Amgen 2009 Annual Report Download - page 126

AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2009
1. Summary of significant accounting policies
Business
Amgen Inc. (including its subsidiaries, referred to as “Amgen,” “the Company,” “we,” “our” and “us”) is a
global biotechnology medicines company that discovers, develops, manufactures and markets medicines for
grievous illnesses. We concentrate on innovating novel medicines based on advances in cellular and molecular
biology and we operate in one business segment, human therapeutics.
Principles of consolidation
The consolidated financial statements include the accounts of Amgen as well as its wholly owned sub-
sidiaries. We do not have any significant interests in any variable interest entities. All material intercompany
transactions and balances have been eliminated in consolidation.
Use of estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the Unit-
ed States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in
the consolidated financial statements and accompanying notes. Actual results may differ from those estimates.
Financial Accounting Standards Board Accounting Standards Codification
Effective July 1, 2009, the Financial Accounting Standards Board (“FASB”) Accounting Standards Codifica-
tion (“ASC” or “Codification”) became the authoritative source of GAAP. All existing FASB accounting
standards and guidance were superseded by the ASC. Instead of issuing new accounting standards in the form of
statements, staff positions and Emerging Issues Task Force abstracts, the FASB now issues Accounting Stan-
dards Updates that update the Codification. Rules and interpretive releases of the Securities and Exchange
Commission (“SEC”) under authority of federal securities laws continue to be additional sources of authoritative
GAAP for SEC registrants.
Change in method of accounting for convertible debt instruments
Effective January 1, 2009, we adopted a new accounting standard that changed the method of accounting for
convertible debt that may be partially or wholly settled in cash. As required by this new standard, we retrospectively
applied this change in accounting to all prior periods for which we had applicable outstanding convertible debt. Un-
der this method of accounting, the debt and equity components of our convertible notes are bifurcated and accounted
for separately. The equity components of our convertible notes, including our 2011 Convertible Notes, 2013 Con-
vertible Notes and 2032 Modified Convertible Notes, are included in “Common stock and additional paid-in capital”
in the Consolidated Balance Sheets, with a corresponding reduction in the carrying values of these convertible notes
as of the date of issuance or modification, as applicable. The reduced carrying values of our convertible notes are be-
ing accreted back to their principal amounts through the recognition of non-cash interest expense. This results in
recognizing interest expense on these borrowings at effective rates approximating what we would have incurred had
we issued nonconvertible debt with otherwise similar terms. See Note 2, “Change in method of accounting for con-
vertible debt instruments” and Note 16, “Financing arrangements.”
Product sales
Product sales primarily consist of sales of Aranesp®(darbepoetin alfa), EPOGEN®(Epoetin alfa), Neu-
lasta®(pegfilgrastim), NEUPOGEN®(Filgrastim) and Enbrel®(etanercept). Sales of our products are recognized
when shipped and title and risk of loss have passed. Product sales are recorded net of accruals for estimated re-
bates, wholesaler chargebacks, discounts and other deductions (collectively “sales deductions”) and returns.
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