail websites and focus on selection, price, and
convenience. We also manufacture and sell electronic devices. We offer programs that enable sellers to sell their products on
our websites and their own branded websites and to fulfill orders through us, and programs that allow authors, musicians,
filmmakers, app developers, and others to publish and sell content. We serve developers and enterprises of all sizes through our
AWS segment, which provides access to technology infrastructure that enables virtually any type of business. In addition, we
provide services, such as advertising services and co-branded credit card agreements.
We have organized our operations into three segments: North America, International, and AWS. See “Note 11—Segment
Information.”
Prior Period Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation, including recasting the
segment financial information within “Note 11—Segment Information” as a result of changing our reportable segments to
include an AWS segment.
Principles of Consolidation
The consolidated financial statements include the accounts of Amazon.com, Inc., its wholly-owned subsidiaries, and
those entities in which we have a variable interest and of which we are the primary beneficiary, including certain entities in
India and China (collectively, the “Company”). Intercompany balances and transactions between consolidated entities are
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, determining the selling
price of products and services in multiple element revenue arrangements and determining the amortization period of these
elements, incentive discount offers, sales returns, vendor funding, stock-based compensation forfeiture rates, income taxes,
valuation and impairment of investments, inventory valuation and inventory purchase commitments, collectability of
receivables, valuation of acquired intangibles and goodwill, depreciable lives of property and equipment, internal-use software
and website development costs, acquisition purchase price allocations, investments in equity interests, 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. In periods when we have a net loss, stock awards are excluded from our
calculation of earnings per share as their inclusion would have an antidilutive effect. In 2014, we excluded stock awards of 17
million.
The following table shows the calculation of diluted shares (in millions):
Year Ended December 31,
2015 2014 2013
Shares used in computation of basic earnings per share 467 462 457
Total dilutive effect of outstanding stock awards 10
—
8
Shares used in computation of diluted earnings per share 477 462 465