Amgen 2011 Annual Report Download - page 133

AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
is recorded as goodwill. Contingent consideration obligations incurred in connection with a business combination
are recorded at their fair values on the acquisition date and remeasured at their fair values each subsequent
reporting period until the related contingencies are resolved. The resulting changes in fair values are recorded in
earnings. See Note 2, Business combinations, and Note 16, Fair value measurement.
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 the 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 9,
Available-for-sale investments, and Note 16, 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 that approximates the first-in, first-out method. Cost also includes
the Puerto Rico excise tax enacted in 2011 related to our manufacturing operations in Puerto Rico. See Note 10,
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 16, Fair value measurement,
and Note 17, Derivative instruments.
Property, plant and equipment, net
Property, plant and equipment is recorded at historical cost, net of accumulated depreciation, amortization
and, if applicable, impairment charges. We review our property, plant and equipment assets for impairment
whenever events or changes in circumstances indicate that the carrying amount of an asset may not be
recoverable. Depreciation is provided over the assets’ useful lives on a straight-line basis. Leasehold
improvements are amortized on a straight-line basis over the shorter of their estimated useful lives or lease terms.
See Note 11, Property, plant and equipment.
Intangible assets and goodwill
Finite-lived intangible assets are recorded at cost, net of accumulated amortization and, if applicable,
impairment charges. Amortization of finite-lived intangible assets is provided over their estimated useful lives on
a straight-line basis. We review our finite-lived intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable. See Note 12, Intangible
assets.
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