AMAZON COM INC, 10-K filed on 1/30/2015
Annual Report
Document and Entity Information (USD $)
12 Months Ended
Dec. 31, 2014
Jan. 16, 2015
Jun. 30, 2014
Document Document And Entity Information [Abstract]
 
 
 
Document Type
10-K 
 
 
Amendment Flag
false 
 
 
Document Period End Date
Dec. 31, 2014 
 
 
Document Fiscal Year Focus
2014 
 
 
Document Fiscal Period Focus
FY 
 
 
Trading Symbol
AMZN 
 
 
Entity Registrant Name
AMAZON COM INC 
 
 
Entity Central Index Key
0001018724 
 
 
Current Fiscal Year End Date
--12-31 
 
 
Entity Well-known Seasoned Issuer
Yes 
 
 
Entity Current Reporting Status
Yes 
 
 
Entity Voluntary Filers
No 
 
 
Entity Filer Category
Large Accelerated Filer 
 
 
Entity Public Float
 
 
$ 122,614,381,040 
Entity Common Stock, Shares Outstanding
 
464,383,939 
 
Consolidated Statements Of Cash Flows (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
CASH AND CASH EQUIVALENTS, BEGINNING OF PERIOD
$ 8,658 
$ 8,084 
$ 5,269 
OPERATING ACTIVITIES:
 
 
 
Net income (loss)
(241)
274 
(39)
Adjustments to reconcile net income (loss) to net cash from operating activities:
 
 
 
Depreciation of property and equipment, including internal-use software and website development, and other amortization
4,746 
3,253 
2,159 
Stock-based compensation
1,497 
1,134 
833 
Other operating expense (income), net
129 
114 
154 
Losses (gains) on sales of marketable securities, net
(3)
1 
(9)
Other expense (income), net
62 
166 
253 
Deferred income taxes
(316)
(156)
(265)
Excess tax benefits from stock-based compensation
(6)
(78)
(429)
Changes in operating assets and liabilities:
 
 
 
Inventories
(1,193)
(1,410)
(999)
Accounts receivable, net and other
(1,039)
(846)
(861)
Accounts payable
1,759 
1,888 
2,070 
Accrued expenses and other
706 
736 
1,038 
Additions to unearned revenue
4,433 
2,691 
1,796 
Amortization of previously unearned revenue
(3,692)
(2,292)
(1,521)
Net cash provided by (used in) operating activities
6,842 
5,475 
4,180 
INVESTING ACTIVITIES:
 
 
 
Purchases of property and equipment, including internal-use software and website development
(4,893)
(3,444)
(3,785)
Acquisitions, net of cash acquired, and other
(979)
(312)
(745)
Sales and maturities of marketable securities and other investments
3,349 
2,306 
4,237 
Purchases of marketable securities and other investments
(2,542)
(2,826)
(3,302)
Net cash provided by (used in) investing activities
(5,065)
(4,276)
(3,595)
FINANCING ACTIVITIES:
 
 
 
Excess tax benefits from stock-based compensation
6 
78 
429 
Common stock repurchased
0 
0 
(960)
Proceeds from long-term debt and other
6,359 
394 
3,378 
Repayments of long-term debt
(513)
(231)
(82)
Principal repayments of capital lease obligations
(1,285)
(775)
(486)
Principal repayments of finance lease obligations
(135)
(5)
(20)
Net cash provided by (used in) financing activities
4,432 
(539)
2,259 
Foreign-currency effect on cash and cash equivalents
(310)
(86)
(29)
Net increase (decrease) in cash and cash equivalents
5,899 
574 
2,815 
CASH AND CASH EQUIVALENTS, END OF PERIOD
14,557 
8,658 
8,084 
SUPPLEMENTAL CASH FLOW INFORMATION:
 
 
 
Cash paid for interest on long-term debt
91 
97 
31 
Cash paid for income taxes (net of refunds)
177 
169 
112 
Assets Held under Capital Leases
 
 
 
SUPPLEMENTAL CASH FLOW INFORMATION:
 
 
 
Property and equipment acquired
4,008 
1,867 
802 
Assets Held under Build-To-Suit Leases
 
 
 
SUPPLEMENTAL CASH FLOW INFORMATION:
 
 
 
Property and equipment acquired
$ 920 
$ 877 
$ 29 
Consolidated Statements Of Operations (USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Net product sales
$ 70,080 
$ 60,903 
$ 51,733 
Net service sales
18,908 
13,549 
9,360 
Total net sales
88,988 
74,452 
61,093 
Operating expenses:
 
 
 
Cost of sales
62,752 
54,181 
45,971 
Fulfillment
10,766 
8,585 
6,419 
Marketing
4,332 
3,133 
2,408 
Technology and content
9,275 
6,565 
4,564 
General and administrative
1,552 
1,129 
896 
Other operating expense (income), net
133 
114 
159 
Total operating expenses
88,810 
73,707 
60,417 
Income from operations
178 
745 
676 
Interest income
39 
38 
40 
Interest expense
(210)
(141)
(92)
Other income (expense), net
(118)
(136)
(80)
Total non-operating income (expense)
(289)
(239)
(132)
Income (loss) before income taxes
(111)
506 
544 
Provision for income taxes
(167)
(161)
(428)
Equity-method investment activity, net of tax
37 
(71)
(155)
Net income (loss)
$ (241)
$ 274 
$ (39)
Basic earnings per share
$ (0.52)
$ 0.60 
$ (0.09)
Diluted earnings per share
$ (0.52)
$ 0.59 
$ (0.09)
Weighted average shares used in computation of earnings per share:
 
 
 
Basic
462 
457 
453 
Diluted
462 
465 
453 
Consolidated Statements Of Operations (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Fulfillment
 
 
 
Stock-based compensation
$ 375 
$ 294 
$ 212 
Marketing
 
 
 
Stock-based compensation
125 
88 
61 
Technology and content
 
 
 
Stock-based compensation
804 
603 
434 
General and administrative
 
 
 
Stock-based compensation
$ 193 
$ 149 
$ 126 
Consolidated Statements of Comprehensive Income (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Net income (loss)
$ (241)
$ 274 
$ (39)
Other comprehensive income (loss):
 
 
 
Foreign currency translation adjustments, net of tax of $(3), $(20), and $(30)
(325)
63 
76 
Net change in unrealized gains on available-for-sale securities:
 
 
 
Unrealized gains (losses), net of tax of $1, $3, and $(3)
2 
(10)
8 
Reclassification adjustment for losses (gains) included in “Other income (expense), net,” net of tax of $(1), $(1), and $3
(3)
1 
(7)
Net unrealized gains (losses) on available-for-sale securities
(1)
(9)
1 
Total other comprehensive income (loss)
(326)
54 
77 
Comprehensive income (loss)
$ (567)
$ 328 
$ 38 
Consolidated Statements of Comprehensive Income (Parenthetical) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Statement of Comprehensive Income [Abstract]
 
 
 
Foreign currency translation adjustments, tax
$ (3)
$ (20)
$ (30)
Unrealized gains (losses), tax
1 
3 
(3)
Reclassification adjustment for losses (gains) included in other income (expense), net, tax
$ (1)
$ (1)
$ 3 
Consolidated Balance Sheets (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Current assets:
 
 
Cash and cash equivalents
$ 14,557 
$ 8,658 
Marketable securities
2,859 
3,789 
Inventories
8,299 
7,411 
Accounts receivable, net and other
5,612 
4,767 
Total current assets
31,327 
24,625 
Property and equipment, net
16,967 
10,949 
Goodwill
3,319 
2,655 
Other assets
2,892 
1,930 
Total assets
54,505 
40,159 
Current liabilities:
 
 
Accounts payable
16,459 
15,133 
Accrued expenses and other
9,807 
6,688 
Unearned revenue
1,823 
1,159 
Total current liabilities
28,089 
22,980 
Long-term debt
8,265 
3,191 
Other long-term liabilities
7,410 
4,242 
Commitments and contingencies (Note 8)
   
   
Stockholders’ equity:
 
 
Preferred stock, $0.01 par value: Authorized shares - 500 Issued and outstanding shares - none
0 
0 
Common stock, $0.01 par value: Authorized shares - 5,000 Issued shares - 488 and 483 Outstanding shares - 465 and 459
5 
5 
Treasury stock, at cost
(1,837)
(1,837)
Additional paid-in capital
11,135 
9,573 
Accumulated other comprehensive loss
(511)
(185)
Retained earnings
1,949 
2,190 
Total stockholders’ equity
10,741 
9,746 
Total liabilities and stockholders’ equity
$ 54,505 
$ 40,159 
Consolidated Balance Sheets (Parenthetical) (USD $)
Dec. 31, 2014
Dec. 31, 2013
Statement of Financial Position [Abstract]
 
 
Preferred stock, par value (in usd per share)
$ 0.01 
$ 0.01 
Preferred stock, Authorized shares
500,000,000 
500,000,000 
Preferred stock, Issued shares
0 
0 
Preferred stock, Outstanding shares
0 
0 
Common stock, par value (in usd per share)
$ 0.01 
$ 0.01 
Common stock, Authorized shares
5,000,000,000 
5,000,000,000 
Common stock, Issued shares
488,000,000 
483,000,000 
Common stock, Outstanding shares
465,000,000 
459,000,000 
Consolidated Statements of Stockholders' Equity (USD $)
In Millions
Total
Common Stock
Treasury Stock
Additional Paid-In Capital
Accumulated Other Comprehensive Income (Loss)
Retained Earnings
Beginning Balance at Dec. 31, 2011
$ 7,757 
$ 5 
$ (877)
$ 6,990 
$ (316)
$ 1,955 
Beginning Balance (in shares) at Dec. 31, 2011
 
455 
 
 
 
 
Net income (loss)
(39)
 
 
 
 
(39)
Other comprehensive income (loss)
77 
 
 
 
77 
 
Exercise of common stock options (in shares)
 
4 
 
 
 
 
Exercise of common stock options
8 
 
 
8 
 
 
Repurchase of common stock (in shares)
 
(5)
 
 
 
 
Repurchase of common stock
(960)
 
(960)
 
 
 
Excess tax benefits from stock-based compensation
429 
 
 
429 
 
 
Stock-based compensation and issuance of employee benefit plan stock
854 
 
 
854 
 
 
Issuance of common stock for acquisition activity
66 
 
 
66 
 
 
Ending Balance at Dec. 31, 2012
8,192 
5 
(1,837)
8,347 
(239)
1,916 
Ending Balance (in shares) at Dec. 31, 2012
 
454 
 
 
 
 
Net income (loss)
274 
 
 
 
 
274 
Other comprehensive income (loss)
54 
 
 
 
54 
 
Exercise of common stock options (in shares)
 
5 
 
 
 
 
Exercise of common stock options
4 
 
 
4 
 
 
Repurchase of common stock (in shares)
 
0 
 
 
 
 
Repurchase of common stock
0 
 
0 
 
 
 
Excess tax benefits from stock-based compensation
73 
 
 
73 
 
 
Stock-based compensation and issuance of employee benefit plan stock
1,149 
 
 
1,149 
 
 
Ending Balance at Dec. 31, 2013
9,746 
5 
(1,837)
9,573 
(185)
2,190 
Ending Balance (in shares) at Dec. 31, 2013
 
459 
 
 
 
 
Net income (loss)
(241)
 
 
 
 
(241)
Other comprehensive income (loss)
(326)
 
 
 
(326)
 
Exercise of common stock options (in shares)
 
6 
 
 
 
 
Exercise of common stock options
2 
 
 
2 
 
 
Excess tax benefits from stock-based compensation
6 
 
 
6 
 
 
Stock-based compensation and issuance of employee benefit plan stock
1,510 
 
 
1,510 
 
 
Ending Balance at Dec. 31, 2014
$ 10,741 
$ 5 
$ (1,837)
$ 11,135 
$ (511)
$ 1,949 
Ending Balance (in shares) at Dec. 31, 2014
 
465 
 
 
 
 
Description of Business and Accounting Policies
Description of Business and Accounting Policies
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 two geographic segments, we serve our primary customer sets, consisting of consumers, sellers, 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 AWS, 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 two segments: North America and International. See “Note 12—Segment Information.”
Prior Period Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation, including the expanded presentation of “Net cash provided by (used in) financing activities” on our consolidated statements of cash flows and components of the provision for income taxes in “Note 11—Income Taxes.”
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 (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 lives 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 of 17 million and 15 million in 2014 and 2012, were excluded as their inclusion would have an antidilutive effect.
The following table shows the calculation of diluted shares (in millions):
  
Year Ended December 31,
 
2014
 
2013
 
2012
Shares used in computation of basic earnings per share
462

 
457

 
453

Total dilutive effect of outstanding stock awards
—

 
8

 
—

Shares used in computation of diluted earnings per share
462

 
465

 
453


Revenue
We recognize revenue from product sales or services rendered when the following four criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or service has been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. Revenue arrangements with multiple deliverables are divided into separate units and revenue is allocated using estimated selling prices if we do not have vendor-specific objective evidence or third-party evidence of the selling prices of the deliverables. We allocate the arrangement price to each of the elements based on the relative selling prices of each element. Estimated selling prices are management’s best estimates of the prices that we would charge our customers if we were to sell the standalone elements separately and include considerations of customer demand, prices charged by us and others for similar deliverables, and the price if largely based on the cost of producing the product or service.
Sales of our digital devices, including Kindle e-readers, Fire tablets, Fire TVs, Echo, and Fire phones, are considered arrangements with multiple deliverables, consisting of the device, undelivered software upgrades and/or undelivered non-software services such as cloud storage and free trial memberships to other services. The revenue allocated to the device, which is the substantial portion of the total sale price, and related costs are generally recognized upon delivery. Revenue related to undelivered software upgrades and/or undelivered non-software services is deferred and recognized generally on a straight-line basis over the estimated period the software upgrades and non-software services are expected to be provided for each of these devices.
Sales of Amazon Prime memberships are also considered arrangements with multiple deliverables, including shipping benefits, Prime Instant Video, Prime Music, Prime Photo, and access to the Kindle Owners’ Lending Library. The revenue related to the deliverables is amortized over the life of the membership based on the estimated delivery of services. Amazon Prime membership fees are allocated between product sales and service sales. Costs to deliver Amazon Prime benefits are recognized as cost of sales as incurred. As we add more benefits to the Prime membership, we will update the method of determining the estimated selling prices of each element as well as the allocation of Prime membership fees.
We evaluate whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. Generally, when we are primarily obligated in a transaction, are subject to inventory risk, have latitude in establishing prices and selecting suppliers, or have several but not all of these indicators, revenue is recorded at the gross sale price. We generally record the net amounts as commissions earned if we are not primarily obligated and do not have latitude in establishing prices. Such amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two.
Product sales represent revenue from the sale of products and related shipping fees and digital media content where we record revenue gross. Product sales and shipping revenues, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped and title passes to customers. Retail sales to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon our delivery to the carrier. Amazon’s electronic devices sold through retailers are recognized at the point of sale to consumers.
Service sales represent third-party seller fees earned (including commissions) and related shipping fees, digital content subscriptions, and non-retail activities such as AWS, advertising services, and our co-branded credit card agreements. Service sales, net of promotional discounts and return allowances, are recognized when service has been rendered.
Return allowances, which reduce revenue, are estimated using historical experience. Allowance for returns was $147 million, $167 million, and $198 million as of December 31, 2014, 2013, and 2012. Additions to the allowance were $1.1 billion, $907 million, and $702 million, and deductions to the allowance were $1.1 billion, $938 million, and $659 million as of December 31, 2014, 2013, and 2012. Revenue from product sales and services rendered is recorded net of sales and consumption taxes. Additionally, we periodically provide incentive offers to our customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases, inducement offers, such as offers for future discounts subject to a minimum current purchase, and other similar offers. Current discount offers, when accepted by our customers, are treated as a reduction to the purchase price of the related transaction, while inducement offers, when accepted by our customers, are treated as a reduction to purchase price based on estimated future redemption rates. Redemption rates are estimated using our historical experience for similar inducement offers. Current discount offers and inducement offers are presented as a net amount in “Total net sales.”
Cost of Sales
Cost of sales consists of the purchase price of consumer products and digital media content where we record revenue gross, including Prime Instant Video, packaging supplies, and inbound and outbound shipping costs, including sortation and delivery centers, and related equipment costs. Shipping costs to receive products from our suppliers are included in our inventory, and recognized as cost of sales upon sale of products to our customers. Payment processing and related transaction costs, including those associated with seller transactions, are classified in “Fulfillment” on our consolidated statements of operations.
Vendor Agreements
We have agreements with our vendors to receive funds for cooperative marketing efforts, promotions, and volume rebates. We generally consider amounts received from vendors to be a reduction of the prices we pay for their goods or services, and therefore record those amounts as a reduction of the cost of inventory or cost of services. Vendor rebates are typically dependent upon reaching minimum purchase thresholds. We evaluate the likelihood of reaching purchase thresholds using past experience and current year forecasts. When volume rebates can be reasonably estimated, we record a portion of the rebate as we make progress towards the purchase threshold.
When we receive direct reimbursements for costs incurred by us in advertising the vendor’s product or service, the amount we receive is recorded as an offset to “Marketing” on our consolidated statements of operations.
Fulfillment
Fulfillment costs represent those costs incurred in operating and staffing our fulfillment and customer service centers, including costs attributable to buying, receiving, inspecting, and warehousing inventories; picking, packaging, and preparing customer orders for shipment; payment processing and related transaction costs, including costs associated with our guarantee for certain seller transactions; responding to inquiries from customers; and supply chain management for our manufactured electronic devices. Fulfillment costs also include amounts paid to third parties that assist us in fulfillment and customer service operations.
Marketing
Marketing costs consist primarily of targeted online advertising, television advertising, public relations expenditures, and payroll and related expenses for personnel engaged in marketing, business development, and selling activities. We pay commissions to participants in our Associates program when their customer referrals result in product sales and classify such costs as “Marketing” on our consolidated statements of operations. We also participate in cooperative advertising arrangements with certain of our vendors, and other third parties.
Advertising and other promotional costs are expensed as incurred and were $3.3 billion, $2.4 billion, and $2.0 billion in 2014, 2013, and 2012. Prepaid advertising costs were not significant as of December 31, 2014 and 2013.
Technology and Content
Technology costs consist principally of research and development activities including payroll and related expenses for employees involved in application, production, maintenance, operation, and platform development for new and existing products and services, as well as AWS and other technology infrastructure expenses.
Content costs consist principally of payroll and related expenses for employees involved in category expansion, editorial content, buying, and merchandising selection.
Technology and content costs are expensed as incurred, except for certain costs relating to the development of internal-use software and website development, including software used to upgrade and enhance our websites and applications supporting our business, which are capitalized and amortized over two years.
General and Administrative
General and administrative expenses consist of payroll and related expenses for employees involved in general corporate functions, including accounting, finance, tax, legal, and human resources, among others; costs associated with use by these functions of facilities and equipment, such as depreciation expense and rent; professional fees and litigation costs; and other general corporate costs.
Stock-Based Compensation
Compensation cost for all stock awards expected to vest is measured at fair value on the date of grant and recognized over the service period. The fair value of restricted stock units is determined based on the number of shares granted and the quoted price of our common stock and the fair value of stock options are estimated on the date of grant using a Black-Scholes model. Such value is recognized as expense over the service period, net of estimated forfeitures, using the accelerated method. The estimated number of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including employee classification, economic environment, and historical experience.
Other Operating Expense (Income), Net
Other operating expense (income), net, consists primarily of intangible asset amortization expense and expenses related to legal settlements.
Other Income (Expense), Net
Other income (expense), net, consists primarily of foreign currency losses of $(127) million, $(137) million, and $(95) million in 2014, 2013, and 2012, and realized gains and losses on marketable securities sales of $3 million, $(1) million, and $10 million in 2014, 2013, and 2012.
Income Taxes
Income tax expense includes U.S. (federal and state) and foreign income taxes. Except as required under U.S. tax laws, we do not provide for U.S. taxes on our undistributed earnings of foreign subsidiaries that have not been previously taxed since we intend to invest such undistributed earnings indefinitely outside of the U.S. If our intent changes or if these funds are needed for our U.S. operations, we would be required to accrue or pay U.S. taxes on some or all of these undistributed earnings and our effective tax rate would be adversely affected. Undistributed earnings of foreign subsidiaries that are indefinitely invested outside of the U.S were $2.5 billion as of December 31, 2014. Determination of the unrecognized deferred tax liability that would be incurred if such amounts were repatriated is not practicable.
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.
Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent we believe they will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent cumulative earnings experience and expectations of future taxable income and capital gains by taxing jurisdiction, the carry-forward periods available to us for tax reporting purposes, and other relevant factors. We allocate our valuation allowance to current and long-term deferred tax assets on a pro-rata basis.
We utilize a two-step approach to recognizing and measuring uncertain income tax positions (tax contingencies). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating our tax positions and estimating our tax benefits, which may require periodic adjustments and which may not accurately forecast actual outcomes. We include interest and penalties related to our tax contingencies in income tax expense.
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
For our cash, cash equivalents, or marketable securities, we measure the fair value of money market funds and equity securities based on quoted prices in active markets for identical assets or liabilities. All other financial instruments were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. We did not hold any cash, cash equivalents, or marketable securities categorized as Level 3 assets as of December 31, 2014, or December 31, 2013.
As part of entering into commercial agreements, we often obtain equity warrant assets giving us the right to acquire stock primarily in private companies. We record these assets in “Other assets” on the accompanying consolidated balance sheets. Equity warrant assets are classified as Level 3 assets, and the balances and related activity for our equity warrant assets were not significant for the periods ended December 31, 2014, 2013, and 2012.
Cash and Cash Equivalents
We classify all highly liquid instruments with an original maturity of three months or less at the time of purchase as cash equivalents.
Inventories
Inventories, consisting of products available for sale, are primarily accounted for using the FIFO method, and are valued at the lower of cost or market value. This valuation requires us to make judgments, based on currently-available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category.
We provide Fulfillment by Amazon services in connection with certain of our sellers’ programs. Third-party sellers maintain ownership of their inventory, regardless of whether fulfillment is provided by us or the third-party sellers, and therefore these products are not included in our inventories.
We also purchase electronic device components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, we enter into agreements with contract manufacturers and suppliers. A portion of our reported purchase commitments arising from these agreements consists of firm, non-cancellable commitments. These commitments are based on forecasted customer demand. If we reduce these commitments, we may incur additional costs.
Accounts Receivable, Net and Other
Included in “Accounts receivable, net and other” on our consolidated balance sheets are amounts primarily related to vendor and customer receivables. As of December 31, 2014 and 2013, vendor receivables, net, were $1.4 billion and $1.3 billion, and customer receivables, net, were $1.9 billion and $1.7 billion.
We estimate losses on receivables based on known troubled accounts and historical experience of losses incurred. Receivables are considered impaired and written-off when it is probable that all contractual payments due will not be collected in accordance with the terms of the agreement. The allowance for doubtful accounts was $190 million, $153 million, and $116 million as of December 31, 2014, 2013, and 2012. Additions to the allowance were $225 million, $172 million, and $136 million, and deductions to the allowance were $188 million, $135 million, and $102 million as of December 31, 2014, 2013, and 2012.
Internal-use Software and Website Development
Costs incurred to develop software for internal use and our websites are capitalized and amortized over the estimated useful life of the software. Costs related to design or maintenance of internal-use software and website development are expensed as incurred. For the years ended 2014, 2013, and 2012, we capitalized $641 million (including $104 million of stock-based compensation), $581 million (including $87 million of stock-based compensation), and $454 million (including $74 million of stock-based compensation) of costs associated with internal-use software and website development. Amortization of previously capitalized amounts was $559 million, $451 million, and $327 million for 2014, 2013, and 2012.
Property and Equipment, Net
Property and equipment are stated at cost less accumulated depreciation. Property includes buildings and land that we own, along with property we have acquired under build-to-suit, financing, and capital lease arrangements. Equipment includes assets such as furniture and fixtures, heavy equipment, servers and networking equipment, and internal-use software and website development. Depreciation 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, two years for assets such as internal-use software, three years for our servers, five years for networking equipment, five years for furniture and fixtures, and ten years for heavy equipment). Depreciation expense is classified within the corresponding operating expense categories on our consolidated statements of operations.
Leases and Asset Retirement Obligations
We categorize leases at their inception as either operating or capital leases. On certain of our lease agreements, we may receive rent holidays and other incentives. We recognize lease costs on a straight-line basis without regard to deferred payment terms, such as rent holidays, that defer the commencement date of required payments. Additionally, incentives we receive are treated as a reduction of our costs over the term of the agreement. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the non-cancellable term of the lease.
We establish assets and liabilities for the estimated construction costs incurred under build-to-suit lease arrangements to the extent we are involved in the construction of structural improvements or take construction risk prior to commencement of a lease. Upon occupancy of facilities under build-to-suit leases, we assess whether these arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If we continue to be the deemed owner, the facilities are accounted for as finance leases.
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 depreciated over the lease period into operating expense, and the recorded liabilities are accreted to the future value of the estimated retirement costs.
Goodwill
We evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. We test goodwill for impairment by first comparing the book value of net assets to the fair value of the reporting units. If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. We estimate the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions.
We conduct our annual impairment test as of October 1 of each year, and have determined there to be no impairment for any of the periods presented. There were no triggering events identified from the date of our assessment through December 31, 2014 that would require an update to our annual impairment test. See “Note 4—Acquisitions, Goodwill, and Acquired Intangible Assets.”
Other Assets
Included in “Other assets” on our consolidated balance sheets are amounts primarily related to acquired intangible assets, net of amortization; acquired digital media content, net of amortization; long-term deferred tax assets; certain equity investments; marketable securities restricted for longer than one year, the majority of which are attributable to collateralization of bank guarantees and debt related to our international operations; intellectual property rights, net of amortization; and equity warrant assets.
Content Costs
We obtain video and music content to be made available to Prime members through licensing agreements that have a wide range of licensing provisions and generally have terms from one to five years with fixed payment schedules. When the license fee for a specific movie, television, or music title is determinable or reasonably estimable and available for streaming, we recognize an asset representing the fee per title and a corresponding liability for the amounts owed. We relieve the liability as payments are made and we amortize the asset as cost of sales on a straight-line basis over each title’s contractual window of availability, which typically ranges from six months to five years. If we are unable to reasonably estimate the cost per title, no asset or liability is recorded and licensing costs are expensed as incurred. We also develop original content. The production costs of internally developed content are capitalized only if persuasive evidence exists that the production will generate revenue. Because we have limited history to support the economic benefits of our content, we have generally expensed such costs as incurred. As we develop more experience or otherwise obtain the necessary evidence that future revenue will be earned through licensing or Prime membership activity, a portion of future production costs may be capitalized.
Investments
We generally invest our excess cash in investment grade short- to intermediate-term fixed income securities and AAA-rated money market funds. Such investments are included in “Cash and cash equivalents,” or “Marketable securities” on the accompanying consolidated balance sheets, classified as available-for-sale, and reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive loss.”
Equity investments are accounted for using the equity method of accounting if the investment gives us the ability to exercise significant influence, but not control, over an investee. The total of our investments in equity-method investees, including identifiable intangible assets, deferred tax liabilities, and goodwill, is included within “Other assets” on our consolidated balance sheets. Our share of the earnings or losses as reported by equity-method investees, amortization of the related intangible assets, and related gains or losses, if any, are classified as “Equity-method investment activity, net of tax” on our consolidated statements of operations. Our share of the net income or loss of our equity-method investees includes operating and non-operating gains and charges, which can have a significant impact on our reported equity-method investment activity and the carrying value of those investments. In the event that net losses of the investee reduce our equity-method investment carrying amount to zero, additional net losses may be recorded if other investments in the investee, not accounted for under the equity method, are at-risk even if we have not committed to provide financial support to the investee. 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 sheets 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 as of December 31, 2014 or 2013.
Accrued Expenses and Other
Included in “Accrued expenses and other” on our consolidated balance sheets are liabilities primarily related to unredeemed gift cards, leases and asset retirement obligations, current debt, acquired digital media content, and other operating expenses.
As of December 31, 2014 and 2013 our liabilities for unredeemed gift cards was $1.7 billion and $1.4 billion. We reduce the liability for a gift card when redeemed by a customer. If a gift card is not redeemed, we recognize revenue when it expires or when the likelihood of its redemption becomes remote, generally two years from the date of issuance.
Unearned Revenue
Unearned revenue is recorded when payments are received in advance of performing our service obligations and is recognized over the service period. Unearned revenue primarily relates to prepayments of Amazon Prime memberships and AWS services.
Foreign Currency
We have internationally-focused websites for the United Kingdom, Germany, France, Japan, Canada, China, Italy, Spain, Brazil, India, Mexico, Australia, and the Netherlands. 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 $98 million, $84 million, and $95 million in 2014, 2013, and 2012.
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board issued an Accounting Standard 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. The guidance is effective for annual and interim reporting periods beginning after December 15, 2016, with early adoption prohibited. We are currently evaluating the impact this ASU will have on our consolidated financial statements.
Cash, Cash Equivalents, and Marketable Securities
Cash, Cash Equivalents, and Marketable Securities
CASH, CASH EQUIVALENTS, AND MARKETABLE SECURITIES
As of December 31, 2014 and 2013, our cash, cash equivalents, and marketable securities primarily consisted of cash, U.S. and foreign government and agency securities, AAA-rated money market funds, and other investment grade securities. Cash equivalents and marketable securities are recorded at fair value. The following table summarizes, by major security type, our cash, cash equivalents, and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in millions):
 
 
December 31, 2014
  
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Total
Estimated
Fair Value
Cash
$
4,155

 
$
—

 
$
—

 
$
4,155

Level 1 securities:
 
 
 
 
 
 
 
Money market funds
10,718

 
—

 
—

 
10,718

Equity securities
2

 
2

 
—

 
4

Level 2 securities:
 
 
 
 
 
 
 
Foreign government and agency securities
80

 
—

 
—

 
80

U.S. government and agency securities
2,407

 
1

 
(2
)
 
2,406

Corporate debt securities
401

 
1

 
(1
)
 
401

Asset-backed securities
69

 
—

 
—

 
69

Other fixed income securities
33

 
—

 
—

 
33

 
$
17,865

 
$
4

 
$
(3
)
 
$
17,866

Less: Restricted cash, cash equivalents, and marketable securities (1)
 
 
 
 
 
 
(450
)
Total cash, cash equivalents, and marketable securities
 
$
17,416

 
December 31, 2013
  
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Total
Estimated
Fair Value
Cash
$
3,008

 
$
—

 
$
—

 
$
3,008

Level 1 securities:
 
 
 
 
 
 
 
Money market funds
5,914

 
—

 
—

 
5,914

Equity securities
3

 
1

 
—

 
4

Level 2 securities:
 
 
 
 
 
 
 
Foreign government and agency securities
757

 
2

 
(1
)
 
758

U.S. government and agency securities
2,224

 
1

 
(3
)
 
2,222

Corporate debt securities
739

 
3

 
(1
)
 
741

Asset-backed securities
65

 
—

 
—

 
65

Other fixed income securities
36

 
—

 
—

 
36

 
$
12,746

 
$
7

 
$
(5
)
 
$
12,748

Less: Restricted cash, cash equivalents, and marketable securities (1)
 
 
 
 
 
 
(301
)
Total cash, cash equivalents, and marketable securities
 
$
12,447

___________________
(1)
We are required to pledge or otherwise restrict a portion of our cash, cash equivalents, and marketable securities as collateral for standby and trade letters of credit, guarantees, debt, real estate leases, and amounts due to third-party sellers in certain jurisdictions. We classify cash, cash equivalents and marketable securities with use restrictions of less than twelve months as “Accounts receivable, net and other” and of twelve months or longer as non-current “Other assets” on our consolidated balance sheets. See “Note 8—Commitments and Contingencies.”

The following table summarizes gross gains and gross losses realized on sales of available-for-sale marketable securities (in millions):

 
Year Ended December 31,
 
2014
 
2013
 
2012
Realized gains
$
8

 
$
6

 
$
20

Realized losses
5

 
7

 
10



The following table summarizes the contractual maturities of our cash equivalents and marketable fixed-income securities as of December 31, 2014 (in millions):

 
Amortized
Cost
 
Estimated
Fair Value
Due within one year
$
12,553

 
$
12,552

Due after one year through five years
798

 
799

Due after five years through ten years
132

 
132

Due after ten years
224

 
224

Total
$
13,707

 
$
13,707


Actual maturities may differ from the contractual maturities because borrowers may have certain prepayment conditions.
Property and Equipment
Property and Equipment
PROPERTY AND EQUIPMENT
Property and equipment, at cost, consisted of the following (in millions):
 
 
December 31,
 
2014
 
2013
Gross property and equipment (1):
 
 
 
Land and buildings
$
7,150

 
$
4,584

Equipment and internal-use software (2)
14,213

 
9,274

Other corporate assets
304

 
231

Construction in progress
1,063

 
720

Gross property and equipment
22,730

 
14,809

Total accumulated depreciation (1)
5,763

 
3,860

Total property and equipment, net
$
16,967

 
$
10,949

 ___________________
(1)
Excludes the original cost and accumulated depreciation of fully-depreciated assets.
(2)
Includes internal-use software of $1.3 billion and $1.1 billion as of December 31, 2014 and 2013.
Depreciation expense on property and equipment was $3.6 billion, $2.5 billion, and $1.7 billion, which includes amortization of property and equipment acquired under capital leases of $1.5 billion, $826 million, and $510 million for 2014, 2013, and 2012. Gross assets remaining under capital leases were $7.9 billion and $4.2 billion as of December 31, 2014 and 2013. Accumulated depreciation associated with capital leases was $3.3 billion and $1.9 billion as of December 31, 2014 and 2013.
We capitalize construction in progress and record a corresponding long-term liability for build-to-suit lease agreements where we are considered the owner, for accounting purposes, during the construction period. For buildings under build-to-suit lease arrangements where we have taken occupancy, which do not qualify for sales recognition under the sale-leaseback accounting guidance, we determined that we continue to be the deemed owner of these buildings. This is principally due to our significant investment in tenant improvements. As a result, the buildings are being depreciated over the shorter of their useful lives or the related leases’ terms. Additionally, certain build-to-suit lease arrangements and finance leases provide purchase options. Upon occupancy, the long-term construction obligations are considered long-term finance lease obligations with amounts payable during the next 12 months recorded as “Accrued expenses and other.” Gross assets remaining under finance leases were $1.4 billion and $578 million as of December 31, 2014 and 2013. Accumulated depreciation associated with finance leases was $87 million and $22 million as of December 31, 2014 and 2013.
Cash paid for interest on capital and finance leases was $86 million, $41 million, and $51 million for 2014, 2013, and 2012.
Acquisitions, Goodwill, and Acquired Intangible Assets
Acquisitions, Goodwill, and Acquired Intangible Assets
ACQUISITIONS, GOODWILL, AND ACQUIRED INTANGIBLE ASSETS
2014 Acquisition Activity
On September 25, 2014, we acquired Twitch Interactive, Inc. (“Twitch”) for approximately $842 million in cash, as adjusted for the assumption of options and other items. During 2014, we acquired certain other companies for an aggregate purchase price of $20 million. We acquired Twitch because of its user community and the live streaming experience it provides. The primary reasons for our other 2014 acquisitions were to acquire technologies and know-how to enable Amazon to serve customers more effectively.
Acquisition-related costs were expensed as incurred and not significant. The aggregate purchase price of these acquisitions was allocated as follows (in millions):
Purchase Price
 
Cash paid, net of cash acquired
$
813

Stock options assumed
44

Indemnification holdback
5

 
$
862

Allocation
 
Goodwill
$
707

Intangible assets (1):
 
Marketing-related
23

Contract-based
1

Technology-based
33

Customer-related
173

 
230

Property and equipment
16

Deferred tax assets
64

Other assets acquired
34

Deferred tax liabilities
(88
)
Other liabilities assumed
(101
)
 
$
862

 ___________________
(1)
Acquired intangible assets have estimated useful lives of between one and five years, with a weighted-average amortization period of five years.
The fair value of assumed stock options of $39 million, estimated using the Black-Scholes model, will be expensed over the remaining service period. We determined the estimated fair value of identifiable intangible assets acquired primarily by using the income approach. These assets are included within “Other assets” on our consolidated balance sheets and are being amortized to operating expenses on a straight-line or accelerated basis over their estimated useful lives.
Subsequent to September 30, 2014, we made minor measurement period adjustments to the preliminary purchase price allocation that impacted goodwill, customer-related intangible assets, property and equipment, and deferred taxes and are reflected in the table above. We have not retrospectively adjusted our previously reported consolidated financial statements.
Pro Forma Financial Information – 2014 Acquisition Activity (unaudited)
The acquired companies were consolidated into our financial statements starting on their respective acquisition dates. The aggregate net sales and operating loss of the companies acquired was $40 million and $30 million for the year ended December 31, 2014. The following pro forma financial information presents our results as if the current year acquisitions had occurred at the beginning of 2013 (in millions):
  
  
Year Ended December 31,
 
2014
 
2013
Net sales
$
89,041

 
$
74,505

Net income (loss)
$
(287
)
 
$
180


2013 Acquisition Activity
In 2013, we acquired several companies in cash transactions for an aggregate purchase price of $195 million, resulting in goodwill of $103 million and acquired intangible assets of $83 million. The primary reasons for these acquisitions were to expand our customer base and sales channels and to obtain certain technologies to be used in product development. We determined the estimated fair value of identifiable intangible assets acquired primarily by using the income and cost approaches. These assets are included within “Other assets” on our consolidated balance sheets and are being amortized to operating expenses on a straight-line or accelerated basis over their estimated useful lives. Acquisition-related costs were expensed as incurred and were not significant.
Pro forma results of operations have not been presented because the effects of these acquisitions, individually and in the aggregate, were not material to our consolidated results of operations.
2012 Acquisition Activity
In May 2012, we acquired Kiva Systems, Inc. (“Kiva”) for a purchase price of $678 million. The primary reason for this acquisition was to improve fulfillment center productivity. Acquisition-related costs were expensed as incurred and were not significant. The aggregate purchase price of this acquisition was allocated as follows (in millions):
 
 
 
Purchase Price
 
Cash paid, net of cash acquired
$
613

Stock options assumed
65

 
$
678

Allocation
 
Goodwill
$
560

Intangible assets (1):
 
Marketing-related
5

Contract-based
3

Technology-based
168

Customer-related
17

 
193

Property and equipment
9

Deferred tax assets
34

Other assets acquired
41

Deferred tax liabilities
(81
)
Other liabilities assumed
(78
)
 
$
678

 ___________________
(1)
Acquired intangible assets have estimated useful lives of between four and 10 years, with a weighted-average amortization period of five years.
The fair value of assumed stock options was estimated using the Black-Scholes model. We determined the estimated fair value of identifiable intangible assets acquired primarily by using the income and cost approaches. These assets are included within “Other assets” on our consolidated balance sheets and are being amortized to operating expenses on a straight-line or accelerated basis over their estimated useful lives.
Pro forma results of operations have not been presented because the effect of this acquisition was not material to our consolidated results of operations.
Goodwill
The goodwill of the acquired companies is generally not deductible for tax purposes and is primarily related to expected improvements in sales growth from future product and service offerings and new customers and fulfillment center productivity, together with certain intangible assets that do not qualify for separate recognition. The following summarizes our goodwill activity in 2014 and 2013 by segment (in millions):
 
 
North
America
 
International
 
Consolidated
Goodwill - January 1, 2013
$
1,937

 
$
615

 
$
2,552

New acquisitions
99

 
4

 
103

Other adjustments (1)
(3
)
 
3

 
—

Goodwill - December 31, 2013
2,033

 
622

 
2,655

New acquisitions (2)
553

 
162

 
715

Other adjustments (1)
(2
)
 
(49
)
 
(51
)
Goodwill - December 31, 2014
$
2,584

 
$
735

 
$
3,319

 ___________________
(1)
Primarily includes changes in foreign exchange rates.
(2)
Primarily includes the goodwill of Twitch.
Intangible Assets
Acquired intangible assets, included within “Other assets” on our consolidated balance sheets, consist of the following (in millions):
 
 
 
 
December 31,
 
 
 
2014
 
2013
  
Weighted
Average Life
Remaining
 
Acquired
Intangibles,
Gross (1)
 
Accumulated
Amortization (1)
 
Acquired
Intangibles,
Net
 
Acquired
Intangibles,
Gross (1)
 
Accumulated
Amortization (1)
 
Acquired
Intangibles,
Net
Marketing-related
5.3
 
$
457

 
$
(199
)
 
$
258

 
$
429

 
$
(156
)
 
$
273

Contract-based
2.2
 
172

 
(125
)
 
47

 
173

 
(110
)
 
63

Technology- and content-based
3.5
 
370

 
(129
)
 
241

 
278

 
(74
)
 
204

Customer-related
2.5
 
535

 
(317
)
 
218

 
368

 
(263
)
 
105

Acquired intangibles (2)
3.5
 
$
1,534

 
$
(770
)
 
$
764

 
$
1,248

 
$
(603
)
 
$
645

 ___________________
(1)
Excludes the original cost and accumulated amortization of fully-amortized intangibles.
(2)
Intangible assets have estimated useful lives of between one and 10 years.
Amortization expense for acquired intangibles was $181 million, $168 million, and $163 million in 2014, 2013, and 2012. Expected future amortization expense of acquired intangible assets as of December 31, 2014 is as follows (in millions):
 
Year Ended December 31,
2015
$
202

2016
185

2017
161

2018
106

2019
79

Thereafter
31

 
$
764

Equity-Method Investments
Equity-Method Investments
EQUITY-METHOD INVESTMENTS
LivingSocial’s summarized condensed financial information, as provided to us by LivingSocial, is as follows (in millions):
 
  
Year Ended December 31,
 
2014
 
2013
 
2012
Statement of Operations:
 
 
 
 
 
Revenue
$
231

 
$
302

 
$
347

Gross profit
194

 
253

 
280

Operating expenses
296

 
282

 
367

Operating loss from continuing operations
(102
)
 
(29
)
 
(87
)
Net loss from continuing operations
(73
)
 
(16
)
 
(79
)
Net income (loss) from discontinued operations, net of tax (1)
173

 
(156
)
 
(574
)
Net income (loss)
$
100

 
$
(172
)
 
$
(653
)
___________________
(1)
In January 2014, LivingSocial completed the sale of its Korean operations for approximately $260 million and, in the first quarter of 2014, recognized a gain on disposal of $205 million, net of tax. The statement of operations information above has been recast to present the Korean operations, and certain other operations, as discontinued operations.

 
December 31,
 
2014
 
2013
Balance Sheet:
 
 
 
Current assets
$
163

 
$
182

Non-current assets
29

 
61

Current liabilities
137

 
301

Non-current liabilities
34

 
33

Redeemable stock
366

 
315


Balance sheet financial information as of December 31, 2013 included $146 million in assets and $122 million in liabilities that LivingSocial classified as held for sale for its Korean operations.
As of December 31, 2014, our total investment in LivingSocial is approximately 31% of voting stock and has a book value of $75 million.
Long-Term Debt
Long-Term Debt
LONG-TERM DEBT
In December 2014 and November 2012, we issued $6.0 billion and $3.0 billion of unsecured senior notes as described in the table below (collectively, the “Notes”). As of December 31, 2014 and 2013, the unamortized discount on the Notes was $96 million and $23 million. We also have other long-term debt with a carrying amount, including the current portion, of $881 million and $967 million as of December 31, 2014 and 2013. The face value of our total long-term debt obligations is as follows (in millions):
 
December 31,
 
2014
 
2013
0.65% Notes due on November 27, 2015 (1)
$
750

 
$
750

1.20% Notes due on November 29, 2017 (1)
1,000

 
1,000

2.50% Notes due on November 29, 2022 (1)
1,250

 
1,250

2.60% Notes due on December 5, 2019 (2)
1,000

 
—

3.30% Notes due on December 5, 2021 (2)
1,000

 
—

3.80% Notes due on December 5, 2024 (2)
1,250

 
—

4.80% Notes due on December 5, 2034 (2)
1,250

 
—

4.95% Notes due on December 5, 2044 (2)
1,500

 
—

Other long-term debt
881

 
967

Total debt
9,881

 
3,967

Less current portion of long-term debt
(1,520
)
 
(753
)
Face value of long-term debt
$
8,361

 
$
3,214


_____________________________
(1)
Issued in November 2012, effective interest rates of the 2015, 2017, and 2022 Notes were 0.84%, 1.38%, and 2.66%.
(2)
Issued in December 2014, effective interest rates of the 2019, 2021, 2024, 2034, and 2044 Notes were 2.73%, 3.43%, 3.90%, 4.92%, and 5.11%.
Interest on the Notes issued in 2014 is payable semi-annually in arrears in June and December. Interest on the Notes issued in 2012 is payable semi-annually in arrears in May and November. We may redeem the Notes at any time in whole, or from time to time, in part at specified redemption prices. We are not subject to any financial covenants under the Notes. The proceeds from the Notes are used for general corporate purposes. The estimated fair value of the Notes was approximately $9.1 billion and $2.9 billion as of December 31, 2014 and 2013, which is based on quoted prices for our publicly-traded debt as of those dates.
The other debt, including the current portion, had a weighted average interest rate of 5.5% as of December 31, 2014 and 2013. We used the net proceeds from the issuance of this debt primarily to fund certain international operations. The estimated fair value of the other long-term debt, which is based on Level 2 inputs, approximated its carrying value as of December 31, 2014 and 2013.
As of December 31, 2014, future principal payments for our total debt were as follows (in millions):
 
Year Ended December 31,
2015
$
1,520

2016
36

2017
1,037

2018
38

2019
1,000

Thereafter
6,250

 
$
9,881


On September 5, 2014, we entered into an unsecured revolving credit facility (the “Credit Agreement”) with a syndicate of lenders that provides us with a borrowing capacity of up to $2.0 billion. The Credit Agreement has a term of two years, but it may be extended for up to three additional one-year terms if approved by the lenders. The initial interest rate applicable to outstanding balances under the Credit Agreement is the London interbank offered rate (“LIBOR”) plus 0.625%, under our current credit ratings. If our credit ratings are downgraded this rate could increase to as much as LIBOR plus 1.00%. There were no borrowings outstanding under the Credit Agreement as of December 31, 2014.
Other Long-Term Liabilities
Other Long-Term Liabilities
OTHER LONG-TERM LIABILITIES
Our other long-term liabilities are summarized as follows (in millions):
 
 
December 31,
 
2014
 
2013
Long-term capital lease obligations
$
3,026

 
$
1,435

Long-term finance lease obligations
1,198

 
555

Construction liabilities
467

 
385

Tax contingencies
510

 
457

Long-term deferred tax liabilities
1,021

 
571

Other
1,188

 
839

Total other long-term liabilities
$
7,410

 
$
4,242


Capital and Finance Leases
Certain of our equipment, primarily related to technology infrastructure, and buildings have been acquired under capital leases. Long-term capital lease obligations are as follows (in millions):
 
 
December 31, 2014
Gross capital lease obligations
$
5,182

Less imputed interest
(143
)
Present value of net minimum lease payments
5,039

Less current portion of capital lease obligations
(2,013
)
Total long-term capital lease obligations
$
3,026


We continue to be the deemed owner after occupancy of certain facilities that were constructed as build-to-suit lease arrangements and previously reflected as “Construction liabilities.” As such, these arrangements are accounted for as finance leases. Long-term finance lease obligations are as follows (in millions):
 
December 31, 2014
Gross finance lease obligations
$
1,629

Less imputed interest
(364
)
Present value of net minimum lease payments
1,265

Less current portion of finance lease obligations
(67
)
Total long-term finance lease obligations
$
1,198


Construction Liabilities
We capitalize construction in progress and record a corresponding long-term liability for build-to-suit lease agreements where we are considered the owner during the construction period for accounting purposes. These liabilities primarily relate to our corporate buildings and fulfillment, sortation, delivery, and data centers.
Tax Contingencies
We have recorded tax reserves for tax contingencies, inclusive of accrued interest and penalties, for U.S. and foreign income taxes. These contingencies primarily relate to transfer pricing, state income taxes, and research and development credits. See “Note 11—Income Taxes” for discussion of tax contingencies.
Commitments and Contingencies
Commitments and Contingencies
COMMITMENTS AND CONTINGENCIES
Commitments
We have entered into non-cancellable operating, capital, and finance leases for equipment and office, fulfillment, sortation, delivery, and data center facilities. Rental expense under operating lease agreements was $961 million, $759 million, and $561 million for 2014, 2013, and 2012.
The following summarizes our principal contractual commitments, excluding open orders for purchases that support normal operations, as of December 31, 2014 (in millions):
 
Year Ended December 31,
 
 
 
 
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Operating and capital commitments:
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt principal and interest
$
1,842

 
$
323

 
$
1,322

 
$
310

 
$
1,272

 
$
9,403

 
$
14,472

Capital leases, including interest
2,060

 
1,727

 
1,030

 
178

 
89

 
98

 
5,182

Finance lease obligations, including interest
110

 
112

 
115

 
117

 
119

 
1,056

 
1,629

Operating leases
868

 
791

 
728

 
634

 
549

 
2,343

 
5,913

Unconditional purchase obligations (1)
489

 
435

 
351

 
118

 
38

 
3

 
1,434

Other commitments (2) (3)
928

 
333

 
160

 
140

 
90

 
845

 
2,496

Total commitments
$
6,297

 
$
3,721

 
$
3,706

 
$
1,497

 
$
2,157

 
$
13,748

 
$
31,126

___________________
(1)
Includes unconditional purchase obligations related to long-term agreements to acquire and license digital content that are not reflected on the consolidated balance sheets. For those agreements with variable terms, we do not estimate the total obligation beyond any minimum quantities and/or pricing as of the reporting date. Purchase obligations associated with renewal provisions solely at the option of the content provider are included to the extent such commitments are fixed or a minimum amount is specified.
(2)
Includes the estimated timing and amounts of payments for rent and tenant improvements associated with build-to-suit lease arrangements that have not been placed in service and media content liabilities associated with long-term media content assets with initial terms greater than one year.
(3)
Excludes $710 million of tax contingencies for which we cannot make a reasonably reliable estimate of the amount and period of payment, if any.
Pledged Assets
As of December 31, 2014 and 2013, we have pledged or otherwise restricted $602 million and $482 million of our cash, cash equivalents, and marketable securities, and certain property and equipment as collateral for standby and trade letters of credit, guarantees, debt relating to certain international operations, real estate leases, and amounts due to third-party sellers in certain jurisdictions.
Suppliers
During 2014, no vendor accounted for 10% or more of our purchases. We generally do not have long-term contracts or arrangements with our vendors to guarantee the availability of merchandise, particular payment terms, or the extension of credit limits.
Legal Proceedings
The Company is involved from time to time in claims, proceedings, and litigation, including the following:
In November 2007, an Austrian copyright collection society, Austro-Mechana, filed lawsuits against Amazon.com International Sales, Inc., Amazon EU Sarl, Amazon.de GmbH, Amazon.com GmbH, and Amazon Logistik in the Commercial Court of Vienna, Austria and in the District Court of Munich, Germany seeking to collect a tariff on blank digital media sold by our EU-based retail websites to customers located in Austria. In July 2008, the German court stayed the German case pending a final decision in the Austrian case. In July 2010, the Austrian court ruled in favor of Austro-Mechana and ordered us to report all sales of products to which the tariff potentially applies for a determination of damages. We contested Austro-Mechana’s claim and in September 2010 commenced an appeal in the Commercial Court of Vienna. We lost this appeal and in March 2011 commenced an appeal in the Supreme Court of Austria. In October 2011, the Austrian Supreme Court referred the case to the European Court of Justice (ECJ). In July 2013, the European Court of Justice ruled that EU law does not preclude application of the tariff where certain conditions are met and directed the case back to the Austrian Supreme Court for further proceedings. In October 2013, the Austrian Supreme Court referred the case back to the Commercial Court of Vienna for further fact finding to determine whether the tariff on blank digital media meets the conditions set by the ECJ. In December 2012, a German copyright collection society, Zentralstelle für private Überspielungsrechte (ZPU), filed a complaint against Amazon EU Sarl, Amazon Media EU Sarl, Amazon Services Europe Sarl, Amazon Payments Europe SCA, Amazon Europe Holding Technologies SCS, and Amazon Eurasia Holdings Sarl in the District Court of Luxembourg seeking to collect a tariff on blank digital media sold by the Amazon.de retail website to customers located in Germany. In January 2013, a Belgian copyright collection society, AUVIBEL, filed a complaint against Amazon EU Sarl in the Court of First Instance of Brussels, Belgium, seeking to collect a tariff on blank digital media sold by the Amazon.fr retail website to customers located in Belgium. In November 2013, the Belgian court ruled in favor of AUVIBEL and ordered us to report all sales of products to which the tariff potentially applies for a determination of damages. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in these matters.
In May 2009, Big Baboon, Inc. filed a complaint against Amazon.com, Inc. and Amazon Payments, Inc. for patent infringement in the United States District Court for the Central District of California. The complaint alleges, among other things, that our third-party selling and payments technology infringes patents owned by Big Baboon, Inc. purporting to cover an “Integrated Business-to-Business Web Commerce And Business Automation System” (U.S. Patent Nos. 6,115,690 and 6,343,275) and seeks injunctive relief, monetary damages, treble damages, costs, and attorneys’ fees. In February 2011, the Court entered an order staying the lawsuit pending the outcome of the Patent and Trademark Office’s re-examination of the patent. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In April 2011, Walker Digital LLC filed several complaints against Amazon.com, Inc. for patent infringement in the United States District Court for the District of Delaware. The complaints allege that we infringe several of the plaintiff’s U.S. patents by, among other things, providing “cross benefits” to customers through our promotions (U.S. Patent Nos. 7,831,470 and 7,827,056), using a customer’s identified original product to offer a substitute product (U.S. Patent No. 7,236,942), using our product recommendations and personalization features to offer complementary products together (U.S. Patent Nos. 6,601,036 and 6,138,105), enabling customers to subscribe to a delivery schedule for products they routinely use at reduced prices (U.S. Patent No. 5,970,470), and offering personalized advertising based on customers’ preferences identified using a data pattern (U.S. Patent No. 7,933,893). Another complaint, filed in the same court in October 2011, alleges that we infringe plaintiff’s U.S. Patent No. 8,041,711 by offering personalized advertising based on customer preferences that associate data with resource locators. Another complaint, filed in the same court in February 2012, alleges that we infringe plaintiff’s U.S. Patent No. 8,112,359 by using product information received from customers to identify and offer substitute products using a manufacturer database. In January 2013, the plaintiff filed another complaint in the same court alleging that we infringe U.S. Patent No. 6,381,582 by allowing customers to make local payments for products ordered online. All of the complaints seek monetary damages, interest, injunctive relief, costs, and attorneys’ fees. In March 2013, the complaints asserting U.S. Patent Nos. 7,236,942 and 7,933,893 were voluntarily dismissed with prejudice. In April 2013, the case asserting U.S. Patent No. 8,041,711 was stayed pending final resolution of the reexamination of that patent. In June 2013, the court granted defendants’ motions to dismiss the complaints asserting U.S. Patent Nos. 7,831,470, 7,827,056, and 8,112,359 for lack of standing. In July 2013, we filed motions seeking entry of a final judgment dismissing those claims with prejudice and for attorneys’ fees, and plaintiff filed notices of appeal from the June 2013 order granting the motions to dismiss. In October 2013, the court ruled that its dismissals are with prejudice, and Walker has appealed those rulings. In March 2014, the court stayed the case asserting U.S. Patent Nos. 6,601,036 and 6,138,105 pending the appeal of the cases asserting U.S. Patent Nos. 7,831,470, 7,827,056, and 8,112,359. In September 2014, the court dismissed the matter asserting U.S. Patent No. 6,381,582 with prejudice. In January 2015, the court dismissed with prejudice the complaint asserting U.S. Patent No. 8,041,711, and the United States Court of Appeals for the Federal Circuit affirmed the dismissal of the complaints asserting U.S. Patent Nos. 7,831,470, 7,827,056, and 8,112,359. We dispute the remaining allegations of wrongdoing and intend to defend ourselves vigorously in these matters.
In March 2012, OIP Technologies, Inc. filed a complaint against Amazon.com, Inc. for patent infringement in the United States District Court for the Northern District of California. The complaint alleged, among other things, that certain aspects of our pricing methods infringed U.S. Patent No. 7,970,713, entitled “Method And Apparatus For Automatic Pricing In Electronic Commerce.” The complaint sought three times an unspecified amount of damages, attorneys’ fees, and interest. In September 2012, the court invalidated the plaintiff’s patent and dismissed the case with prejudice. In September 2012, OIP appealed the judgment of the district court to the United States Court of Appeals for the Federal Circuit, which, in November 2012, stayed all proceedings pending its decision in a separate case that raises a related question of law and, in June 2013, continued the stay pending a decision by the United States Supreme Court. In July 2014, the court of appeals lifted the stay. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In June 2012, Hand Held Products, Inc., a subsidiary of Honeywell, filed a complaint against Amazon.com, Inc., AMZN Mobile, LLC, AmazonFresh, LLC, A9.com, Inc., A9 Innovations, LLC, and Quidsi, Inc. in the United States District Court for the District of Delaware. The complaint alleges, among other things, that the use of mobile barcode reader applications, including Amazon Mobile, Amazon Price Check, Flow, and AmazonFresh, infringes U.S. Patent No. 6,015,088, entitled “Decoding Of Real Time Video Imaging.” The complaint seeks an unspecified amount of damages, interest, and an injunction. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In July 2012, Norman Blagman filed a purported class-action complaint against Amazon.com, Inc. for copyright infringement in the United States District Court for the Southern District of New York. The complaint alleges, among other things, that Amazon.com, Inc. sells digital music in our Amazon MP3 Store obtained from defendant Orchard Enterprises and other unnamed “digital music aggregators” without obtaining mechanical licenses for the compositions embodied in that music. The complaint seeks certification as a class action, statutory damages, attorneys’ fees, and interest. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In August 2012, an Australian quasi-government entity named Commonwealth Scientific and Industrial Research Organization filed a complaint against Amazon.com, Inc. in the United States District Court for the Eastern District of Texas. The complaint alleges, among other things, that the sale of “products which are operable according to the Institute of Electrical and Electronics Engineers (“IEEE”) 802.11a, g, n, and/or draft n standards” infringe U.S. Patent No. 5,487,069, entitled “Wireless LAN.” The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, and injunctive relief. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In November 2012, Lexington Luminance LLC filed a complaint against Amazon.com, Inc. and Amazon Digital Services, Inc. in the United States District Court for the District of Massachusetts. The complaint alleges, among other things, that certain light-emitting diodes in certain Kindle devices infringe U.S. Patent No. 6,936,851, entitled “Semiconductor Light-Emitting Device And Method For Manufacturing Same.” The complaint seeks an unspecified amount of damages and an injunction or, in the absence of an injunction, a compulsory ongoing royalty. In March 2014, the Court invalidated the plaintiff’s patent and dismissed the case with prejudice, and the plaintiff appealed the judgment to the United States Court of Appeals for the Federal Circuit. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In May 2013, Adaptix, Inc. filed a complaint against Amazon.com, Inc. in the United States District Court for the Eastern District of Texas. The complaint alleges, among other things, that certain Kindle devices infringe U.S. Patent Nos. 7,454,212 and 6,947,748, both entitled “OFDMA With Adaptive Subcarrier-Cluster Configuration And Selective Loading.” The complaint seeks an unspecified amount of damages, interest, injunctive relief, and attorneys’ fees. In March 2014, the case was transferred to the United States District Court for the Northern District of California. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In July 2013, Telebuyer, LLC filed a complaint against Amazon.com, Inc., Amazon Web Services, LLC, and VADATA, Inc. in the United States District Court for the Eastern District of Virginia. The complaint alleges, among other things, that certain features used on our retail website—including high resolution video and still images, user-indicated areas of interest, targeted follow-up communications, vendor proposals, on-line chat, Gold Box and Lightning Deals, and vendor ratings—infringe seven U.S. patents: Nos. 6,323,894, 7,835,508, 7,835,509, 7,839,984, 8,059,796, and 8,098,272, all entitled “Commercial Product Routing System With Video Vending Capability,” and 8,315,364, entitled “Commercial Product Routing System With Mobile Wireless And Video Vending Capability.” The complaint seeks an unspecified amount of damages, interest, and injunctive relief. In September 2013, the case was transferred to the United States District Court for the Western District of Washington. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In August 2013, Cellular Communications Equipment, LLC filed a complaint against Amazon.com, Inc. in the United States District Court for the Eastern District of Texas. The complaint alleges, among other things, that certain Kindle devices infringe U.S. Patent Nos.: 6,819,923, entitled “Method For Communication Of Neighbor Cell Information”; 7,215,962, entitled “Method For An Intersystem Connection Handover”; 7,941,174, entitled “Method For Multicode Transmission By A Subscriber Station”; and 8,055,820 entitled “Apparatus, System, And Method For Designating A Buffer Status Reporting Format Based On Detected Pre-Selected Buffer Conditions.” In March 2014, the plaintiff filed an amended complaint that alleges, among other things, that certain Kindle devices infringe U.S. Patent No. 8,055,820, entitled “Apparatus, System, And Method For Designating A Buffer Status Reporting Format Based On Detected Pre-Selected Buffer Conditions.” The amended complaint seeks an unspecified amount of damages and interest. In January 2015, the court dismissed with prejudice the claim of infringement of U.S. Patent No. 7,215,962. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
Beginning in August 2013, a number of complaints were filed alleging, among other things, that Amazon.com, Inc. and several of its subsidiaries failed to compensate hourly workers for time spent waiting in security lines and otherwise violated federal and state wage and hour statutes and common law. In August 2013, Busk v. Integrity Staffing Solutions, Inc. and Amazon.com, Inc. was filed in the United States District Court for the District of Nevada, and Vance v. Amazon.com, Inc., Zappos.com Inc., another affiliate of Amazon.com, Inc., and Kelly Services, Inc. was filed in the United States District Court for the Western District of Kentucky. In September 2013, Allison v. Amazon.com, Inc. and Integrity Staffing Solutions, Inc. was filed in the United States District Court for the Western District of Washington, and Johnson v. Amazon.com, Inc. and an affiliate of Amazon.com, Inc. was filed in the United States District Court for the Western District of Kentucky. In October 2013, Davis v. Amazon.com, Inc., an affiliate of Amazon.com, Inc., and Integrity Staffing Solutions, Inc. was filed in the United States District Court for the Middle District of Tennessee. The plaintiffs variously purport to represent a nationwide class of certain current and former employees under the Fair Labor Standards Act and/or state-law-based subclasses for certain current and former employees in states including Arizona, California, Pennsylvania, South Carolina, Kentucky, and Nevada, and one complaint asserts nationwide breach of contract and unjust enrichment claims. The complaints seek an unspecified amount of damages, interest, injunctive relief, and attorneys’ fees. We have been named in several other similar cases. In December 2014, the Supreme Court ruled in Busk that time spent waiting for and undergoing security screening is not compensable working time under the federal wage and hour statute. We dispute any remaining allegations of wrongdoing and intend to defend ourselves vigorously in these matters.
In September 2013, Personalized Media Communications, LLC filed a complaint against Amazon.com, Inc. and Amazon Web Services, LLC in the United States District Court for the District of Delaware. The complaint alleges, among other things, that the use of certain Kindle devices, Kindle apps and/or Amazon.com, Inc.’s website to purchase and receive electronic media infringes nine U.S. Patents: Nos. 5,887,243, 7,801,304, 7,805,749, 7,940,931, 7,769,170, 7,864,956, 7,827,587, 8,046,791, and 7,883,252, all entitled “Signal Processing Apparatus And Methods.” The complaint also alleges, among other things, that CloudFront, S3, and EC2 web services infringe three of those patents, Nos. 7,801,304, 7,864,956, and 7,827,587. The complaint seeks an unspecified amount of damages, interest, and injunctive relief. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In October 2013, Mobile Telecommunications Technologies, LLC filed a complaint against Amazon.com, Inc. for patent infringement in the United States District Court for the Eastern District of Texas. The complaint alleges, among other things, that our network operation centers and our mobile devices, such as Kindle Fire models based on the Android operating system that provide XMPP-compliant messaging services and applications, infringe U.S. Patent No. 5,809,428, entitled “Method And Device For Processing Undelivered Data Messages In A Two-Way Wireless Communications System.” The complaint also alleges that Amazon’s mobile devices infringe U.S. Patent No. 5,754,946, entitled “Nationwide Communication System,” and that Amazon.com, Inc. infringes U.S. Patent No. 5,786,748, entitled “Method And Apparatus For Giving Notification Of Express Mail Delivery,” by providing tracking and notification services to customers who purchase products directly from Amazon.com, Inc. The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, interest, and injunctive relief. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In October 2013, Tuxis Technologies, LLC filed a complaint against Amazon.com, Inc. for patent infringement in the United States District Court for District of Delaware. The complaint alleges, among other things, that “the Amazon.com website” with “recommendation features” infringes U.S. Patent No. 6,055,513, entitled “Methods And Apparatus For Intelligent Selection Of Goods And Services In Telephonic And Electronic Commerce.” The complaint seeks an unspecified amount of damages, attorneys’ fees, costs, and interest. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In November 2013, Memory Integrity, LLC filed a complaint against Amazon.com, Inc. for patent infringement in the United States District Court for the District of Delaware. The complaint alleges, among other things, that certain Kindle devices infringe U.S. Patent No. 7,296,121, entitled “Reducing Probe Traffic In Multiprocessor Systems.” The complaint seeks an unspecified amount of damages, costs, expenses, and interest. In December 2014, the case was stayed pending resolution of review petitions filed with the United States Patent and Trademark Office. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In November 2013, Vantage Point Technology, Inc. filed a complaint against Amazon.com, Inc. for patent infringement in the United States District Court for the Eastern District of Texas. The complaint alleges, among other things, that Kindle devices with a Cortex A-9 core processor and OMAP 4430 chipset, Kindle device HD tablets with a Cortex A-9 core processor and OMAP 4470 chipset, and Kindle devices with a Cortex A-8 core processor and Freescale MX50 family chipset infringe U.S. Patent No. 5,463,750, entitled “Method And Apparatus For Translating Virtual Addresses In A Data Processing System Having Multiple Instruction Pipelines And Separate TLB’s For Each Pipeline.” The complaint seeks an unspecified amount of damages, enhanced damages, costs, and interest. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In December 2013, Appistry, Inc. filed a complaint against Amazon.com, Inc. and Amazon Web Services, Inc. for patent infringement in the United States District Court for the Eastern District of Missouri. The complaint alleges, among other things, that Amazon’s Elastic Compute Cloud infringes U.S. Patent Nos. 8,200,746, entitled “System And Method For Territory-Based Processing Of Information,” and  8,341,209, entitled “System And Method For Processing Information Via Networked Computers Including Request Handlers, Process Handlers, And Task Handlers.” The complaint seeks injunctive relief, an unspecified amount of monetary damages, treble damages, costs, and interest. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In December 2013, ContentGuard Holdings, Inc. filed a complaint against Amazon.com, Inc. for patent infringement in the United States District Court for Eastern District of Texas. The complaint alleges, among other things, that certain digital rights management software used by various Kindle Fire software applications, including the Kindle Reader and Amazon Instant Video, infringe seven U.S. Patents:  Nos. 6,963,859, entitled “Content Rendering Repository”; 7,523,072, entitled “System For Controlling The Distribution And Use Of Digital Works”; 7,269,576, entitled “Content Rendering Apparatus”; 8,370,956, entitled “System And Method For Rendering Digital Content In Accordance With Usage Rights Information”; 8,393,007, entitled “System And Method For Distributing Digital Content In Accordance With Usage Rights Information”; 7,225,160, entitled “Digital Works Having Usage Rights And Method For Creating The Same”; and 8,583,556, entitled “Method For Providing A Digital Asset For Distribution.” In January 2014, ContentGuard filed an amended complaint that, among other things, added HTC Corporation and HTC America as defendants. The complaint seeks an unspecified amount of damages, an injunction, enhanced damages, attorneys’ fees, costs, and interest. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In March 2014, Kaavo, Inc. filed a complaint against Amazon.com, Inc. and Amazon Web Services, Inc. for patent infringement in the United States District Court for the District of Delaware. The complaint alleges, among other things, that Amazon Web Services’ Elastic Beanstalk and CloudFormation infringe U.S. Patent No. 8,271,974, entitled “Cloud Computing Lifecycle Management For N-Tier Applications.” The complaint seeks injunctive relief, an unspecified amount of monetary damages, costs, and interest. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In April 2014, Spansion LLC filed complaints for patent infringement against Amazon.com, Inc. in both the United States District Court for the Northern District of California and the United States International Trade Commission. The complaints allege, among other things, that certain Kindle devices infringe U.S. Patent Nos. 6,246,611, entitled “System For Erasing A Memory Cell,” and 6,744,666, entitled “Method And System To Minimize Page Programming Time For Flash Memory Devices.” The district court complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, interest, and injunctive relief. The International Trade Commission complaint seeks an exclusion order preventing the importation of certain Kindle devices into the United States, as well as a cease-and-desist order barring sale of certain Kindle devices after importation. In June 2014, the district court case was stayed pending resolution of the International Trade Commission action. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in these matters.
In June 2014, SimpleAir, Inc. filed a complaint against Amazon.com, Inc. in the United States District Court for the Eastern District of Texas. The complaint alleges, among other things, that Amazon Device Messaging and Simple Notification Service infringe U.S Patent Nos. 7,035,914, 8,090,803, 8,572,279, 8,601,154, and 8,639,838, all of which are entitled “System and Method for Transmission of Data.” The complaint seeks an unspecified amount of damages, pre-judgment interest, costs, attorneys’ fees, enhanced damages, and injunctive relief. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
In December 2014, Smartflash LLC and Smartflash Technologies Limited filed a complaint against Amazon.com, Inc., Amazon.com, LLC, AMZN Mobile, LLC, Amazon Web Services, Inc. and Audible, Inc. for patent infringement in the United States District Court for Eastern District of Texas. The complaint alleges, among other things, that Amazon Appstore, Amazon Instant Video, Amazon Music, Audible Audiobooks, the Amazon Mobile Ad Network, certain Kindle and Fire devices, Kindle e-bookstore, Amazon’s proprietary Android operating system, and the servers involved in operating Amazon Appstore, Amazon Instant Video, Amazon Music, the Fire TV app, Audible Audiobooks, Cloud Drive, Cloud Player, Amazon Web Services, and Amazon Mobile Ad Network infringe seven related U.S. Patents: Nos. 7,334,720; 7,942,317; 8,033,458; 8,061,598; 8,118,221; 8,336,772; and 8,794,516, all entitled “Data Storage and Access Systems.” The complaint seeks an unspecified amount of damages, an injunction, enhanced damages, attorneys’ fees, costs, and interest. We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.
The outcomes of our legal proceedings are inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular period. In addition, for some matters for which a loss is probable or reasonably possible, an estimate of the amount of loss or range of loss is not possible and we may be unable to estimate the possible loss or range of losses that could potentially result from the application of non-monetary remedies.
See also “Note 11—Income Taxes.”
Stockholders' Equity
Stockholders' Equity
STOCKHOLDERS’ EQUITY
Preferred Stock
We have authorized 500 million shares of $0.01 par value preferred stock. No preferred stock was outstanding for any period presented.
Common Stock
Common shares outstanding plus shares underlying outstanding stock awards totaled 483 million, 476 million, and 470 million, as of December 31, 2014, 2013, and 2012. These totals include all vested and unvested stock awards outstanding, including those awards we estimate will be forfeited.
Stock Repurchase Activity
In January 2010, our Board of Directors authorized the Company to repurchase up to $2.0 billion of our common stock with no fixed expiration. We have $763 million remaining under the $2.0 billion repurchase program.
Stock Award Plans
Employees vest in restricted stock unit awards and stock options over the corresponding service term, generally between two and five years.
Stock Award Activity
Stock options outstanding, which were primarily obtained through acquisitions, totaled 0.4 million, 0.2 million and 0.4 million, as of December 31, 2014, 2013, and 2012. The after-tax compensation expense for stock options was not material for 2014, 2013, and 2012, as well as the total intrinsic value for stock options outstanding, the amount of cash received from the exercise of stock options, and the related tax benefits.
The following table summarizes our restricted stock unit activity (in millions):
 
 
Number of Units
 
Weighted Average
Grant-Date
Fair Value
Outstanding as of January 1, 2012
13.1

 
$
143

Units granted
8.2

 
209

Units vested
(4.2
)
 
110

Units forfeited
(1.7
)
 
168

Outstanding as of December 31, 2012
15.4

 
184

Units granted
7.2

 
283

Units vested
(4.5
)
 
160

Units forfeited
(1.8
)
 
209

Outstanding as of December 31, 2013
16.3

 
233

Units granted
8.5

 
328

Units vested
(5.1
)
 
202

Units forfeited
(2.3
)
 
264

Outstanding as of December 31, 2014
17.4

 
$
285


Scheduled vesting for outstanding restricted stock units as of December 31, 2014, is as follows (in millions):
 

 
Year Ended December 31,
 
 
 
 
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Scheduled vesting—restricted stock units
5.9

 
6.1

 
3.4

 
1.7

 
0.2

 
0.1

 
17.4


As of December 31, 2014, there was $2.2 billion of net unrecognized compensation cost related to unvested stock-based compensation arrangements. This compensation is recognized on an accelerated basis with approximately half of the compensation expected to be expensed in the next twelve months, and has a weighted-average recognition period of 1.2 years.
During 2014 and 2013, the fair value of restricted stock units that vested was $1.7 billion and $1.4 billion.
As matching contributions under our 401(k) savings plan, we granted 0.2 million and 0.1 million shares of common stock in 2014 and 2013. Shares granted as matching contributions under our 401(k) plan are included in outstanding common stock when issued, and recorded as stock-based compensation expense.
Common Stock Available for Future Issuance
As of December 31, 2014, common stock available for future issuance to employees is 137 million shares.
Accumulated Other Comprehensive Loss
Accumulated Other Comprehensive Loss
ACCUMULATED OTHER COMPREHENSIVE LOSS
Changes in the composition of accumulated other comprehensive loss for 2014, 2013, and 2012 are as follows (in millions):
 
 
 
Foreign currency
translation
adjustments
 
Unrealized gains on
available-for-sale
securities
 
Total
Balances as of January 1, 2012
 
$
(326
)
 
$
10

 
$
(316
)
Other comprehensive income
 
76

 
1

 
77

Balances as of December 31, 2012
 
(250
)
 
11

 
(239
)
Other comprehensive income (loss)
 
63

 
(9
)
 
54

Balances as of December 31, 2013
 
(187
)
 
2

 
(185
)
Other comprehensive income (loss)
 
(325
)
 
(1
)
 
(326
)
Balances as of December 31, 2014
 
$
(512
)
 
$
1

 
$
(511
)

Amounts included in accumulated other comprehensive loss are recorded net of their related income tax effects.
Income Taxes
Income Taxes
INCOME TAXES
In 2014, 2013, and 2012, we recorded net tax provisions of $167 million, $161 million, and $428 million. We have tax benefits relating to excess stock-based compensation deductions and accelerated depreciation deductions that are being utilized to reduce our U.S. taxable income. In December 2014, U.S. legislation was enacted providing a one year extension of accelerated depreciation deductions on qualifying property and the U.S. federal research and development credit through 2014. As such, cash taxes paid, net of refunds, were $177 million, $169 million, and $112 million for 2014, 2013, and 2012.
The components of the provision for income taxes, net are as follows (in millions):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Current taxes:
 
 
 
 
 
U.S. Federal
$
214

 
$
99

 
$
528

U.S. State
65

 
45

 
34

International
204

 
173

 
131

Current taxes
483

 
317

 
693

Deferred taxes:
 
 
 
 
 
U.S. Federal
(125
)
 
(114
)
 
(129
)
U.S. State
(11
)
 
(19
)
 
(27
)
International
(180
)
 
(23
)
 
(109
)
Deferred taxes
(316
)
 
(156
)
 
(265
)
Provision for income taxes, net
$
167

 
$
161

 
$
428


U.S. and international components of income before income taxes are as follows (in millions):
 
Year Ended December 31,
 
2014
 
2013
 
2012
U.S.
$
292

 
$
704

 
$
882

International
(403
)
 
(198
)
 
(338
)
Income (loss) before income taxes
$
(111
)
 
$
506

 
$
544


The items accounting for differences between income taxes computed at the federal statutory rate and the provision recorded for income taxes are as follows (in millions):
 
 
Year Ended December 31,
 
2014
 
2013
 
2012
Income taxes computed at the federal statutory rate
$
(39
)
 
$
177

 
$
191

Effect of:
 
 
 
 
 
Impact of foreign tax differential
136

 
(41
)
 
172

State taxes, net of federal benefits
29

 
14

 
1

Tax credits
(85
)
 
(84
)
 
(24
)
Nondeductible compensation
117

 
86

 
72

Domestic production activities deduction
(20
)
 
(11
)
 
—

Other, net
29

 
20

 
16

Total
$
167

 
$
161

 
$
428


Our provision for income taxes in 2014 was higher than in 2013 primarily due to the increased losses in certain foreign subsidiaries for which we may not realize a tax benefit and audit-related developments, partially offset by the favorable impact of earnings in lower tax rate jurisdictions. Losses for which we may not realize a related tax benefit reduce our pre-tax income without a corresponding reduction in our tax expense, and therefore increase our effective tax rate. We have recorded valuation allowances against the deferred tax assets associated with losses for which we may not realize a related tax benefit. Income earned in lower tax jurisdictions is primarily related to our European operations, which are headquartered in Luxembourg.
In 2013, our provision for income taxes was lower than in 2012 primarily due to a decline in the proportion of our losses for which we may not realize a related tax benefit, the favorable impact of earnings in lower tax rate jurisdictions, and the retroactive extension in 2013 of the U.S. federal research and development credit to 2012. In 2013, we recognized tax benefits for a greater proportion of losses for which we may not realize a related tax benefit, primarily due to losses of certain foreign subsidiaries, as compared to 2012. The favorable impact of earnings in lower tax rate jurisdictions was primarily related to our European operations.
Except as required under U.S. tax laws, we do not provide for U.S. taxes on our undistributed earnings of foreign subsidiaries that have not been previously taxed since we intend to invest such undistributed earnings indefinitely outside of the U.S. If our intent changes or if these funds are needed for our U.S. operations, we would be required to accrue or pay U.S. taxes on some or all of these undistributed earnings and our effective tax rate would be adversely affected. Undistributed earnings of foreign subsidiaries that are indefinitely invested outside of the U.S were $2.5 billion as of December 31, 2014. Determination of the unrecognized deferred tax liability that would be incurred if such amounts were repatriated is not practicable.



Deferred income tax assets and liabilities are as follows (in millions):
 
 
December 31,
 
2014 (1)
 
2013
Deferred tax assets:
 
 
 
Net operating losses U.S. - Federal/States (2)
$
357

 
$
53

Net operating losses foreign (3)
669

 
427

Accrued liabilities, reserves, & other expenses
780

 
590

Stock-based compensation
534

 
396

Deferred revenue
156

 
249

Assets held for investment
154

 
164

Other items
242

 
177

Tax credits (4)
115

 
107

Total gross deferred tax assets
3,007

 
2,163

Less valuation allowance (5)
(901
)
 
(698
)
Deferred tax assets, net of valuation allowance
2,106

 
1,465

Deferred tax liabilities:
 
 
 
Depreciation & amortization
(1,609
)
 
(1,021
)
Acquisition related intangible assets
(195
)
 
(201
)
Other items
(31
)
 
(16
)
Net deferred tax assets, net of valuation allowance
$
271

 
$
227

 ___________________
(1)
Deferred tax assets related to net operating losses and tax credits are presented net of tax contingencies.
(2)
Excluding $261 million and $81 million of deferred tax assets as of December 31, 2014 and 2013, related to net operating losses that result from excess stock-based compensation and for which any benefit realized will be recorded to stockholders’ equity.
(3)
Excluding $2 million and $2 million of deferred tax assets as of December 31, 2014 and 2013, related to net operating losses that result from excess stock-based compensation and for which any benefit realized will be recorded to stockholders’ equity.
(4)
Excluding $268 million and $227 million of deferred tax assets as of December 31, 2014 and 2013, related to tax credits that result from excess stock-based compensation and for which any benefit realized will be recorded to stockholders’ equity.
(5)
Relates primarily to deferred tax assets that would only be realizable upon the generation of net income in certain foreign taxing jurisdictions and future capital gains.
As of December 31, 2014, our federal, foreign, and state net operating loss carryforwards for income tax purposes were approximately $1.9 billion, $2.5 billion, and $1.1 billion. The federal and state net operating loss carryforwards are subject to limitations under Section 382 of the Internal Revenue Code and applicable state tax law. If not utilized, a portion of the federal, foreign, and state net operating loss carryforwards will begin to expire in 2020, 2015, and 2015, respectively. As of December 31, 2014, our tax credit carryforwards for income tax purposes were approximately $506 million. If not utilized, a portion of the tax credit carryforwards will begin to expire in 2017.
The Company’s consolidated balance sheets reflect deferred tax assets related to net operating losses and tax credit carryforwards excluding amounts resulting from excess stock-based compensation. Amounts related to excess stock-based compensation are accounted for as an increase to additional paid-in capital if and when realized through a reduction in income taxes payable.
Tax Contingencies
We are subject to income taxes in the U.S. (federal and state) and numerous foreign jurisdictions. Significant judgment is required in evaluating our tax positions and determining our provision for income taxes. During the ordinary course of business, there are many transactions and calculations for which the ultimate tax determination is uncertain. We establish reserves for tax-related uncertainties based on estimates of whether, and the extent to which, additional taxes will be due. These reserves are established when we believe that certain positions might be challenged despite our belief that our tax return positions are fully supportable. We adjust these reserves in light of changing facts and circumstances, such as the outcome of tax audits. The provision for income taxes includes the impact of reserve provisions and changes to reserves that are considered appropriate.
The reconciliation of our tax contingencies is as follows (in millions):
 
 
December 31,
 
2014
 
2013
 
2012
Gross tax contingencies – January 1
$
407

 
$
294

 
$
229

Gross increases to tax positions in prior periods
351

 
78

 
91

Gross decreases to tax positions in prior periods
(50
)
 
(18
)
 
(47
)
Gross increases to current period tax positions
20

 
54

 
26

Audit settlements paid
(16
)
 
(1
)
 
(4
)
Lapse of statute of limitations
(2
)
 
—

 
(1
)
Gross tax contingencies – December 31 (1)
$
710

 
$
407

 
$
294

 ___________________
(1)
As of December 31, 2014, we had $710 million of tax contingencies, of which $604 million, if fully recognized, would decrease our effective tax rate.
As of December 31, 2014 and 2013, we had accrued interest and penalties, net of federal income tax benefit, related to tax contingencies of $41 million and $33 million. Interest and penalties, net of federal income tax benefit, recognized for the years ended December 31, 2014, 2013, and 2012 was $8 million, $8 million, and $1 million.
We are under examination, or may be subject to examination, by the Internal Revenue Service (“IRS”) for the calendar year 2005 and thereafter. These examinations may lead to ordinary course adjustments or proposed adjustments to our taxes or our net operating losses with respect to years under examination as well as subsequent periods. As previously disclosed, we have received Notices of Proposed Adjustment from the IRS for transactions undertaken in the 2005 and 2006 calendar years relating to transfer pricing with our foreign subsidiaries. The IRS is seeking to increase our U.S. taxable income by an amount that would result in additional federal tax of approximately $1.5 billion, subject to interest. To date, we have not resolved this matter administratively and are currently contesting it in U.S. Tax Court. We continue to disagree with these IRS positions and intend to defend ourselves vigorously in this matter. In addition to the risk of additional tax for 2005 and 2006 transactions, if this litigation is adversely determined or if the IRS were to seek transfer pricing adjustments of a similar nature for transactions in subsequent years, Amazon could be subject to significant additional tax liabilities.
Certain of our subsidiaries are under examination or investigation or may be subject to examination or investigation by the French Tax Administration (“FTA”) for calendar year 2006 or thereafter. These examinations may lead to ordinary course adjustments or proposed adjustments to our taxes. While we have not yet received a final assessment from the FTA, in September 2012, we received proposed tax assessment notices for calendar years 2006 through 2010 relating to the allocation of income between foreign jurisdictions. The notices propose additional French tax of approximately $250 million, including interest and penalties through the date of the assessment. We disagree with the proposed assessment and intend to contest it vigorously. We plan to pursue all available administrative remedies at the FTA, and if we are not able to resolve this matter with the FTA, we plan to pursue judicial remedies. In addition, in October 2014, the European Commission opened a formal investigation to examine whether decisions by the tax authorities in Luxembourg with regard to the corporate income tax paid by certain of our subsidiaries comply with European Union rules on state aid. If this matter is adversely resolved, Luxembourg may be required to assess, and we may be required to pay, additional amounts with respect to current and prior periods and our taxes in the future could increase. We are also subject to taxation in various states and other foreign jurisdictions including Canada, China, Germany, India, Japan, Luxembourg, and the United Kingdom. We are under, or may be subject to, audit or examination and additional assessments in respect of these particular jurisdictions for 2003 and thereafter.
We expect the total amount of tax contingencies will grow in 2015. In addition, changes in state, federal, and foreign tax laws may increase our tax contingencies. The timing of the resolution of income tax examinations is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued. It is reasonably possible that within the next 12 months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax examinations in one or more jurisdictions. These assessments or settlements may or may not result in changes to our contingencies related to positions on tax filings in years through 2014. The actual amount of any change could vary significantly depending on the ultimate timing and nature of any settlements. We cannot currently provide an estimate of the range of possible outcomes.
Segment Information
Segment Information
SEGMENT INFORMATION
We have organized our operations into two segments: North America and International. We present our segment information along the same lines that our Chief Executive Officer reviews our operating results in assessing performance and allocating resources. We expect to change our reportable segments to report North America, International, and AWS, beginning with the first quarter of 2015.
We allocate to segment results the operating expenses “Fulfillment,” “Marketing,” “Technology and content,” and “General and administrative,” but exclude from our allocations the portions of these expense lines attributable to stock-based compensation. We do not allocate the line item “Other operating expense (income), net” to our segment operating results. Our “Technology and content” costs included in our segments are primarily based on the geographic location of where the costs are incurred, the majority of these costs are incurred in the U.S. and included in our North America segment. There are no internal revenue transactions between our reporting segments.
North America
The North America segment consists of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through North America-focused websites such as www.amazon.com and www.amazon.ca and include amounts earned from AWS. This segment includes export sales from www.amazon.com and www.amazon.ca.
International
The International segment consists of amounts earned from retail sales of consumer products (including from sellers) and subscriptions through internationally-focused websites. This segment includes export sales from these internationally based websites (including export sales from these sites to customers in the U.S. and Canada), but excludes export sales from our U.S. and Canadian websites.

Information on reportable segments and reconciliation to consolidated net income (loss) is as follows (in millions):
  
Year Ended December 31,
 
2014
 
2013
 
2012
North America
 
 
 
 
 
Net sales
$
55,469

 
$
44,517

 
$
34,813

Segment operating expenses (1)
53,364

 
42,631

 
33,221

Segment operating income
$
2,105

 
$
1,886

 
$
1,592

International
 
 
 
 
 
Net sales
$
33,519

 
$
29,935

 
$
26,280

Segment operating expenses (1)
33,816

 
29,828

 
26,204

Segment operating income (loss)
$
(297
)
 
$
107

 
$
76

Consolidated
 
 
 
 
 
Net sales
$
88,988

 
$
74,452

 
$
61,093

Segment operating expenses (1)
87,180

 
72,459

 
59,425

Segment operating income
1,808

 
1,993

 
1,668

Stock-based compensation
(1,497
)
 
(1,134
)
 
(833
)
Other operating income (expense), net
(133
)
 
(114
)
 
(159
)
Income from operations
178

 
745

 
676

Total non-operating income (expense)
(289
)
 
(239
)
 
(132
)
Provision for income taxes
(167
)
 
(161
)
 
(428
)
Equity-method investment activity, net of tax
37

 
(71
)
 
(155
)
Net income (loss)
$
(241
)
 
$
274

 
$
(39
)
___________________
(1)
Represents operating expenses, excluding stock-based compensation and “Other operating expense (income), net,” which are not allocated to segments.
We have aggregated our products and services into groups of similar products and services and provided the supplemental disclosure of net sales (in millions) below. We evaluate whether additional disclosure is appropriate when a product or service category begins to approach a significant level of net sales. For the periods presented, no individual product or service represented more than 10% of net sales.

  
Year Ended December 31,
 
2014
 
2013
 
2012
Net Sales:
 
Media
$
22,505

 
$
21,716

 
$
19,942

Electronics and other general merchandise
60,886

 
48,802

 
38,628

Other (1)
5,597

 
3,934

 
2,523

 
$
88,988

 
$
74,452

 
$
61,093

___________________
(1)
Includes sales from non-retail activities, such as AWS, advertising services, and our co-branded credit card agreements.

Net sales generated from these internationally-focused websites are denominated in local functional currencies. Revenues are translated at average rates prevailing throughout the period. Net sales attributed to foreign countries are as follows (in millions):
 
 
Year Ended December 31,
 
2014
 
2013
 
2012
Germany
$
11,919

 
$
10,535

 
$
8,732

Japan
7,912

 
7,639

 
7,800

United Kingdom
8,341

 
7,291

 
6,478


Total assets, property and equipment, net, and total property and equipment additions, by geography, reconciled to consolidated amounts are (in millions):
 
 
December 31,
 
2014
 
2013
 
2012
North America
 
 
 
 
 
Total assets
$
39,157

 
$
26,108

 
$
20,703

Property and equipment, net
13,163

 
8,447

 
5,481

Total property and equipment additions
7,464

 
4,837

 
3,348

International
 
 
 
 
 
Total assets
$
15,348

 
$
14,051

 
$
11,852

Property and equipment, net
3,804

 
2,502

 
1,579

Total property and equipment additions
2,017

 
1,536

 
969

Consolidated
 
 
 
 
 
Total assets
$
54,505

 
$
40,159

 
$
32,555

Property and equipment, net
16,967

 
10,949

 
7,060

Total property and equipment additions
9,481

 
6,373

 
4,317


Except for the U.S., property and equipment, net, in any single country was less than 10% of consolidated property and equipment, net.
Depreciation expense, by segment, is as follows (in millions):
 
 
Year Ended December 31,
 
2014
 
2013
 
2012
North America
$
2,701

 
$
1,863

 
$
1,229

International
915

 
597

 
424

Consolidated
$
3,616

 
$
2,460

 
$
1,653

Quarterly Results (Unaudited)
Quarterly Results (Unaudited)
QUARTERLY RESULTS (UNAUDITED)
The following tables contain selected unaudited statement of operations information for each quarter of 2014 and 2013. The following information reflects all normal recurring adjustments necessary for a fair presentation of the information for the periods presented. The operating results for any quarter are not necessarily indicative of results for any future period. Our business is affected by seasonality, which historically has resulted in higher sales volume during our fourth quarter. Unaudited quarterly results are as follows (in millions, except per share data):
 
 
 
Year Ended December 31, 2014 (1)
 
 
Fourth
Quarter
 
Third
Quarter
 
Second
Quarter
 
First
Quarter
Net sales
 
$
29,328

 
$
20,579

 
$
19,340

 
$
19,741

Income (loss) from operations
 
591

 
(544
)
 
(15
)
 
146

Income (loss) before income taxes
 
429

 
(634
)
 
(27
)
 
120

Benefit (provision) for income taxes
 
(205
)
 
205

 
(94
)
 
(73
)
Net income (loss)
 
214

 
(437
)
 
(126
)
 
108

Basic earnings per share
 
0.46

 
(0.95
)
 
(0.27
)
 
0.23

Diluted earnings per share
 
0.45

 
(0.95
)
 
(0.27
)
 
0.23

Shares used in computation of earnings per share:
 
 
 
 
 
 
 
 
Basic
 
464

 
463

 
461

 
460

Diluted
 
472

 
463

 
461

 
468

 
 
Year Ended December 31, 2013 (1)
 
 
Fourth
Quarter
 
Third
Quarter
 
Second
Quarter
 
First
Quarter
Net sales
 
$
25,587

 
$
17,092

 
$
15,704

 
$
16,070

Income (loss) from operations
 
510

 
(25
)
 
79

 
181

Income (loss) before income taxes
 
451

 
(43
)
 
17

 
81

Benefit (provision) for income taxes
 
(179
)
 
12

 
(13
)
 
18

Net income (loss)
 
239

 
(41
)
 
(7
)
 
82

Basic earnings per share
 
0.52

 
(0.09
)
 
(0.02
)
 
0.18

Diluted earnings per share
 
0.51

 
(0.09
)
 
(0.02
)
 
0.18

Shares used in computation of earnings per share:
 
 
 
 
 
 
 
 
Basic
 
458

 
457

 
456

 
455

Diluted
 
467

 
457

 
456

 
463

 ___________________
(1)
The sum of quarterly amounts, including per share amounts, may not equal amounts reported for year-to-date periods. This is due to the effects of rounding and changes in the number of weighted-average shares outstanding for each period.
Description of Business and Accounting Policies (Policies)
Description of Business 
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 two geographic segments, we serve our primary customer sets, consisting of consumers, sellers, 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 AWS, 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 two segments: North America and International. See “Note 12—Segment Information.”
Prior Period Reclassifications 
Prior Period Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation, including the expanded presentation of “Net cash provided by (used in) financing activities” on
Principles of Consolidation 
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 (collectively, the “Company”). Intercompany balances and transactions between consolidated entities are eliminated.
Use of Estimates 
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 lives 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 
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 of 17 million and 15 million in 2014 and 2012, were excluded as their inclusion would have an antidilutive effect.
Revenue 
Revenue
We recognize revenue from product sales or services rendered when the following four criteria are met: persuasive evidence of an arrangement exists, delivery has occurred or service has been rendered, the selling price is fixed or determinable, and collectability is reasonably assured. Revenue arrangements with multiple deliverables are divided into separate units and revenue is allocated using estimated selling prices if we do not have vendor-specific objective evidence or third-party evidence of the selling prices of the deliverables. We allocate the arrangement price to each of the elements based on the relative selling prices of each element. Estimated selling prices are management’s best estimates of the prices that we would charge our customers if we were to sell the standalone elements separately and include considerations of customer demand, prices charged by us and others for similar deliverables, and the price if largely based on the cost of producing the product or service.
Sales of our digital devices, including Kindle e-readers, Fire tablets, Fire TVs, Echo, and Fire phones, are considered arrangements with multiple deliverables, consisting of the device, undelivered software upgrades and/or undelivered non-software services such as cloud storage and free trial memberships to other services. The revenue allocated to the device, which is the substantial portion of the total sale price, and related costs are generally recognized upon delivery. Revenue related to undelivered software upgrades and/or undelivered non-software services is deferred and recognized generally on a straight-line basis over the estimated period the software upgrades and non-software services are expected to be provided for each of these devices.
Sales of Amazon Prime memberships are also considered arrangements with multiple deliverables, including shipping benefits, Prime Instant Video, Prime Music, Prime Photo, and access to the Kindle Owners’ Lending Library. The revenue related to the deliverables is amortized over the life of the membership based on the estimated delivery of services. Amazon Prime membership fees are allocated between product sales and service sales. Costs to deliver Amazon Prime benefits are recognized as cost of sales as incurred. As we add more benefits to the Prime membership, we will update the method of determining the estimated selling prices of each element as well as the allocation of Prime membership fees.
We evaluate whether it is appropriate to record the gross amount of product sales and related costs or the net amount earned as commissions. Generally, when we are primarily obligated in a transaction, are subject to inventory risk, have latitude in establishing prices and selecting suppliers, or have several but not all of these indicators, revenue is recorded at the gross sale price. We generally record the net amounts as commissions earned if we are not primarily obligated and do not have latitude in establishing prices. Such amounts earned are determined using a fixed percentage, a fixed-payment schedule, or a combination of the two.
Product sales represent revenue from the sale of products and related shipping fees and digital media content where we record revenue gross. Product sales and shipping revenues, net of promotional discounts, rebates, and return allowances, are recorded when the products are shipped and title passes to customers. Retail sales to customers are made pursuant to a sales contract that provides for transfer of both title and risk of loss upon our delivery to the carrier. Amazon’s electronic devices sold through retailers are recognized at the point of sale to consumers.
Service sales represent third-party seller fees earned (including commissions) and related shipping fees, digital content subscriptions, and non-retail activities such as AWS, advertising services, and our co-branded credit card agreements. Service sales, net of promotional discounts and return allowances, are recognized when service has been rendered.
Return allowances, which reduce revenue, are estimated using historical experience. Allowance for returns was $147 million, $167 million, and $198 million as of December 31, 2014, 2013, and 2012. Additions to the allowance were $1.1 billion, $907 million, and $702 million, and deductions to the allowance were $1.1 billion, $938 million, and $659 million as of December 31, 2014, 2013, and 2012. Revenue from product sales and services rendered is recorded net of sales and consumption taxes. Additionally, we periodically provide incentive offers to our customers to encourage purchases. Such offers include current discount offers, such as percentage discounts off current purchases, inducement offers, such as offers for future discounts subject to a minimum current purchase, and other similar offers. Current discount offers, when accepted by our customers, are treated as a reduction to the purchase price of the related transaction, while inducement offers, when accepted by our customers, are treated as a reduction to purchase price based on estimated future redemption rates. Redemption rates are estimated using our historical experience for similar inducement offers. Current discount offers and inducement offers are presented as a net amount in “Total net sales.”
Cost of Sales 
Cost of Sales
Cost of sales consists of the purchase price of consumer products and digital media content where we record revenue gross, including Prime Instant Video, packaging supplies, and inbound and outbound shipping costs, including sortation and delivery centers, and related equipment costs. Shipping costs to receive products from our suppliers are included in our inventory, and recognized as cost of sales upon sale of products to our customers. Payment processing and related transaction costs, including those associated with seller transactions, are classified in “Fulfillment” on our consolidated statements of operations.
Vendor Agreements 
Vendor Agreements
We have agreements with our vendors to receive funds for cooperative marketing efforts, promotions, and volume rebates. We generally consider amounts received from vendors to be a reduction of the prices we pay for their goods or services, and therefore record those amounts as a reduction of the cost of inventory or cost of services. Vendor rebates are typically dependent upon reaching minimum purchase thresholds. We evaluate the likelihood of reaching purchase thresholds using past experience and current year forecasts. When volume rebates can be reasonably estimated, we record a portion of the rebate as we make progress towards the purchase threshold.
When we receive direct reimbursements for costs incurred by us in advertising the vendor’s product or service, the amount we receive is recorded as an offset to “Marketing” on our consolidated statements of operations.
Fulfillment 
Fulfillment
Fulfillment costs represent those costs incurred in operating and staffing our fulfillment and customer service centers, including costs attributable to buying, receiving, inspecting, and warehousing inventories; picking, packaging, and preparing customer orders for shipment; payment processing and related transaction costs, including costs associated with our guarantee for certain seller transactions; responding to inquiries from customers; and supply chain management for our manufactured electronic devices. Fulfillment costs also include amounts paid to third parties that assist us in fulfillment and customer service operations.
Marketing 
Marketing
Marketing costs consist primarily of targeted online advertising, television advertising, public relations expenditures, and payroll and related expenses for personnel engaged in marketing, business development, and selling activities. We pay commissions to participants in our Associates program when their customer referrals result in product sales and classify such costs as “Marketing” on our consolidated statements of operations. We also participate in cooperative advertising arrangements with certain of our vendors, and other third parties.
Advertising and other promotional costs are expensed as incurred and were $3.3 billion, $2.4 billion, and $2.0 billion in 2014, 2013, and 2012. Prepaid advertising costs were not significant as of December 31, 2014 and 2013.
Technology and Content 
Technology and Content
Technology costs consist principally of research and development activities including payroll and related expenses for employees involved in application, production, maintenance, operation, and platform development for new and existing products and services, as well as AWS and other technology infrastructure expenses.
Content costs consist principally of payroll and related expenses for employees involved in category expansion, editorial content, buying, and merchandising selection.
Technology and content costs are expensed as incurred, except for certain costs relating to the development of internal-use software and website development, including software used to upgrade and enhance our websites and applications supporting our business, which are capitalized and amortized over two years.
General and Administrative 
General and Administrative
General and administrative expenses consist of payroll and related expenses for employees involved in general corporate functions, including accounting, finance, tax, legal, and human resources, among others; costs associated with use by these functions of facilities and equipment, such as depreciation expense and rent; professional fees and litigation costs; and other general corporate costs.
Stock-Based Compensation 
Stock-Based Compensation
Compensation cost for all stock awards expected to vest is measured at fair value on the date of grant and recognized over the service period. The fair value of restricted stock units is determined based on the number of shares granted and the quoted price of our common stock and the fair value of stock options are estimated on the date of grant using a Black-Scholes model. Such value is recognized as expense over the service period, net of estimated forfeitures, using the accelerated method. The estimated number of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised. We consider many factors when estimating expected forfeitures, including employee classification, economic environment, and historical experience.
Other Operating Expense (Income), Net 
Other Operating Expense (Income), Net
Other operating expense (income), net, consists primarily of intangible asset amortization expense and expenses related to legal settlements.
Other Income (Expense), Net 
Other Income (Expense), Net
Other income (expense), net, consists primarily of foreign currency losses of $(127) million, $(137) million, and $(95) million in 2014, 2013, and 2012, and realized gains and losses on marketable securities sales of $3 million, $(1) million, and $10 million in 2014, 2013, and 2012.
Income Taxes 
Income Taxes
Income tax expense includes U.S. (federal and state) and foreign income taxes. Except as required under U.S. tax laws, we do not provide for U.S. taxes on our undistributed earnings of foreign subsidiaries that have not been previously taxed since we intend to invest such undistributed earnings indefinitely outside of the U.S. If our intent changes or if these funds are needed for our U.S. operations, we would be required to accrue or pay U.S. taxes on some or all of these undistributed earnings and our effective tax rate would be adversely affected. Undistributed earnings of foreign subsidiaries that are indefinitely invested outside of the U.S were $2.5 billion as of December 31, 2014. Determination of the unrecognized deferred tax liability that would be incurred if such amounts were repatriated is not practicable.
Deferred income tax balances reflect the effects of temporary differences between the carrying amounts of assets and liabilities and their tax bases and are stated at enacted tax rates expected to be in effect when taxes are actually paid or recovered.
Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent we believe they will not be realized. We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent cumulative earnings experience and expectations of future taxable income and capital gains by taxing jurisdiction, the carry-forward periods available to us for tax reporting purposes, and other relevant factors. We allocate our valuation allowance to current and long-term deferred tax assets on a pro-rata basis.
We utilize a two-step approach to recognizing and measuring uncertain income tax positions (tax contingencies). The first step is to evaluate the tax position for recognition by determining if the weight of available evidence indicates it is more likely than not that the position will be sustained on audit, including resolution of related appeals or litigation processes. The second step is to measure the tax benefit as the largest amount which is more than 50% likely of being realized upon ultimate settlement. We consider many factors when evaluating our tax positions and estimating our tax benefits, which may require periodic adjustments and which may not accurately forecast actual outcomes. We include interest and penalties related to our tax contingencies in income tax expense.
Fair Value of Financial Instruments 
Fair Value of Financial Instruments
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. To increase the comparability of fair value measures, the following hierarchy prioritizes the inputs to valuation methodologies used to measure fair value:
Level 1—Valuations based on quoted prices for identical assets and liabilities in active markets.
Level 2—Valuations based on observable inputs other than quoted prices included in Level 1, such as quoted prices for similar assets and liabilities in active markets, quoted prices for identical or similar assets and liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3—Valuations based on unobservable inputs reflecting our own assumptions, consistent with reasonably available assumptions made by other market participants. These valuations require significant judgment.
For our cash, cash equivalents, or marketable securities, we measure the fair value of money market funds and equity securities based on quoted prices in active markets for identical assets or liabilities. All other financial instruments were valued either based on recent trades of securities in inactive markets or based on quoted market prices of similar instruments and other significant inputs derived from or corroborated by observable market data. We did not hold any cash, cash equivalents, or marketable securities categorized as Level 3 assets as of December 31, 2014, or December 31, 2013.
As part of entering into commercial agreements, we often obtain equity warrant assets giving us the right to acquire stock primarily in private companies. We record these assets in “Other assets” on the accompanying consolidated balance sheets. Equity warrant assets are classified as Level 3 assets, and the balances and related activity for our equity warrant assets were not significant for the periods ended December 31, 2014, 2013, and 2012.
Cash and Cash Equivalents 
Cash and Cash Equivalents
We classify all highly liquid instruments with an original maturity of three months or less at the time of purchase as cash equivalents.
Inventories 
Inventories
Inventories, consisting of products available for sale, are primarily accounted for using the FIFO method, and are valued at the lower of cost or market value. This valuation requires us to make judgments, based on currently-available information, about the likely method of disposition, such as through sales to individual customers, returns to product vendors, or liquidations, and expected recoverable values of each disposition category.
We provide Fulfillment by Amazon services in connection with certain of our sellers’ programs. Third-party sellers maintain ownership of their inventory, regardless of whether fulfillment is provided by us or the third-party sellers, and therefore these products are not included in our inventories.
We also purchase electronic device components from a variety of suppliers and use several contract manufacturers to provide manufacturing services for our products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate component supply, we enter into agreements with contract manufacturers and suppliers. A portion of our reported purchase commitments arising from these agreements consists of firm, non-cancellable commitments. These commitments are based on forecasted customer demand. If we reduce these commitments, we may incur additional costs.
Accounts Receivable, Net and Other 
Accounts Receivable, Net and Other
Included in “Accounts receivable, net and other” on our consolidated balance sheets are amounts primarily related to vendor and customer receivables. As of December 31, 2014 and 2013, vendor receivables, net, were $1.4 billion and $1.3 billion, and customer receivables, net, were $1.9 billion and $1.7 billion.
We estimate losses on receivables based on known troubled accounts and historical experience of losses incurred. Receivables are considered impaired and written-off when it is probable that all contractual payments due will not be collected in accordance with the terms of the agreement. The allowance for doubtful accounts was $190 million, $153 million, and $116 million as of December 31, 2014, 2013, and 2012. Additions to the allowance were $225 million, $172 million, and $136 million, and deductions to the allowance were $188 million, $135 million, and $102 million as of December 31, 2014, 2013, and 2012.
Internal-use Software and Website Development 
Internal-use Software and Website Development
Costs incurred to develop software for internal use and our websites are capitalized and amortized over the estimated useful life of the software. Costs related to design or maintenance of internal-use software and website development are expensed as incurred. For the years ended 2014, 2013, and 2012, we capitalized $641 million (including $104 million of stock-based compensation), $581 million (including $87 million of stock-based compensation), and $454 million (including $74 million of stock-based compensation) of costs associated with internal-use software and website development. Amortization of previously capitalized amounts was $559 million, $451 million, and $327 million for 2014, 2013, and 2012.
Property and Equipment, Net 
Property and Equipment, Net
Property and equipment are stated at cost less accumulated depreciation. Property includes buildings and land that we own, along with property we have acquired under build-to-suit, financing, and capital lease arrangements. Equipment includes assets such as furniture and fixtures, heavy equipment, servers and networking equipment, and internal-use software and website development. Depreciation 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, two years for assets such as internal-use software, three years for our servers, five years for networking equipment, five years for furniture and fixtures, and ten years for heavy equipment). Depreciation expense is classified within the corresponding operating expense categories on our consolidated statements of operations.
Leases and Asset Retirement Obligations 
Leases and Asset Retirement Obligations
We categorize leases at their inception as either operating or capital leases. On certain of our lease agreements, we may receive rent holidays and other incentives. We recognize lease costs on a straight-line basis without regard to deferred payment terms, such as rent holidays, that defer the commencement date of required payments. Additionally, incentives we receive are treated as a reduction of our costs over the term of the agreement. Leasehold improvements are capitalized at cost and amortized over the lesser of their expected useful life or the non-cancellable term of the lease.
We establish assets and liabilities for the estimated construction costs incurred under build-to-suit lease arrangements to the extent we are involved in the construction of structural improvements or take construction risk prior to commencement of a lease. Upon occupancy of facilities under build-to-suit leases, we assess whether these arrangements qualify for sales recognition under the sale-leaseback accounting guidance. If we continue to be the deemed owner, the facilities are accounted for as finance leases.
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 depreciated over the lease period into operating expense, and the recorded liabilities are accreted to the future value of the estimated retirement costs.
Goodwill 
Goodwill
We evaluate goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. We test goodwill for impairment by first comparing the book value of net assets to the fair value of the reporting units. If the fair value is determined to be less than the book value or qualitative factors indicate that it is more likely than not that goodwill is impaired, a second step is performed to compute the amount of impairment as the difference between the estimated fair value of goodwill and the carrying value. We estimate the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions.
We conduct our annual impairment test as of October 1 of each year, and have determined there to be no impairment for any of the periods presented. There were no triggering events identified from the date of our assessment through December 31, 2014 that would require an update to our annual impairment test. See “Note 4—Acquisitions, Goodwill, and Acquired Intangible Assets.”
Other Assets 
Other Assets
Included in “Other assets” on our consolidated balance sheets are amounts primarily related to acquired intangible assets, net of amortization; acquired digital media content, net of amortization; long-term deferred tax assets; certain equity investments; marketable securities restricted for longer than one year, the majority of which are attributable to collateralization of bank guarantees and debt related to our international operations; intellectual property rights, net of amortization; and equity warrant assets.
Content Costs 
Content Costs
We obtain video and music content to be made available to Prime members through licensing agreements that have a wide range of licensing provisions and generally have terms from one to five years with fixed payment schedules. When the license fee for a specific movie, television, or music title is determinable or reasonably estimable and available for streaming, we recognize an asset representing the fee per title and a corresponding liability for the amounts owed. We relieve the liability as payments are made and we amortize the asset as cost of sales on a straight-line basis over each title’s contractual window of availability, which typically ranges from six months to five years. If we are unable to reasonably estimate the cost per title, no asset or liability is recorded and licensing costs are expensed as incurred. We also develop original content. The production costs of internally developed content are capitalized only if persuasive evidence exists that the production will generate revenue. Because we have limited history to support the economic benefits of our content, we have generally expensed such costs as incurred. As we develop more experience or otherwise obtain the necessary evidence that future revenue will be earned through licensing or Prime membership activity, a portion of future production costs may be capitalized.
Investments 
Investments
We generally invest our excess cash in investment grade short- to intermediate-term fixed income securities and AAA-rated money market funds. Such investments are included in “Cash and cash equivalents,” or “Marketable securities” on the accompanying consolidated balance sheets, classified as available-for-sale, and reported at fair value with unrealized gains and losses included in “Accumulated other comprehensive loss.”
Equity investments are accounted for using the equity method of accounting if the investment gives us the ability to exercise significant influence, but not control, over an investee. The total of our investments in equity-method investees, including identifiable intangible assets, deferred tax liabilities, and goodwill, is included within “Other assets” on our consolidated balance sheets. Our share of the earnings or losses as reported by equity-method investees, amortization of the related intangible assets, and related gains or losses, if any, are classified as “Equity-method investment activity, net of tax” on our consolidated statements of operations. Our share of the net income or loss of our equity-method investees includes operating and non-operating gains and charges, which can have a significant impact on our reported equity-method investment activity and the carrying value of those investments. In the event that net losses of the investee reduce our equity-method investment carrying amount to zero, additional net losses may be recorded if other investments in the investee, not accounted for under the equity method, are at-risk even if we have not committed to provide financial support to the investee. 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 sheets 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
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 as of December 31, 2014 or 2013.
Accrued Expenses and Other 
Accrued Expenses and Other
Included in “Accrued expenses and other” on our consolidated balance sheets are liabilities primarily related to unredeemed gift cards, leases and asset retirement obligations, current debt, acquired digital media content, and other operating expenses.
As of December 31, 2014 and 2013 our liabilities for unredeemed gift cards was $1.7 billion and $1.4 billion. We reduce the liability for a gift card when redeemed by a customer. If a gift card is not redeemed, we recognize revenue when it expires or when the likelihood of its redemption becomes remote, generally two years from the date of issuance.
Unearned Revenue 
Unearned Revenue
Unearned revenue is recorded when payments are received in advance of performing our service obligations and is recognized over the service period. Unearned revenue primarily relates to prepayments of Amazon Prime memberships and AWS services.
Foreign Currency 
Foreign Currency
We have internationally-focused websites for the United Kingdom, Germany, France, Japan, Canada, China, Italy, Spain, Brazil, India, Mexico, Australia, and the Netherlands. 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 $98 million, $84 million, and $95 million in 2014, 2013, and 2012.
Recent Accounting Pronouncements 
Recent Accounting Pronouncements
In May 2014, the Financial Accounting Standards Board issued an Accounting Standard 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. The guidance is effective for annual and interim reporting periods beginning after December 15, 2016, with early adoption prohibited. We are currently evaluating the impact this ASU will have on our consolidated financial statements.
Description of Business and Accounting Policies (Tables)
Schedule of Weighted Average Number of Shares
The following table shows the calculation of diluted shares (in millions):
  
Year Ended December 31,
 
2014
 
2013
 
2012
Shares used in computation of basic earnings per share
462

 
457

 
453

Total dilutive effect of outstanding stock awards
—

 
8

 
—

Shares used in computation of diluted earnings per share
462

 
465

 
453

Cash, Cash Equivalents, and Marketable Securities (Tables)
Fair Value by Balance Sheet Grouping 
The following table summarizes, by major security type, our cash, cash equivalents, and marketable securities that are measured at fair value on a recurring basis and are categorized using the fair value hierarchy (in millions):
 
 
December 31, 2014
  
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Total
Estimated
Fair Value
Cash
$
4,155

 
$
—

 
$
—

 
$
4,155

Level 1 securities:
 
 
 
 
 
 
 
Money market funds
10,718

 
—

 
—

 
10,718

Equity securities
2

 
2

 
—

 
4

Level 2 securities:
 
 
 
 
 
 
 
Foreign government and agency securities
80

 
—

 
—

 
80

U.S. government and agency securities
2,407

 
1

 
(2
)
 
2,406

Corporate debt securities
401

 
1

 
(1
)
 
401

Asset-backed securities
69

 
—

 
—

 
69

Other fixed income securities
33

 
—

 
—

 
33

 
$
17,865

 
$
4

 
$
(3
)
 
$
17,866

Less: Restricted cash, cash equivalents, and marketable securities (1)
 
 
 
 
 
 
(450
)
Total cash, cash equivalents, and marketable securities
 
$
17,416

 
December 31, 2013
  
Cost or
Amortized
Cost
 
Gross
Unrealized
Gains
 
Gross
Unrealized
Losses
 
Total
Estimated
Fair Value
Cash
$
3,008

 
$
—

 
$
—

 
$
3,008

Level 1 securities:
 
 
 
 
 
 
 
Money market funds
5,914

 
—

 
—

 
5,914

Equity securities
3

 
1

 
—

 
4

Level 2 securities:
 
 
 
 
 
 
 
Foreign government and agency securities
757

 
2

 
(1
)
 
758

U.S. government and agency securities
2,224

 
1

 
(3
)
 
2,222

Corporate debt securities
739

 
3

 
(1
)
 
741

Asset-backed securities
65

 
—

 
—

 
65

Other fixed income securities
36

 
—

 
—

 
36

 
$
12,746

 
$
7

 
$
(5
)
 
$
12,748

Less: Restricted cash, cash equivalents, and marketable securities (1)
 
 
 
 
 
 
(301
)
Total cash, cash equivalents, and marketable securities
 
$
12,447

___________________
(1)
We are required to pledge or otherwise restrict a portion of our cash, cash equivalents, and marketable securities as collateral for standby and trade letters of credit, guarantees, debt, real estate leases, and amounts due to third-party sellers in certain jurisdictions. We classify cash, cash equivalents and marketable securities with use restrictions of less than twelve months as “Accounts receivable, net and other” and of twelve months or longer as non-current “Other assets” on our consolidated balance sheets. See “Note 8—Commitments and Contingencies.”
Realized Gain (Loss) on Investments 
The following table summarizes gross gains and gross losses realized on sales of available-for-sale marketable securities (in millions):

 
Year Ended December 31,
 
2014
 
2013
 
2012
Realized gains
$
8

 
$
6

 
$
20

Realized losses
5

 
7

 
10

Investments Classified by Contractual Maturity Date 
The following table summarizes the contractual maturities of our cash equivalents and marketable fixed-income securities as of December 31, 2014 (in millions):

 
Amortized
Cost
 
Estimated
Fair Value
Due within one year
$
12,553

 
$
12,552

Due after one year through five years
798

 
799

Due after five years through ten years
132

 
132

Due after ten years
224

 
224

Total
$
13,707

 
$
13,707

Property and Equipment (Tables)
Property and Equipment at Cost
Property and equipment, at cost, consisted of the following (in millions):
 
 
December 31,
 
2014
 
2013
Gross property and equipment (1):
 
 
 
Land and buildings
$
7,150

 
$
4,584

Equipment and internal-use software (2)
14,213

 
9,274

Other corporate assets
304

 
231

Construction in progress
1,063

 
720

Gross property and equipment
22,730

 
14,809

Total accumulated depreciation (1)
5,763

 
3,860

Total property and equipment, net
$
16,967

 
$
10,949

 ___________________
(1)
Excludes the original cost and accumulated depreciation of fully-depreciated assets.
(2)
Includes internal-use software of $1.3 billion and $1.1 billion as of December 31, 2014 and 2013.
Acquisitions, Goodwill, and Acquired Intangible Assets (Tables)
Allocation of Aggregate Purchase Price of Acquisitions 
The aggregate purchase price of this acquisition was allocated as follows (in millions):
 
 
 
Purchase Price
 
Cash paid, net of cash acquired
$
613

Stock options assumed
65

 
$
678

Allocation
 
Goodwill
$
560

Intangible assets (1):
 
Marketing-related
5

Contract-based
3

Technology-based
168

Customer-related
17

 
193

Property and equipment
9

Deferred tax assets
34

Other assets acquired
41

Deferred tax liabilities
(81
)
Other liabilities assumed
(78
)
 
$
678

 ___________________
(1)
Acquired intangible assets have estimated useful lives of between four and 10 years, with a weighted-average amortization period of five years.
The aggregate purchase price of these acquisitions was allocated as follows (in millions):
Purchase Price
 
Cash paid, net of cash acquired
$
813

Stock options assumed
44

Indemnification holdback
5

 
$
862

Allocation
 
Goodwill
$
707

Intangible assets (1):
 
Marketing-related
23

Contract-based
1

Technology-based
33

Customer-related
173

 
230

Property and equipment
16

Deferred tax assets
64

Other assets acquired
34

Deferred tax liabilities
(88
)
Other liabilities assumed
(101
)
 
$
862

 ___________________
(1)
Acquired intangible assets have estimated useful lives of between one and five years, with a weighted-average amortization period of five years.
Business Acquisitions Pro Forma Financial Information 
The following pro forma financial information presents our results as if the current year acquisitions had occurred at the beginning of 2013 (in millions):
  
  
Year Ended December 31,
 
2014
 
2013
Net sales
$
89,041

 
$
74,505

Net income (loss)
$
(287
)
 
$
180

Summary of Goodwill Activity by Segment 
The following summarizes our goodwill activity in 2014 and 2013 by segment (in millions):
 
 
North
America
 
International
 
Consolidated
Goodwill - January 1, 2013
$
1,937

 
$
615

 
$
2,552

New acquisitions
99

 
4

 
103

Other adjustments (1)
(3
)
 
3

 
—

Goodwill - December 31, 2013
2,033

 
622

 
2,655

New acquisitions (2)
553

 
162

 
715

Other adjustments (1)
(2
)
 
(49
)
 
(51
)
Goodwill - December 31, 2014
$
2,584

 
$
735

 
$
3,319

 ___________________
(1)
Primarily includes changes in foreign exchange rates.
(2)
Primarily includes the goodwill of Twitch.
Acquired Finite-Lived Intangible Assets by Major Class 
Acquired intangible assets, included within “Other assets” on our consolidated balance sheets, consist of the following (in millions):
 
 
 
 
December 31,
 
 
 
2014
 
2013
  
Weighted
Average Life
Remaining
 
Acquired
Intangibles,
Gross (1)
 
Accumulated
Amortization (1)
 
Acquired
Intangibles,
Net
 
Acquired
Intangibles,
Gross (1)
 
Accumulated
Amortization (1)
 
Acquired
Intangibles,
Net
Marketing-related
5.3
 
$
457

 
$
(199
)
 
$
258

 
$
429

 
$
(156
)
 
$
273

Contract-based
2.2
 
172

 
(125
)
 
47

 
173

 
(110
)
 
63

Technology- and content-based
3.5
 
370

 
(129
)
 
241

 
278

 
(74
)
 
204

Customer-related
2.5
 
535

 
(317
)
 
218

 
368

 
(263
)
 
105

Acquired intangibles (2)
3.5
 
$
1,534

 
$
(770
)
 
$
764

 
$
1,248

 
$
(603
)
 
$
645

 ___________________
(1)
Excludes the original cost and accumulated amortization of fully-amortized intangibles.
(2)
Intangible assets have estimated useful lives of between one and 10 years.
Schedule of Finite-Lived Intangible Assets, Future Amortization Expense 
Expected future amortization expense of acquired intangible assets as of December 31, 2014 is as follows (in millions):
 
Year Ended December 31,
2015
$
202

2016
185

2017
161

2018
106

2019
79

Thereafter
31

 
$
764

Equity-Method Investments (Tables)
Equity Method Investments Summarized Financial Information
LivingSocial’s summarized condensed financial information, as provided to us by LivingSocial, is as follows (in millions):
 
  
Year Ended December 31,
 
2014
 
2013
 
2012
Statement of Operations:
 
 
 
 
 
Revenue
$
231

 
$
302

 
$
347

Gross profit
194

 
253

 
280

Operating expenses
296

 
282

 
367

Operating loss from continuing operations
(102
)
 
(29
)
 
(87
)
Net loss from continuing operations
(73
)
 
(16
)
 
(79
)
Net income (loss) from discontinued operations, net of tax (1)
173

 
(156
)
 
(574
)
Net income (loss)
$
100

 
$
(172
)
 
$
(653
)
___________________
(1)
In January 2014, LivingSocial completed the sale of its Korean operations for approximately $260 million and, in the first quarter of 2014, recognized a gain on disposal of $205 million, net of tax. The statement of operations information above has been recast to present the Korean operations, and certain other operations, as discontinued operations.

 
December 31,
 
2014
 
2013
Balance Sheet:
 
 
 
Current assets
$
163

 
$
182

Non-current assets
29

 
61

Current liabilities
137

 
301

Non-current liabilities
34

 
33

Redeemable stock
366

 
315

Long-Term Debt (Tables)
Long-Term Debt Obligations 
The face value of our total long-term debt obligations is as follows (in millions):
 
December 31,
 
2014
 
2013
0.65% Notes due on November 27, 2015 (1)
$
750

 
$
750

1.20% Notes due on November 29, 2017 (1)
1,000

 
1,000

2.50% Notes due on November 29, 2022 (1)
1,250

 
1,250

2.60% Notes due on December 5, 2019 (2)
1,000

 
—

3.30% Notes due on December 5, 2021 (2)
1,000

 
—

3.80% Notes due on December 5, 2024 (2)
1,250

 
—

4.80% Notes due on December 5, 2034 (2)
1,250

 
—

4.95% Notes due on December 5, 2044 (2)
1,500

 
—

Other long-term debt
881

 
967

Total debt
9,881

 
3,967

Less current portion of long-term debt
(1,520
)
 
(753
)
Face value of long-term debt
$
8,361

 
$
3,214


_____________________________
(1)
Issued in November 2012, effective interest rates of the 2015, 2017, and 2022 Notes were 0.84%, 1.38%, and 2.66%.
(2)
Issued in December 2014, effective interest rates of the 2019, 2021, 2024, 2034, and 2044 Notes were 2.73%, 3.43%, 3.90%, 4.92%, and 5.11%.
Future Principal Payments for Debt 
As of December 31, 2014, future principal payments for our total debt were as follows (in millions):
 
Year Ended December 31,
2015
$
1,520

2016
36

2017
1,037

2018
38

2019
1,000

Thereafter
6,250

 
$
9,881

Other Long-Term Liabilities (Tables)
Other Liabilities Table Disclosure 
Our other long-term liabilities are summarized as follows (in millions):
 
 
December 31,
 
2014
 
2013
Long-term capital lease obligations
$
3,026

 
$
1,435

Long-term finance lease obligations
1,198

 
555

Construction liabilities
467

 
385

Tax contingencies
510

 
457

Long-term deferred tax liabilities
1,021

 
571

Other
1,188

 
839

Total other long-term liabilities
$
7,410

 
$
4,242

Schedule of Capital Lease Obligations 
Long-term capital lease obligations are as follows (in millions):
 
 
December 31, 2014
Gross capital lease obligations
$
5,182

Less imputed interest
(143
)
Present value of net minimum lease payments
5,039

Less current portion of capital lease obligations
(2,013
)
Total long-term capital lease obligations
$
3,026

Schedule of Finance Lease Obligations 
Long-term finance lease obligations are as follows (in millions):
 
December 31, 2014
Gross finance lease obligations
$
1,629

Less imputed interest
(364
)
Present value of net minimum lease payments
1,265

Less current portion of finance lease obligations
(67
)
Total long-term finance lease obligations
$
1,198

Commitments and Contingencies (Tables)
Commitments Disclosure
The following summarizes our principal contractual commitments, excluding open orders for purchases that support normal operations, as of December 31, 2014 (in millions):
 
Year Ended December 31,
 
 
 
 
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Operating and capital commitments:
 
 
 
 
 
 
 
 
 
 
 
 
 
Debt principal and interest
$
1,842

 
$
323

 
$
1,322

 
$
310

 
$
1,272

 
$
9,403

 
$
14,472

Capital leases, including interest
2,060

 
1,727

 
1,030

 
178

 
89

 
98

 
5,182

Finance lease obligations, including interest
110

 
112

 
115

 
117

 
119

 
1,056

 
1,629

Operating leases
868

 
791

 
728

 
634

 
549

 
2,343

 
5,913

Unconditional purchase obligations (1)
489

 
435

 
351

 
118

 
38

 
3

 
1,434

Other commitments (2) (3)
928

 
333

 
160

 
140

 
90

 
845

 
2,496

Total commitments
$
6,297

 
$
3,721

 
$
3,706

 
$
1,497

 
$
2,157

 
$
13,748

 
$
31,126

___________________
(1)
Includes unconditional purchase obligations related to long-term agreements to acquire and license digital content that are not reflected on the consolidated balance sheets. For those agreements with variable terms, we do not estimate the total obligation beyond any minimum quantities and/or pricing as of the reporting date. Purchase obligations associated with renewal provisions solely at the option of the content provider are included to the extent such commitments are fixed or a minimum amount is specified.
(2)
Includes the estimated timing and amounts of payments for rent and tenant improvements associated with build-to-suit lease arrangements that have not been placed in service and media content liabilities associated with long-term media content assets with initial terms greater than one year.
(3)
Excludes $710 million of tax contingencies for which we cannot make a reasonably reliable estimate of the amount and period of payment, if any.
Stockholders' Equity (Tables)
Nonvested Restricted Stock Units Activity 
The following table summarizes our restricted stock unit activity (in millions):
 
 
Number of Units
 
Weighted Average
Grant-Date
Fair Value
Outstanding as of January 1, 2012
13.1

 
$
143

Units granted
8.2

 
209

Units vested
(4.2
)
 
110

Units forfeited
(1.7
)
 
168

Outstanding as of December 31, 2012
15.4

 
184

Units granted
7.2

 
283

Units vested
(4.5
)
 
160

Units forfeited
(1.8
)
 
209

Outstanding as of December 31, 2013
16.3

 
233

Units granted
8.5

 
328

Units vested
(5.1
)
 
202

Units forfeited
(2.3
)
 
264

Outstanding as of December 31, 2014
17.4

 
$
285

Nonvested Share Activity 
Scheduled vesting for outstanding restricted stock units as of December 31, 2014, is as follows (in millions):
 

 
Year Ended December 31,
 
 
 
 
 
2015
 
2016
 
2017
 
2018
 
2019
 
Thereafter
 
Total
Scheduled vesting—restricted stock units
5.9

 
6.1

 
3.4

 
1.7

 
0.2

 
0.1

 
17.4

Accumulated Other Comprehensive Loss (Tables)
Changes in Composition of Accumulated Other Comprehensive Income or Loss
Changes in the composition of accumulated other comprehensive loss for 2014, 2013, and 2012 are as follows (in millions):
 
 
 
Foreign currency
translation
adjustments
 
Unrealized gains on
available-for-sale
securities
 
Total
Balances as of January 1, 2012
 
$
(326
)
 
$
10

 
$
(316
)
Other comprehensive income
 
76

 
1

 
77

Balances as of December 31, 2012
 
(250
)
 
11

 
(239
)
Other comprehensive income (loss)
 
63

 
(9
)
 
54

Balances as of December 31, 2013
 
(187
)
 
2

 
(185
)
Other comprehensive income (loss)
 
(325
)
 
(1
)
 
(326
)
Balances as of December 31, 2014
 
$
(512
)
 
$
1

 
$
(511
)
Income Taxes (Tables)
Components of Income Tax Expense (Benefit) 
The components of the provision for income taxes, net are as follows (in millions):
 
Year Ended December 31,
 
2014
 
2013
 
2012
Current taxes:
 
 
 
 
 
U.S. Federal
$
214

 
$
99

 
$
528

U.S. State
65

 
45

 
34

International
204

 
173

 
131

Current taxes
483

 
317

 
693

Deferred taxes:
 
 
 
 
 
U.S. Federal
(125
)
 
(114
)
 
(129
)
U.S. State
(11
)
 
(19
)
 
(27
)
International
(180
)
 
(23
)
 
(109
)
Deferred taxes
(316
)
 
(156
)
 
(265
)
Provision for income taxes, net
$
167

 
$
161

 
$
428

Income before Income Tax, Domestic and Foreign 
U.S. and international components of income before income taxes are as follows (in millions):
 
Year Ended December 31,
 
2014
 
2013
 
2012
U.S.
$
292

 
$
704

 
$
882

International
(403
)
 
(198
)
 
(338
)
Income (loss) before income taxes
$
(111
)
 
$
506

 
$
544

Effective Income Tax Rate Reconciliation 
The items accounting for differences between income taxes computed at the federal statutory rate and the provision recorded for income taxes are as follows (in millions):
 
 
Year Ended December 31,
 
2014
 
2013
 
2012
Income taxes computed at the federal statutory rate
$
(39
)
 
$
177

 
$
191

Effect of:
 
 
 
 
 
Impact of foreign tax differential
136

 
(41
)
 
172

State taxes, net of federal benefits
29

 
14

 
1

Tax credits
(85
)
 
(84
)
 
(24
)
Nondeductible compensation
117

 
86

 
72

Domestic production activities deduction
(20
)
 
(11
)
 
—

Other, net
29

 
20

 
16

Total
$
167

 
$
161

 
$
428

Deferred Tax Assets and Liabilities 
Deferred income tax assets and liabilities are as follows (in millions):
 
 
December 31,
 
2014 (1)
 
2013
Deferred tax assets:
 
 
 
Net operating losses U.S. - Federal/States (2)
$
357

 
$
53

Net operating losses foreign (3)
669

 
427

Accrued liabilities, reserves, & other expenses
780

 
590

Stock-based compensation
534

 
396

Deferred revenue
156

 
249

Assets held for investment
154

 
164

Other items
242

 
177

Tax credits (4)
115

 
107

Total gross deferred tax assets
3,007

 
2,163

Less valuation allowance (5)
(901
)
 
(698
)
Deferred tax assets, net of valuation allowance
2,106

 
1,465

Deferred tax liabilities:
 
 
 
Depreciation & amortization
(1,609
)
 
(1,021
)
Acquisition related intangible assets
(195
)
 
(201
)
Other items
(31
)
 
(16
)
Net deferred tax assets, net of valuation allowance
$
271

 
$
227

 ___________________
(1)
Deferred tax assets related to net operating losses and tax credits are presented net of tax contingencies.
(2)
Excluding $261 million and $81 million of deferred tax assets as of December 31, 2014 and 2013, related to net operating losses that result from excess stock-based compensation and for which any benefit realized will be recorded to stockholders’ equity.
(3)
Excluding $2 million and $2 million of deferred tax assets as of December 31, 2014 and 2013, related to net operating losses that result from excess stock-based compensation and for which any benefit realized will be recorded to stockholders’ equity.
(4)
Excluding $268 million and $227 million of deferred tax assets as of December 31, 2014 and 2013, related to tax credits that result from excess stock-based compensation and for which any benefit realized will be recorded to stockholders’ equity.
(5)
Relates primarily to deferred tax assets that would only be realizable upon the generation of net income in certain foreign taxing jurisdictions and future capital gains.
Summary of Income Tax Contingencies 
The reconciliation of our tax contingencies is as follows (in millions):
 
 
December 31,
 
2014
 
2013
 
2012
Gross tax contingencies – January 1
$
407

 
$
294

 
$
229

Gross increases to tax positions in prior periods
351

 
78

 
91

Gross decreases to tax positions in prior periods
(50
)
 
(18
)
 
(47
)
Gross increases to current period tax positions
20

 
54

 
26

Audit settlements paid
(16
)
 
(1
)
 
(4
)
Lapse of statute of limitations
(2
)
 
—

 
(1
)
Gross tax contingencies – December 31 (1)
$
710

 
$
407

 
$
294

 ___________________
(1)
As of December 31, 2014, we had $710 million of tax contingencies, of which $604 million, if fully recognized, would decrease our effective tax rate.
Segment Information (Tables)
Schedule of Segment Reporting Information by Segment 
Information on reportable segments and reconciliation to consolidated net income (loss) is as follows (in millions):
  
Year Ended December 31,
 
2014
 
2013
 
2012
North America
 
 
 
 
 
Net sales
$
55,469

 
$
44,517

 
$
34,813

Segment operating expenses (1)
53,364

 
42,631

 
33,221

Segment operating income
$
2,105

 
$
1,886

 
$
1,592

International
 
 
 
 
 
Net sales
$
33,519

 
$
29,935

 
$
26,280

Segment operating expenses (1)
33,816

 
29,828

 
26,204

Segment operating income (loss)
$
(297
)
 
$
107

 
$
76

Consolidated
 
 
 
 
 
Net sales
$
88,988

 
$
74,452

 
$
61,093

Segment operating expenses (1)
87,180

 
72,459

 
59,425

Segment operating income
1,808

 
1,993

 
1,668

Stock-based compensation
(1,497
)
 
(1,134
)
 
(833
)
Other operating income (expense), net
(133
)
 
(114
)
 
(159
)
Income from operations
178

 
745

 
676

Total non-operating income (expense)
(289
)
 
(239
)
 
(132
)
Provision for income taxes
(167
)
 
(161
)
 
(428
)
Equity-method investment activity, net of tax
37

 
(71
)
 
(155
)
Net income (loss)
$
(241
)
 
$
274

 
$
(39
)
___________________
(1)
Represents operating expenses, excluding stock-based compensation and “Other operating expense (income), net,” which are not allocated to segments.
Revenue from External Customers by Products and Services 
  
Year Ended December 31,
 
2014
 
2013
 
2012
Net Sales:
 
Media
$
22,505

 
$
21,716

 
$
19,942

Electronics and other general merchandise
60,886

 
48,802

 
38,628

Other (1)
5,597

 
3,934

 
2,523

 
$
88,988

 
$
74,452

 
$
61,093

___________________
(1)
Includes sales from non-retail activities, such as AWS, advertising services, and our co-branded credit card agreements.
Net Sales Attributed to Foreign Countries 
Net sales attributed to foreign countries are as follows (in millions):
 
 
Year Ended December 31,
 
2014
 
2013
 
2012
Germany
$
11,919

 
$
10,535

 
$
8,732

Japan
7,912

 
7,639

 
7,800

United Kingdom
8,341

 
7,291

 
6,478

Total Assets, Property, Plant, and Equipment And Additions, by Segment 
Total assets, property and equipment, net, and total property and equipment additions, by geography, reconciled to consolidated amounts are (in millions):
 
 
December 31,
 
2014
 
2013
 
2012
North America
 
 
 
 
 
Total assets
$
39,157

 
$
26,108

 
$
20,703

Property and equipment, net
13,163

 
8,447

 
5,481

Total property and equipment additions
7,464

 
4,837

 
3,348

International
 
 
 
 
 
Total assets
$
15,348

 
$
14,051

 
$
11,852

Property and equipment, net
3,804

 
2,502

 
1,579

Total property and equipment additions
2,017

 
1,536

 
969

Consolidated
 
 
 
 
 
Total assets
$
54,505

 
$
40,159

 
$
32,555

Property and equipment, net
16,967

 
10,949

 
7,060

Total property and equipment additions
9,481

 
6,373

 
4,317

Depreciation Expense by Segment 
Depreciation expense, by segment, is as follows (in millions):
 
 
Year Ended December 31,
 
2014
 
2013
 
2012
North America
$
2,701

 
$
1,863

 
$
1,229

International
915

 
597

 
424

Consolidated
$
3,616

 
$
2,460

 
$
1,653

Quarterly Results (Unaudited) (Tables)
Quarterly Financial Information
Unaudited quarterly results are as follows (in millions, except per share data):
 
 
 
Year Ended December 31, 2014 (1)
 
 
Fourth
Quarter
 
Third
Quarter
 
Second
Quarter
 
First
Quarter
Net sales
 
$
29,328

 
$
20,579

 
$
19,340

 
$
19,741

Income (loss) from operations
 
591

 
(544
)
 
(15
)
 
146

Income (loss) before income taxes
 
429

 
(634
)
 
(27
)
 
120

Benefit (provision) for income taxes
 
(205
)
 
205

 
(94
)
 
(73
)
Net income (loss)
 
214

 
(437
)
 
(126
)
 
108

Basic earnings per share
 
0.46

 
(0.95
)
 
(0.27
)
 
0.23

Diluted earnings per share
 
0.45

 
(0.95
)
 
(0.27
)
 
0.23

Shares used in computation of earnings per share:
 
 
 
 
 
 
 
 
Basic
 
464

 
463

 
461

 
460

Diluted
 
472

 
463

 
461

 
468

 
 
Year Ended December 31, 2013 (1)
 
 
Fourth
Quarter
 
Third
Quarter
 
Second
Quarter
 
First
Quarter
Net sales
 
$
25,587

 
$
17,092

 
$
15,704

 
$
16,070

Income (loss) from operations
 
510

 
(25
)
 
79

 
181

Income (loss) before income taxes
 
451

 
(43
)
 
17

 
81

Benefit (provision) for income taxes
 
(179
)
 
12

 
(13
)
 
18

Net income (loss)
 
239

 
(41
)
 
(7
)
 
82

Basic earnings per share
 
0.52

 
(0.09
)
 
(0.02
)
 
0.18

Diluted earnings per share
 
0.51

 
(0.09
)
 
(0.02
)
 
0.18

Shares used in computation of earnings per share:
 
 
 
 
 
 
 
 
Basic
 
458

 
457

 
456

 
455

Diluted
 
467

 
457

 
456

 
463

 ___________________
(1)
The sum of quarterly amounts, including per share amounts, may not equal amounts reported for year-to-date periods. This is due to the effects of rounding and changes in the number of weighted-average shares outstanding for each period.

Description of Business and Accounting Policies - Additional Information (Detail) (USD $)
12 Months Ended
Dec. 31, 2014
Segment
Dec. 31, 2013
Dec. 31, 2012
Significant Accounting Policies [Line Items]
 
 
 
Number of principal segments
2 
 
 
Allowance for returns
$ 147,000,000 
$ 167,000,000 
$ 198,000,000 
Additions to allowance for returns
1,100,000,000 
907,000,000 
702,000,000 
Deductions to allowance for returns
1,100,000,000 
938,000,000 
659,000,000 
Advertising and other promotional costs
3,300,000,000 
2,400,000,000 
2,000,000,000 
Foreign currency transaction gain (loss)
(127,000,000)
(137,000,000)
(95,000,000)
Marketable securities realized gain (loss)
3,000,000 
(1,000,000)
10,000,000 
Undistributed earnings of foreign subsidiaries that are indefinitely invested outside of the U.S
2,500,000,000 
 
 
Accounts receivable, net and other
5,612,000,000 
4,767,000,000 
 
Allowance for doubtful accounts
190,000,000 
153,000,000 
116,000,000 
Additions to allowance for doubtful accounts
225,000,000 
172,000,000 
136,000,000 
Deductions to allowance for doubtful accounts
188,000,000 
135,000,000 
102,000,000 
Capitalized costs associated with internal-use software and website development
641,000,000 
581,000,000 
454,000,000 
Capitalized costs associated with internal-use software and website development, share-based compensation
104,000,000 
87,000,000 
74,000,000 
Capitalized costs associated with internal-use software and website development, amortization of previously capitalized amounts
559,000,000 
451,000,000 
327,000,000 
Estimated useful lives of assets description
Depreciation 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, 
 
 
Unredeemed gift certificates
1,700,000,000 
1,400,000,000 
 
Unredeemed gift certificates, period of recognition
2 years 
 
 
Transaction losses arising from foreign currency transactions
98,000,000 
84,000,000 
95,000,000 
Vendor Receivables
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
Accounts receivable, net and other
1,400,000,000 
1,300,000,000 
 
Customer Receivables
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
Accounts receivable, net and other
$ 1,900,000,000 
$ 1,700,000,000 
 
Internal use software and website development
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
Estimated useful lives of assets
2 years 
 
 
Building |
Maximum
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
Estimated useful lives of assets
40 years 
 
 
Servers
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
Estimated useful lives of assets
3 years 
 
 
Network Equipment
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
Estimated useful lives of assets
5 years 
 
 
Furniture and Fixtures
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
Estimated useful lives of assets
5 years 
 
 
Heavy Equipment
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
Estimated useful lives of assets
10 years 
 
 
Digital Video Content |
Minimum
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
Digital video content licensing agreements term
1 year 
 
 
Digital video content amortization period
6 months 
 
 
Digital Video Content |
Maximum
 
 
 
Significant Accounting Policies [Line Items]
 
 
 
Digital video content licensing agreements term
5 years 
 
 
Digital video content amortization period
5 years 
 
 
Description of Business and Accounting Policies Calculation of Diluted Shares (Detail)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Accounting Policies [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Shares used in computation of basic earnings per share
464 1
463 1
461 1
460 1
458 1
457 1
456 1
455 1
462 
457 
453 
Total dilutive effect of outstanding stock awards
 
 
 
 
 
 
 
 
0 
8 
0 
Shares used in computation of diluted earnings per share
472 1
463 1
461 1
468 1
467 1
457 1
456 1
463 1
462 
465 
453 
Description of Business and Accounting Policies Calculation of Diluted Shares Additional Information (Details)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2012
Antidilutive Securities Excluded from Computation of Earnings Per Share [Line Items]
 
 
Stock awards excluded from the computation of earnings per share as their inclusion would have an antidilutive effect, Amount
17 
15 
Cash, Cash Equivalents, and Marketable Securities - Summary by Major Security Type Cash Cash Equivalents and Marketable Securities Measured at Fair Value on Recurring Basis and Categorized Using Fair Value Hierarchy (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Cash, cash equivalents and marketable securities [Line Items]
 
 
Less: Restricted cash, cash equivalents, and marketable securities
$ (450)1
$ (301)1
Cash, Cash Equivalents, and Short-term Investments
17,416 
12,447 
Cash
 
 
Cash, cash equivalents and marketable securities [Line Items]
 
 
Cost or Amortized Cost
4,155 
3,008 
Gross Unrealized Gains
0 
0 
Gross Unrealized Losses
0 
0 
Cash, Cash Equivalents, and Short-term Investments
4,155 
3,008 
Cash, cash equivalents, and marketable securities
 
 
Cash, cash equivalents and marketable securities [Line Items]
 
 
Cost or Amortized Cost
17,865 
12,746 
Gross Unrealized Gains
4 
7 
Gross Unrealized Losses
(3)
(5)
Cash, Cash Equivalents, and Short-term Investments
17,866 
12,748 
Level 1 Securities |
Money market funds
 
 
Cash, cash equivalents and marketable securities [Line Items]
 
 
Cost or Amortized Cost
10,718 
5,914 
Gross Unrealized Gains
0 
0 
Gross Unrealized Losses
0 
0 
Cash, Cash Equivalents, and Short-term Investments
10,718 
5,914 
Level 1 Securities |
Equity securities
 
 
Cash, cash equivalents and marketable securities [Line Items]
 
 
Cost or Amortized Cost
2 
3 
Gross Unrealized Gains
2 
1 
Gross Unrealized Losses
0 
0 
Cash, Cash Equivalents, and Short-term Investments
4 
4 
Level 2 Securities |
Foreign government and agency securities
 
 
Cash, cash equivalents and marketable securities [Line Items]
 
 
Cost or Amortized Cost
80 
757 
Gross Unrealized Gains
0 
2 
Gross Unrealized Losses
0 
(1)
Cash, Cash Equivalents, and Short-term Investments
80 
758 
Level 2 Securities |
U.S. government and agency securities
 
 
Cash, cash equivalents and marketable securities [Line Items]
 
 
Cost or Amortized Cost
2,407 
2,224 
Gross Unrealized Gains
1 
1 
Gross Unrealized Losses
(2)
(3)
Cash, Cash Equivalents, and Short-term Investments
2,406 
2,222 
Level 2 Securities |
Corporate debt securities
 
 
Cash, cash equivalents and marketable securities [Line Items]
 
 
Cost or Amortized Cost
401 
739 
Gross Unrealized Gains
1 
3 
Gross Unrealized Losses
(1)
(1)
Cash, Cash Equivalents, and Short-term Investments
401 
741 
Level 2 Securities |
Asset-backed securities
 
 
Cash, cash equivalents and marketable securities [Line Items]
 
 
Cost or Amortized Cost
69 
65 
Gross Unrealized Gains
0 
0 
Gross Unrealized Losses
0 
0 
Cash, Cash Equivalents, and Short-term Investments
69 
65 
Level 2 Securities |
Other fixed income securities
 
 
Cash, cash equivalents and marketable securities [Line Items]
 
 
Cost or Amortized Cost
33 
36 
Gross Unrealized Gains
0 
0 
Gross Unrealized Losses
0 
0 
Cash, Cash Equivalents, and Short-term Investments
$ 33 
$ 36 
Cash, Cash Equivalents, and Marketable Securities - Gross Grains and Gross Losses Realized on Sales of Available-For-Sale Marketable Securities (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Investments, Debt and Equity Securities [Abstract]
 
 
 
Realized gains
$ 8 
$ 6 
$ 20 
Realized losses
$ 5 
$ 7 
$ 10 
Cash, Cash Equivalents, and Marketable Securities - Summary of Contractual Maturities of Cash Equivalent and Marketable Fixed Income Securities (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Investments Classified by Contractual Maturity Date [Line Items]
 
Amortized Cost
$ 13,707 
Estimated Fair Value
13,707 
Due within one year
 
Investments Classified by Contractual Maturity Date [Line Items]
 
Amortized Cost
12,553 
Estimated Fair Value
12,552 
Due after one year through five years
 
Investments Classified by Contractual Maturity Date [Line Items]
 
Amortized Cost
798 
Estimated Fair Value
799 
Due after five years through ten years
 
Investments Classified by Contractual Maturity Date [Line Items]
 
Amortized Cost
132 
Estimated Fair Value
132 
Due after ten years
 
Investments Classified by Contractual Maturity Date [Line Items]
 
Amortized Cost
224 
Estimated Fair Value
$ 224 
Property and Equipment Fixed Assets at Cost (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Property, Plant and Equipment [Line Items]
 
 
Gross property and equipment
$ 22,730 1
$ 14,809 1
Total accumulated depreciation
5,763 1
3,860 1
Total property and equipment, net
16,967 
10,949 
Land and Buildings
 
 
Property, Plant and Equipment [Line Items]
 
 
Gross property and equipment
7,150 1
4,584 1
Equipment and Internal-use Software
 
 
Property, Plant and Equipment [Line Items]
 
 
Gross property and equipment
14,213 1 2
9,274 1 2
Other Corporate Assets
 
 
Property, Plant and Equipment [Line Items]
 
 
Gross property and equipment
304 1
231 1
Construction in Progress
 
 
Property, Plant and Equipment [Line Items]
 
 
Gross property and equipment
$ 1,063 1
$ 720 1
Property and Equipment - Additional Information (Detail) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Significant Acquisitions and Disposals [Line Items]
 
 
 
Internal-use software
$ 1,300,000,000 
$ 1,100,000,000 
 
Depreciation expense
3,616,000,000 
2,460,000,000 
1,653,000,000 
Amortization of property and equipment acquired under capital leases
1,500,000,000 
826,000,000 
510,000,000 
Gross assets remaining under capital leases
7,900,000,000 
4,200,000,000 
 
Accumulated depreciation associated with capital leases
3,300,000,000 
1,900,000,000 
 
Gross assets remaining under finance leases
1,400,000,000 
578,000,000 
 
Accumulated depreciation associated with finance leases
87,000,000 
22,000,000 
 
Cash paid For interest on capital and finance leases
$ 86,000,000 
$ 41,000,000 
$ 51,000,000 
Acquisitions Goodwill and Acquired Intangible Assets - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended 1 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2014
Twitch Interactive, Inc.
Dec. 31, 2014
2014 Acquisitions
Dec. 31, 2014
Series of Individually Immaterial Business Acquisitions
Dec. 31, 2013
Series of Individually Immaterial Business Acquisitions
May 31, 2012
Kiva Systems, Inc
Business Acquisition [Line Items]
 
 
 
 
 
 
 
 
Business Acquisition, Effective Date of Acquisition
 
 
 
Sep. 25, 2014 
 
 
 
 
Aggregate purchase price
 
 
 
$ 842 
$ 862 
$ 20 
$ 195 
$ 678 
Fair value of stock options that will be expensed over the remaining service period
 
 
 
 
39 
 
 
 
Acquired goodwill
3,319 
2,655 
2,552 
 
707 
 
103 
560 
Acquired intangible assets
 
 
 
 
 
 
83 
 
Net sales of acquired companies included in our consolidated financial statements since acquisition dates
40 
 
 
 
 
 
 
 
Operating loss of acquired companies included in our consolidated financial statements since acquisition dates
30 
 
 
 
 
 
 
 
Amortization expense for acquired intangibles
$ 181 
$ 168 
$ 163 
 
 
 
 
 
Acquisitions, Goodwill, and Acquired Intangible Assets Allocation of Aggregate Purchase Price of Acquisitions (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended 1 Months Ended 12 Months Ended 12 Months Ended 1 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2013
Minimum
Dec. 31, 2013
Maximum
Dec. 31, 2014
Marketing-related
Dec. 31, 2014
Contract-based
Dec. 31, 2014
Technology-based
Dec. 31, 2014
Customer-related
Dec. 31, 2014
2014 Acquisitions
Dec. 31, 2014
2014 Acquisitions
Minimum
Dec. 31, 2014
2014 Acquisitions
Maximum
Dec. 31, 2014
2014 Acquisitions
Marketing-related
Dec. 31, 2014
2014 Acquisitions
Contract-based
Dec. 31, 2014
2014 Acquisitions
Technology-based
Dec. 31, 2014
2014 Acquisitions
Customer-related
Dec. 31, 2014
Series of Individually Immaterial Business Acquisitions
Dec. 31, 2013
Series of Individually Immaterial Business Acquisitions
May 31, 2012
Kiva Systems, Inc
Dec. 31, 2013
Kiva Systems, Inc
Dec. 31, 2013
Kiva Systems, Inc
Minimum
Dec. 31, 2013
Kiva Systems, Inc
Maximum
May 31, 2012
Kiva Systems, Inc
Marketing-related
May 31, 2012
Kiva Systems, Inc
Contract-based
May 31, 2012
Kiva Systems, Inc
Technology-based
May 31, 2012
Kiva Systems, Inc
Customer-related
Purchase Price
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Cash paid, net of cash acquired
 
 
 
 
 
 
 
 
 
$ 813 
 
 
 
 
 
 
 
 
$ 613 
 
 
 
 
 
 
 
Stock options assumed
 
 
 
 
 
 
 
 
 
44 
 
 
 
 
 
 
 
 
65 
 
 
 
 
 
 
 
Indemnification holdback
 
 
 
 
 
 
 
 
 
5 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Aggregate purchase price
 
 
 
 
 
 
 
 
 
862 
 
 
 
 
 
 
20 
195 
678 
 
 
 
 
 
 
 
Allocation
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Goodwill
3,319 
2,655 
2,552 
 
 
 
 
 
 
707 
 
 
 
 
 
 
 
103 
560 
 
 
 
 
 
 
 
Intangible assets
 
 
 
 
 
 
 
 
 
230 1
 
 
23 1
1 1
33 1
173 1
 
 
193 2
 
 
 
5 2
3 2
168 2
17 2
Property and equipment
 
 
 
 
 
 
 
 
 
16 
 
 
 
 
 
 
 
 
9 
 
 
 
 
 
 
 
Deferred tax assets
 
 
 
 
 
 
 
 
 
64 
 
 
 
 
 
 
 
 
34 
 
 
 
 
 
 
 
Other assets acquired
 
 
 
 
 
 
 
 
 
34 
 
 
 
 
 
 
 
 
41 
 
 
 
 
 
 
 
Deferred tax liabilities
 
 
 
 
 
 
 
 
 
88 
 
 
 
 
 
 
 
 
81 
 
 
 
 
 
 
 
Other liabilities assumed
 
 
 
 
 
 
 
 
 
101 
 
 
 
 
 
 
 
 
78 
 
 
 
 
 
 
 
Business acquisition, allocation
 
 
 
 
 
 
 
 
 
$ 862 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Intangible assets, estimated useful life
 
 
 
1 year 
10 years 
 
 
 
 
 
1 year 
5 years 
 
 
 
 
 
 
 
 
4 years 
10 years 
 
 
 
 
Acquired intangibles weighted average amortization period
3 years 183 days 3
 
 
 
 
5 years 110 days 
2 years 73 days 
3 years 183 days 
2 years 183 days 
5 years 
 
 
 
 
 
 
 
 
 
5 years 
 
 
 
 
 
 
Acquisitions, Goodwill, and Acquired Intangible Assets Business Acquisitions Pro Forma Financial Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Business Combinations [Abstract]
 
 
Net sales
$ 89,041 
$ 74,505 
Net income (loss)
$ (287)
$ 180 
Acquisitions, Goodwill, and Acquired Intangible Assets Summary of Goodwill Activity by Segment (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Goodwill [Line Items]
 
 
Goodwill - Beginning Balance
$ 2,655 
$ 2,552 
New acquisitions
715 1
103 
Other adjustments
(51)2
0 2
Goodwill - Ending Balance
3,319 
2,655 
North America
 
 
Goodwill [Line Items]
 
 
Goodwill - Beginning Balance
2,033 
1,937 
New acquisitions
553 1
99 
Other adjustments
(2)2
(3)2
Goodwill - Ending Balance
2,584 
2,033 
International
 
 
Goodwill [Line Items]
 
 
Goodwill - Beginning Balance
622 
615 
New acquisitions
162 1
4 
Other adjustments
(49)2
3 2
Goodwill - Ending Balance
$ 735 
$ 622 
Acquisitions, Goodwill, and Acquired Intangible Assets Acquired Intangible Assets (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 12 Months Ended 1 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2014
Marketing-related
Dec. 31, 2013
Marketing-related
Dec. 31, 2014
Contract-based
Dec. 31, 2013
Contract-based
Dec. 31, 2014
Technology- and content-based
Dec. 31, 2013
Technology- and content-based
Dec. 31, 2014
Customer-related
Dec. 31, 2013
Customer-related
Dec. 31, 2013
Minimum
Dec. 31, 2013
Maximum
Acquired Finite-Lived Intangible Assets [Line Items]
 
 
 
 
 
 
 
 
 
 
 
 
Acquired intangibles weighted average life remaining
3 years 183 days 1
 
5 years 110 days 
 
2 years 73 days 
 
3 years 183 days 
 
2 years 183 days 
 
 
 
Acquired Intangibles, Gross
$ 1,534 1 2
$ 1,248 1 2
$ 457 2
$ 429 2
$ 172 2
$ 173 2
$ 370 2
$ 278 2
$ 535 2
$ 368 2
 
 
Accumulated Amortization
(770)1 2
(603)1 2
(199)2
(156)2
(125)2
(110)2
(129)2
(74)2
(317)2
(263)2
 
 
Acquired Intangibles, Net
$ 764 1
$ 645 1
$ 258 
$ 273 
$ 47 
$ 63 
$ 241 
$ 204 
$ 218 
$ 105 
 
 
Intangible assets, estimated useful life
 
 
 
 
 
 
 
 
 
 
1 year 
10 years 
Acquisitions, Goodwill, and Acquired Intangible Assets Expected Future Amortization Expense of Acquired Intangible Assets (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Business Combinations [Abstract]
 
 
2015
$ 202 
 
2016
185 
 
2017
161 
 
2018
106 
 
2019
79 
 
Thereafter
31 
 
Acquired Intangibles, Net
$ 764 1
$ 645 1
Equity Method Investments - Additional Information of LivingSocial (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Schedule of Equity Method Investments [Line Items]
 
 
LivingSocial assets held-for-sale
 
$ 146 
Living Social liabilities held-for-sale
 
122 
LivingSocial total investment, book value
$ 75 
 
LivingSocial total investment, ownership percentage
31.00% 
 
Equity-Method Investments Summarized Condensed Financial Information of LivingSocial (Detail) (USD $)
In Millions, unless otherwise specified
1 Months Ended 12 Months Ended
Jan. 31, 2014
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Statement of Operations:
 
 
 
 
Revenue
 
$ 231 
$ 302 
$ 347 
Gross profit
 
194 
253 
280 
Operating expenses
 
296 
282 
367 
Operating loss from continuing operations
 
(102)
(29)
(87)
Net loss from continuing operations
 
(73)
(16)
(79)
Net income (loss) from discontinued operations, net of tax
 
173 
(156)
(574)
Net income (loss)
 
100 
(172)
(653)
Sale of Korean operations
260 
 
 
 
Gain on disposal of Korean operations
205 
 
 
 
Balance Sheet:
 
 
 
 
Current assets
 
163 
182 
 
Non-current assets
 
29 
61 
 
Current liabilities
 
137 
301 
 
Non-current liabilities
 
34 
33 
 
Redeemable stock
 
$ 366 
$ 315 
 
Long-Term Debt - Additional Information (Detail) (USD $)
12 Months Ended 12 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2014
Notes issued in 2014
Dec. 31, 2014
Notes issued in 2012
Nov. 30, 2012
Notes issued in 2012
Dec. 31, 2014
Maximum
Debt Instrument [Line Items]
 
 
 
 
 
 
Issued notes
 
 
$ 6,000,000,000 
 
$ 3,000,000,000 
 
Unamortized discount on senior notes
96,000,000 
23,000,000 
 
 
 
 
Other long-term debt carrying amount including current portion
881,000,000 
967,000,000 
 
 
 
 
Interest payment frequency
 
 
semi-annually in arrears in June and December 
semi-annually in arrears in May and November 
 
 
Total estimated fair value of senior notes
9,100,000,000 
2,900,000,000 
 
 
 
 
Other debt, weighted average interest rate
5.50% 
5.50% 
 
 
 
 
Credit Agreement, initiation date
Sep. 05, 2014 
 
 
 
 
 
Credit Agreement, maximum borrowing capacity
2,000,000,000 
 
 
 
 
 
Credit Agreement, term
2 years 
 
 
 
 
 
Credit Agreement, term additional information
may be extended for up to three additional one-year terms if approved by the lenders 
 
 
 
 
 
Credit Agreement, variable rate basis
LIBOR 
 
 
 
 
 
Credit Agreement, basis spread on variable rate
0.625% 
 
 
 
 
1.00% 
Credit Agreement, borrowings outstanding
$ 0 
 
 
 
 
 
Long-Term Debt Long-Term Debt Obligations (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Debt Instrument [Line Items]
 
 
Other long-term debt
$ 881 
$ 967 
Total debt
9,881 
3,967 
Less current portion of long-term debt
(1,520)
(753)
Face value of long-term debt
8,361 
3,214 
0.65% Notes due on November 27, 2015
 
 
Debt Instrument [Line Items]
 
 
Stated interest rate
0.65% 
 
Total debt
750 1
750 1
Effective interest rate
0.84% 
 
1.20% Notes due on November 29, 2017
 
 
Debt Instrument [Line Items]
 
 
Stated interest rate
1.20% 
 
Total debt
1,000 1
1,000 1
Effective interest rate
1.38% 
 
Senior Unsecured Notes Two Point Five Percent Due November Twenty Nine Two Thousand Twenty Two [Member]
 
 
Debt Instrument [Line Items]
 
 
Stated interest rate
2.50% 
 
Total debt
1,250 1
1,250 1
Effective interest rate
2.66% 
 
2.60% Notes due on December 5, 2019
 
 
Debt Instrument [Line Items]
 
 
Stated interest rate
2.60% 
 
Total debt
1,000 2
0 2
Effective interest rate
2.73% 
 
3.30% Notes due on December 5, 2021
 
 
Debt Instrument [Line Items]
 
 
Stated interest rate
3.30% 
 
Total debt
1,000 2
0 2
Effective interest rate
3.43% 
 
3.80% Notes due on December 5, 2024
 
 
Debt Instrument [Line Items]
 
 
Stated interest rate
3.80% 
 
Total debt
1,250 2
0 2
Effective interest rate
3.90% 
 
4.80% Notes due on December 5, 2034
 
 
Debt Instrument [Line Items]
 
 
Stated interest rate
4.80% 
 
Total debt
1,250 2
0 2
Effective interest rate
4.92% 
 
4.95% Notes due on December 5, 2044
 
 
Debt Instrument [Line Items]
 
 
Stated interest rate
4.95% 
 
Total debt
$ 1,500 2
$ 0 2
Effective interest rate
5.11% 
 
Long-Term Debt Future Principal Payment for Debt (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Debt Disclosure [Abstract]
 
 
2014
$ 1,520 
 
2015
36 
 
2016
1,037 
 
2017
38 
 
2018
1,000 
 
Thereafter
6,250 
 
Total debt
$ 9,881 
$ 3,967 
Other Long Term Liabilities Summary (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Other Liabilities [Line Items]
 
 
Long-term capital lease obligations
$ 3,026 
$ 1,435 
Long-term finance lease obligations
1,198 
555 
Construction liabilities
467 
385 
Tax contingencies
510 
457 
Long-term deferred tax liabilities
1,021 
571 
Other
1,188 
839 
Total other long-term liabilities
$ 7,410 
$ 4,242 
Other Long-Term Liabilities Long Term Capital Lease Obligation (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Other Liabilities Disclosure [Abstract]
 
 
Gross capital lease obligations
$ 5,182 
 
Less imputed interest
(143)
 
Present value of net minimum lease payments
5,039 
 
Less current portion of capital lease obligations
(2,013)
 
Total long-term capital lease obligations
$ 3,026 
$ 1,435 
Other Long-Term Liabilities Long Term Finance Lease Obligation (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Other Liabilities Disclosure [Abstract]
 
 
Gross finance lease obligations
$ 1,629 
 
Less imputed interest
(364)
 
Present value of net minimum lease payments
1,265 
 
Less current portion of finance lease obligations
(67)
 
Total long-term finance lease obligations
$ 1,198 
$ 555 
Commitments and Contingencies - Additional Information (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended 3 Months Ended 1 Months Ended 12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2014
Smarflash LLC and Smartflash Technologies Limited
Patent
Sep. 30, 2013
Personalized Media Communications, LLC
Patent
Sep. 30, 2013
Personalized Media Communications, LLC
CloudFront, S3 and EC2
Patent
Dec. 31, 2013
ContentGuard Holdings, Inc.
Patent
Dec. 31, 2014
Maximum
Vendor Concentration Risk
Loss Contingencies [Line Items]
 
 
 
 
 
 
 
 
Rental expense under operating lease agreements
$ 961 
$ 759 
$ 561 
 
 
 
 
 
Pledged or otherwise restricted cash, marketable securities, and certain fixed assets as collateral
$ 602 
$ 482 
 
 
 
 
 
 
Concentration percentage, no more than
 
 
 
 
 
 
 
10.00% 
Number of patents allegedly infringed
 
 
 
7 
9 
3 
7 
 
Commitments and Contingencies Contractual Commitments, Exlcuding Open Orders for Purchases that Support Normal Operations (Detail) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Dec. 31, 2011
Total commitments
 
 
 
 
Year Ended December 31, 2015
$ 6,297 
 
 
 
Year Ended December 31, 2016
3,721 
 
 
 
Year Ended December 31, 2017
3,706 
 
 
 
Year Ended December 31, 2018
1,497 
 
 
 
Year Ended December 31, 2019
2,157 
 
 
 
Thereafter
13,748 
 
 
 
Total
31,126 
 
 
 
Capital leases, including interest
 
 
 
 
Year Ended December 31, 2015
2,060 
 
 
 
Year Ended December 31, 2016
1,727 
 
 
 
Year Ended December 31, 2017
1,030 
 
 
 
Year Ended December 31, 2018
178 
 
 
 
Year Ended December 31, 2019
89 
 
 
 
Thereafter
98 
 
 
 
Total
5,182 
 
 
 
Operating leases
 
 
 
 
Year Ended December 31, 2015
868 
 
 
 
Year Ended December 31, 2016
791 
 
 
 
Year Ended December 31, 2017
728 
 
 
 
Year Ended December 31, 2018
634 
 
 
 
Year Ended December 31, 2019
549 
 
 
 
Thereafter
2,343 
 
 
 
Total
5,913 
 
 
 
Unconditional purchase obligations
 
 
 
 
Year Ended December 31, 2015
489 1
 
 
 
Year Ended December 31, 2016
435 1
 
 
 
Year Ended December 31, 2017
351 1
 
 
 
Year Ended December 31, 2018
118 1
 
 
 
Year Ended December 31, 2019
38 1
 
 
 
Thereafter
3 1
 
 
 
Total
1,434 1
 
 
 
Other commitments
 
 
 
 
Year Ended December 31, 2015
928 2 3
 
 
 
Year Ended December 31, 2016
333 2 3
 
 
 
Year Ended December 31, 2017
160 2 3
 
 
 
Year Ended December 31, 2018
140 2 3
 
 
 
Year Ended December 31, 2019
90 2 3
 
 
 
Thereafter
845 2 3
 
 
 
Total
2,496 2 3
 
 
 
Excluded tax contingencies
710 4
407 
294 
229 
Debt principal and interest
 
 
 
 
Total commitments
 
 
 
 
Year Ended December 31, 2015
1,842 
 
 
 
Year Ended December 31, 2016
323 
 
 
 
Year Ended December 31, 2017
1,322 
 
 
 
Year Ended December 31, 2018
310 
 
 
 
Year Ended December 31, 2019
1,272 
 
 
 
Thereafter
9,403 
 
 
 
Total
14,472 
 
 
 
Finance lease obligations, including interest
 
 
 
 
Total commitments
 
 
 
 
Year Ended December 31, 2015
110 
 
 
 
Year Ended December 31, 2016
112 
 
 
 
Year Ended December 31, 2017
115 
 
 
 
Year Ended December 31, 2018
117 
 
 
 
Year Ended December 31, 2019
119 
 
 
 
Thereafter
1,056 
 
 
 
Total
$ 1,629 
 
 
 
Stockholders Equity - Additional Information (Detail) (USD $)
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Stockholders Equity Note [Line Items]
 
 
 
Preferred stock, authorized shares
500,000,000 
500,000,000 
 
Preferred stock, par value (in usd per share)
$ 0.01 
$ 0.01 
 
Common shares outstanding plus shares underlying outstanding stock awards, including all stock-based awards outstanding, including estimated forfeiture
483,000,000 
476,000,000 
470,000,000 
2010 repurchase program authorized by Board of Directors
$ 2,000,000,000 
 
 
2010 repurchase program authorized, remaining
763,000,000 
 
 
Stock options outstanding
400,000 
200,000 
400,000 
Net unrecognized compensation cost related to unvested stock-based compensation arrangements
2,200,000,000 
 
 
Net unrecognized compensation cost related to unvested stock-based compensation arrangements, weighted average recognition period (in years)
1 year 2 months 12 days 
 
 
Fair value of vested restricted stock units
$ 1,700,000,000 
$ 1,400,000,000 
 
Shares of common stock granted under the 401(k) savings plan
200,000 
100,000 
 
Common stock available for future issuance to employees
137,000,000 
 
 
Minimum
 
 
 
Stockholders Equity Note [Line Items]
 
 
 
Restricted stock unit awards and stock options, vesting period
2 years 
 
 
Maximum
 
 
 
Stockholders Equity Note [Line Items]
 
 
 
Restricted stock unit awards and stock options, vesting period
5 years 
 
 
Stockholders' Equity Restricted Stock Unit Activity (Detail) (Restricted Stock Units, USD $)
In Millions, except Per Share data, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Restricted Stock Units
 
 
 
Number of units
 
 
 
Beginning balance (in shares)
16.3 
15.4 
13.1 
Units granted (in shares)
8.5 
7.2 
8.2 
Units vested (in shares)
(5.1)
(4.5)
(4.2)
Units forfeited (in shares)
(2.3)
(1.8)
(1.7)
Ending balance (in shares)
17.4 
16.3 
15.4 
Weighted Average Grant-Date Fair Value
 
 
 
Beginning balance (in usd per share)
$ 233 
$ 184 
$ 143 
Units granted (in usd per share)
$ 328 
$ 283 
$ 209 
Units vested (in usd per share)
$ 202 
$ 160 
$ 110 
Units forfeited (in usd per share)
$ 264 
$ 209 
$ 168 
Ending balance (in usd per share)
$ 285 
$ 233 
$ 184 
Stockholders' Equity Scheduled Vesting for Outstanding Restricted Stock Units (Detail) (Restricted Stock Units)
In Millions, unless otherwise specified
Dec. 31, 2014
Restricted Stock Units
 
Schedule of Vesting [Line Items]
 
2015
5.9 
2016
6.1 
2017
3.4 
2018
1.7 
2019
0.2 
Thereafter
0.1 
Total
17.4 
Accumulated Other Comprehensive Loss Changes in Composition of Accumulated Other Comprehensive Income or Loss (Detail) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Increase (Decrease) in Accumulated Other Comprehensive Loss [Roll Forward]
 
 
 
Balance as of beginning of period
$ (185)
$ (239)
$ (316)
Other comprehensive income (Loss)
(325)
63 
76 
Other comprehensive income (loss)
(1)
(9)
1 
Total other comprehensive income (loss)
(326)
54 
77 
Balance as of end of period
(511)
(185)
(239)
Foreign currency translation adjustments
 
 
 
Increase (Decrease) in Accumulated Other Comprehensive Loss [Roll Forward]
 
 
 
Balance as of beginning of period
(187)
(250)
(326)
Other comprehensive income (Loss)
(325)
63 
76 
Balance as of end of period
(512)
(187)
(250)
Unrealized gains on available-for-sale securities
 
 
 
Increase (Decrease) in Accumulated Other Comprehensive Loss [Roll Forward]
 
 
 
Balance as of beginning of period
2 
11 
10 
Other comprehensive income (loss)
(1)
(9)
1 
Balance as of end of period
$ 1 
$ 2 
$ 11 
Income Taxes - Additional Information (Detail) (USD $)
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Taxes [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Provision for income taxes, net
$ (205,000,000)1
$ 205,000,000 1
$ (94,000,000)1
$ (73,000,000)1
$ (179,000,000)1
$ 12,000,000 1
$ (13,000,000)1
$ 18,000,000 1
$ 167,000,000 
$ 161,000,000 
$ 428,000,000 
Cash taxes paid, net of refunds
 
 
 
 
 
 
 
 
177,000,000 
169,000,000 
112,000,000 
Undistributed earnings of foreign subsidiaries that are indefinitely invested outside of the U.S
2,500,000,000 
 
 
 
 
 
 
 
2,500,000,000 
 
 
Tax credit carryforwards for income tax purposes
506,000,000 
 
 
 
 
 
 
 
506,000,000 
 
 
Tax credit carryforwards for income tax purposes, beginning expiration year
 
 
 
 
 
 
 
 
Dec. 31, 2017 
 
 
Accrrued interest and penalties, net of federal income tax benefit, related to tax contingencies
41,000,000 
 
 
 
33,000,000 
 
 
 
41,000,000 
33,000,000 
 
Interest and penalties, net of federal income tax benefit
 
 
 
 
 
 
 
 
8,000,000 
8,000,000 
1,000,000 
Internal Revenue Service (IRS)
 
 
 
 
 
 
 
 
 
 
 
Income Taxes [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net operating loss carryforwards
1,900,000,000 
 
 
 
 
 
 
 
1,900,000,000 
 
 
Operating loss carryforwards, beginning expiration year
 
 
 
 
 
 
 
 
Dec. 31, 2020 
 
 
Description of the status of the tax examination
 
 
 
 
 
 
 
 
We are under examination, or may be subject to examination, by the Internal Revenue Service (“IRS”) for the calendar year 2005 and thereafter. 
 
 
Tax examination, estimate of additional tax expense
 
 
 
 
 
 
 
 
1,500,000,000 
 
 
Foreign Country
 
 
 
 
 
 
 
 
 
 
 
Income Taxes [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net operating loss carryforwards
2,500,000,000 
 
 
 
 
 
 
 
2,500,000,000 
 
 
Operating loss carryforwards, beginning expiration year
 
 
 
 
 
 
 
 
Dec. 31, 2015 
 
 
Description of the status of the tax examination
 
 
 
 
 
 
 
 
We are also subject to taxation in various states and other foreign jurisdictions including Canada, China, Germany, India, Japan, Luxembourg, and the United Kingdom. 
 
 
Income tax examination, beginning examination year
 
 
 
 
 
 
 
 
2003 
 
 
State
 
 
 
 
 
 
 
 
 
 
 
Income Taxes [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net operating loss carryforwards
1,100,000,000 
 
 
 
 
 
 
 
1,100,000,000 
 
 
Operating loss carryforwards, beginning expiration year
 
 
 
 
 
 
 
 
Dec. 31, 2015 
 
 
France
 
 
 
 
 
 
 
 
 
 
 
Income Taxes [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Description of the status of the tax examination
 
 
 
 
 
 
 
 
Certain of our subsidiaries are under examination or investigation or may be subject to examination or investigation by the French Tax Administration (“FTA”) for calendar year 2006 or thereafter. 
 
 
Tax examination, estimate of additional tax expense
 
 
 
 
 
 
 
 
$ 250,000,000 
 
 
European Union
 
 
 
 
 
 
 
 
 
 
 
Income Taxes [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Description of the status of the tax examination
 
 
 
 
 
 
 
 
In addition, in October 2014, the European Commission opened a formal investigation to examine whether decisions by the tax authorities in Luxembourg with regard to the corporate income tax paid by certain of our subsidiaries comply with European Union rules on state aid. 
 
 
Income Taxes Components of Provision for Income Taxes, Net (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Current taxes:
 
 
 
 
 
 
 
 
 
 
 
U.S. Federal
 
 
 
 
 
 
 
 
$ 214 
$ 99 
$ 528 
U.S. State
 
 
 
 
 
 
 
 
65 
45 
34 
International
 
 
 
 
 
 
 
 
204 
173 
131 
Current taxes
 
 
 
 
 
 
 
 
483 
317 
693 
Deferred taxes:
 
 
 
 
 
 
 
 
 
 
 
U.S. Federal
 
 
 
 
 
 
 
 
(125)
(114)
(129)
U.S. State
 
 
 
 
 
 
 
 
(11)
(19)
(27)
International
 
 
 
 
 
 
 
 
(180)
(23)
(109)
Deferred taxes
 
 
 
 
 
 
 
 
(316)
(156)
(265)
Provision for income taxes, net
$ (205)1
$ 205 1
$ (94)1
$ (73)1
$ (179)1
$ 12 1
$ (13)1
$ 18 1
$ 167 
$ 161 
$ 428 
Income Taxes U.S. and International Components of Income before Income Taxes (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
U.S.
 
 
 
 
 
 
 
 
$ 292 
$ 704 
$ 882 
International
 
 
 
 
 
 
 
 
(403)
(198)
(338)
Income (loss) before income taxes
$ 429 1
$ (634)1
$ (27)1
$ 120 1
$ 451 1
$ (43)1
$ 17 1
$ 81 1
$ (111)
$ 506 
$ 544 
Income Taxes Items Accounting for Differences between Income Taxes Computed at Federal Statutory Rate and Provision Recorded for Income Taxes (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Income taxes computed at the federal statutory rate
 
 
 
 
 
 
 
 
$ (39)
$ 177 
$ 191 
Effect of:
 
 
 
 
 
 
 
 
 
 
 
Impact of foreign tax differential
 
 
 
 
 
 
 
 
136 
(41)
172 
State taxes, net of federal benefits
 
 
 
 
 
 
 
 
29 
14 
1 
Tax credits
 
 
 
 
 
 
 
 
(85)
(84)
(24)
Nondeductible compensation
 
 
 
 
 
 
 
 
117 
86 
72 
Domestic production activities deduction
 
 
 
 
 
 
 
 
20 
11 
0 
Other, net
 
 
 
 
 
 
 
 
29 
20 
16 
Provision for income taxes, net
$ (205)1
$ 205 1
$ (94)1
$ (73)1
$ (179)1
$ 12 1
$ (13)1
$ 18 1
$ 167 
$ 161 
$ 428 
Income Taxes Deferred Income Tax Assets and Liabilities (Details) (USD $)
In Millions, unless otherwise specified
Dec. 31, 2014
Dec. 31, 2013
Deferred tax assets:
 
 
Excluding net operating losses U.S. - Federal/States
$ 357 1 2
$ 53 1 2
Net operating losses foreign
669 2 3
427 2 3
Accrued liabilities, reserves, & other expenses
780 
590 
Stock-based compensation
534 
396 
Deferred revenue
156 
249 
Assets held for investment
154 
164 
Other items
242 
177 
Tax credits
115 2 4
107 2 4
Total gross deferred tax assets
3,007 
2,163 
Less valuation allowance
(901)5
(698)5
Deferred tax assets, net of valuation allowance
2,106 
1,465 
Deferred tax liabilities:
 
 
Depreciation & amortization
(1,609)
(1,021)
Acquisition related intangible assets
(195)
(201)
Other items
(31)
(16)
Net deferred tax assets, net of valuation allowance
271 
227 
Stock Based Compensation Expense
 
 
Deferred tax assets:
 
 
Excluding net operating losses U.S. - Federal/States
261 
81 
Net operating losses foreign
2 
2 
Tax credits
$ 268 
$ 227 
Income Taxes Reconciliation of Tax Contingencies (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Income Tax Disclosure [Abstract]
 
 
 
Gross tax contingencies - January 1
$ 407 
$ 294 
$ 229 
Gross increases to tax positions in prior periods
351 
78 
91 
Gross decreases to tax positions in prior periods
50 
18 
47 
Gross increases to current period tax positions
20 
54 
26 
Audit settlements paid
16 
1 
4 
Lapse of statute of limitations
2 
0 
1 
Gross tax contingencies - December 31
710 1
407 
294 
Tax contingencies, that if fully recognized, would decrease our effective tax rate
$ 604 
 
 
Segment Information - Additional Information (Detail)
12 Months Ended
Dec. 31, 2014
Segment
Segment Reporting Disclosure [Line Items]
 
Number of segments
2 
Individual Product or Service Concentration Risk |
Net Sales |
Maximum
 
Segment Reporting Disclosure [Line Items]
 
Concentration percentage, no more than
10.00% 
Single Country Excluding U.S. Concentration Risk |
Property, Plant and Equipment |
Outside United States |
Maximum
 
Segment Reporting Disclosure [Line Items]
 
Concentration percentage, no more than
10.00% 
Segment Information - Reportable Segments and Reconciliation to Consolidated Net Income (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Segment Reporting Disclosure [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net sales
$ 29,328 1
$ 20,579 1
$ 19,340 1
$ 19,741 1
$ 25,587 1
$ 17,092 1
$ 15,704 1
$ 16,070 1
$ 88,988 
$ 74,452 
$ 61,093 
Segment operating expenses
 
 
 
 
 
 
 
 
88,810 
73,707 
60,417 
Income from operations
591 1
(544)1
(15)1
146 1
510 1
(25)1
79 1
181 1
178 
745 
676 
Stock-based compensation
 
 
 
 
 
 
 
 
(1,497)
(1,134)
(833)
Other operating income (expense), net
 
 
 
 
 
 
 
 
(133)
(114)
(159)
Total non-operating income (expense)
 
 
 
 
 
 
 
 
(289)
(239)
(132)
Provision for income taxes
205 1
(205)1
94 1
73 1
179 1
(12)1
13 1
(18)1
(167)
(161)
(428)
Equity-method investment activity, net of tax
 
 
 
 
 
 
 
 
37 
(71)
(155)
Net income (loss)
214 1
(437)1
(126)1
108 1
239 1
(41)1
(7)1
82 1
(241)
274 
(39)
Operating Segments
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Disclosure [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
88,988 
74,452 
61,093 
Segment operating expenses
 
 
 
 
 
 
 
 
87,180 2
72,459 2
59,425 2
Income from operations
 
 
 
 
 
 
 
 
 
1,993 
1,668 
Operating Segments |
North America
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Disclosure [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
55,469 
44,517 
34,813 
Segment operating expenses
 
 
 
 
 
 
 
 
53,364 2
42,631 2
33,221 2
Income from operations
 
 
 
 
 
 
 
 
2,105 
1,886 
1,592 
Operating Segments |
International
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting Disclosure [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
33,519 
29,935 
26,280 
Segment operating expenses
 
 
 
 
 
 
 
 
33,816 2
29,828 2
26,204 2
Income from operations
 
 
 
 
 
 
 
 
$ (297)
$ 107 
$ 76 
Segment Information - Net Sales of Similar Products and Services (Detail) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Revenue from External Customer [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net sales
$ 29,328 1
$ 20,579 1
$ 19,340 1
$ 19,741 1
$ 25,587 1
$ 17,092 1
$ 15,704 1
$ 16,070 1
$ 88,988 
$ 74,452 
$ 61,093 
Media
 
 
 
 
 
 
 
 
 
 
 
Revenue from External Customer [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
22,505 
21,716 
19,942 
Electronics and other general merchandise
 
 
 
 
 
 
 
 
 
 
 
Revenue from External Customer [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
60,886 
48,802 
38,628 
Other
 
 
 
 
 
 
 
 
 
 
 
Revenue from External Customer [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
$ 5,597 2
$ 3,934 2
$ 2,523 2
Segment Information - Net Sales Attributed to Foreign Countries (Details) (USD $)
In Millions, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net sales
$ 29,328 1
$ 20,579 1
$ 19,340 1
$ 19,741 1
$ 25,587 1
$ 17,092 1
$ 15,704 1
$ 16,070 1
$ 88,988 
$ 74,452 
$ 61,093 
Foreign Country |
Germany
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
11,919 
10,535 
8,732 
Foreign Country |
Japan
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
7,912 
7,639 
7,800 
Foreign Country |
United Kingdom
 
 
 
 
 
 
 
 
 
 
 
Segment Reporting, Revenue Reconciling Item [Line Items]
 
 
 
 
 
 
 
 
 
 
 
Net sales
 
 
 
 
 
 
 
 
$ 8,341 
$ 7,291 
$ 6,478 
Segment Information - Total Assets Fixed Assets Net and Total Fixed Asset Additions By Segment (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Total assets
$ 54,505 
$ 40,159 
Property and equipment, net
16,967 
10,949 
Total property and equipment additions
9,481 
6,373 
North America
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Total assets
39,157 
26,108 
Property and equipment, net
13,163 
8,447 
Total property and equipment additions
7,464 
4,837 
International
 
 
Segment Reporting, Asset Reconciling Item [Line Items]
 
 
Total assets
15,348 
14,051 
Property and equipment, net
3,804 
2,502 
Total property and equipment additions
$ 2,017 
$ 1,536 
Segment Information - Depreciation Expense, by Segment (Details) (USD $)
In Millions, unless otherwise specified
12 Months Ended
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Reconciliation Of Depreciation By Segment [Line Items]
 
 
 
Depreciation expense
$ 3,616 
$ 2,460 
$ 1,653 
North America
 
 
 
Reconciliation Of Depreciation By Segment [Line Items]
 
 
 
Depreciation expense
2,701 
1,863 
1,229 
International
 
 
 
Reconciliation Of Depreciation By Segment [Line Items]
 
 
 
Depreciation expense
$ 915 
$ 597 
$ 424 
Quarterly Results (Unaudited) - Unaudited Quarterly Results (Detail) (USD $)
In Millions, except Per Share data, unless otherwise specified
3 Months Ended 12 Months Ended
Dec. 31, 2014
Sep. 30, 2014
Jun. 30, 2014
Mar. 31, 2014
Dec. 31, 2013
Sep. 30, 2013
Jun. 30, 2013
Mar. 31, 2013
Dec. 31, 2014
Dec. 31, 2013
Dec. 31, 2012
Quarterly Financial Information Disclosure [Abstract]
 
 
 
 
 
 
 
 
 
 
 
Net sales
$ 29,328 1
$ 20,579 1
$ 19,340 1
$ 19,741 1
$ 25,587 1
$ 17,092 1
$ 15,704 1
$ 16,070 1
$ 88,988 
$ 74,452 
$ 61,093 
Income (loss) from operations
591 1
(544)1
(15)1
146 1
510 1
(25)1
79 1
181 1
178 
745 
676 
Income (loss) before income taxes
429 1
(634)1
(27)1
120 1
451 1
(43)1
17 1
81 1
(111)
506 
544 
Benefit (provision) for income taxes
(205)1
205 1
(94)1
(73)1
(179)1
12 1
(13)1
18 1
167 
161 
428 
Net income (loss)
$ 214 1
$ (437)1
$ (126)1
$ 108 1
$ 239 1
$ (41)1
$ (7)1
$ 82 1
$ (241)
$ 274 
$ (39)
Basic earnings per share
$ 0.46 1
$ (0.95)1
$ (0.27)1
$ 0.23 1
$ 0.52 1
$ (0.09)1
$ (0.02)1
$ 0.18 1
$ (0.52)
$ 0.60 
$ (0.09)
Diluted earnings per share
$ 0.45 1
$ (0.95)1
$ (0.27)1
$ 0.23 1
$ 0.51 1
$ (0.09)1
$ (0.02)1
$ 0.18 1
$ (0.52)
$ 0.59 
$ (0.09)
Shares used in computation of earnings per share:
 
 
 
 
 
 
 
 
 
 
 
Basic
464 1
463 1
461 1
460 1
458 1
457 1
456 1
455 1
462 
457 
453 
Diluted
472 1
463 1
461 1
468 1
467 1
457 1
456 1
463 1
462 
465 
453