AbbVie 2014 Annual Report Download - page 73

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Property and Equipment
as of December 31 (in millions) 2014 2013
Land $48$50
Buildings 1,228 1,263
Equipment 5,324 5,214
Construction in progress 505 382
Property and equipment, gross 7,105 6,909
Less accumulated depreciation (4,620) (4,611)
Property and equipment, net $ 2,485 $ 2,298
Depreciation for property and equipment is recorded on a straight-line basis over the estimated useful
lives of the assets. The estimated useful life for buildings ranges from 10 to 50 years and five to 20 years
for equipment. Leasehold improvements are amortized over the life of the related facility lease (including
any renewal periods, if appropriate) or the asset, whichever is shorter. Depreciation expense for the years
ended December 31, 2014, 2013 and 2012 was $383 million, $388 million and $525 million, respectively.
Equipment includes certain computer software and software development costs incurred in connection with
developing or obtaining software for internal use and is amortized over three to 10 years. Assets under
capital leases included in property and equipment in the consolidated balance sheets are not material.
Litigation
Loss contingency provisions are recorded for probable losses when it is probable that a liability has
been incurred and the amount of the liability can be reasonably estimated based on existing information.
When a best estimate cannot be made, the minimum loss contingency amount in a probable range is
recorded. Legal fees are expensed as incurred.
Product Liability
AbbVie accrues for product liability claims, on an undiscounted basis, when it is probable that a
liability has been incurred and the amount of the liability can be reasonably estimated based on existing
information. The liabilities are adjusted quarterly as additional information becomes available. Receivables
for insurance recoveries, if any, for product liability claims are recorded as assets, on an undiscounted basis,
when it is probable that a recovery will be realized.
Business Combinations
Results of operations of acquired companies are included in AbbVie’s results of operations beginning
on the respective acquisition dates. Assets acquired and liabilities assumed are recognized at the date of
acquisition at their respective fair values. Any excess of the fair value consideration transferred over the
estimated fair values of the net assets acquired is recognized as goodwill. Contingent consideration is
recognized at the estimated fair value on the acquisition date, which is determined by utilizing a probability
weighted discounted cash flow model. Subsequent changes to the fair value of contingent payments are
recognized in other income, net in the consolidated statements of earnings. The fair value of assets
acquired and liabilities assumed in certain cases may be subject to revision based on the final
determination of fair value. Legal costs, due diligence costs, business valuation costs and all other business
acquisition costs are expensed when incurred.
Goodwill and Intangible Assets
Intangible assets acquired in a business combination are recorded at fair value using a discounted cash
flow model. The discounted cash flow model requires assumptions about the timing and amount of future net
2014 Form 10-K 67