What changed in this filing

/stocks — the workspaceLOADING

Item 8. Financial Statements and Supplementary Data

2023-02-03 compared with 2022-02-04 · 235 added, 164 removed, 944 unchanged (30% of the section changed)

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Consolidated Statements of Operations

Consolidated Statements of Comprehensive Income

Consolidated Statements of Comprehensive Income (Loss)

Consolidated Balance Sheets

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We have audited the accompanying consolidated balance sheets of Amazon.com, Inc.

(the Company) as of December 31, 2021 and 2020, and the related consolidated statements of operations, comprehensive income, stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2021, and the related notes (collectively referred to as the “consolidated financial statements”).

(the Company) as of December 31, 2022 and 2021, and the related consolidated statements of operations, comprehensive income (loss), stockholders’ equity, and cash flows for each of the three years in the period ended December 31, 2022, and the related notes (collectively referred to as the “consolidated financial statements”).

In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company at December 31, 2022 and 2021, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2022, in conformity with U.S.

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The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Uncertain Tax Positions

Description of

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The Company uses significant judgment in (1) determining whether a tax position’s technical merits are more likely than not to be sustained and (2) measuring the amount of tax benefit that qualifies for recognition.

As of December 31, 2022, the Company reported accrued liabilities of $4.0 billion for various tax contingencies.

Auditing the recognition and measurement of the Company’s tax contingencies was challenging because the evaluation of whether a tax position is more likely than not to be sustained and the measurement of the benefit of various tax positions can be complex and involves significant auditor judgment.

Management’s evaluation of tax positions may involve the use of valuation methodologies and assumptions, including forecasts of income or loss, and is based on interpretations of tax laws and legal rulings.

How We Addressed the Matter in Our Audit We tested controls over the Company’s process to assess the technical merits of its tax contingencies, including controls over the assessment as to whether a tax position is more likely than not to be sustained;

measurement of the benefit of its tax positions, including the selection of valuation methodologies and assumptions;

determination of forecasts of income or loss;

and development of the related disclosures.

Management’s evaluation of tax positions is based on interpretations of tax laws and legal rulings, and may be impacted by regulatory changes and judicial and examination activity.

How We Addressed the Matter in Our Audit We tested controls over the Company’s process to assess the technical merits of its tax contingencies, including controls over:

the assessment as to whether a tax position is more likely than not to be sustained;

the measurement of the benefit of its tax positions, both initially and on an ongoing basis;

and the development of the related disclosures.

We involved our international tax, transfer pricing, and research and development tax professionals in assessing the technical merits of certain of the Company’s tax positions.

Depending on the nature of the specific tax position and, as applicable, developments with the relevant tax authorities relating thereto, our procedures included obtaining and examining the Company’s analysis including the Company’s correspondence with such tax authorities and evaluating the underlying facts upon which the tax positions are based.

We used our knowledge of and experience with international, transfer pricing, and other income tax laws by the relevant income tax authorities to evaluate the Company’s accounting for its tax contingencies.

We used our knowledge of and experience with international, transfer pricing, and other income tax laws of the relevant taxing jurisdictions to evaluate the Company’s accounting for its tax contingencies.

We evaluated developments in the applicable regulatory environments to assess potential effects on the Company’s positions, including recent decisions in relevant court cases.

We analyzed the appropriateness of the Company’s valuation methodologies and assumptions, including the determination of forecasts of income or loss, and the accuracy of the Company’s calculations and data used to determine the amount of tax benefits to recognize.

We have also evaluated the Company’s income tax disclosures in relation to these matters.

We analyzed the appropriateness of the Company’s assumptions and the accuracy of the Company’s calculations and data used to determine the amount of tax benefits to recognize.

We evaluated the Company’s income tax disclosures in relation to these matters.

/s/ Ernst & Young LLP

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OPERATING ACTIVITIES:

Net income 11,588 21,331 33,364

Adjustments to reconcile net income to net cash from operating activities:

Net income (loss) 21,331 33,364 ( 2,722 )

Adjustments to reconcile net income (loss) to net cash from operating activities:

Depreciation and amortization of property and equipment and capitalized content costs, operating lease assets, and other 25,180 34,433 41,921

Stock-based compensation 9,208 12,757 19,621

Other operating expense (income), net 164 ( 71 ) 137

Other expense (income), net ( 2,582 ) ( 14,306 ) 16,966

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FINANCING ACTIVITIES:

Common stock repurchased — — ( 6,000 )

Proceeds from short-term debt, and other 6,796 7,956 41,553

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Technology and content 42,740 56,052 73,213

Marketing 18,878 22,008 32,551

Sales and marketing 22,008 32,551 42,238

General and administrative 6,668 8,823 11,891

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Total non-operating income (expense) 1,279 13,272 ( 18,184 )

Income before income taxes 13,976 24,178 38,151

Provision for income taxes ( 2,374 ) ( 2,863 ) ( 4,791 )

Income (loss) before income taxes 24,178 38,151 ( 5,936 )

Benefit (provision) for income taxes ( 2,863 ) ( 4,791 ) 3,217

Equity-method investment activity, net of tax 16 4 ( 3 )

Net income $ 11,588 $ 21,331 $ 33,364

Net income (loss) $ 21,331 $ 33,364 $ ( 2,722 )

Basic earnings per share $ 2.13 $ 3.30 $ ( 0.27 )

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AMAZON.COM, INC.

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME

CONSOLIDATED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(in millions)

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2020 2021 2022

Net income $ 11,588 $ 21,331 $ 33,364

Net income (loss) $ 21,331 $ 33,364 $ ( 2,722 )

Other comprehensive income (loss):

Net change in foreign currency translation adjustments:

Foreign currency translation adjustments, net of tax of $( 36 ), $ 47 , and $ 100

561 ( 819 ) ( 2,586 )

Reclassification adjustment for foreign currency translation included in “Other operating expense (income), net,” net of tax of $ 29 , $ 0 , and $ 0

Net foreign currency translation adjustments ( 30 ) 561 ( 819 )

Net change in unrealized gains (losses) on available-for-sale debt securities:

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Total other comprehensive income (loss) 806 ( 1,196 ) ( 3,111 )

Comprehensive income $ 11,637 $ 22,137 $ 32,168

Comprehensive income (loss) $ 22,137 $ 32,168 $ ( 5,833 )

See accompanying notes to consolidated financial statements.

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Preferred stock ($ 0.01 par value;

Authorized shares — 500

Issued and outstanding shares — none

500 shares authorized;

no shares issued or outstanding)

Common stock ($ 0.01 par value;

Authorized shares — 5,000

Issued shares — 527 and 532

Outstanding shares — 503 and 509

100,000 shares authorized;

10,644 and 10,757 shares issued;

10,175 and 10,242 shares outstanding)

Treasury stock, at cost ( 1,837 ) ( 7,837 )

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Balance as of January 1, 2020 9,950 $ 104 $ ( 1,837 ) $ 33,559 $ ( 986 ) $ 31,220 $ 62,060

Cumulative effect of change in accounting principle related to leases — — — — — 7 7

Net income — — — — — 21,331 21,331

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Balance as of December 31, 2021 10,175 106 ( 1,837 ) 55,437 ( 1,376 ) 85,915 138,245

Net income — — — — — 33,364 33,364

Net loss — — — — — ( 2,722 ) ( 2,722 )

Other comprehensive income (loss) — — — — ( 3,111 ) — ( 3,111 )

Stock-based compensation and issuance of employee benefit plan stock 113 2 — 19,629 — — 19,631

Common stock repurchased ( 46 ) — ( 6,000 ) — — — ( 6,000 )

Balance as of December 31, 2022 10,242 $ 108 $ ( 7,837 ) $ 75,066 $ ( 4,487 ) $ 83,193 $ 146,043

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We serve consumers through our online and physical stores and focus on selection, price, and convenience.

We offer programs that enable sellers to grow their businesses, sell their products in our stores, and fulfill orders through us, and programs that allow authors, musicians, filmmakers, Twitch streamers, skill and app developers, and others to publish and sell content.

We offer programs that enable sellers to grow their businesses, sell their products in our stores, and fulfill orders through us, and programs that allow authors, independent publishers, musicians, filmmakers, Twitch streamers, skill and app developers, and others to publish and sell content.

We serve developers and enterprises of all sizes through AWS, which offers a broad set of on-demand technology services, including compute, storage, database, analytics, and machine learning, and other services.

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See “Note 10 — Segment Information.”

Common Stock Split

On May 27, 2022, we effected a 20 -for-1 stock split of our common stock and proportionately increased the number of authorized shares of common stock.

All share, restricted stock unit (“RSU”), and per share or per RSU information throughout this Annual Report on Form 10-K has been retroactively adjusted to reflect the stock split.

The shares of common stock retain a par value of $ 0.01 per share.

Accordingly, an amount equal to the par value of the increased shares resulting from the stock split was reclassified from “Additional paid-in capital” to “Common stock.”

Prior Period Reclassifications

Certain prior period amounts have been reclassified to conform to the current period presentation.

“Other operating expense (income), net” was reclassified into “Depreciation and amortization of property and equipment and capitalized content costs, operating lease assets, and other” on our consolidated statements of cash flows.

Principles of Consolidation

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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.

For example, in Q4 2021 we completed a useful life study for our servers and networking equipment and are increasing the useful lives from four years to five years for servers and from five years to six years for networking equipment in January 2022, which, based on servers and networking equipment that are included in “Property and equipment, net” as of December 31, 2021, will have an anticipated impact to our 2022 operating income of $ 3.1 billion.

We had previously increased the useful life of our servers from three years to four years in January 2020.

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 years to five years and for our networking equipment from five years 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 the year ended December 31, 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 year ended December 31, 2022, was a reduction in depreciation and amortization expense of $ 3.6 billion and a benefit to net loss of $ 2.8 billion, or $ 0.28 per basic share and $ 0.28 per diluted share.

For the year ended December 31, 2022, we recorded approximately $ 1.1 billion, of which $ 720 million was recorded in the fourth quarter, of impairments of property and equipment and operating leases primarily related to physical stores.

These charges were recorded in “Other operating expense (income), net” on our consolidated statements of operations and primarily impacted our North America segment.

For the year ended December 31, 2022, we also recorded expenses of approximately

$ 480 million primarily in “Fulfillment” on our consolidated statements of operations relating to terminating contracts for certain leases not yet commenced as well as other purchase commitments, which primarily impacted our North America segment.

For the year ended December 31, 2022, we recorded approximately $ 720 million, of which $ 640 million was recorded in the fourth quarter, of estimated severance costs primarily related to planned role eliminations.

These charges were recorded primarily in “Technology and content,” “Fulfillment,” and “General and administrative” on our consolidated statements of operations and primarily impacted our North America segment.

Supplemental Cash Flow Information

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Assets acquired under operating leases $ 16,217 $ 25,369 $ 18,800

Property and equipment acquired under finance leases $ 13,723 $ 11,588 $ 7,061

Property and equipment acquired under build-to-suit lease arrangements $ 1,362 $ 2,267 $ 5,616

Property and equipment acquired under finance leases, net of remeasurements and modifications $ 11,588 $ 7,061 $ 675

Property and equipment recognized during the construction period of build-to-suit lease arrangements $ 2,267 $ 5,846 $ 3,187

Property and equipment derecognized after the construction period of build-to-suit lease arrangements, with the associated leases recognized as operating $ — $ 230 $ 5,158

Earnings Per Share

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Sales commissions we pay in connection with contracts that exceed one year are capitalized and amortized over the contract term.

Other - Other revenue includes sales related to various other service offerings, which are recognized as or when those services are performed.

Other - Other revenue includes sales related to various other offerings, such as certain licensing and distribution of video content and shipping services, and our co-branded credit card agreements.

Revenue is recognized when content is licensed or distributed and as or when services are performed.

Return Allowances

Return allowances, which reduce revenue and cost of sales, are estimated using historical experience.

Liabilities for return allowances are included in “Accrued expenses and other” and were $ 712 million, $ 859 million, and $ 1.0 billion as of December 31, 2019, 2020, and 2021.

Liabilities for return allowances are included in “Accrued expenses and other” and were $ 859 million, $ 1.0 billion, and $ 1.3 billion as of December 31, 2020, 2021, and 2022.

Additions to the allowance were $ 3.5 billion, $ 5.1 billion, and $ 5.5 billion and deductions from the allowance were $ 3.6 billion, $ 4.9 billion, and $ 5.2 billion in 2020, 2021, and 2022.

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Infrastructure costs include servers, networking equipment, and data center related depreciation and amortization, rent, utilities, and other expenses necessary to support AWS and other Amazon businesses.

Collectively, these costs reflect the investments we make in order to offer a wide variety of products and services to our customers.

Collectively, these costs reflect the investments we make in order to offer a wide variety of products and services to our customers, including expenditures related to initiatives to build and deploy innovative and efficient software and electronic devices and the development of a satellite network for global broadband service and autonomous vehicles for ride-hailing services.

Technology and content costs are generally expensed as incurred.

Marketing costs primarily consist of advertising and payroll and related expenses for personnel engaged in marketing and selling activities, including sales commissions related to AWS.

Sales and Marketing

Sales and marketing costs include advertising and payroll and related expenses for personnel engaged in marketing and selling activities, including sales commissions related to AWS.

We pay commissions to third parties when their customer referrals result in sales.

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The estimated number of stock awards that will ultimately vest requires judgment, and to the extent actual results or updated estimates differ from our current estimates, such amounts will be recorded as a cumulative adjustment in the period estimates are revised.

We consider many factors when estimating expected forfeitures, including historical forfeiture experience and employee level.

Additionally, stock-based compensation includes stock

appreciation rights that are expected to settle in cash.

We consider many factors when estimating expected forfeitures, including historical forfeiture experience by grant year and employee level.

Additionally, stock-based compensation includes stock appreciation rights that are expected to settle in cash.

These liability-classified awards are remeasured to fair value at the end of each reporting period until settlement or expiration.

Other Operating Expense (Income), Net

Other operating expense (income), net, consists primarily of a benefit from accelerated vesting of warrants to acquire equity of a vendor in Q4 2020, offset by a lease impairment in Q2 2020 and the amortization of intangible assets.

Other operating expense (income), net, consists primarily of the amortization of intangible assets and, for 2020, a benefit from accelerated vesting of warrants to acquire equity of a vendor partially offset by a lease impairment and, for 2022, $ 1.1 billion of impairments of property and equipment and operating leases.

Other Income (Expense), Net

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Total other income (expense), net 2,371 14,633 ( 16,806 )

Included in other income (expense), net in 2021 is a marketable equity securities valuation gain of $ 11.8 billion from our equity investment in Rivian Automotive, Inc.

Included in other income (expense), net in 2021 and 2022 is a marketable equity securities valuation gain (loss) of $ 11.8 billion and $( 12.7 ) billion from our equity investment in Rivian Automotive, Inc.

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.

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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, and the 2021 valuation gain is primarily comprised of the gain recognized upon the initial public offering, and also includes subsequent changes in fair value through December 31, 2021.

As of December 31, 2021, our equity investment in Rivian had a fair value of $ 15.6 billion, which reflects a discount for lack of marketability until Q1 2022 of approximately $ 800 million due to regulatory sales restrictions, and is included in “Marketable securities” on our consolidated balance sheets.

Summarized financial information of Rivian as disclosed in its SEC filings is as follows (in millions):

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):

December 31, 2020 Year Ended

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Total liabilities 2,780 3,686

Contingently redeemable convertible preferred stock 5,244 7,894

Income tax expense includes U.S.

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Deferred tax assets are evaluated for future realization and reduced by a valuation allowance to the extent we believe they will not be realized.

We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including our recent cumulative loss experience and expectations of future earnings, capital gains and investment in such jurisdiction, the carry-forward periods available to us for tax reporting purposes, and other relevant factors.

We consider many factors when assessing the likelihood of future realization of our deferred tax assets, including recent cumulative loss experience and expectations of future earnings, capital gains and investment in such jurisdiction, the carry-forward periods available to us for tax reporting purposes, and other relevant factors.

We utilize a two-step approach to recognizing and measuring uncertain income tax positions (tax contingencies).

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During the normal course of business, in order to manage manufacturing lead times and help ensure adequate supply, we enter into agreements with contract manufacturers and suppliers for certain electronic device components.

A portion of our reported purchase commitments arising from these agreements consists of firm, non-cancellable commitments.

We have certain non-cancellable purchase commitments arising from these agreements.

These commitments are based on forecasted customer demand.

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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, 2020 and 2021, customer receivables, net, were $ 14.8 billion and $ 20.2 billion, vendor receivables, net, were $ 4.8 billion and $ 5.3 billion, and seller receivables, net, were $ 381 million and $ 1.0 billion.

As of December 31, 2021 and 2022, customer receivables, net, were $ 20.2 billion and $ 26.6 billion, vendor receivables, net, were $ 5.3 billion and $ 6.9 billion, and seller receivables, net, were $ 1.0 billion and $ 1.3 billion.

Seller receivables are amounts due from sellers related to our seller lending program, which provides funding to sellers primarily to procure inventory.

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Receivables are considered impaired and written-off when it is probable that all contractual payments due will not be collected in accordance with the terms of the agreement.

The allowance for doubtful accounts was $ 718 million, $ 1.1 billion, and $ 1.1 billion as of December 31, 2019, 2020, and 2021.

Additions to the allowance were $ 1.0 billion, $ 1.4 billion, and $ 1.0 billion, and deductions to the allowance were $ 793 million, $ 1.0 billion, and $ 1.1 billion in 2019, 2020, and 2021.

The allowance for doubtful accounts was $ 1.1 billion, $ 1.1 billion, and $ 1.4 billion as of December 31, 2020, 2021, and 2022.

Additions to the allowance were $ 1.4 billion, $ 1.0 billion, and $ 1.6 billion, and deductions to the allowance were $ 1.0 billion, $ 1.1 billion, and $ 1.3 billion in 2020, 2021, and 2022.

Software Development Costs

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Equipment includes assets such as servers and networking equipment, heavy equipment, and other fulfillment equipment.

Depreciation and amortization is recorded on a straight-line basis over the estimated useful lives of the assets (generally the lesser of 40 years or the remaining life of the underlying building, three years prior to January 1, 2020 and four years subsequent to January 1, 2020 for our servers, five years for networking equipment, ten years for heavy equipment, and three to ten years for other fulfillment equipment).

Depreciation and amortization is recorded on a straight-line basis over the estimated useful lives of the assets (generally the lesser of 40 years or the remaining life of the underlying building, four years prior to January 1, 2022 and five years subsequent to January 1, 2022 for our servers, five years prior to January 1, 2022 and six years subsequent to January 1, 2022 for our networking equipment, ten years for heavy equipment, and three to ten years for other fulfillment equipment).

Depreciation and amortization expense is classified within the corresponding operating expense categories on our consolidated statements of operations.

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We compare the carrying value of each reporting unit and indefinite-lived intangible asset to its estimated fair value and if the fair value is determined to be less than the carrying value, we recognize an impairment loss for the difference.

We estimate the fair value of the reporting units using discounted cash flows.

We estimate the fair value of the reporting units using discounted cash

Forecasts of future cash flows are based on our best estimate of future net sales and operating expenses, based primarily on expected category expansion, pricing, market segment share, and general economic conditions.

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Included in “Other assets” on our consolidated balance sheets are amounts primarily related to video and music content, net of accumulated amortization;

acquired intangible assets, net of accumulated amortization;

equity warrant assets;

long-term deferred tax assets;

and certain equity investments.

acquired intangible assets, net of accumulated amortization;

equity warrant assets and certain equity investments;

and satellite network launch services deposits.

We recognize certain transactions with governments when there is reasonable assurance that incentives included in the agreements, such as cash or certain tax credits, will be received and we are able to comply with any related conditions.

These incentives are recorded as reductions to the cost of related assets or expenses.

Digital Video and Music Content

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If the licensing fee is not determinable or reasonably estimable, no asset or liability is recorded and licensing costs are expensed as incurred.

We also develop original video content for which the production costs are capitalized and amortized to “Cost of sales” predominantly on an accelerated basis that follows the viewing patterns associated with the content.

We also develop original video content for which the production costs are capitalized and amortized to “Cost of sales” predominantly on an accelerated basis that follows the estimated viewing patterns associated with the content.

The weighted average remaining life of our capitalized video content is 2.6 years.

We review usage and viewing patterns impacting the amortization of capitalized video content on an ongoing basis and reflect any changes prospectively.

Changes in historical and anticipated viewing patterns are lengthening the weighted average life of our capitalized video content.

We anticipate the changes in viewing patterns will positively impact 2023 operating income by approximately $ 1.0 billion, generally ratably throughout the year.

Our produced and licensed video content is primarily monetized together as a unit, referred to as a film group, in each major geography where we offer Amazon Prime memberships.

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If the investment is impaired, we write it down to its estimated fair value.

As of December 31, 2020 and 2021, these investments had a carrying value of $ 2.7 billion and $ 603 million.

As of December 31, 2021 and 2022, these investments had a carrying value of $ 603 million and $ 715 million.

Equity investments are accounted for using the equity method of accounting, or at fair value if we elect the fair value option, if the investment gives us the ability to exercise significant influence, but not control, over an investee.

Equity-method investments are included within “Other assets” on our consolidated balance sheets.

Equity-method

investments are included within “Other assets” on our consolidated balance sheets.

Our share of the earnings or losses as reported by equity-method investees, amortization of basis differences, related gains or losses, and impairments, if any, are recognized in “Equity-method investment activity, net of tax” on our consolidated statements of operations.

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Accrued Expenses and Other

Included in “Accrued expenses and other” on our consolidated balance sheets are liabilities primarily related to leases and asset retirement obligations, tax-related liabilities, payroll and related expenses, unredeemed gift cards, customer liabilities, marketing liabilities, current debt, acquired digital media content, and other operating expenses.

Included in “Accrued expenses and other” on our consolidated balance sheets are liabilities primarily related to leases and asset retirement obligations, tax-related liabilities, current debt, payroll and related expenses, unredeemed gift cards, self-insurance liabilities, customer liabilities, marketing liabilities, acquired digital media content, and other operating expenses.

As of December 31, 2021 and 2022, our liabilities for payroll related expenses were $ 7.4 billion and $ 7.7 billion and our liabilities for unredeemed gift cards were $ 5.2 billion and $ 5.4 billion.

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The portion of gift cards that we do not expect to be redeemed is recognized based on customer usage patterns.

Self-Insurance Liabilities

Although we maintain certain high-deductible, third-party insurance coverage for catastrophic losses, we effectively self-insure for exposure primarily related to workers’ compensation, employee health care benefits, general and product liability, and automobile liability, including liability resulting from third-party transportation service providers.

We estimate self-insurance liabilities by considering historical claims experience, frequency and costs of claims, projected claims development, inflation, and other actuarial assumptions.

Changes in the number or costs of claims, healthcare costs, judgment and settlement amounts, associated legal expenses, and other factors could cause actual results to differ materially from these estimates.

As of December 31, 2021 and 2022, our total self-insurance liabilities were $ 2.2 billion and $ 4.0 billion and are included in “Accrued expenses and other” on our consolidated balance sheets.

In the fourth quarter of 2022, we increased our reserves for general, product, and automobile liabilities by $ 1.3 billion primarily driven by changes in our estimates about the costs of asserted and unasserted claims, which was primarily recorded in “Cost of sales” on our consolidated statements of operations and impacted our North America segment.

Unearned Revenue

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Other Long-Term Liabilities

Included in “Other long-term liabilities” on our consolidated balance sheets are liabilities primarily related to financing obligations, asset retirement obligations, deferred tax liabilities, unearned revenue, tax contingencies, and digital video and music content.

Included in “Other long-term liabilities” on our consolidated balance sheets are liabilities primarily related to financing obligations, asset retirement obligations, unearned revenue, tax contingencies, digital video and music content, and deferred tax liabilities.

Foreign Currency

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Dollars at period-end foreign exchange rates, and revenues and expenses are translated at average rates prevailing throughout the period.

Translation adjustments are included in “Accumulated other comprehensive income (loss),” a separate component of stockholders’ equity, and in the “Foreign currency effect on cash, cash equivalents, and restricted cash,” on our consolidated statements of cash flows.

Translation adjustments are included in “Accumulated other comprehensive income (loss),” a separate component of stockholders’ equity.

Transaction gains and losses including intercompany transactions denominated in a currency other than the functional currency of the entity involved are included in “Other income (expense), net” on our consolidated statements of operations.

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Other fixed income securities 249 — ( 12 ) 237

Equity securities (1)(3) 15,740

$ 67,484 $ — $ ( 802 ) $ 70,391

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___________________

(1) The related unrealized gain (loss) recorded in “Other income (expense), net” was $ 4 million, $ 448 million, and $ 11.6 billion for the years ended December 31, 2019, 2020, and 2021.

(1) The related unrealized gain (loss) recorded in “Other income (expense), net” was $ 448 million, $ 11.6 billion, and $( 13.6 ) billion for the years ended December 31, 2020, 2021, and 2022.

(2) We are required to pledge or otherwise restrict a portion of our cash, cash equivalents, and marketable fixed income securities primarily as collateral for real estate, amounts due to third-party sellers in certain jurisdictions, debt, and standby and trade letters of credit.

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See “Note 7 — Commitments and Contingencies.”

(3) Our equity investment in Rivian of $ 15.6 billion reflects a discount for lack of marketability until Q1 2022 due to regulatory sales restrictions.

In addition, we are subject to contractual sales restrictions until Q2 2022.

(3) Our equity investment in Rivian had a fair value of $ 15.6 billion and $ 2.9 billion as of December 31, 2021 and December 31, 2022, respectively.

The investment was subject to regulatory sales restrictions resulting in a discount for lack of marketability of approximately $ 800 million as of December 31, 2021, which expired in Q1 2022.

The following table summarizes gross gains and gross losses realized on sales of marketable fixed income securities (in millions):

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Note 4 — LEASES

We have entered into non-cancellable operating and finance leases for fulfillment, delivery, office, physical store, data center, and sortation facilities as well as server and networking equipment, vehicles, and aircraft.

We have entered into non-cancellable operating and finance leases for fulfillment, delivery, office, data center, physical store, and sortation facilities as well as server and networking equipment, vehicles, and aircraft.

Gross assets acquired under finance leases, inclusive of those where title transfers at the end of the lease, are recorded in “ Property and equipment, net ” and were $ 72.2 billion and $ 68.0 billion as of December 31, 2021 and 2022.

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2020 Acquisition Activity

During 2019, we acquired certain companies for an aggregate purchase price of $ 315 million, net of cash acquired.

2020 Acquisition Activity

During 2020, we acquired certain companies for an aggregate purchase price of $ 1.2 billion, net of cash acquired, of which $ 1.1 billion was capitalized to in-process research and development intangible assets (“IPR&D”).

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During 2021, we acquired certain companies for an aggregate purchase price of $ 496 million, net of cash acquired.

The primary reason for all acquisitions was to acquire technologies and know-how to enable Amazon to serve customers more effectively.

Acquisition-related costs were expensed as incurred.

Pro forma results of operations have not been presented because the effects of 2021 acquisitions, individually and in the aggregate, were not material to our consolidated results of operations.

2022 Acquisition Activity

On March 17, 2022, we acquired MGM Holdings Inc., 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.

During 2022, we also acquired certain other companies for an aggregate purchase price of $ 141 million, net of cash acquired.

Pro forma results of operations have not been presented because the effects of the 2022 acquisitions, individually and in the aggregate, were not material to our consolidated results of operations.

Acquisition-related costs were expensed as incurred and were not significant.

The goodwill of the acquired companies 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.

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

(2) Finite-lived intangible assets have estimated useful lives of between one and twenty-five years , and are being amortized to operating expenses on a straight-line basis.

(2) Finite-lived intangible assets, excluding acquired video content, have estimated useful lives of between one and twenty-five years , and are being amortized to operating expenses on a straight-line basis.

(3) Intangible assets acquired in a business combination that are in-process and used in research and development activities are considered indefinite-lived until the completion or abandonment of the research and development efforts.

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Note 6 — DEBT

As of December 31, 2021, we had $ 49.7 billion of unsecured senior notes outstanding (the “Notes”).

We issued $ 18.5 billion of Notes in May 2021, of which $ 1.0 billion was issued for green or social projects, such as projects related to clean transportation, renewable energy, sustainable buildings, affordable housing, or socioeconomic advancement and empowerment, and the remainder for general corporate purposes.

We also had other long-term debt and borrowings under our credit facility of $ 924 million and $ 803 million as of December 31, 2020 and 2021.

As of December 31, 2022, we had $ 69.5 billion of unsecured senior notes outstanding (the “Notes”), including $ 12.8 billion issued in April 2022 and $ 8.3 billion issued in December 2022 for general corporate purposes, and $ 1.0 billion of borrowings under our secured revolving credit facility.

Our total long-term debt obligations are as follows (in millions):

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0.35 % - 3.31 %

18,500 18,500

April 2022 Notes issuance of $ 12.8 billion

2024 - 2062 2.73 % - 4.10 %

2.83 % - 4.15 %

December 2022 Notes issuance of $ 8.3 billion

2024 - 2032 4.55 % - 4.70 %

4.61 % - 4.83 %

Credit Facility 803 1,042

Other long-term debt 586 —

Total face value of long-term debt 50,553 70,542

Unamortized discount and issuance costs, net ( 318 ) ( 393 )

Less current portion of long-term debt ( 1,155 ) ( 1,491 )

current portion of long-term debt ( 1,491 ) ( 2,999 )

Long-term debt $ 48,744 $ 67,150

___________________

(1) The weighted-average remaining lives of the 2012, 2014, 2017, 2020 and 2021 Notes were 0.9 , 13.6 , 15.2 , 17.7 and 14.3 years as of December 31, 2021.

(1) The weighted-average remaining lives of the 2014, 2017, 2020, 2021, April 2022, and December 2022 Notes were 12.6 , 14.2 , 16.7 , 13.3 , 13.3 , and 5.9 years as of December 31, 2022.

The combined weighted-average remaining life of the Notes was 13.1 years as of December 31, 2022.

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The estimated fair value of the Notes was approximately $ 53.3 billion and $ 61.4 billion as of December 31, 2021 and 2022, which is based on quoted prices for our debt as of those dates.

We have a $ 1.0 billion secured revolving credit facility with a lender that is secured by certain seller receivables, which we increased from $ 740 million in November 2021 and may from time to time increase in the future subject to lender approval (the “Credit Facility”).

The Credit Facility is available until October 2022, bears interest at the London interbank offered rate (“LIBOR”) plus 1.40 %, and has a commitment fee of 0.50 % on the undrawn portion.

There were $ 338 million and $ 803 million of borrowings outstanding under the Credit Facility as of December 31, 2020 and 2021, which had a weighted-average interest rate of 3.0 % and 2.7 %, respectively.

As of December 31, 2020 and 2021, we have pledged $ 398 million and $ 918 million of our cash and seller receivables as collateral for debt related to our Credit Facility.

We have a $ 1.5 billion secured revolving credit facility with a lender that is secured by certain seller receivables, which we increased from $ 1.0 billion to $ 1.5 billion in August 2022 and we may from time to time increase in the future subject to lender approval (the “Credit Facility”).

The Credit Facility is available until August 2025, bears interest based on the daily Secured Overnight Financing Rate plus 1.25 %, and has a commitment fee of up to 0.45 % on the undrawn portion.

There were $ 803 million and $ 1.0 billion of borrowings outstanding under the Credit Facility as of December 31, 2021 and 2022, which had an interest rate of 1.5 % and 5.6 %, respectively.

As of December 31, 2021 and 2022, we have pledged $ 918 million and $ 1.2 billion of our cash and seller receivables as collateral for debt related to our Credit Facility.

The estimated fair value of the Credit Facility, which is based on Level 2 inputs, approximated its carrying value as of December 31, 2021 and 2022.

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Dollar and Euro commercial paper programs (the “Commercial Paper Programs”) under which we may from time to time issue unsecured commercial paper up to a total of $ 20.0 billion (including up to € 3.0 billion) at the date of issue, with individual maturities that may vary but will not exceed 397 days from the date of issue.

There were $ 725 million of borrowings outstanding under the Commercial Paper Programs as of December 31, 2020 and 2021, which were included in “Accrued expenses and other” on our consolidated balance sheets and had a weighted-average effective interest rate, including

issuance costs, of 0.11 % and 0.08 %, respectively.

In March 2022, we increased the size of the Commercial Paper Programs from $ 10.0 billion to $ 20.0 billion.

There were $ 725 million and $ 6.8 billion of borrowings outstanding under the Commercial Paper Programs as of December 31, 2021 and 2022, which were

included in “Accrued expenses and other” on our consolidated balance sheets and had a weighted-average effective interest rate, including issuance costs, of 0.08 % and 4.47 %, respectively.

We use the net proceeds from the issuance of commercial paper for general corporate purposes.

We also have a $ 7.0 billion unsecured revolving credit facility with a syndicate of lenders with a term that extends to June 2023, which was amended in November 2021 to replace LIBOR as the applicable benchmark rate for loans denominated in certain foreign currencies (the “Credit Agreement”).

We have a $ 10.0 billion unsecured revolving credit facility with a syndicate of lenders (the “Credit Agreement”), which was amended and restated in March 2022 to increase the borrowing capacity from $ 7.0 billion to $ 10.0 billion and to extend the term to March 2025.

It may be extended for up to three additional one-year terms if approved by the lenders.

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There were no borrowings outstanding under the Credit Agreement as of December 31, 2021 and 2022.

In November 2022, we entered into a $ 10.0 billion unsecured 364-day revolving credit facility with a syndicate of lenders (the “Short-Term Credit Agreement”), which matures in November 2023 and may be extended for one additional period of 364 days if approved by the lenders.

The interest rate applicable to outstanding balances under the Short-Term Credit Agreement is the Secured Overnight Financing Rate specified in the Short-Term Credit Agreement plus 0.45 %, with a commitment fee of 0.05 % on the undrawn portion.

There were no borrowings outstanding under the Short-Term Credit Agreement as of December 31, 2022.

We also utilize other short-term credit facilities for working capital purposes.

These amounts are included in “Accrued expenses and other” on our consolidated balance sheets.

There were $ 318 million and $ 1.2 billion of borrowings outstanding under these facilities as of December 31, 2021 and 2022, which were included in “Accrued expenses and other” on our consolidated balance sheets.

In addition, we had $ 6.9 billion of unused letters of credit as of December 31, 2022.

In January 2023, we entered into an $ 8.0 billion unsecured 364-day term loan with a syndicate of lenders (the “Term Loan”), which matures in January 2024 and bears interest at the Secured Overnight Financing Rate specified in the Term Loan plus 0.75 %.

If we exercise our option to extend the Term Loan’s maturity to January 2025, the interest rate spread will increase from 0.75 % to 1.05 %.

As of the date of this filing, the entire Term Loan is outstanding.

Note 7 — COMMITMENTS AND CONTINGENCIES

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Excluding interest, current financing obligations of $ 196 million and $ 266 million are recorded within “Accrued expenses and other” and $ 6.2 billion and $ 6.7 billion are recorded within “Other long-term liabilities” as of December 31, 2021 and 2022.

The weighted-average remaining term of the financing obligations was 19.0 and 18.8 years and the weighted-average imputed interest rate was 3.8 % and 3.2 % as of December 31, 2020 and 2021.

The weighted-average remaining term of the financing obligations was 18.8 years and 17.9 years and the weighted-average imputed interest rate was 3.2 % and 3.1 % as of December 31, 2021 and 2022.

(2) Includes unconditional purchase obligations related to long-term agreements to acquire and license digital media content that are not reflected on the consolidated balance sheets and certain products offered in our Whole Foods Market stores.

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Purchase obligations associated with renewal provisions solely at the option of the content provider are included to the extent such commitments are fixed or a minimum amount is specified.

(3) Includes the estimated timing and amounts of payments for rent and tenant improvements associated with build-to-suit lease arrangements that are under construction, asset retirement obligations, and liabilities associated with digital media content agreements with initial terms greater than one year.

(3) Includes asset retirement obligations, liabilities associated with digital media content agreements with initial terms greater than one year, and the estimated timing and amounts of payments for rent and tenant improvements associated with build-to-suit lease arrangements that are under construction.

(4) Excludes approximately $ 4.0 billion of accrued tax contingencies for which we cannot make a reasonably reliable estimate of the amount and period of payment, if any.

In addition, in May 2021, we entered into an agreement to acquire MGM Holdings Inc.

(“MGM”) for approximately $ 8.5 billion, including MGM’s debt, subject to customary closing conditions.

We expect to fund this acquisition with cash on hand.

In July 2022, we entered into an agreement to acquire 1Life Healthcare, Inc.

(One Medical) for approximately $ 3.9 billion, including its debt, subject to customary closing conditions.

In August 2022, we entered into an agreement to acquire iRobot Corporation for approximately $ 1.7 billion, including its debt, subject to customary closing conditions.

We expect to fund these acquisitions with cash on hand.

During 2022, no vendor accounted for 10% or more of our purchases.

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We are disputing claims and denials of refunds or credits related to various non-income taxes (such as sales, value added, consumption, service, and similar taxes), including in jurisdictions in which we already collect and remit these taxes.

These non-income tax contr oversies typically relate to (i) the taxability of products and services, including cross-border intercompany transactions, (ii) collection and withholding on transactions with third parties, and (iii) the adequacy of compliance with reporting obligations, including evolving documentation requirements.

These non-income tax controversies typically relate to (i) the taxability of products and services, including cross-border intercompany transactions, (ii) collection and withholding on transactions with third parties, and (iii) the adequacy of compliance with reporting obligations, including evolving documentation requirements.

Due to the inherent complexity and uncertainty of these matters and the judicial and regulatory processes in certain jurisdictions, the final outcome of any such controversies may be materially different from our expectations.

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In February 2016, Eolas filed an amended complaint seeking, among other things, an unspecified amount of damages.

In February 2017, Eolas alleged in its damages report that in the event of a finding of liability Amazon could be subject to $ 130 -$ 250 million in damages.

In February 2017, Eolas alleged in its damages report that in the event of a finding of liability Amazon could be subject to $ 130 to $ 250 million in damages.

In April 2017, the case was transferred to the United States District Court for the Northern District of California.

In May 2022, the district court granted summary judgment holding that the patent is invalid.

In June 2022, Eolas filed a notice of appeal.

We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

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The complaint alleges, among other things, that “Alexa Voice Software and Alexa enabled devices” infringe U.S.

7,177,798, entitled “Natural Language Interface Using Constrained Intermediate Dictionary of Results.” The complaint seeks an injunction, an unspecified amount of damages, enhanced damages, an ongoing royalty, pre- and post-judgment interest, attorneys’ fees, and costs.

7,177,798, entitled “Natural Language Interface Using Constrained Intermediate Dictionary of Results.” The complaint seeks an injunction, an unspecified amount of damages, enhanced damages , an ongoing royalty, interest, attorneys’ fees, and costs.

We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

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The complaint alleges, among other things, that Amazon S3 and DynamoDB infringe U.S.

7,814,170 and 7,103,640, both entitled “Network Distributed Tracking Wire Transfer Protocol,” and 7,233,978, entitled “Method And Apparatus For Managing Location Information In A Network Separate From The Data To Which The Location Information Pertains.” The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, interest, and injunctive relief.

7,814,170 and 7,103,640, both entitled “Network Distributed Tracking Wire Transfer Protocol”;

and 7,233,978, entitled “Method and Apparatus for Managing Location Information in a Network Separate from the Data to Which the Location Information Pertains.” The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, interest, and injunctive relief.

In March 2022, the case was stayed pending resolution of review petitions we filed with the United States Patent and Trademark Office.

In November 2022, the stay was lifted.

We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

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Amazon.com, Inc.

filed in the United States District Court for the Western District of Washington, a number of cases have been filed in the U.S.

filed in the United States District Court for the Western District of Washington, private litigants have filed a number of cases in the U.S.

and Canada alleging, among other things, price fixing arrangements between Amazon.com, Inc.

and third-party sellers in Amazon’s stores, monopolization and attempted monopolization, and consumer protection and unjust enrichment claims.

Some of the cases include allegations of several distinct purported classes, including consumers who purchased a product through Amazon’s stores and consumers who purchased a product offered by Amazon through another e-commerce retailer.

The complaints seek billions of dollars of alleged actual damages, treble damages, punitive damages, and injunctive relief.

Individuals have also initiated arbitrations based on substantially similar allegations.

and vendors and third-party sellers in Amazon’s stores, monopolization and attempted monopolization, and consumer protection and unjust enrichment claims.

Attorneys General for the District of Columbia and California brought similar suits in May 2021 and September 2022 in the Superior Court of the District of Columbia and the California Superior Court for the County of San Francisco, respectively.

Some of the private cases include allegations of several distinct purported classes, including consumers who purchased a product through Amazon’s stores and consumers who purchased a product offered by Amazon through another e-commerce retailer.

The complaints seek billions of dollars of alleged actual damages, treble damages, punitive damages, injunctive relief, civil penalties, attorneys’ fees, and costs.

In March 2022 and January 2023, Amazon’s motions to dismiss were granted in part and denied in part in Frame-Wilson and De Coster v.

Amazon.com, Inc.

(WD Wash), respectively;

both courts dismissed claims alleging that Amazon’s pricing policies are inherently illegal and denied dismissal of claims alleging that Amazon’s pricing policies are an unlawful restraint of trade.

In March 2022, the DC Superior Court dismissed the DC Attorney General’s lawsuit in its entirety;

the dismissal is under appeal as of January 2023.

We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in these matters.

In October 2020, BroadbandiTV, Inc.

filed a complaint against Amazon.com, Inc., Amazon.com Services LLC, and Amazon Web Services, Inc.

in the United States District Court for the Western District of Texas.

The complaint alleges, among other things, that certain Amazon Prime Video features and services infringe U.S.

9,648,388, 10,546,750, and 10,536,751, each entitled “Video-On-Demand Content Delivery System for Providing Video-On-Demand Services to TV Services Subscribers”;

10,028,026, entitled “System for Addressing On-Demand TV Program Content on TV Services Platform of a Digital TV Services Provider”;

and 9,973,825, entitled “Dynamic Adjustment of Electronic Program Guide Displays Based on Viewer Preferences for Minimizing Navigation in VOD Program Selection.” The complaint seeks an unspecified amount of damages.

In April 2022, BroadbandiTV alleged in its damages report that, in the event of a finding of liability, Amazon could be subject to $ 166 to $ 986 million in damages.

In September 2022, the court granted summary judgment, holding that the patents are invalid.

In October 2022, BroadbandiTV filed a notice of appeal.

We dispute the allegations of wrongdoing and will continue to defend ourselves vigorously in this matter.

In November 2020, the European Commission issued a Statement of Objections alleging that Amazon uses data relating to our marketplace sellers in a manner that infringes EU competition rules.

The Statement of Objections seeks to impose unspecified fines and remedial actions.

We disagree with the preliminary assertions of the European Commission and intend to defend ourselves vigorously in this matter.

The Statement of Objections sought to impose unspecified fines and remedial actions.

In December 2022, the European Commission adopted formal commitments without fines, fully resolving the investigation.

In July 2021, the Luxembourg National Commission for Data Protection (the “CNPD”) issued a decision against Amazon Europe Core S.à r.l.

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7,246,058, entitled “Detecting Voiced and Unvoiced Speech Using Both Acoustic and Nonacoustic Sensors”;

8,019,091, entitled “Voice Activity

Detector (VAD)-Based Multiple-Microphone Acoustic Noise Suppression”;

8,019,091, entitled “Voice Activity Detector (VAD)-Based Multiple-Microphone Acoustic Noise Suppression”;

8,280,072, entitled “Microphone Array with Rear Venting”;

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8,467,543, entitled “Microphone and Voice Activity Detection (VAD) Configurations for Use with Communications Systems”;

8,503,691, entitled “Virtual Microphone Arrays Using Dual Omnidirectional Microphone Array (DOMA)”;

10,779,080, entitled “Dual Omnidirectional Microphone Array (DOMA)”;

and 11,122,357, entitled “Forming Virtual Microphone Arrays Using Dual Omnidirectional Microphone Array (DOMA).” The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, interest, and injunctive relief.

In November 2022, the case was transferred to the United States District Court for the Northern District of California.

We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

In December 2021, the Italian Competition Authority (the “ICA”) issued a decision against Amazon Services Europe S.à r.l., Amazon Europe Core S.à r.l., Amazon EU S.à r.l., Amazon Italia Services S.r.l., and Amazon Italia Logistica S.r.l.

claiming that certain of our marketplace and logistics practices in Italy infringed EU competition rules.

The decision imposes a fine of € 1.13 billion and remedial actions.

claiming that certain of our marketplace and logistics practices in Italy infringe EU competition rules.

The decision imposes remedial actions and a fine of € 1.13 billion, which we are paying and will seek to recover pending conclusion of all appeals.

We believe the ICA’s decision to be without merit and intend to defend ourselves vigorously in this matter.

In January 2022, VideoLabs, Inc.

and VL Collective IP LLC filed a complaint against Amazon.com, Inc.

and Amazon Web Services, Inc.

in the United States District Court for the Western District of Texas.

The complaint alleges, among other things, that Amazon Prime Video, Amazon Glow, Amazon Echo Show, Fire TV, Fire TV Cube, Fire TV Stick, Fire Tablets, AWS Elemental MediaConvert, AWS Elemental Live, AWS Elemental Server, AWS Elemental MediaPackage, AWS Elemental MediaLive, and Amazon Elastic Transcoder infringe U.S.

7,769,238 and 8,139,878, both entitled “Picture Coding Method and Picture Decoding Method”;

and 7,970,059, entitled “Variable Length Coding Method and Variable Length Decoding Method”;

that Amazon Prime Video, AWS Elemental MediaConvert, AWS Elemental Live, AWS Elemental Server, AWS Elemental MediaPackage, AWS Elemental MediaLive, Amazon Elastic Transcoder, and Amazon Kinesis Video Streams infringe U.S.

8,605,794, entitled “Method for Synchronizing Content-Dependent Data Segments of Files”;

that Amazon Echo Show, Amazon Echo Spot, Amazon Connect, Amazon Chime, and Amazon Kinesis Video Streams infringe U.S.

7,266,682, entitled “Method and System for Transmitting Data from a Transmitter to a Receiver and Transmitter and Receiver Therefore”;

that AWS Auto Scaling and Amazon EC2 Auto Scaling infringe U.S.

6,880,156, entitled “Demand Responsive Method and Apparatus to Automatically Activate Spare Servers”;

and that Amazon Prime Video infringes U.S.

7,440,559, entitled “System and Associated Terminal, Method and Computer Program Product for Controlling the Flow of Content.” The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, interest, and injunctive relief.

In July 2022, Acceleration Bay, LLC filed a complaint against Amazon Web Services, Inc.

in the United States District Court for the District of Delaware.

The complaint alleges, among other things, that Amazon EC2, Amazon CloudFront, AWS Lambda, Amazon Lumberyard, Luna, Amazon Prime Video, Twitch, Amazon GameLift, GridMate, Amazon EKS, AWS App Mesh, and Amazon VPC infringe U.S.

6,701,344, entitled “Distributed Game Environment”;

6,714,966, entitled “Information Delivery Service”;

6,732,147, entitled “Leaving a Broadcast Channel”;

6,829,634, entitled “Broadcasting Network”;

and 6,910,069, entitled “Joining a Broadcast Channel.” The complaint seeks injunctive relief, an unspecified amount of damages, enhanced damages, interest, attorneys’ fees, and costs.

We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

In addition, we are regularly subject to claims, litigation, and other proceedings, including potential regulatory proceedings, involving patent and other intellectual property matters, taxes, labor and employment, competition and antitrust, privacy and data protection, consumer protection, commercial disputes, goods and services offered by us and by third parties, and other matters.

In November 2022, LightGuide, Inc.

filed a complaint against Amazon.com, Inc.

and Amazon.com Services LLC in the United States District Court for the Eastern District of Texas.

The complaint alleges, among other things, that Amazon’s Nike Intent Detection System used in certain fulfillment centers infringes U.S.

7,515,981, entitled “Light Guided Assembly System”;

and 9,658,614 and 10,528,036, each entitled “Light Guided Assembly System and Method.” The complaint seeks an unspecified amount of damages, enhanced damages, attorneys’ fees, costs, interest, and injunctive relief.

We dispute the allegations of wrongdoing and intend to defend ourselves vigorously in this matter.

In addition, we are regularly subject to claims, li tigation, and other proceedings, including potential regulatory proceedings, involving patent and other intellectual property matters, taxes, labor and employment, competition and antitrust, privacy and data protection, consumer protection, commercial disputes, goods and services offered by us and by third parties, and other matters.

The outcomes of our legal proceedings and other contingencies are inherently unpredictable, subject to significant uncertainties, and could be material to our operating results and cash flows for a particular period.

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No preferred stock was outstanding for any year presented.

Common shares outstanding plus shares underlying outstanding stock awards totaled 512 million, 518 million, and 523 million, as of December 31, 2019, 2020, and 2021.

Common shares outstanding plus shares underlying outstanding stock awards totaled 10.4 billion, 10.5 billion, and 10.6 billion, as of December 31, 2020, 2021, and 2022.

These totals include all vested and unvested stock awards outstanding, including those awards we estimate will be forfeited.

Stock Repurchase Activity

In February 2016, the Board of Directors authorized a program to repurchase up to $ 5.0 billion of our common stock, with no fixed expiration.

In March 2022, the Board of Directors authorized a program to repurchase up to $ 10.0 billion of our common stock, with no fixed expiration, which replaced the previous $ 5.0 billion stock repurchase authorization, approved by the Board of Directors in February 2016.

We repurchased 46.2 million shares of our common stock for $ 6.0 billion in 2022 under these programs.

There were no repurchases of common stock in 2020 or 2021.

During the period from January 1, 2022 through February 2, 2022, we repurchased 0.5 million shares of our common stock for $ 1.3 billion.

As of December 31, 2022, we have $ 6.1 billion remaining under the repurchase program.

Stock Award Plans

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Technology and content 5,061 6,645 10,621

Marketing 1,135 1,710 2,530

Sales and marketing 1,710 2,530 3,875

General and administrative 797 1,096 1,623

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As of December 31, 2022, there was $ 23.8 billion of net unrecognized compensation cost related to unvested stock-based compensation arrangements.

This compensation is recognized on an accelerated basis with approximately half of the compensation expected to be expensed in the next twelve months, and has a remaining weighted-average recognition period of 1.1 years.

The estimated forfeiture rate as of December 31, 2019, 2020, and 2021 was 27 %.

This compensation is recognized on an accelerated basis with more than half of the compensation expected to be expensed in the next twelve months, and has a remaining weighted-average recognition period of 1.1 years.

The estimated forfeiture rate as of December 31, 2020, 2021, and 2022 was 26.7 %, 26.5 %, and 26.5 %.

Changes in our estimates and assumptions relating to forfeitures may cause us to realize material changes in stock-based compensation expense in the future.

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Common Stock Available for Future Issuance

As of December 31, 2021, common stock available for future issuance to employees is 97 million shares.

As of December 31, 2022, common stock available for future issuance to employees is 1.7 billion shares.

Note 9 — INCOME TAXES

In 2019, 2020, and 2021, we recorded net tax provisions of $ 2.4 billion, $ 2.9 billion, and $ 4.8 billion.

Tax benefits relating to excess stock-based compensation deductions and accelerated depreciation deductions are reducing our U.S.

taxable income.

Cash taxes paid, net of refunds, were $ 881 million, $ 1.7 billion, and $ 3.7 billion for 2019, 2020, and 2021.

In 2020, 2021, and 2022, we recorded net tax provision (benefit) of $ 2.9 billion, $ 4.8 billion, and $( 3.2 ) billion.

taxable income is reduced by accelerated depreciation deductions and increased by the impact of capitalized research and development expenses.

Cash taxes paid, net of refunds, were $ 1.7 billion, $ 3.7 billion, and $ 6.0 billion for 2020, 2021, and 2022.

Certain foreign subsidiary earnings and losses are subject to current U.S.

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tax rules also provide for enhanced accelerated depreciation deductions by allowing the election of full expensing of qualified property, primarily equipment, through 2022.

Our federal tax provision included the election of full expensing of qualified property for 2019 and a partial election for 2020 and 2021.

The components of the provision for income taxes, net are as follows (in millions):

Our federal tax provision included a partial election for 2020 and 2021, and a full election for 2022.

Effective January 1, 2022, research and development expenses are required to be capitalized and amortized for U.S.

tax purposes.

The components of the provision (benefit) for income taxes, net are as follows (in millions):

Year Ended December 31,

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Total 743 1,922 1,522

Provision for income taxes, net $ 2,374 $ 2,863 $ 4,791

and international components of income before income taxes are as follows (in millions):

Provision (benefit) for income taxes, net $ 2,863 $ 4,791 $ ( 3,217 )

and international components of income (loss) before income taxes are as follows (in millions):

Year Ended December 31,

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International 3,959 2,272 2,289

Income before income taxes $ 13,976 $ 24,178 $ 38,151

Income (loss) before income taxes $ 24,178 $ 38,151 $ ( 5,936 )

The items accounting for differences between income taxes computed at the federal statutory rate and the provision recorded for income taxes are as follows (in millions):

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___________________

(1) Includes non-deductible stock-based compensation and excess tax benefits from stock-based compensation.

Our tax provision includes $ 1.4 billion, $ 1.8 billion, and $ 1.9 billion of excess tax benefits from stock-based compensation for 2019, 2020, and 2021.

(1) Includes non-deductible stock-based compensation and excess tax benefits or shortfalls from stock-based compensation.

Our tax provision includes $ 1.8 billion and $ 1.9 billion of excess tax benefits from stock-based compensation for 2020 and 2021, and a $ 33 million tax shortfall from stock-based compensation for 2022.

companies are eligible for a deduction that lowers the effective tax rate on certain foreign income.

This regime is referred to as the Foreign-Derived Intangible Income deduction (“FDII”).

Our provision for income taxes in 2020 was higher than in 2019 primarily due to an increase in pretax income.

This was partially offset by the impact of developments in our ongoing global tax controversies on taxes related to our foreign earnings and losses, an increase in excess tax benefits from stock-based compensation, and an increase in our foreign income deduction under FDII.

In addition, our Luxembourg operations generated earnings in 2020 and utilized deferred tax assets previously subject to valuation allowances.

This regime is referred to as the Foreign-Derived Intangible Income deduction.

Our provision for income taxes in 2021 was higher than in 2020 primarily due to an increase in pretax income.

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in Q4 2021, resulting in the utilization of $ 2.6 billion of Luxembourg deferred tax assets previously subject to a valuation allowance.

We generated an income tax benefit in 2022 as compared to a provision for income taxes in 2021 primarily due to a decrease in pretax income and an increase in the foreign income deduction.

This was partially offset by a reduction in excess tax benefits from stock-based compensation and a decrease in the tax impact of foreign earnings and losses driven by a decline in the favorable effects of corporate restructuring transactions.

The foreign income deduction benefit recognized in 2022 reflects a change in our application of tax regulations related to the computation of qualifying foreign income and includes an income tax benefit of approximately $ 655 million related to years prior to 2022.

We intend to invest substantially all of our foreign subsidiary earnings, as well as our capital in our foreign subsidiaries, indefinitely outside of the U.S.

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Operating lease liabilities 15,399 18,285

Capitalized research and development — 6,824

Other items 603 1,023

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(1) Deferred tax assets are presented after tax effects and net of tax contingencies.

(2) Relates primarily to deferred tax assets that would only be realizable upon the generation of net income in certain foreign taxing jurisdictions.

(2) Relates primarily to deferred tax assets that would only be realizable upon the generation of net income in certain foreign taxing jurisdictions or future capital gains, as well as tax credits.

Our valuation allowances primarily relate to foreign deferred tax assets, including substantially all of our foreign net operating loss carryforwards as of December 31, 2022.

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As of December 31, 2021 and 2022, we had accrued interest and penalties, net of federal income tax benefit, related to tax contingencies of $ 110 million and $ 103 million.

Interest and penalties, net of federal income tax benefit, recognized for the years ended December 31, 2019, 2020, and 2021 was $ 4 million, $( 48 ) million, and $ 28 million.

We are under examination, or may be subject to examination, by the Internal Revenue Service (“IRS”) for the calendar year 2016 and thereafter.

Interest and penalties, net of federal income tax benefit, recognized for the years ended December 31, 2020, 2021, and 2022 were $( 48 ) million, $ 28 million, and $( 7 ) million.

We are under examination, or may be subject to examination, by the Internal Revenue Service for the calendar year 2016 and thereafter.

These examinations may lead to ordinary course adjustments or proposed adjustments to our taxes or our net operating losses with respect to years under examination as well as subsequent periods.

We resolved the audits of tax years 2007 through 2015 with the IRS for amounts that were materially consistent with our accrual.

We are also subject to taxation in various states and other foreign jurisdictions including China, France, Germany, India, Japan, Luxembourg, and the United Kingdom.

We are under, or may be subject to, audit or examination and additional assessments by the relevant authorities in respect of these particular jurisdictions primarily for 2011 and thereafter.

We are currently disputing tax assessments in multiple jurisdictions, including with respect to the allocation and characterization of income.

In September 2022, the Luxembourg Tax Authority (“LTA”) denied the tax basis of certain intangible assets that we distributed from Luxembourg to the U.S.

We believe the LTA’s position is without merit and intend to defend ourselves vigorously in this matter.

In February 2023, we received a decision by the Indian Tax Authority (“ITA”) that tax applies to cloud services fees paid to the U.S.

We will need to remit taxes on the services in question, including for a portion of prior years, until this matter is resolved, which payments could be significant in the aggregate.

We believe the ITA’s decision is without merit, we intend to defend our position vigorously, and we expect to recoup taxes paid.

If this matter is adversely resolved, we would reflect significant additional tax expense, including for taxes previously paid.

In October 2014, the European Commission opened a formal investigation to examine whether decisions by the tax authorities in Luxembourg with regard to the corporate income tax paid by certain of our subsidiaries comply with European Union rules on state aid.

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We will continue to defend ourselves vigorously in this matter.

We are also subject to taxation in various states and other foreign jurisdictions including China, France, Germany, India, Japan, Luxembourg, and the United Kingdom.

We are under, or may be subject to, audit or examination and additional assessments by the relevant authorities in respect of these particular jurisdictions primarily for 2009 and thereafter.

Changes in tax laws, regulations, administrative practices, principles, and interpretations may impact our tax contingencies.

The timing of the resolution of income tax controversies is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued.

Due to various factors, including the inherent complexities and uncertainties of the judicial, administrative, and regulatory processes in certain jurisdictions, the timing of the resolution of income tax controversies is highly uncertain, and the amounts ultimately paid, if any, upon resolution of the issues raised by the taxing authorities may differ from the amounts accrued.

It is reasonably possible that within the next twelve months we will receive additional assessments by various tax authorities or possibly reach resolution of income tax controversies in one or more jurisdictions.

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North America, International, and AWS.

We allocate to segment results the operating expenses “Fulfillment,” “Technology and content,” “Marketing,” and “General and administrative” based on usage, which is generally reflected in the segment in which the costs are incurred.

We allocate to segment results the operating expenses “Fulfillment,” “Technology and content,” “Sales and marketing,” and “General and administrative” based on usage, which is generally reflected in the segment in which the costs are incurred.

The majority of technology infrastructure costs are allocated to the AWS segment based on usage.

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Operating expenses 227,631 272,562 318,727

Operating income $ 7,033 $ 8,651 $ 7,271

Operating income (loss) $ 8,651 $ 7,271 $ ( 2,847 )

International

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Total non-operating income (expense) 1,279 13,272 ( 18,184 )

Provision for income taxes ( 2,374 ) ( 2,863 ) ( 4,791 )

Benefit (provision) for income taxes ( 2,863 ) ( 4,791 ) 3,217

Equity-method investment activity, net of tax 16 4 ( 3 )

Net income $ 11,588 $ 21,331 $ 33,364

Net income (loss) $ 21,331 $ 33,364 $ ( 2,722 )

Net sales by groups of similar products and services, which also have similar economic characteristics, is as follows (in millions):

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(5) Includes sales of advertising services to sellers, vendors, publishers, authors, and others, through programs such as sponsored ads, display, and video advertising.

(6) Includes sales related to various other service offerings.

(6) Includes sales related to various other offerings, such as certain licensing and distribution of video content and shipping services, and our co-branded credit card agreements.

Net sales are attributed to countries primarily based on country-focused online and physical stores or, for AWS purposes, the selling entity.

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___________________

(1) Includes property and equipment added under finance leases of $ 3.8 billion, $ 5.6 billion, and $ 3.6 billion in 2019, 2020, and 2021, and under build-to-suit lease arrangements of $ 1.3 billion, $ 2.7 billion, and $ 5.6 billion in 2019, 2020, and 2021.

(2) Includes property and equipment added under finance leases of $ 10.6 billion, $ 7.7 billion, and $ 3.5 billion in 2019, 2020, and 2021, and under build-to-suit lease arrangements of $ 0 million , $ 130 million, and $ 51 million in 2019, 2020, and 2021.

property and equipment, net and operating leases were $ 69.8 billion, $ 109.5 billion, and $ 155.0 billion, in 2019, 2020, and 2021, and non-U.S.

property and equipment, net and operating leases were $ 28.0 billion, $ 41.2 billion, and $ 61.3 billion in 2019, 2020, and 2021.

(1) Includes property and equipment added under finance leases of $ 5.6 billion, $ 3.6 billion, and $ 422 million in 2020, 2021, and 2022, and under build-to-suit lease arrangements of $ 2.7 billion, $ 5.6 billion, and $ 3.2 billion in 2020, 2021, and 2022.

(2) Includes property and equipment added under finance leases of $ 7.7 billion, $ 3.5 billion, and $ 253 million in 2020, 2021, and 2022, and under build-to-suit lease arrangements of $ 130 million, $ 51 million, and $ 20 million in 2020, 2021, and 2022.

property and equipment, net and operating leases were $ 109.5 billion, $ 155.0 billion, and $ 180.0 billion, as of December 31, 2020, 2021, and 2022, and non-U.S.

property and equipment, net and operating leases were $ 41.2 billion, $ 61.3 billion, and $ 72.9 billion as of December 31, 2020, 2021, and 2022.

Except for the U.S., property and equipment, net and operating leases in any single country were less than 10% of consolidated property and equipment, net and operating leases.

9 unchanged sentences

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 8. Financial Statements and Supplementary Data