ACQUISITIONS, GOODWILL, AND ACQUIRED INTANGIBLE ASSETS

2015 Acquisition Activity

During 2015, we acquired certain companies for an aggregate purchase price of $690 million. The primary reasons for these acquisitions, none of which was individually material to our consolidated financial statements, 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	$	599
Stock options and restricted stock units assumed	5
Indemnification holdback	86
	$	690
Allocation
Goodwill	$	482
Intangible assets (1):
Marketing-related	3
Contract-based	1
Technology-based	208
Customer-related	18
	230
Property and equipment	4
Deferred tax assets	55
Other assets acquired	53
Deferred tax liabilities	(85		)
Other liabilities assumed	(49		)
	$	690

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(1)	Acquired intangible assets have estimated useful lives of between one and six years, with a weighted-average amortization period of five years.

The fair value of assumed stock options, estimated using the Black-Scholes model, and restricted stock units of $9 million 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 basis over their estimated useful lives.

Pro Forma Financial Information – 2015 Acquisition Activity (unaudited)

The acquired companies were consolidated into our financial statements starting on their respective acquisition dates. The aggregate net sales and operating income (loss) of the companies acquired was $23 million and $(112) million for 2015. The following financial information, which excludes certain acquired companies for which the pro forma impact is not meaningful, presents our results as if the acquisitions during 2015 had occurred at the beginning of 2014 (in millions):



	Year Ended December 31,
	2015		2014
Net sales	$	107,054	$	89,039
Net income (loss)	$	576	$	(311	)

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

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(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.

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.

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.

Goodwill

The goodwill of the acquired companies is generally not deductible for tax purposes and is primarily related to expected improvements in technology performance and functionality, as well as sales growth from future product and service offerings and new customers, together with certain intangible assets that do not qualify for separate recognition. The following summarizes our goodwill activity in 2015 and 2014 by segment (in millions):



	North America			International			AWS			Consolidated
Goodwill - January 1, 2014	$	2,033		$	622		$	—		$	2,655
New acquisitions (1)	553			162			—			715
Other adjustments (2)	(2		)	(49		)	—			(51		)
Goodwill - December 31, 2014	2,584			735			—			3,319
Segment reallocation—January 1, 2015 (3)	(606		)	—			606			—
New acquisitions	41			18			423			482
Other adjustments (2)	(7		)	(34		)	(1		)	(42		)
Goodwill - December 31, 2015	$	2,012		$	719		$	1,028		$	3,759

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(1)	Primarily includes the goodwill of Twitch.


(2)	Primarily includes changes in foreign exchange rates.


(3)	In conjunction with the change in reportable segments, we reallocated goodwill on a relative fair value basis.

Intangible Assets

Acquired intangible assets, included within “Other assets” on our consolidated balance sheets, consist of the following (in millions):



		December 31,
		2015							2014
	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	4.4	$	457	$	(250	)	$	207	$	457	$	(199	)	$	258
Contract-based	2.1	130		(99		)	31		172		(125		)	47
Technology- and content-based	3.9	559		(205		)	354		370		(129		)	241
Customer-related	3.6	331		(161		)	170		535		(317		)	218
Acquired intangibles (2)	3.9	$	1,477	$	(715	)	$	762	$	1,534	$	(770	)	$	764

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(1)	Excludes the original cost and accumulated amortization of fully-amortized intangibles.


(2)	Intangible assets have estimated useful lives of between one and ten years.

Amortization expense for acquired intangibles was $228 million, $181 million, and $168 million in 2015, 2014, and 2013. Expected future amortization expense of acquired intangible assets as of December 31, 2015 is as follows (in millions):



Year Ended December 31,
2016	$	218
2017	191
2018	131
2019	103
2020	41
Thereafter	78
	$	762