Amgen 2010 Annual Report Download - page 156

spot rates, forward points, LIBOR and swap curves and obligor credit default swap rates. In addition, inputs for our
foreign currency option contracts also include implied volatility measures. These inputs, where applicable, are at
commonly quoted intervals. As of December 31, 2010 and December 31, 2009, we had open foreign currency
forward contracts with notional amounts of $3.2 billion and $3.4 billion, respectively, and open foreign currency
option contracts with notional amounts of $398 million and $376 million, respectively, that were primarily Euro-
based and were designated as cash flow hedges. In addition, as of December 31, 2010 and December 31, 2009, we
had $670 million and $414 million, respectively, of open foreign currency forward contracts to reduce exposure to
fluctuations in value of certain assets and liabilities denominated in foreign currencies that were primarily Euro-
based and that were not designated as hedges. (See Note 18, Derivative instruments.)
Our interest rate swap contracts are entered into with counterparties that have a minimum credit rating of “A-”
or equivalent by S&P, Moody’s or Fitch. We estimate the fair value of these contracts using an income-based
industry standard valuation model for which all significant inputs are observable either directly or indirectly. These
inputs include LIBOR and swap curves and obligor credit default swap rates. We had interest rate swap agreements
with an aggregate notional amount of $3.6 billion and $1.5 billion as of December 31, 2010 and December 31, 2009,
respectively, that were designated as fair value hedges. (See Note 18, Derivative instruments.)
There have been no transfers of assets or liabilities between the fair value measurement levels and there were
no material remeasurements to fair value during the year ended 2009 of assets and liabilities that are not measured at
fair value on a recurring basis. See Note 8, Cost savings initiatives and restructuring for further discussion on an
impairment that we recognized in 2010.
Summary of the fair value of other financial instruments
Short-term assets and liabilities
The estimated fair values of cash equivalents, accounts receivable and accounts payable approximate their
carrying values due to the short-term nature of these financial instruments.
Borrowings
We estimate the fair value of our convertible notes using an income-based industry standard valuation model
for which all significant inputs are observable either directly or indirectly, including benchmark yields adjusted for
our credit risk (Level 2). The fair values of our convertible notes exclude their equity components and represent only
the liability components of these instruments as their equity components are included in “Common stock and
additional paid-in capital” in the Consolidated Balance Sheets. We estimate the fair value of our other long-term
notes taking into consideration indicative prices obtained from a third party financial institution that utilizes
industry standard valuation models, including both income and market based approaches, for which all significant
inputs are observable, either directly or indirectly. These inputs include reported trades and broker/dealer quotes of
the same or similar securities, credit spreads, benchmark yields and other observable inputs (Level 2). The
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AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)