AbbVie 2014 Annual Report Download - page 72

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maintained when, based on currently available information, it is more likely than not that all or a portion
of a deferred tax asset will not be realized.
In AbbVie’s financial statements for periods prior to 2013, income tax expense and tax balances were
calculated as if AbbVie was a separate taxpayer, although AbbVie’s operations were historically included in
tax returns filed by Abbott. After separation, AbbVie’s income tax expense and income tax balances
represent AbbVie’s federal, state and foreign income taxes as an independent company. As a result, its
effective tax rate and income tax balances are not necessarily comparable to those for periods prior to the
separation.
Cash and Equivalents
Cash and equivalents include time deposits, money market funds, and treasury securities with original
maturities at the time of purchase of three months or less.
Investments
Short-term investments consist primarily of time deposits and held-to-maturity debt. 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 loss in AbbVie’s
consolidated balance sheets. 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 fair 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 fair 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 other income, net and the available-for-sale securities’ unrealized loss is recognized
as a charge to income and removed from accumulated other comprehensive loss (AOCI).
Accounts Receivable
Accounts receivable are stated at their net realizable value. The allowance against gross accounts
receivable reflects the best estimate of probable losses inherent in the receivables portfolio determined on
the basis of historical experience, specific allowances for known troubled accounts and other currently
available information. Accounts receivable are written off after all reasonable means to collect the full
amount (including litigation, where appropriate) have been exhausted. The allowance was $74 million at
December 31, 2014 and $88 million at December 31, 2013.
Inventories
Inventories are valued at the lower of cost (first-in, first-out basis) or market. Cost includes material
and conversion costs. Inventories, net, consist of the following:
as of December 31 (in millions) 2014 2013
Finished goods $ 341 $ 485
Work-in-process 629 404
Materials 154 261
Inventories, net $1,124 $1,150
66 2014 Form 10-K