Amgen 2010 Annual Report Download - page 130

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position
will be sustained on examination by the taxing authorities based on the technical merits of the position. The tax
benefit recognized in the financial statements for a particular tax position is based on the largest benefit that is more
likely than not to be 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 obtained 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 4, Income taxes.
Collaborative arrangements
Certain arrangements we have entered into regarding the R&D, manufacture and/or commercialization of
products and product candidates are considered collaborative arrangements. 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. For collaborative arrangements where it is determined that we are the
principal participant, revenue generated and costs incurred with third parties are recorded on a gross basis in our
consolidated financial statements. See Note 6, Collaborative arrangements.
Cash equivalents
We consider cash equivalents to be only those investments which are highly liquid, readily convertible to cash
and which mature within three months from date of purchase.
Available-for-sale investments
We consider our investment portfolio available-for-sale and, accordingly, these investments are recorded at fair
value with unrealized gains and losses generally recorded in other comprehensive income. See Note 10,
Available-for-sale securities and Note 17, Fair value measurement.
Inventories
Inventories are stated at the lower of cost or market. Cost, which includes amounts related to materials, labor
and overhead, is determined in a manner which approximates the first-in, first-out method. The Company
capitalizes inventories produced in preparation for product launches when the related product candidates are
considered to have a high probability of regulatory approval and the related costs are expected to be recoverable
through the commercialization of the product. See Note 11, Inventories.
Derivatives
We recognize all of our derivative instruments as either assets or liabilities at fair value in the Consolidated
Balance Sheets. The accounting for changes in the fair value of a derivative instrument depends on whether it has
been formally designated and qualifies as part of a hedging relationship under the applicable accounting standards
and, further, on the type of hedging relationship. For derivatives formally designated as hedges, we assess both at
inception and quarterly thereafter, whether the hedging derivatives are highly effective in offsetting changes in
either the fair value or cash flows of the hedged item. Our derivatives that are not designated and do not qualify as
hedges are adjusted to fair value through current earnings. See Note 17, Fair value measurement and Note 18,
Derivative instruments.
F-8
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)