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Goodwill and Intangible Assets Accounting Policy

Goodwill

Amazon.com evaluates goodwill for impairment annually or more frequently when an event occurs or circumstances change that indicate the carrying value may not be recoverable. In testing goodwill for impairment, Amazon.com may elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment indicates that goodwill impairment is more likely than not, Amazon.com performs a two-step impairment test. Amazon.com tests goodwill for impairment under the two-step impairment test 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. Amazon.com estimates the fair value of the reporting units using discounted cash flows. Forecasts of future cash flows are based on Amazon.com's best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions.

Amazon.com completed the required annual testing of goodwill for impairment for all reporting units as of April 1, 2017, and determined that goodwill is not impaired as the fair value of the reporting units substantially exceeded their book value. There were no triggering events identified from the date of Amazon.com's assessment through December 31, 2017 that would require an update to the annual impairment test.

Source: Amazon.com Inc., Annual Report

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Goodwill and Intangible Assets Disclosure

Amazon.com Inc., Statement of Financial Position, Goodwill and Intangible Assets

USD $ in millions

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Marketing-related
Contract-based
Technology- and content-based
Customer-related
Acquired intangibles, gross
Accumulated amortization
Acquired intangibles, net
Goodwill
Goodwill and acquired intangible assets

Source: Based on data from Amazon.com Inc. Annual Reports

Item Description The company
Acquired intangibles, net Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Amazon.com Inc.'s acquired intangibles, net increased from 2015 to 2016 and from 2016 to 2017.
Goodwill Carrying amount as of the balance sheet date, which is the cumulative amount paid and (if applicable) the fair value of any noncontrolling interest in the acquiree, adjusted for any amortization recognized prior to the adoption of any changes in generally accepted accounting principles (as applicable) and for any impairment charges, in excess of the fair value of net assets acquired in one or more business combination transactions. Amazon.com Inc.'s goodwill increased from 2015 to 2016 and from 2016 to 2017.
Goodwill and acquired intangible assets Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Amazon.com Inc.'s goodwill and acquired intangible assets increased from 2015 to 2016 and from 2016 to 2017.

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Analyst Adjustments: Removal of Goodwill

Amazon.com Inc., adjustments to financial data

USD $ in millions

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Adjustment to Total Assets
Total assets (as reported)
Less: Goodwill
Total assets (adjusted)
Adjustment to Total Stockholders' Equity
Total stockholders' equity (as reported)
Less: Goodwill
Total stockholders' equity (adjusted)

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Adjusted Ratios: Removal of Goodwill (Summary)

Amazon.com Inc., adjusted ratios

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Total Asset Turnover
Reported total asset turnover
Adjusted total asset turnover
Financial Leverage
Reported financial leverage
Adjusted financial leverage
Return on Equity (ROE)
Reported ROE % % % % %
Adjusted ROE % % % % %
Return on Assets (ROA)
Reported ROA % % % % %
Adjusted ROA % % % % %
Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Amazon.com Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Amazon.com Inc.'s adjusted financial leverage declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders' equity. Amazon.com Inc.'s adjusted ROE improved from 2015 to 2016 and from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Amazon.com Inc.'s adjusted ROA improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017.

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Adjusted Total Asset Turnover

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net sales (USD $ in millions)
Total assets (USD $ in millions)
Total asset turnover1
Adjusted for Goodwill
Net sales (USD $ in millions)
Adjusted total assets (USD $ in millions)
Adjusted total asset turnover2

2017 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= ÷ =

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Amazon.com Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.

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Adjusted Financial Leverage

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Total assets (USD $ in millions)
Total stockholders' equity (USD $ in millions)
Financial leverage1
Adjusted for Goodwill
Adjusted total assets (USD $ in millions)
Adjusted total stockholders' equity (USD $ in millions)
Adjusted financial leverage2

2017 Calculations

1 Financial leverage = Total assets ÷ Total stockholders' equity
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total stockholders' equity
= ÷ =

Ratio Description The company
Adjusted financial leverage A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity.
Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.
Amazon.com Inc.'s adjusted financial leverage declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

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Adjusted Return on Equity (ROE)

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net income (loss) (USD $ in millions)
Total stockholders' equity (USD $ in millions)
ROE1 % % % % %
Adjusted for Goodwill
Net income (loss) (USD $ in millions)
Adjusted total stockholders' equity (USD $ in millions)
Adjusted ROE2 % % % % %

2017 Calculations

1 ROE = 100 × Net income (loss) ÷ Total stockholders' equity
= 100 × ÷ = %

2 Adjusted ROE = 100 × Net income (loss) ÷ Adjusted total stockholders' equity
= 100 × ÷ = %

Ratio Description The company
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders' equity. Amazon.com Inc.'s adjusted ROE improved from 2015 to 2016 and from 2016 to 2017.

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Adjusted Return on Assets (ROA)

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net income (loss) (USD $ in millions)
Total assets (USD $ in millions)
ROA1 % % % % %
Adjusted for Goodwill
Net income (loss) (USD $ in millions)
Adjusted total assets (USD $ in millions)
Adjusted ROA2 % % % % %

2017 Calculations

1 ROA = 100 × Net income (loss) ÷ Total assets
= 100 × ÷ = %

2 Adjusted ROA = 100 × Net income (loss) ÷ Adjusted total assets
= 100 × ÷ = %

Ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Amazon.com Inc.'s adjusted ROA improved from 2015 to 2016 but then slightly deteriorated from 2016 to 2017.

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