Amgen 2009 Annual Report Download - page 128

AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
SG&A expenses also include costs and cost recoveries associated with certain collaborative arrangements
including the co-promotion agreement with Pfizer Inc. (“Pfizer”) (formerly Wyeth). Net payment or reimburse-
ment of SG&A costs for collaborations is recognized when the obligations are incurred or as we become entitled
to the cost recovery. See Note 7, “Collaborative arrangements.”
Advertising costs are expensed as incurred. For the years ended December 31, 2009, 2008 and 2007, adver-
tising costs were $95 million, $81 million and $93 million, respectively.
Acquired in-process research and development
For business combinations that occurred prior to January 1, 2009, under the then existing accounting rules
the estimated fair value of acquired in-process R&D (“IPR&D”) projects, which had not reached technological
feasibility at the date of acquisition and which did not have an alternative future use, were immediately expensed.
In 2007, we wrote-off $270 million and $320 million of acquired IPR&D related to the Ilypsa, Inc. (“Ilypsa”) and
Alantos Pharmaceuticals Holding, Inc. (“Alantos”) acquisitions, respectively. Acquired IPR&D for acquisitions
prior to January 1, 2009 is considered part of total R&D expense. See Note 3, “Acquisitions.”
For business combinations that occur on or after January 1, 2009, under current GAAP the estimated fair val-
ues of acquired IPR&D projects which have not reached technological feasibility at the date of acquisition are
capitalized and subsequently tested for impairment through completion of the development process, at which
point the capitalized amounts are amortized over their estimated useful life. If a project is abandoned rather than
completed, all capitalized amounts are written-off immediately.
Share based payments
We have employee compensation plans under which various types of stock-based instruments are granted.
All share-based payments to employees, including grants of employee stock options, are recognized in the Con-
solidated Statements of Income as compensation expense (based on their estimated fair values) generally over the
vesting period of the awards. See Note 4, “Employee stock-based payments.”
Income taxes
We provide for income taxes based on pretax income, applicable tax rates and tax planning opportunities
available in the various jurisdictions in which we operate.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax posi-
tion will be sustained on examination by the taxing authorities based on the technical merits of the position. The
tax benefits recognized in the financial statements on a particular tax position are measured based on the largest
benefit that has a greater than a 50% likelihood of being realized upon settlement. The amount of unrecognized
tax benefits (“UTBs”) is adjusted as appropriate for changes in facts and circumstances, such as significant
amendments to existing tax law, new regulations or interpretations by the taxing authorities, new information ob-
tained during a tax examination, or resolution of an examination. We recognize both accrued interest and
penalties, where appropriate, related to UTBs in income tax expense. See Note 5, “Income taxes.”
Collaborative arrangements
Effective January 1, 2009, we adopted a new accounting standard that provides financial statement pre-
sentation and disclosure guidance for collaborative arrangements, as defined, which include certain arrangements
we have entered into regarding the R&D, manufacture and/or commercialization of products and product candi-
dates.
Under this standard, a collaborative arrangement is defined as a contractual arrangement that involves a
joint operating activity. These arrangements involve two or more parties who are both (i) active participants in
the activity and (ii) exposed to significant risks and rewards dependent on the commercial success of the activity.
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