Amgen 2009 Annual Report Download - page 90

net gains of $27 million. Interest and other income, net increased 14% for the year ended December 31, 2008
compared to 2007. This increase is primarily due to higher net gains on sales of investments of $79 million;
higher interest income of $20 million, principally due to higher portfolio investment returns; partially offset by
higher foreign currency exchange net losses of $34 million.
Income taxes
Our effective tax rate was 11.5%, 19.2% and 18.9% for 2009, 2008 and 2007, respectively. Our effective tax
rate for 2009 decreased over 2008 primarily due to: (i) the favorable resolution of certain prior years’ matters
with tax authorities, (ii) higher profits and manufacturing in Puerto Rico, which are taxed under an incentive
grant, and (iii) a tax benefit from adjustments to previously established deferred taxes arising from changes in
California tax law enacted in 2009 and effective for subsequent periods. The resolution of prior years’ tax matters
recognized in the year ended December 31, 2009 reduced the effective tax rate by 4.2%.
Our effective tax rate for 2008 remained relatively unchanged from 2007. Although the 2007 effective tax
rate benefited from the favorable resolution of certain income tax examinations, this benefit was substantially
offset by the write-off of nondeductible acquired IPR&D costs, resulting in a comparable effective tax rate be-
tween the two years.
As permitted under U.S. GAAP, 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 “Summary of Critical Accounting Policies – Income taxes” and Note 5, “Income taxes” to the Con-
solidated Financial Statements for further discussion.)
Recent accounting pronouncements
In June 2009, the Financial Accounting Standards Board (“FASB”) issued a new accounting standard which
amends guidance regarding consolidation of variable interest entities to address the elimination of the concept of
a qualifying special purpose entity. This standard also replaces the quantitative-based risks and rewards calcu-
lation for determining which enterprise has a controlling financial interest in a variable interest entity with an
approach focused on identifying which enterprise has the power to direct the activities of the variable interest en-
tity and the obligation to absorb losses of the entity or the right to receive benefits from the entity. Additionally,
this standard requires any enterprise that holds a variable interest in a variable interest entity to make ongoing as-
sessments of whether it has a controlling financial interest in the variable interest entity and to provide enhanced
disclosures that will provide users of financial statements with more transparent information about an enterprise’s
involvement in the variable interest entity. This standard is effective for us beginning January 1, 2010. The adop-
tion of this standard is not expected to have a material impact on our consolidated results of operations, financial
position or cash flows.
In October 2009, the FASB issued a new accounting standard which amends guidance on accounting for rev-
enue arrangements involving the delivery of more than one element of goods and/or services. This standard
addresses the unit of accounting for arrangements involving multiple deliverables and removes the previous
separation criteria that objective and reliable evidence of fair value of any undelivered item must exist for the de-
livered item to be considered a separate unit of accounting. This standard also addresses how the arrangement
consideration should be allocated to each deliverable. Finally, this standard expands disclosures related to multi-
ple element revenue arrangements. This standard is effective for us beginning January 1, 2011. The adoption of
this standard is not expected to have a material impact on our consolidated results of operations, financial posi-
tion or cash flows.
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