AbbVie 2012 Annual Report Download - page 71

AbbVie Inc. and Subsidiaries
Notes to Combined Financial Statements
Note 1 Basis of Presentation
The principal business of AbbVie Inc. (AbbVie or the company) is the discovery, development,
manufacture and sale of a broad line of proprietary pharmaceutical products. Substantially all of
AbbVie’s U.S. sales are to three wholesalers. Outside the United States, products are sold primarily to
health care providers or through distributors, depending on the market served.
On January 1, 2013, AbbVie became an independent company as a result of the distribution by Abbott
Laboratories (Abbott) of 100 percent of the outstanding common stock of AbbVie to Abbott’s
shareholders. AbbVie was incorporated in Delaware on April 10, 2012. Abbott’s Board of Directors
approved the distribution of its shares of AbbVie on November 28, 2012. AbbVie’s Registration
Statement on Form 10 was declared effective by the U.S. Securities and Exchange Commission on
December 7, 2012. On January 1, 2013, Abbott’s shareholders of record as of the close of business on
December 12, 2012, received one share of AbbVie common stock for every one share of Abbott’s
common stock held as of the record date. AbbVie’s common stock began trading ‘‘regular-way’’ under
the ticker symbol ‘‘ABBV’’ on the New York Stock Exchange on January 2, 2013.
The accompanying combined financial statements have been prepared on a stand-alone basis and are
derived from Abbott’s consolidated financial statements and accounting records as if the former
research-based pharmaceutical business of Abbott had been part of AbbVie for all periods presented.
The combined financial statements reflected AbbVie’s financial position, results of operations and cash
flows as its business was operated as part of Abbott prior to the distribution, in conformity with U.S.
generally accepted accounting principles.
The combined financial statements included the allocation of certain assets and liabilities that have
historically been held at the Abbott corporate level but which are specifically identifiable or allocable to
AbbVie. Prior to 2012, cash and equivalents, short-term investments and restricted funds held by
Abbott were not allocated to AbbVie unless those assets were held by an entity that was transferred to
AbbVie. As of December 31, 2012, AbbVie’s combined balance sheet reflected the direct holdings for
AbbVie legal entities. All intracompany transactions and accounts have been eliminated. Prior to 2012,
all intercompany transactions between AbbVie and Abbott were considered to be effectively settled in
the combined financial statements at the time the transaction was recorded. As a result, the total net
effect of settlement of these intercompany transactions was reflected in the combined statements of
cash flows as a financing activity and in the combined balance sheet as net parent company investment
in AbbVie. As of December 31, 2012, outstanding intercompany transactions between AbbVie and
Abbott are reflected as Due from Abbott Laboratories and Due to Abbott Laboratories in the
combined balance sheet.
AbbVie’s combined financial statements included an allocation of expenses related to certain Abbott
corporate functions, including senior management, legal, human resources, finance, information
technology and quality assurance. These expenses have been allocated to AbbVie based on direct usage
or benefit where identifiable, with the remainder allocated on a pro rata basis of revenues, headcount,
square footage, number of transactions or other measures. AbbVie considers the expense allocation
methodology and results to be reasonable for all periods presented. However, the allocations may not
be indicative of the actual expenses that would have been incurred had AbbVie operated as an
independent, publicly-traded company for the periods presented.
AbbVie employees participated in various benefit and stock-based compensation programs maintained
by Abbott. A portion of the cost of those programs was included in AbbVie’s financial statements.
However, AbbVie’s combined balance sheet does not include any equity related to stock-based
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