Amazon.com 2015 Annual Report Download - page 60

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Foreign Currency
We have internationally-focused websites for Australia, Brazil, Canada, China, France, Germany, India, Italy, Japan,
Mexico, the Netherlands, Spain, and the United Kingdom. Net sales generated from these websites, as well as most of the
related expenses directly incurred from those operations, are denominated in local functional currencies. The functional
currency of our subsidiaries that either operate or support these websites is generally the same as the local currency. Assets and
liabilities of these subsidiaries are translated into U.S. Dollars at period-end foreign exchange rates, and revenues and expenses
are translated at average rates prevailing throughout the period. Translation adjustments are included in “Accumulated other
comprehensive 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 including intercompany 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. In connection with the settlement and remeasurement of intercompany
balances, we recorded losses of $215 million, $98 million, and $84 million in 2015, 2014, and 2013.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board (“FASB”) issued an Accounting Standards Update (“ASU”)
amending revenue recognition guidance and requiring more detailed disclosures to enable users of financial statements to
understand the nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. In
August 2015, the FASB deferred the effective date of the revenue recognition guidance to reporting periods beginning after
December 15, 2017. Early adoption is permitted for reporting periods beginning after December 15, 2016. We are continuing to
evaluate our method of adoption and the impact this ASU, and related amendments and interpretations, will have on our
consolidated financial statements.
In July 2015, the FASB issued an ASU modifying the accounting for inventory. Under this ASU, the measurement
principle for inventory will change from lower of cost or market value to lower of cost and net realizable value. The ASU
defines net realizable value as the estimated selling price in the ordinary course of business, less reasonably predictable costs of
completion, disposal, and transportation. The ASU is applicable to inventory that is accounted for under the first-in, first-out
method and is effective for reporting periods after December 15, 2016, with early adoption permitted. We do not expect
adoption to have a material impact on our consolidated financial statements.
In November 2015, the FASB issued an ASU amending the accounting for income taxes and requiring all deferred tax
assets and liabilities to be classified as non-current on the consolidated balance sheet. The ASU is effective for reporting
periods beginning after December 15, 2016, with early adoption permitted. The ASU may be adopted either prospectively or
retrospectively. We are currently evaluating the method of adoption and expect this ASU will have an impact on our
consolidated balance sheets as our current deferred tax assets were $769 million and current deferred tax liabilities were $13
million as of December 31, 2015.