income tax paid by certain of our subsidiaries comply with European Union rules on state aid. If this matter is adversely resolved, Luxembourg may be required to assess, and we may be required to pay, additional amounts with respect to current and prior periods and our taxes in the future could increase. Although we believe our tax estimates are reasonable, the final outcome of tax audits, investigations, and any related litigation could be materially different from our historical income tax provisions and accruals. Developments in an audit, litigation, or the relevant laws, regulations, administrative practices, principles, and interpretations could have a material effect on our operating results or cash flows in the period or periods for which that development occurs, as well as for prior and subsequent periods. For instance, the IRS is seeking to increase our U.S. taxable income related to transfer pricing with our foreign subsidiaries for transactions undertaken in 2005 and 2006, and we are currently contesting the matter in U.S. Tax Court. In addition to the risk of additional tax for 2005 and 2006 transactions, if this litigation is adversely determined or if the IRS were to seek transfer pricing adjustments of a similar nature for transactions in subsequent years, Amazon could be subject to significant additional tax liabilities. 

Recent Accounting Pronouncements 

See Item 8 of Part II, “Financial Statements and Supplementary Data—Note 1—Description of Business and Accounting Policies—Recent Accounting Pronouncements.” 

Liquidity and Capital Resources 

Our financial focus is on long-term, sustainable growth in free cash flow. Free cash flow, a non-GAAP financial measure, was $1.9 billion for 2014 , compared to $2.0 billion and $395 million for 2013 and 2012 . See “Results of Operations—Non-GAAP Financial Measures” for a reconciliation of free cash flow to cash provided by operating activities. The decrease in free cash flow for 2014, compared to the comparable prior year period, was due to increased cash capital expenditures partially offset by higher operating cash flows. The increase in free cash flow for 2013, compared to the comparable prior year period, was due to higher operating cash flows and decreased cash capital expenditures. Operating cash flows and free cash flows can be volatile and are sensitive to many factors, including changes in working capital, the timing and magnitude of capital expenditures, including our decision to finance property and equipment under capital leases and other financing arrangements, and our net income (loss). Working capital at any specific point in time is subject to many variables, including seasonality, inventory management and category expansion, the timing of cash receipts and payments, vendor payment terms, and fluctuations in foreign exchange rates. 

Our principal sources of liquidity are cash flows generated from operations and our cash, cash equivalents, and marketable securities balances, which, at fair value, were $17.4 billion , $12.4 billion , and $11.4 billion as of December 31, 2014 , 2013 , and 2012 . Cash and cash equivalents also reflects net proceeds from the issuance of