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Accounting Policies and Supplemental Disclosures | 6 Months Ended
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Jun. 30, 2024
Accounting Policies [Abstract] |
Accounting Policies and Supplemental Disclosures | ACCOUNTING POLICIES AND SUPPLEMENTAL DISCLOSURES Unaudited Interim Financial Information We have prepared the accompanying consolidated financial statements pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for interim financial reporting. These consolidated financial statements are unaudited and, in our opinion, include all adjustments, consisting of normal recurring adjustments and accruals necessary for a fair presentation of our consolidated cash flows, operating results, and balance sheets for the periods presented. Operating results for the periods presented are not necessarily indicative of the results that may be expected for 2024 due to seasonal and other factors. Certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) have been omitted in accordance with the rules and regulations of the SEC. These consolidated financial statements should be read in conjunction with the audited consolidated financial statements and accompanying notes in Item 8 of Part II, “Financial Statements and Supplementary Data,” of our 2023 Annual Report on Form 10-K. Prior Period Reclassifications Certain prior period amounts have been reclassified to conform to the current period presentation. “Other assets” were reclassified out of “Accounts receivable, net and other” on our consolidated statements of cash flows. Principles of Consolidation The consolidated financial statements include the accounts of Amazon.com, Inc. and its consolidated entities (collectively, the “Company”), consisting of its wholly-owned subsidiaries and those entities in which we have a variable interest and of which we are the primary beneficiary, including certain entities in India and certain entities that support our health care services and seller lending financing activities. 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, income taxes, useful lives of equipment, commitments and contingencies, valuation of acquired intangibles and goodwill, stock-based compensation forfeiture rates, vendor funding, inventory valuation, collectability of receivables, impairment of property and equipment and operating leases, valuation and impairment of investments, self-insurance liabilities, and viewing patterns of capitalized video content. Actual results could differ materially from these estimates. We review the useful lives of equipment on an ongoing basis, and effective January 1, 2024 we changed our estimate of the useful lives for our servers from five to six years. The longer useful lives are due to continuous improvements in our hardware, software, and data center designs. The effect of this change in estimate for Q2 2024, based on servers that were included in “Property and equipment, net” as of March 31, 2024 and those acquired during the three months ended June 30, 2024, was a reduction in depreciation and amortization expense of $786 million and a benefit to net income of $601 million, or $0.06 per basic share and $0.06 per diluted share. The effect of this change in estimate for the six months ended June 30, 2024, based on servers that were included in “Property and equipment, net” as of December 31, 2023 and those acquired during the six months ended June 30, 2024, was a reduction in depreciation and amortization expense of $1.7 billion and a benefit to net income of $1.3 billion, or $0.12 per basic share and $0.12 per diluted share. Supplemental Cash Flow Information The following table shows supplemental cash flow information (in millions):
| Three Months Ended June 30, |  | Six Months Ended June 30, |  | Twelve Months Ended June 30,
| 2023 |  | 2024 |  | 2023 |  | 2024 |  | 2023 |  | 2024
SUPPLEMENTAL CASH FLOW INFORMATION: |  |  |  |  |  |  |  |  |  |  |
Cash paid for interest on debt, net of capitalized interest | $ | 954 |  |  | $ | 680 |  |  | $ | 1,356 |  |  | $ | 949 |  |  | $ | 2,289 |  |  | $ | 2,201 |
Cash paid for operating leases | 2,528 |  |  | 2,844 |  |  | 4,995 |  |  | 6,176 |  |  | 9,173 |  |  | 11,634 |
Cash paid for interest on finance leases | 77 |  |  | 72 |  |  | 158 |  |  | 146 |  |  | 330 |  |  | 296 |
Cash paid for interest on financing obligations | 41 |  |  | 50 |  |  | 100 |  |  | 114 |  |  | 194 |  |  | 210 |
Cash paid for income taxes, net of refunds | 3,735 |  |  | 5,700 |  |  | 4,354 |  |  | 6,158 |  |  | 6,791 |  |  | 12,983 |
Assets acquired under operating leases | 4,104 |  |  | 3,911 |  |  | 7,730 |  |  | 7,664 |  |  | 19,254 |  |  | 13,986 |
Property and equipment acquired under finance leases, net of remeasurements and modifications | 240 |  |  | 181 |  |  | 248 |  |  | 223 |  |  | 696 |  |  | 617 |
Property and equipment recognized during the construction period of build-to-suit lease arrangements | 84 |  |  | 31 |  |  | 215 |  |  | 68 |  |  | 1,051 |  |  | 210 |
Property and equipment derecognized after the construction period of build-to-suit lease arrangements, with the associated leases recognized as operating | — |  |  | — |  |  | 720 |  |  | — |  |  | 4,766 |  |  | 654 |
Earnings Per Share Basic earnings per share is calculated using our weighted-average outstanding common shares. Diluted earnings per share is calculated using our weighted-average outstanding common shares including the dilutive effect of stock awards as determined under the treasury stock method. In periods when we have a net loss, stock awards are excluded from our calculation of earnings per share as their inclusion would have an antidilutive effect. The following table shows the calculation of diluted shares (in millions):
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2023 |  | 2024 |  | 2023 |  | 2024
Shares used in computation of basic earnings per share | 10,285 |  |  | 10,447 |  |  | 10,268 |  |  | 10,420 |
Total dilutive effect of outstanding stock awards | 164 |  |  | 261 |  |  | 130 |  |  | 269 |
Shares used in computation of diluted earnings per share | 10,449 |  |  | 10,708 |  |  | 10,398 |  |  | 10,689 |
Other Income (Expense), Net “Other income (expense), net” is as follows (in millions):
| Three Months Ended June 30, |  | Six Months Ended June 30,
| 2023 |  | 2024 |  | 2023 |  | 2024
Marketable equity securities valuation gains (losses) | $ | 299 |  |  | $ | 443 |  |  | $ | (181) |  |  | $ | (1,683) |
Equity warrant valuation gains (losses) | (220) |  |  | (271) |  |  | (161) |  |  | (501) |
Upward adjustments relating to equity investments in private companies | 10 |  |  | 6 |  |  | 26 |  |  | 11 |
Foreign currency gains (losses) | 9 |  |  | (138) |  |  | 79 |  |  | (212) |
Other, net | (37) |  |  | (58) |  |  | (145) |  |  | (306) |
Total other income (expense), net | 61 |  |  | (18) |  |  | (382) |  |  | (2,691) |
Included in “Other income (expense), net” is a marketable equity securities valuation gain (loss) of $187 million and $391 million in Q2 2023 and Q2 2024, and $(280) million and $(1.6) billion for the six months ended June 30, 2023 and 2024, from our equity investment in Rivian Automotive, Inc. (“Rivian”). As of June 30, 2024, we held 158 million shares of Rivian’s Class A common stock, representing an approximate 16% ownership interest, and an approximate 15% voting interest. We determined that we have the ability to exercise significant influence over Rivian through our equity investment, our commercial arrangement for the purchase of electric vehicles and jointly-owned intellectual property, and one of our employees serving on Rivian’s board of directors. We elected the fair value option to account for our equity investment in Rivian, which is included in “Marketable securities” on our consolidated balance sheets, and had a fair value of $3.7 billion and $2.1 billion as of December 31, 2023 and June 30, 2024. Required summarized financial information of Rivian as disclosed in its most recent SEC filings is as follows (in millions):
|  |  |  |  | Three Months Ended March 31,
|  |  |  |  | 2023 |  | 2024
Revenues |  |  |  |  | $ | 661 |  |  | $ | 1,204 |
Gross profit |  |  |  |  | (535) |  |  | (527) |
Loss from operations |  |  |  |  | (1,433) |  |  | (1,484) |
Net loss |  |  |  |  | (1,349) |  |  | (1,446) |
Inventories Inventories, consisting of products available for sale, are primarily accounted for using the first-in, first-out method, and are valued at the lower of cost and net realizable 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. The inventory valuation allowance, representing a write-down of inventory, was $3.0 billion and $2.6 billion as of December 31, 2023 and June 30, 2024. Accounts Receivable, Net and Other Included in “Accounts receivable, net and other” on our consolidated balance sheets are receivables primarily related to customers, vendors, and sellers, as well as prepaid expenses and other current assets. As of December 31, 2023 and June 30, 2024, customer receivables, net, were $34.1 billion and $33.1 billion, vendor receivables, net, were $8.5 billion and $7.8 billion, seller receivables, net, were $1.0 billion and $0.3 billion, and other receivables, net, were $3.3 billion and $3.0 billion. Seller receivables are amounts due from sellers related to our seller lending program, which provides funding to sellers primarily to procure inventory. Prepaid expenses and other current assets were $5.4 billion and $5.9 billion as of December 31, 2023 and June 30, 2024. We estimate losses on receivables based on expected losses, including our historical experience of actual losses. The allowance for doubtful accounts was $1.7 billion as of December 31, 2023 and June 30, 2024. Digital Video and Music Content The total capitalized costs of video, which is primarily released content, and music as of December 31, 2023 and June 30, 2024 were $17.4 billion and $18.4 billion. Total video and music expense was $4.4 billion and $4.6 billion in Q2 2023 and Q2 2024, and $8.4 billion and $9.2 billion for the six months ended June 30, 2023 and 2024 Unearned Revenue Unearned revenue is recorded when payments are received or due in advance of performing our service obligations and is recognized over the service period. Unearned revenue primarily relates to prepayments of AWS services and Amazon Prime memberships. Our total unearned revenue as of December 31, 2023 was $20.9 billion, of which $9.8 billion was recognized as revenue during the six months ended June 30, 2024. Included in “Other long-term liabilities” on our consolidated balance sheets was $5.7 billion and $6.7 billion of unearned revenue as of December 31, 2023 and June 30, 2024. Additionally, we have performance obligations, primarily related to AWS, associated with commitments in customer contracts for future services that have not yet been recognized in our consolidated financial statements. For contracts with original terms that exceed one year, those commitments not yet recognized were $156.6 billion as of June 30, 2024. The weighted-average remaining life of our long-term contracts is 3.9 years. However, the amount and timing of revenue recognition is largely driven by customer usage, which can extend beyond the original contractual term. Accounting Pronouncements Not Yet Adopted In December 2023, the Financial Accounting Standards Board issued an Accounting Standards Update (“ASU”) amending existing income tax disclosure guidance, primarily requiring more detailed disclosure for income taxes paid and the effective tax rate reconciliation. The ASU is effective for annual reporting periods beginning after December 15, 2024, with early adoption permitted, and can be applied on either a prospective or retroactive basis. We are currently evaluating the ASU to determine its impact on our income tax disclosures.

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