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Accounting Policies and Supplemental Disclosures
 3 Months Ended
Mar. 31, 2022
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 2022 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 2021 Annual Report on Form 10-K.
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. Actual results could differ materially from these estimates.
We review the useful lives of equipment on an ongoing basis, and effective January 1, 2022 we changed our estimate of the useful lives for our servers from four to five years and for our networking equipment 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 Q1 2022, based on servers and networking equipment that were included in “Property and equipment, net” as of December 31, 2021 and those acquired during the quarter ended March 31, 2022, was a reduction in depreciation and amortization expense of $973 million and a benefit to net loss of $769 million, or $1.51 per basic share and $1.51 per diluted share.
Supplemental Cash Flow Information
The following table shows supplemental cash flow information (in millions):
Three Months Ended
March 31,		Twelve Months Ended
March 31,
2021202220212022
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid for interest on debt$276 $279 $902 $1,101 
Cash paid for operating leases1,640 2,367 5,086 7,449 
Cash paid for interest on finance leases157 107 601 471 
Cash paid for interest on financing obligations33 58 113 178 
Cash paid for income taxes, net of refunds801 453 2,209 3,340 
Assets acquired under operating leases3,536 2,175 17,345 24,008 
Property and equipment acquired under finance leases2,067 166 11,489 5,160 
Property and equipment acquired under build-to-suit lease arrangements887 1,332 2,775 6,061 
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
March 31,
20212022
Shares used in computation of basic earnings per share504 509 
Total dilutive effect of outstanding stock awards9 — 
Shares used in computation of diluted earnings per share513 509 
Other Income (Expense), Net
Other income (expense), net, is as follows (in millions):
Three Months Ended
March 31,
20212022
Marketable equity securities valuation gains (losses)$(76)$(8,245)
Equity warrant valuation gains (losses)305 (312)
Upward adjustments relating to equity investments in private companies1,475 7 
Foreign currency gains (losses)(31)14 
Other, net24 (34)
Total other income (expense), net1,697 (8,570)
Included in other income (expense), net for the three months ended March 31, 2022 is a marketable equity securities valuation loss of $7.6 billion from our equity investment in Rivian Automotive, Inc. (“Rivian”). Our investment in Rivian’s preferred stock was accounted for at cost, with adjustments for observable changes in prices or impairments, prior to Rivian’s initial public offering in November 2021, which resulted in the conversion of our preferred stock to Class A common stock. As of March 31, 2022, we held 158 million shares of Rivian’s Class A common stock, representing an approximate 18% ownership interest, and an approximate 16% voting interest. We determined that we have the ability to exercise significant influence over Rivian through our equity investment, our commercial arrangement for the purchase of electric vehicles, and one of our employees serving on Rivian’s board of directors. We elected the fair value option to account for our equity investment in Rivian, which is included in “Marketable securities” on our consolidated balance sheets.
Required summarized financial information of Rivian as disclosed in its most recent SEC filings is as follows (in millions):
Year Ended
December 31, 2020		Year Ended
December 31, 2021
Revenues$— $55 
Gross profit— (465)
Loss from operations(1,021)(4,220)
Net loss(1,018)(4,688)
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 $2.6 billion and $2.5 billion as of December 31, 2021 and March 31, 2022.
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, 2021 and March 31, 2022, customer receivables, net, were $20.2 billion and $20.9 billion, vendor receivables, net, were $5.3 billion and $4.2 billion, and seller receivables, net, were $1.0 billion and $1.1 billion. 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 $1.1 billion as of December 31, 2021 and March 31, 2022.
Digital Video and Music Content
The total capitalized costs of video, which is primarily released content, and music as of December 31, 2021 and March 31, 2022 were $10.7 billion and $14.5 billion. Total video and music expense was $3.0 billion and $3.5 billion in Q1 2021 and Q1 2022.
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, 2021 was $14.0 billion, of which $5.1 billion was recognized as revenue during the three months ended March 31, 2022. Included in “Other long-term liabilities” on our consolidated balance sheets was $2.2 billion and $2.5 billion of unearned revenue as of December 31, 2021 and March 31, 2022.
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 $88.9 billion as of March 31, 2022. The weighted-average remaining life of our long-term contracts is 3.8 years. However, the amount and timing of revenue recognition is largely driven by customer usage, which can extend beyond the original contractual term.
Acquisition Activity
On March 17, 2022, we acquired MGM Holdings Inc. (“MGM”), for cash consideration of approximately $6.1 billion, net of cash acquired, to provide more digital media content options for customers. We also assumed $2.5 billion of debt, which we repaid immediately after closing. The acquired assets primarily consist of $3.4 billion of video content and $4.9 billion of goodwill, the majority of which is allocated to our North America segment. Due to the limited amount of time since the MGM acquisition, the valuation of certain assets and liabilities is preliminary and subject to change.
Pro forma results of operations have not been presented because the effects of the MGM acquisition were not material to our consolidated results of operations. Acquisition-related costs were expensed as incurred and were not significant.