I need help with #1-5. Please refer to Amazons 2020 Annual Report. Thank You!

Name of company chosen: Refer to the notes to the financial statements. The first note, "Summary of Significant Ac- counting Policies," provides information about the company's depreciation and amortization methods. You will also need to refer to the other notes to the financial statements and to the fi- nancial statements themselves in order to answer the following questions. IMPORTANT: Indicate the page number in which the information was found. THE BASICS Property, plant and equipment 1. What depreciation method does the company use? Page 2. What is the amount of depreciation expense for the current year? Page (Hint: Look at the operating activities section of the cash flow statement if the indirect method was used.) Current year Last year Intangible assets 3. Does the company have any intangible assets? If so, what are they? Page Page 4. Does the company report any goodwin? What is the amount? FURTHER ANALYSIS 5. Calculate the following: Show your computations You will find prior years' total assets in the Five-Year Summary of Selected Financial Data. (2) Average useful life of plant assets = Average cost of plant assets Depreciation expense (b) Average age of plant assets = Accumulated Depreciation Depreciation Expense (c) Asset turnover = Sales Average total assets current year last year two years ago two years ago (d) Return on assets Net income Average total assets current year last year 6. What information is provided by: (2) The asset turnover ratio (b) Return on assets 7. Compare the asset turnover ratio and the return on assets computed above to the industry averages. Your company Industry Asset turnover Return on assets How does your company compare to others in the industry? INFORMATION FOR DECISION MAKING Answer the following questions. Use complete sentences 8. How does depreciation expense affect cash flow? 9. Comment on the average age of the company's assets relative to their average useful life. Refer to the information obtained in question 5, above. 10. Refer to the investing activities section of the company's cash flow statement. Page What was the amount spent to purchase long-lived assets (capital expenditures) during each year presented? last year current year two years ago 11. Evaluate your company's capital spending. Compute the capital expenditure ratio Cash provided by operating activities Capital expenditures Comment on your company's ability to finance its capital spending through operations. (A ratio of 2 would indicate that the company could have purchased twice as much property, plant and equipment as it did without any additional external financing.) 15 36.410 S 21,856 $ 11.588 21.331 10,073 25.251 9,208 (2.582) (554) 3.263 (2.849) (8.169) 17.480 5.754 1.265 66,064 AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2018 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF 32,173 5 PERIOD OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash from operating activities Depreciation and amortization of property and equipment and capitalized content 21.789 15.341 costs, operating lease assets, and other 6,864 5,418 Stock-based compensation 164 274 Other operating expense (income), net Other expense (income), net 219 (249) Deferred income taxes 441 796 Changes in operating assets and liabilities: Inventories (1,314) (3.278) Accounts receivable, net and other (4,615) (7,681) Accounts payable 8,193 Accrued expenses and other 472 (1,383) Unearned revenue 1.151 1.711 Net cash provided by (used in) operating activities 30,723 38,514 INVESTING ACTIVITIES: Purchases of property and equipment (13,427) (16,861) Proceeds from property and equipment sales and incentives 2,104 4,172 Acquisitions, net of cash acquired, and other (2,186 (2,461) Sales and maturities of marketable securities 8.240 22,681 Purchases of marketable securities (7.100) (31.812) Net cash provided by (used in) investing activities (12,369) (24.281 FINANCING ACTIVITIES: Proceeds from short-term debt, and other 886 1.402 Repayments of short-term debt, and other (813) (1.518) Proceeds from long-term debt 182 871 Repayments of long-term debt (155) (1.166) Principal repayments of finance leases (7.449) (9,628) Principal repayments of financing obligations (337) (27) Net cash provided by (used in) financing activities (7.686) Foreign currency effect on cash, cash equivalents, and restricted cash (10,066 (351) Net increase (decrease) in cash, cash equivalents, and restricted cash 70 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD 10,317 4,237 32.173 S 36,410 S See accompanying notes to consolidated financial statements, (40.140) 5,096 (2.325) 50.237 (72,479) (59,611) 6,796 (6,177) 10.525 (1.553) (10.642) (53) (1.104) 618 5.967 42,377 AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) S Year Ended December 31, 2018 2019 141,915 S 160,408 S 90.972 120.114 232,887 280.522 2020 215,915 170,149 386,064 Net product sales Net service sales Total net sales Operating expenses: Cost of sales Fulfillment Technology and content Marketing General and administrative Other operating expense (income), net Total operating expenses Operating income Interest income Interest expense Other income (expense), net Total non-operating income (expense) Income before income taxes Provision for income taxes Equity-method investment activity, net of tax Net income Basic earnings per share Diluted earnings per share Weighted-average shares used in computation of earnings per share: Basic Diluted 139,156 34.027 28,837 13,814 4,336 296 220,466 12,421 440 (1.417) (183) (1,160) 11.261 (1.197) 165,536 40,232 35,931 18,878 5.203 201 265,981 14,541 832 (1.600) 203 (565) 13,976 (2,374) (14) 11.588 S 23.46 S 23.01 S 233,307 58,517 42,740 22,008 6,668 (75) 363,165 22,899 555 (1.647) 2.371 1.279 24.178 (2.863) 16 21,331 42.64 41.83 S S 10.073 $ 20.68 $ 20.14 S $ 487 500 494 504 500 510 See accompanying notes to consolidated financial statements. AMAZON.COM, INC. CONSOLIDATED BALANCE SHEETS (in millions, except per share data) December 31, 2019 2010 ASSETS Current assets Cash and cash equivalents Marketable securities s 2 Inventories 36,0925 18.929 20,497 20,816 96,334 72,705 25,141 14,754 16,314 225.2485 42,122 420274 23,795 24,542 132.733 113,114 37,553 15.017 22,778 321,195 $ 47.183 S 32.439 8,190 87,812 39,791 23,414 12.171 72 539 44,138 9,708 126,385 52,573 31,816 17.017 Accounts receivable, net and other Total current assets Property and equipment, net Operating leases Goodwill Other assets Total assets $ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued expenses and other Unearned revenue Total current liabilities Long-term lease liabilities 4 Long-term debt Other long-term liabilities Commitments and contingencies (Note 7) Stockholders' equity: Preferred stock. $0.01 par value: Authorized shares 500 Issued and outstanding shares-Done Common stock, S0.01 par value: Authorized shares-5.000 Issued shares-521 and 327 Outstanding shares - 498 and 503 Treasury stock, at cost Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total stockholders' equity Total liabilities and stockholders' equity s See accompanying notes to consolidated financial statements 5 (1.837) 33,658 (986) 31,220 62,060 225.2485 5 (1.837) 42,865 (180) 52,551 93,404 321,195 Sofware Development Costs software, and our websites Software development costs capitalned were no significant for the years presented. All other costs We incur software development costs related to products to be sold, leased, or marketed to external users, internal use including those related to design or maintenance, are expensed as incurred Property and Equipment, Nel Property and equipment are stated at cost less accumulated depreciation and amortization, Incentives that we receive from along with property we have acquired under build-to-suit lease arrangements when we have control over the building during the property and equipment vendors are recorded as a reduction to our costs. Property includes buildings and land that we own, beavy equipment and other fulfillment equipment. Depreciation and amortization is recorded on a straight-line basis over the estimated useful lives of the assets (generally the lesser of 40 years or the remaining life of the underlying building, three years Years for heavy equipment, and three to ten years for other Fulfillment equipment). Depreciation and amortization expense is peace for anuary 1, 2020 and four years subsequent to January 1, 2020 for our servers, five years for networking equipment, ten classified within the corresponding operating expense categories on our consolidated statements of operations Leases prices. We categorize leases with contractual terms longer than twelve months as either operating or finance. Finance cases are generally those lenses that allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in Property and equipment, net. All other leases are categorized as operating leases. Our leuses generally have terms that range from one to ten years for equipment and one to twenty years for property. Certain lease contracts include obligations to pay for other services, such as operations and maintenance. For leases of accounted for separately and we allocate payments to the lease and other services components based on estimated stand-alone property, we account for these other services as a component of the lease. For substantially all other leases, the services are Lease liabilities are recognized at the present value of the fixed lease payments, reduced by landlord incentives using a discount rate based on similarly secured borrowings available to us Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases or lease prepayments reclassified from "Other assets upon lease commencement. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term. When we have the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that we will exercise the option, we consider the option in determining the classification and measurement of the lease. Our leases may include variable payments based on measures that include changes in price indices, market interest rates, or the level of sales at a physical store, which are expensed as incurred. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease. Finance lease assets are amortized within operating expenses on a straight-line basis over the shorter of the estimated useful lives of the assets or, in the instance where title does not transfer at the end of the lease term, the lease term. The interest component of a finance lease is included in interest expense and recognized using the effective interest method over the lease term We establish assets and liabilities for the present value of estimated future costs to retire long-lived assets at the termination or expiration of a lease. Such assets are amortired over the lease period into operating expense, and the recorded liabilities are accreted to the future value of the estimated retirement costs. Financing Oligations We record assets and liabilities for estimated construction costs under build-to-suit lease arrangements when we have control over the building during the construction period. If we continue to control the building after the construction period, the arrangement is classified as a financing obligation instead of a lease. The building is depreciated over the shorter of its useful life or the term of the obligation If we do not control the building after the construction period ends, the assets and liabilities for construction costs are derecognized, and we classify the lease as either operating or finance. Goodwill and Indefinite-Lived Intangible Assets We evaluate goodwill and indefinite lived intangible assets for impairment annually or more frequently when an event cursor circumstances change that indicate the carrying value may not be recoverable We may clect to be a qualitative sessment to evaluate whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible et indefinite-lived intangible asset to its estimated fair value and if the fair value is determined to be less than the carrying valac less than its carrying value and if so, we perform a quantitative test. We compare the carrying value of each reporting unit and se recognize an impairment loss for the difference Wc estimate the fair value of the reporting units using discounted cash pows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily to expected category expansion, pricing, market segment share, and general economic conditions We completed the required annual impairment test of goodwill for all reporting units and indefinite-lived intangible assets as of April 1, 2020, resulting in no impairments. The fair value of our reporting units substantially exceeded their Goodwill, and Acquired Intangible Assets." carrying value. There were no events that caused us to update our annual impairment test. See Note 5 Acquisitions Other Assets Included in Other assets" on our consolidated balance sheets are amounts primarily related to video and music content net of accumulated amortization, acquired intangible assets, net of accumulated amortization, certain equity investments, equity wartant assets, long-term deferred tax assets, and lease prepayments made prior to lease commencement Digital Video and Music Content We obtain video content, inclusive of episodic television and movies, and music content for customers through licensing agreements that have a wide range of licensing provisions including both fixed and variable payment schedules. When the license fee for a specific video or music title is determinable or reasonably estimable and the content is available 10 ws. We recognize an asset and a corresponding linbility for the amounts owed. We reduce the liability as payments are made and we amortize the asset to "Cost of sales" on an accelerated basis, based on estimated usage or viewing patterns, or on a straight-line basis . If the licensing fee is not determinable or reasonably estimable, no asset or liability is recorded and licensing costs are expensed as incurred. We also develop original video content for which the production costs are capitalized and amortized to Cost of sales" predominantly on an accelerated basis that follows the viewing patterns associated with the content. The weighted average remaining life of our capitalized video content is 2.5 years. Our produced and licensed video content is primarily monetized together as a unit, referred to as a film group, in cach major geography where we offer Amazon Prime memberships. These film groups are evaluated for impaiment whenever an event occurs or circumstances change indicating the fair value is less than the carrying value. The total capitalized costs of video, which is primarily released content, and music as of December 31, 2019 and 2020 were $5.8 billion and $6.8 billion Total video and music expense was $7.8 billion and S110 billion for the year ended December 31, 2019 and 2020. Total video and music expense includes licensing and production costs associated with content offered within Amazon Prime memberships, and costs associated with digital subscriptions and sold or rented content Investments We generally invest our excess cash in AAA-rated money market funds and investment grade short-to intermediate-term fixed income securities. Such investments are included in Cash and cash equivalents" or "Marketable securities on the accompanying consolidated balance sheets Marketable debt securities are classified as available for sale and reported at fair value with unrealized gains and losses included in "Accumulated other comprehensive income (loss)." Each reporting period, we evaluate whether declines in fait value below carrying value are due to expected credit losses, as well as our ability and intent to hold the investment until a forecasted recovery occurs. Expected credit losses are recorded as an allowance through "Other income (expense), met" on our consolidated statements of operations, Equity investments in private companies for which we do not have the ability to exercise significant influence are accounted for at cost, with adjustments for observable changes in prices or impairments, and arc classified as "Other assets" on our consolidated balance sheets with adjustments recognized in "Other income (expense), net on our consolidated statements of operations. Each reporting period, we perform a qualitative assessment to evaluate whether the investment is impaired. Our assessment includes a review of recent operating results and trends, recent sales'acquisitions of the investee securities, and other publicly available data. If the investment is impaired, we write it down to its estimated fair value. As of December 31, 2019 and 2020, these investments had a carrying value of S1.5 billion and $2.7 billion. exercise significant influence, but not control over ante. Furthed investments are included within "Othere Equity investments are accounted for the equity method of accounting of the investment gives us the ability to basis differences, related gains or losses, and impairments if any, are recognied in "Equity-method investment activity. The of on our consolidated balance sheets. Our share of the car or lossess reported by equity-method investees, amortization of tax on our consolidated statement of operations Each reporting periodevaate whether declines in fair value below carrying value are other than-temporary and if so, we write down the streetmated fair value Equity investments that have readily determinable fair values are included in Marketable securities on our consolidated statements of operations Long-Lived Assets Lons-lived assets, other than goodwill and indefinite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying out of the assets might not be recoverable. Conditions that gnificant change in the extent or manner in which an asset it used ce any other significant adverse change that would indicate old necesitate an impairment assessment include a suficant decline in the observable market value of an asset, a that the carrying amount of an asset or group of assets may not be recoverable amount is not recoverable through its undiscounted, peobubility-weighted futuro 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 on is fons-lived antes used in operations, including lease asset impairment losses are only recorded if the asset's carrying sale in its immediate condition, and the sale is probable within one year of the reporting date. Assets held for sale are reported at when certain criteria are met, including when management has committed to a plan to sell the asset, the asset is available for the lower of cost or fair value less costs to sell Assets held for sale were not significant as of December 31, 2019 and 2020. Accrued Expenses and Other Included in "Accrued expenses and other on our consolidated balance sheets are liabilities primarily related to leases and asset retirement obligations, payroll and related expenses, tax-related liabilities, unredeemed gift cards, customer liabilities, current debt, acquired digital media content, and other operating expenses As of December 31, 2019 and 2020, our liabilities for payroll related expenses were 54.3 billion and $7.6 billion and our liabilities for unredeemed gift cards were $3.3 billion and $47 billion. We reduce the liability for a gift card when redeemed by a customer. The portion of gift cards that we do not expect to be redeemed is recognized based on customer usage patterns Unearned Revenue Uncamed revenue is recorded when payments are received or due in advance of performing our service obligations and is recognized over the service period. Uneamed revenue primarily relates to prepayments of AWS services and Amazon Prime memberships. Our total unearned revenue as of December 31, 2019 was 5102 billion, of which $79 billion was recognized as revenue during the year ended December 31, 2020 and our total uncanned revenue as of December 31, 2020 was $11.6 billion Included in "Other long-term liabilities on our consolidated balance sheets was $20 billion and S1.9 billion of uncamed revenue as of December 31, 2019 and 2020. Additionally, we have performance obligations, primarily related to AWS, associated with commitments in customer contracts for future services that have not yet been recognized in our financial statements. For contracts with original terms that exceed one year, those commitments not yet recognized were $500 billion as of December 31, 2020. The weighted average remaining life of our long-term contracts is 3.4 years. However, the amount and timing of revenue recognition is largely driven by customer usage, which can extend beyond the original contractual term Other Long-Term Liabilities Included in "Other long-term liabilities on our consolidated balance sheets are liabilities primarily related to financing obligations, asset retirement obligations, deferred tax liabilities, uneamed revenue, tax contingencies, and digital video and music content Foreign Currency We have internationally focused stores for which the net sales generated, 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 cither operate or support these stores is generally the same as the local currency. Assets and liabilities of these subsidiaries are translated into US Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates 30 Consolidated Statements of Cash Flows Reconciliation ecolidated balance sheets to the total of the same such amounts shown in the consolidated statements of cash flows The following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported within millions Cash and cash equivalents Restricted cash included in accounts receivable, nct and other Restricted cash included in other acts Total cash, cash equivalents, and restricted cash sbown in the consolidated statements of December 31, 2019 Dember 31, 2000 36,0925 276 233 42 cash flows $ 36,4105 42.377 Note PROPERTY AND EQUIPMENT Property and equipment, at cost, consisted of the following (in millions) December 31, 2019 S Gross property and equipment (1) Land and buildings Equipment Other assets Construction in progress Gross property and equipment Total accumulated depreciation and amortization (1) Total property and equipment, net 39.223 5 71,310 3,111 6,036 119.680 46,975 72 7055 52.324 97,224 3.772 15.228 173.545 60,434 113.114 S (1) Includes the original cost and accumulated depreciation of fully-depreciated assets. Depreciation and amortization expense on property and equipment was $12.1 billion, $15.1 billion, and $162 billion which includes amortization of property and equipment acquired under finance leases of S7.3 billion, $10.1 billion, and $8.5 billion for 2018, 2019, and 2020. Note 4-LEASES Gross assets acquired under finance cases, inclusive of those where title transfers at the end of the lease are recorded in "Property and equipment, net and were $57.4 billion and $68.1 billion as of December 31, 2019 and 2020. Accumulated amortization associated with finance leases was $30.0 billion and $36.5 billion as of December 31, 2019 and 2020. Lease cost recognized in our consolidated statements of operations is summarized as follows (in millions Year Ended December 31, 2019 Operating lease cost S 3,669 5,019 Finance lease cost: Amortization of lease assets 10,094 8,452 Interest on lease liabilities 695 617 Finance lease cost 10,789 9,069 Variable lease cost 966 1.238 Total lease cost 15,424 5 15,326 53 Name of company chosen: Refer to the notes to the financial statements. The first note, "Summary of Significant Ac- counting Policies," provides information about the company's depreciation and amortization methods. You will also need to refer to the other notes to the financial statements and to the fi- nancial statements themselves in order to answer the following questions. IMPORTANT: Indicate the page number in which the information was found. THE BASICS Property, plant and equipment 1. What depreciation method does the company use? Page 2. What is the amount of depreciation expense for the current year? Page (Hint: Look at the operating activities section of the cash flow statement if the indirect method was used.) Current year Last year Intangible assets 3. Does the company have any intangible assets? If so, what are they? Page Page 4. Does the company report any goodwin? What is the amount? FURTHER ANALYSIS 5. Calculate the following: Show your computations You will find prior years' total assets in the Five-Year Summary of Selected Financial Data. (2) Average useful life of plant assets = Average cost of plant assets Depreciation expense (b) Average age of plant assets = Accumulated Depreciation Depreciation Expense (c) Asset turnover = Sales Average total assets current year last year two years ago two years ago (d) Return on assets Net income Average total assets current year last year 6. What information is provided by: (2) The asset turnover ratio (b) Return on assets 7. Compare the asset turnover ratio and the return on assets computed above to the industry averages. Your company Industry Asset turnover Return on assets How does your company compare to others in the industry? INFORMATION FOR DECISION MAKING Answer the following questions. Use complete sentences 8. How does depreciation expense affect cash flow? 9. Comment on the average age of the company's assets relative to their average useful life. Refer to the information obtained in question 5, above. 10. Refer to the investing activities section of the company's cash flow statement. Page What was the amount spent to purchase long-lived assets (capital expenditures) during each year presented? last year current year two years ago 11. Evaluate your company's capital spending. Compute the capital expenditure ratio Cash provided by operating activities Capital expenditures Comment on your company's ability to finance its capital spending through operations. (A ratio of 2 would indicate that the company could have purchased twice as much property, plant and equipment as it did without any additional external financing.) 15 36.410 S 21,856 $ 11.588 21.331 10,073 25.251 9,208 (2.582) (554) 3.263 (2.849) (8.169) 17.480 5.754 1.265 66,064 AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in millions) Year Ended December 31, 2018 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, BEGINNING OF 32,173 5 PERIOD OPERATING ACTIVITIES: Net income Adjustments to reconcile net income to net cash from operating activities Depreciation and amortization of property and equipment and capitalized content 21.789 15.341 costs, operating lease assets, and other 6,864 5,418 Stock-based compensation 164 274 Other operating expense (income), net Other expense (income), net 219 (249) Deferred income taxes 441 796 Changes in operating assets and liabilities: Inventories (1,314) (3.278) Accounts receivable, net and other (4,615) (7,681) Accounts payable 8,193 Accrued expenses and other 472 (1,383) Unearned revenue 1.151 1.711 Net cash provided by (used in) operating activities 30,723 38,514 INVESTING ACTIVITIES: Purchases of property and equipment (13,427) (16,861) Proceeds from property and equipment sales and incentives 2,104 4,172 Acquisitions, net of cash acquired, and other (2,186 (2,461) Sales and maturities of marketable securities 8.240 22,681 Purchases of marketable securities (7.100) (31.812) Net cash provided by (used in) investing activities (12,369) (24.281 FINANCING ACTIVITIES: Proceeds from short-term debt, and other 886 1.402 Repayments of short-term debt, and other (813) (1.518) Proceeds from long-term debt 182 871 Repayments of long-term debt (155) (1.166) Principal repayments of finance leases (7.449) (9,628) Principal repayments of financing obligations (337) (27) Net cash provided by (used in) financing activities (7.686) Foreign currency effect on cash, cash equivalents, and restricted cash (10,066 (351) Net increase (decrease) in cash, cash equivalents, and restricted cash 70 CASH, CASH EQUIVALENTS, AND RESTRICTED CASH, END OF PERIOD 10,317 4,237 32.173 S 36,410 S See accompanying notes to consolidated financial statements, (40.140) 5,096 (2.325) 50.237 (72,479) (59,611) 6,796 (6,177) 10.525 (1.553) (10.642) (53) (1.104) 618 5.967 42,377 AMAZON.COM, INC. CONSOLIDATED STATEMENTS OF OPERATIONS (in millions, except per share data) S Year Ended December 31, 2018 2019 141,915 S 160,408 S 90.972 120.114 232,887 280.522 2020 215,915 170,149 386,064 Net product sales Net service sales Total net sales Operating expenses: Cost of sales Fulfillment Technology and content Marketing General and administrative Other operating expense (income), net Total operating expenses Operating income Interest income Interest expense Other income (expense), net Total non-operating income (expense) Income before income taxes Provision for income taxes Equity-method investment activity, net of tax Net income Basic earnings per share Diluted earnings per share Weighted-average shares used in computation of earnings per share: Basic Diluted 139,156 34.027 28,837 13,814 4,336 296 220,466 12,421 440 (1.417) (183) (1,160) 11.261 (1.197) 165,536 40,232 35,931 18,878 5.203 201 265,981 14,541 832 (1.600) 203 (565) 13,976 (2,374) (14) 11.588 S 23.46 S 23.01 S 233,307 58,517 42,740 22,008 6,668 (75) 363,165 22,899 555 (1.647) 2.371 1.279 24.178 (2.863) 16 21,331 42.64 41.83 S S 10.073 $ 20.68 $ 20.14 S $ 487 500 494 504 500 510 See accompanying notes to consolidated financial statements. AMAZON.COM, INC. CONSOLIDATED BALANCE SHEETS (in millions, except per share data) December 31, 2019 2010 ASSETS Current assets Cash and cash equivalents Marketable securities s 2 Inventories 36,0925 18.929 20,497 20,816 96,334 72,705 25,141 14,754 16,314 225.2485 42,122 420274 23,795 24,542 132.733 113,114 37,553 15.017 22,778 321,195 $ 47.183 S 32.439 8,190 87,812 39,791 23,414 12.171 72 539 44,138 9,708 126,385 52,573 31,816 17.017 Accounts receivable, net and other Total current assets Property and equipment, net Operating leases Goodwill Other assets Total assets $ LIABILITIES AND STOCKHOLDERS' EQUITY Current liabilities: Accounts payable Accrued expenses and other Unearned revenue Total current liabilities Long-term lease liabilities 4 Long-term debt Other long-term liabilities Commitments and contingencies (Note 7) Stockholders' equity: Preferred stock. $0.01 par value: Authorized shares 500 Issued and outstanding shares-Done Common stock, S0.01 par value: Authorized shares-5.000 Issued shares-521 and 327 Outstanding shares - 498 and 503 Treasury stock, at cost Additional paid-in capital Accumulated other comprehensive income (loss) Retained earnings Total stockholders' equity Total liabilities and stockholders' equity s See accompanying notes to consolidated financial statements 5 (1.837) 33,658 (986) 31,220 62,060 225.2485 5 (1.837) 42,865 (180) 52,551 93,404 321,195 Sofware Development Costs software, and our websites Software development costs capitalned were no significant for the years presented. All other costs We incur software development costs related to products to be sold, leased, or marketed to external users, internal use including those related to design or maintenance, are expensed as incurred Property and Equipment, Nel Property and equipment are stated at cost less accumulated depreciation and amortization, Incentives that we receive from along with property we have acquired under build-to-suit lease arrangements when we have control over the building during the property and equipment vendors are recorded as a reduction to our costs. Property includes buildings and land that we own, beavy equipment and other fulfillment equipment. Depreciation and amortization is recorded on a straight-line basis over the estimated useful lives of the assets (generally the lesser of 40 years or the remaining life of the underlying building, three years Years for heavy equipment, and three to ten years for other Fulfillment equipment). Depreciation and amortization expense is peace for anuary 1, 2020 and four years subsequent to January 1, 2020 for our servers, five years for networking equipment, ten classified within the corresponding operating expense categories on our consolidated statements of operations Leases prices. We categorize leases with contractual terms longer than twelve months as either operating or finance. Finance cases are generally those lenses that allow us to substantially utilize or pay for the entire asset over its estimated life. Assets acquired under finance leases are recorded in Property and equipment, net. All other leases are categorized as operating leases. Our leuses generally have terms that range from one to ten years for equipment and one to twenty years for property. Certain lease contracts include obligations to pay for other services, such as operations and maintenance. For leases of accounted for separately and we allocate payments to the lease and other services components based on estimated stand-alone property, we account for these other services as a component of the lease. For substantially all other leases, the services are Lease liabilities are recognized at the present value of the fixed lease payments, reduced by landlord incentives using a discount rate based on similarly secured borrowings available to us Lease assets are recognized based on the initial present value of the fixed lease payments, reduced by landlord incentives, plus any direct costs from executing the leases or lease prepayments reclassified from "Other assets upon lease commencement. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the lease term. When we have the option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that we will exercise the option, we consider the option in determining the classification and measurement of the lease. Our leases may include variable payments based on measures that include changes in price indices, market interest rates, or the level of sales at a physical store, which are expensed as incurred. Costs associated with operating lease assets are recognized on a straight-line basis within operating expenses over the term of the lease. Finance lease assets are amortized within operating expenses on a straight-line basis over the shorter of the estimated useful lives of the assets or, in the instance where title does not transfer at the end of the lease term, the lease term. The interest component of a finance lease is included in interest expense and recognized using the effective interest method over the lease term We establish assets and liabilities for the present value of estimated future costs to retire long-lived assets at the termination or expiration of a lease. Such assets are amortired over the lease period into operating expense, and the recorded liabilities are accreted to the future value of the estimated retirement costs. Financing Oligations We record assets and liabilities for estimated construction costs under build-to-suit lease arrangements when we have control over the building during the construction period. If we continue to control the building after the construction period, the arrangement is classified as a financing obligation instead of a lease. The building is depreciated over the shorter of its useful life or the term of the obligation If we do not control the building after the construction period ends, the assets and liabilities for construction costs are derecognized, and we classify the lease as either operating or finance. Goodwill and Indefinite-Lived Intangible Assets We evaluate goodwill and indefinite lived intangible assets for impairment annually or more frequently when an event cursor circumstances change that indicate the carrying value may not be recoverable We may clect to be a qualitative sessment to evaluate whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible et indefinite-lived intangible asset to its estimated fair value and if the fair value is determined to be less than the carrying valac less than its carrying value and if so, we perform a quantitative test. We compare the carrying value of each reporting unit and se recognize an impairment loss for the difference Wc estimate the fair value of the reporting units using discounted cash pows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily to expected category expansion, pricing, market segment share, and general economic conditions We completed the required annual impairment test of goodwill for all reporting units and indefinite-lived intangible assets as of April 1, 2020, resulting in no impairments. The fair value of our reporting units substantially exceeded their Goodwill, and Acquired Intangible Assets." carrying value. There were no events that caused us to update our annual impairment test. See Note 5 Acquisitions Other Assets Included in Other assets" on our consolidated balance sheets are amounts primarily related to video and music content net of accumulated amortization, acquired intangible assets, net of accumulated amortization, certain equity investments, equity wartant assets, long-term deferred tax assets, and lease prepayments made prior to lease commencement Digital Video and Music Content We obtain video content, inclusive of episodic television and movies, and music content for customers through licensing agreements that have a wide range of licensing provisions including both fixed and variable payment schedules. When the license fee for a specific video or music title is determinable or reasonably estimable and the content is available 10 ws. We recognize an asset and a corresponding linbility for the amounts owed. We reduce the liability as payments are made and we amortize the asset to "Cost of sales" on an accelerated basis, based on estimated usage or viewing patterns, or on a straight-line basis . If the licensing fee is not determinable or reasonably estimable, no asset or liability is recorded and licensing costs are expensed as incurred. We also develop original video content for which the production costs are capitalized and amortized to Cost of sales" predominantly on an accelerated basis that follows the viewing patterns associated with the content. The weighted average remaining life of our capitalized video content is 2.5 years. Our produced and licensed video content is primarily monetized together as a unit, referred to as a film group, in cach major geography where we offer Amazon Prime memberships. These film groups are evaluated for impaiment whenever an event occurs or circumstances change indicating the fair value is less than the carrying value. The total capitalized costs of video, which is primarily released content, and music as of December 31, 2019 and 2020 were $5.8 billion and $6.8 billion Total video and music expense was $7.8 billion and S110 billion for the year ended December 31, 2019 and 2020. Total video and music expense includes licensing and production costs associated with content offered within Amazon Prime memberships, and costs associated with digital subscriptions and sold or rented content Investments We generally invest our excess cash in AAA-rated money market funds and investment grade short-to intermediate-term fixed income securities. Such investments are included in Cash and cash equivalents" or "Marketable securities on the accompanying consolidated balance sheets Marketable debt securities are classified as available for sale and reported at fair value with unrealized gains and losses included in "Accumulated other comprehensive income (loss)." Each reporting period, we evaluate whether declines in fait value below carrying value are due to expected credit losses, as well as our ability and intent to hold the investment until a forecasted recovery occurs. Expected credit losses are recorded as an allowance through "Other income (expense), met" on our consolidated statements of operations, Equity investments in private companies for which we do not have the ability to exercise significant influence are accounted for at cost, with adjustments for observable changes in prices or impairments, and arc classified as "Other assets" on our consolidated balance sheets with adjustments recognized in "Other income (expense), net on our consolidated statements of operations. Each reporting period, we perform a qualitative assessment to evaluate whether the investment is impaired. Our assessment includes a review of recent operating results and trends, recent sales'acquisitions of the investee securities, and other publicly available data. If the investment is impaired, we write it down to its estimated fair value. As of December 31, 2019 and 2020, these investments had a carrying value of S1.5 billion and $2.7 billion. exercise significant influence, but not control over ante. Furthed investments are included within "Othere Equity investments are accounted for the equity method of accounting of the investment gives us the ability to basis differences, related gains or losses, and impairments if any, are recognied in "Equity-method investment activity. The of on our consolidated balance sheets. Our share of the car or lossess reported by equity-method investees, amortization of tax on our consolidated statement of operations Each reporting periodevaate whether declines in fair value below carrying value are other than-temporary and if so, we write down the streetmated fair value Equity investments that have readily determinable fair values are included in Marketable securities on our consolidated statements of operations Long-Lived Assets Lons-lived assets, other than goodwill and indefinite-lived intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying out of the assets might not be recoverable. Conditions that gnificant change in the extent or manner in which an asset it used ce any other significant adverse change that would indicate old necesitate an impairment assessment include a suficant decline in the observable market value of an asset, a that the carrying amount of an asset or group of assets may not be recoverable amount is not recoverable through its undiscounted, peobubility-weighted futuro 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 on is fons-lived antes used in operations, including lease asset impairment losses are only recorded if the asset's carrying sale in its immediate condition, and the sale is probable within one year of the reporting date. Assets held for sale are reported at when certain criteria are met, including when management has committed to a plan to sell the asset, the asset is available for the lower of cost or fair value less costs to sell Assets held for sale were not significant as of December 31, 2019 and 2020. Accrued Expenses and Other Included in "Accrued expenses and other on our consolidated balance sheets are liabilities primarily related to leases and asset retirement obligations, payroll and related expenses, tax-related liabilities, unredeemed gift cards, customer liabilities, current debt, acquired digital media content, and other operating expenses As of December 31, 2019 and 2020, our liabilities for payroll related expenses were 54.3 billion and $7.6 billion and our liabilities for unredeemed gift cards were $3.3 billion and $47 billion. We reduce the liability for a gift card when redeemed by a customer. The portion of gift cards that we do not expect to be redeemed is recognized based on customer usage patterns Unearned Revenue Uncamed revenue is recorded when payments are received or due in advance of performing our service obligations and is recognized over the service period. Uneamed revenue primarily relates to prepayments of AWS services and Amazon Prime memberships. Our total unearned revenue as of December 31, 2019 was 5102 billion, of which $79 billion was recognized as revenue during the year ended December 31, 2020 and our total uncanned revenue as of December 31, 2020 was $11.6 billion Included in "Other long-term liabilities on our consolidated balance sheets was $20 billion and S1.9 billion of uncamed revenue as of December 31, 2019 and 2020. Additionally, we have performance obligations, primarily related to AWS, associated with commitments in customer contracts for future services that have not yet been recognized in our financial statements. For contracts with original terms that exceed one year, those commitments not yet recognized were $500 billion as of December 31, 2020. The weighted average remaining life of our long-term contracts is 3.4 years. However, the amount and timing of revenue recognition is largely driven by customer usage, which can extend beyond the original contractual term Other Long-Term Liabilities Included in "Other long-term liabilities on our consolidated balance sheets are liabilities primarily related to financing obligations, asset retirement obligations, deferred tax liabilities, uneamed revenue, tax contingencies, and digital video and music content Foreign Currency We have internationally focused stores for which the net sales generated, 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 cither operate or support these stores is generally the same as the local currency. Assets and liabilities of these subsidiaries are translated into US Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates 30 Consolidated Statements of Cash Flows Reconciliation ecolidated balance sheets to the total of the same such amounts shown in the consolidated statements of cash flows The following table provides a reconciliation of the amount of cash, cash equivalents, and restricted cash reported within millions Cash and cash equivalents Restricted cash included in accounts receivable, nct and other Restricted cash included in other acts Total cash, cash equivalents, and restricted cash sbown in the consolidated statements of December 31, 2019 Dember 31, 2000 36,0925 276 233 42 cash flows $ 36,4105 42.377 Note PROPERTY AND EQUIPMENT Property and equipment, at cost, consisted of the following (in millions) December 31, 2019 S Gross property and equipment (1) Land and buildings Equipment Other assets Construction in progress Gross property and equipment Total accumulated depreciation and amortization (1) Total property and equipment, net 39.223 5 71,310 3,111 6,036 119.680 46,975 72 7055 52.324 97,224 3.772 15.228 173.545 60,434 113.114 S (1) Includes the original cost and accumulated depreciation of fully-depreciated assets. Depreciation and amortization expense on property and equipment was $12.1 billion, $15.1 billion, and $162 billion which includes amortization of property and equipment acquired under finance leases of S7.3 billion, $10.1 billion, and $8.5 billion for 2018, 2019, and 2020. Note 4-LEASES Gross assets acquired under finance cases, inclusive of those where title transfers at the end of the lease are recorded in "Property and equipment, net and were $57.4 billion and $68.1 billion as of December 31, 2019 and 2020. Accumulated amortization associated with finance leases was $30.0 billion and $36.5 billion as of December 31, 2019 and 2020. Lease cost recognized in our consolidated statements of operations is summarized as follows (in millions Year Ended December 31, 2019 Operating lease cost S 3,669 5,019 Finance lease cost: Amortization of lease assets 10,094 8,452 Interest on lease liabilities 695 617 Finance lease cost 10,789 9,069 Variable lease cost 966 1.238 Total lease cost 15,424 5 15,326 53