AbbVie 2012 Annual Report Download - page 98

government sought to determine whether any of these activities violated civil and/or criminal laws,
including the Federal False Claims Act, the Food, Drug and Cosmetic Act, and the Anti-Kickback
Statute in connection with Medicare and/or Medicaid reimbursement to third parties. The state
Attorneys General offices sought to determine whether any of these activities violated various state
laws, including state consumer fraud/protection statutes. AbbVie recorded charges of $1.5 billion in the
third quarter of 2011 and $100 million in the first quarter of 2012 related to civil and criminal claims
arising from this matter. In May 2012, AbbVie reached resolution of all Depakote-related federal
claims, Medicaid-related claims with 49 states and the District of Columbia, and consumer protection
claims with 45 states and the District of Columbia. In 2012, AbbVie paid approximately $1.6 billion for
the settlement. The payments were material to AbbVie’s cash flows in 2012.
The recorded accrual balance for litigation at December 31, 2012 was not significant. Within the next
year, other legal proceedings may occur that may result in a change in the estimated loss accrued by
AbbVie. While it is not feasible to predict the outcome of all other proceedings and exposures with
certainty, management believes that their ultimate disposition should not have a material adverse effect
on AbbVie’s financial position, cash flows, or results of operations.
Note 13 Related Party Transactions with Abbott
In the historical financial statements, Abbott provided AbbVie certain services, which included
administration of treasury, payroll, employee compensation and benefits, travel and meeting services,
public and investor relations, real estate services, internal audit, telecommunications, information
technology, corporate income tax and selected legal services. Some of these services will be provided to
AbbVie on a temporary basis after the separation. The financial information in these combined
financial statements does not necessarily include all the expenses that would have been incurred had
AbbVie been a separate, stand-alone entity. As such, the financial information herein may not
necessarily reflect the combined financial position, results of operations and cash flows of AbbVie in
the future or what they would have been had AbbVie been a separate, stand-alone entity during the
periods presented. Management believes that the methods used to allocate expenses to AbbVie are
reasonable. The allocation methods included relative sales, headcount, square footage, number of
transactions or other measures. These allocations totaled $838 million, $801 million and $677 million
for the years ended December 31, 2012, 2011 and 2010, respectively. In 2012, AbbVie incurred
$288 million of separation-related expenses, including legal, information technology and regulatory fees,
which were principally classified in SG&A. 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.
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