AbbVie 2012 Annual Report Download - page 73

AbbVie employees participate in defined benefit pension and other post-employment plans sponsored
by Abbott, which include participants of Abbott’s other businesses. Such plans are accounted for as
multiemployer plans in the historical financial statements for AbbVie and, as a result, no asset or
liability was recorded by AbbVie in the historical combined balance sheets to recognize the funded
status of these plans. In 2013, subsequent to the separation from Abbott, AbbVie’s portion of the
defined benefit pension plans will be separated from the Abbott defined benefit pension plans at which
time the funded status for each plan will be reflected in the AbbVie combined balance sheets using a
December 31, 2012 measurement date. In addition to participation in defined benefit pension and
other post-employment plans sponsored by Abbott, AbbVie is the sole sponsor for certain defined
benefit pension and other post-employment plans. The funded status of these plans have been recorded
in the combined balance sheets for AbbVie at December 31, 2012.
Refer to Note 9 for information regarding AbbVie’s pension and post-employment plans.
Income Taxes
Income taxes on earnings reflect the annual effective rates, including charges for interest and penalties.
Deferred income taxes are provided for the tax effect of temporary differences between the tax bases
of assets and liabilities and their reported amounts in the financial statements based on enacted tax
laws and rates. The combined balance sheet as of December 31, 2011 has been appropriately revised to
increase deferred tax liabilities in long-term liabilities by $156 million, decrease deferred tax assets in
other assets by $136 million, and decrease net parent company investment in AbbVie by $292 million to
properly reflect temporary differences attributable to AbbVie assets.
In AbbVie’s combined financial statements, income tax expense and deferred tax balances have been
calculated on a separate tax return basis although AbbVie’s operations have historically been included
in the tax returns filed by the respective Abbott entities of which the AbbVie business is a part. In the
future, as a stand-alone entity, AbbVie will file tax returns on its own behalf and its deferred taxes and
effective tax rate may differ from those in the historical periods.
AbbVie does not maintain an income taxes payable to/from account with Abbott. With the exception of
certain entities outside the United States that transferred to AbbVie at separation, AbbVie is deemed
to have settled current tax balances with the Abbott tax paying entities in the respective jurisdictions.
These settlements were reflected as changes in net parent company investment.
Cash and Equivalents
Cash and equivalents include time deposits and money market funds with original maturities of three
months or less.
Investments
Short-term investments consist primarily of time deposits and U.S. Treasury securities and are carried
at fair value. Investments in marketable equity securities are classified as available-for-sale and are
recorded at fair value with any unrealized holding gains or losses, net of tax, included in accumulated
other comprehensive income (loss). Investments in equity securities that are not traded on public stock
exchanges and held-to-maturity debt securities are recorded at cost.
AbbVie reviews the carrying value of investments each quarter to determine whether an other than
temporary decline in market value exists. AbbVie considers factors affecting the investee, factors
affecting the industry the investee operates in and general equity market trends. The company
considers the length of time an investment’s market value has been below cost and the near-term
prospects for recovery. When AbbVie determines that an other than temporary decline has occurred,
the cost basis investment is written down with a charge to income and the available-for-sale securities’
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