Amgen 2010 Annual Report Download - page 132

Recent accounting pronouncements
In January 2010, we adopted a newly issued accounting standard which requires additional disclosure about
the amounts of and reasons for significant transfers between levels of the fair value hierarchy discussed in Note 17,
Fair value measurement. This standard also clarifies existing disclosure requirements related to the level of
disaggregation of fair value measurements for each class of assets and liabilities and disclosures about inputs and
valuation techniques used to measure fair value for both recurring and nonrecurring Level 2 and Level 3
measurements. In addition, effective for interim and annual periods beginning after December 15, 2010, this
standard requires additional disclosure and requires an entity to present disaggregated information about activity for
Level 3 fair value measurements on a gross as opposed to a net basis. As this accounting standard only requires
enhanced disclosure, its adoption did not impact our consolidated financial position, results of operations or cash
flows.
In January 2011, we adopted a newly issued accounting standard which addresses the accounting for the annual
fee due from the pharmaceutical manufacturing industry beginning January 1, 2011, mandated by the Patient
Protection and Affordable Care Act (the “PPACA”) and the companion Health Care and Education Reconciliation
Act, which made certain changes and adjustments to PPACA. We refer to these two laws collectively as the “new
healthcare reform law”. The new healthcare reform law obligates a pharmaceutical manufacturer, upon the first
gross receipt during a calendar year from prescription drug sales under any specified government program, to pay an
annual fee to the U.S. government. The new accounting standard requires the liability for the annual fee to be
estimated and recorded in full upon the first qualifying sale with a corresponding deferred cost established that is to
be amortized and recognized as an operating expense over the calendar year that it is payable using a straight-line
method of allocation unless another method better allocates the fee. We have elected to amortize this fee on a
straight-line basis and it will be recorded in SG&A expense.
2. Acquisitions
Dompé Biotec, S.p.A
On January 4, 2008, we completed the acquisition of Dompé Biotec, S.p.A (“Dompé”), a privately held
company that marketed certain of our products in Italy. This acquisition was accounted for as a business
combination. The purchase price was approximately $168 million, which included the carrying value of our
existing 49% ownership in Dompé. The purchase price paid was allocated to the net assets acquired of
approximately $63 million, principally comprised of marketing rights to marketed products, based on their
estimated fair values at the acquisition date and the excess of the purchase price over the fair values of net assets
acquired of approximately $105 million was assigned to goodwill. There was no material gain or loss related to the
reacquisition of marketing rights previously granted to Dompé as a result of this business combination. The results
of Dompé’s operations have been included in the consolidated financial statements commencing January 4, 2008.
Pro forma results of operations for the year ended December 31, 2008 assuming the acquisition of Dompé had taken
place at the beginning of 2008 would not differ significantly from the actual reported results.
3. Stock-based compensation
Our 2009 Equity Incentive Plan (the “2009 Plan”) provides for the grant of equity-based awards, including
stock options, restricted stock units and performance units, to employees and consultants of Amgen, its subsidiaries
and non-employee members of our Board of Directors. The 2009 Plan, which was approved by our stockholders on
May 6, 2009, replaced our existing equity plans (the “Prior Plans”) and no further awards may be made under these
Prior Plans. The 2009 Plan authorizes the issuance of 100 million shares of our common stock. Under the terms of
the 2009 Plan, the pool of available shares that may be used for all types of awards, including those issued under our
Prior Plans after December 31, 2008 and before May 6, 2009 (the stub period) is reduced by one share for each stock
option granted and by 1.9 shares for other types of awards granted, including restricted stock units and performance
F-10
AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)