Amgen 2009 Annual Report Download - page 76
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(13) 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 retro-
spectively applied this change in accounting to all prior periods for which we had applicable outstanding
convertible debt. Under 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 Convertible 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 being 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 non-
convertible debt with otherwise similar terms. Included in net income for 2009, 2008, 2007, 2006 and 2005
is non-cash interest expense of $250 million ($155 million, net of tax), $235 million ($144 million, net of
tax), $168 million ($88 million, net of tax) , $197 million ($141 million, net of tax) and $67 million ($41
million, net of tax), respectively, related to the amortization of the discounts resulting from the adoption of
the new accounting standard. See Note 1, “Summary of significant accounting policies,” Note 2, “Change in
method of accounting for convertible debt instruments” and Note 16, “Financing arrangements” to the Con-
solidated Financial Statements for further information.
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