Accounting

AMAZON ANALYSIS OF INVENTORY

Inventory Accounting Policy 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 Amazon.com 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.

Amazon.com provides Fulfillment by Amazon services in connection with certain of the sellers' programs. Third-party sellers maintain ownership of their inventory, regardless of whether fulfillment is provided by Amazon.com or the third-party sellers, and therefore these products are not included in the inventories.

Amazon.com also purchases electronic device components from a variety of suppliers and uses several contract manufacturers to provide manufacturing services for the products. During the normal course of business, in order to manage manufacturing lead times and help ensure adequate supply, Amazon.com enters into agreements with contract manufacturers and suppliers for certain electronic device components. A portion of Amazon.com's reported purchase commitments arising from these agreements consists of rm, non-cancellable commitments. These commitments are based on forecasted customer demand. If Amazon.com reduces these commitments, Amazon.com may incur additional costs. Amazon.com also has rm, non-cancellable commitments for certain products offered in the Whole Foods Market stores.