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Accounting Policies and Supplemental Disclosures
 9 Months Ended
Sep. 30, 2020
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 2020 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 2019 Annual Report on Form 10-K.
Prior Period Reclassifications
Certain prior period amounts have been reclassified to conform to the current period presentation. Proceeds from and repayments of short-term debt, and other were reclassified from proceeds from and repayments of long-term debt, 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 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, and valuation and impairment of investments. Given the global economic climate and additional or unforeseen effects from the COVID-19 pandemic, these estimates have become more challenging, and actual results could differ materially from these estimates.
We review the useful lives of equipment on an ongoing basis, and effective January 1, 2020 we changed our estimate of the useful life for our servers from three to four years. The longer useful life is due to continuous improvements in our hardware, software, and data center designs. The effect of this change in estimate for Q3 2020, based on servers that were included in “Property and equipment, net” as of June 30, 2020 and those acquired during the quarter ended September 30, 2020, was a reduction in depreciation and amortization expense of $634 million and an increase in net income of $479 million, or $0.95 per basic share and $0.93 per diluted share. The effect of this change in estimate for the nine months ended September 30, 2020, based on servers that were included in “Property and equipment, net” as of December 31, 2019 and those acquired during the nine months ended September 30, 2020, was a reduction in depreciation and amortization expense of $2.1 billion and an increase in net income of $1.6 billion, or $3.23 per basic share and $3.18 per diluted share.
Supplemental Cash Flow Information
The following table shows supplemental cash flow information (in millions):
Three Months Ended
September 30,		Nine Months Ended
September 30,		Twelve Months Ended
September 30,
201920202019202020192020
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on debt$287 $285 $720 $715 $842 $869 
Cash paid for operating leases872 1,159 2,420 3,275 2,420 4,215 
Cash paid for interest on finance leases167 155 481 484 585 650 
Cash paid for interest on financing obligations14 28 20 71 72 90 
Cash paid for income taxes, net of refunds241 502 692 1,293 863 1,481 
Assets acquired under operating leases2,299 6,115 5,393 11,870 5,393 14,346 
Property and equipment acquired under finance leases3,606 3,571 9,541 8,892 13,222 13,075 
Property and equipment acquired under build-to-suit arrangements390 366 1,109 1,228 2,252 1,480 
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
September 30,		Nine Months Ended
September 30,
 2019202020192020
Shares used in computation of basic earnings per share495 501 493 500 
Total dilutive effect of outstanding stock awards9 11 10 9 
Shares used in computation of diluted earnings per share504 512 503 509 
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 $1.6 billion and $1.9 billion as of December 31, 2019 and September 30, 2020.
Accounts Receivable, Net and Other
Included in “Accounts receivable, net and other” on our consolidated balance sheets are amounts primarily related to customers, vendors, and sellers. As of December 31, 2019 and September 30, 2020, customer receivables, net, were $12.6 billion and $13.1 billion, vendor receivables, net, were $4.2 billion and $3.3 billion, and seller receivables, net, were $863 million and $446 million. Seller receivables are amounts due from sellers related to our seller lending program, which provides funding to sellers primarily to procure inventory.
We estimate losses on receivables based on expected losses, including our historical experience of actual losses. The allowance for doubtful accounts was $718 million and $968 million as of December 31, 2019 and September 30, 2020.
Digital Video and Music Content
The total capitalized costs of video, which is primarily released content, and music as of December 31, 2019 and September 30, 2020 were $5.8 billion and $6.3 billion. Total video and music expense was $1.9 billion and $2.8 billion in Q3 2019 and Q3 2020, and $5.5 billion and $8.0 billion for the nine months ended September 30, 2019 and 2020.
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, 2019 was $10.2 billion, of which $7.1 billion was recognized as
revenue during the nine months ended September 30, 2020. Included in “Other long-term liabilities” on our consolidated balance sheets was $2.0 billion and $1.9 billion of unearned revenue as of December 31, 2019 and September 30, 2020.
Additionally, we have performance obligations, primarily related to AWS, associated with commitments in customer contracts for future services that have not yet been recognized in our consolidated financial statements. For contracts with original terms that exceed one year, those commitments not yet recognized were $44.8 billion as of September 30, 2020. The weighted average remaining life of our long-term contracts is 3.4 years. However, the amount and timing of revenue recognition is largely driven by customer usage, which can extend beyond the original contractual term.