Amgen 2007 Annual Report Download - page 91

As permitted in Accounting Principles Board Opinion (“APB”) No. 23, “Accounting for Income Taxes —
Special Areas,” we do not provide for U.S. income taxes on undistributed earnings of our foreign operations that
are intended to be invested indefinitely outside of the United States.
(See Note 5, “Income taxes” to the Consolidated Financial Statements for further discussion.)
Recent and proposed accounting pronouncements
In December 2007, the FASB issued Statement of Financial Accounting Standards (“SFAS”) No. 141(R),
“Business Combinations” (“SFAS 141(R)”) and SFAS No. 160, “Accounting and Reporting of Noncontrolling
Interests in Consolidated Financial Statements — an amendment of ARB No. 51” (“SFAS 160”). These standards
will significantly change the accounting and reporting for business combination transactions and noncontrolling
(minority) interests in consolidated financial statements, including capitalizing at the acquisition date the fair
value of acquired IPR&D, and remeasuring and writing down these assets, if necessary, in subsequent periods
during their development. These new standards will be applied prospectively for business combinations that oc-
cur on or after January 1, 2009, except that presentation and disclosure requirements of SFAS 160 regarding
noncontrolling interests shall be applied retrospectively.
In December 2007, the FASB ratified EITF No. 07-1, “Accounting for Collaborative Agreements” (“EITF
07-1”). EITF 07-1 provides guidance regarding financial statement presentation and disclosure of collaborative
arrangements, as defined, which includes arrangements the Company has entered into regarding development and
commercialization of products and product candidates. EITF 07-1 is effective for the Company as of January 1,
2009, and its adoption is not expected to have a material impact on our consolidated results of operations or
financial position.
In June 2007, the FASB ratified EITF No. 07-3, “Accounting for Nonrefundable Advance Payments for
Goods or Services to Be Used in Future Research and Development Activities” (“EITF 07-3”), which requires
that nonrefundable advance payments for goods and services that will be used or rendered in future R&D activ-
ities pursuant to executory contractual arrangements be deferred and recognized as an expense in the period that
the related goods are delivered or services are performed. EITF No. 07-3 became effective as of January 1, 2008
and it did not have a material impact on our consolidated results of operations or financial position upon adop-
tion.
In September 2006, the FASB issued SFAS No. 157, “Fair Value Measurement” (“SFAS 157”). SFAS 157
defines fair value, provides guidance for measuring fair value in U.S. generally accepted accounting principles
and expands disclosures about fair value measurements. SFAS 157 became effective as issued on January 1,
2008 and it did not have a material impact on our consolidated results of operations or financial position upon
adoption.
Effective January 1, 2007, we adopted FASB Interpretation No. (“FIN”) 48, “Accounting for Uncertainty in
Income Taxes — an interpretation of FASB Statement No. 109” (“FIN 48”). FIN 48 clarifies the accounting for
uncertainty in income taxes by prescribing rules for recognition, measurement and classification in our con-
solidated financial statements of tax positions taken or expected to be taken in a tax return. For tax benefits to be
recognized under FIN 48, a tax position must be more-likely-than-not to be sustained upon examination by taxing
authorities. The amount recognized is measured as the largest amount of benefit that is greater than 50% likely of
being realized upon settlement. There was no cumulative effect of applying the recognition and measurement
provisions upon adoption of FIN 48. FIN 48 also provides guidance on the balance sheet classification of li-
abilities for unrecognized tax benefits (“UTBs”) as either current or non-current depending on the expected
timing of payments. Upon adoption of FIN 48, we reclassified approximately $240 million of UTBs and related
accrued interest from current income taxes payable to other non-current liabilities. Interest and penalties related
to UTBs are classified as a component of our provision for income taxes. See Note 5, “Income taxes” to the Con-
solidated Financial Statements for further discussion.
In August 2007, the FASB exposed for public comment a proposed FSP that would change the method of
accounting for convertible debt securities that requires or permits settlement in cash either in whole or in part
upon conversion (“cash settled convertible debt securities”), which includes our convertible debt securities, and
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