Amgen 2011 Annual Report Download - page 134

AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
The estimated fair values of IPR&D projects acquired in a business combination which have not reached
technological feasibility are capitalized and accounted for as indefinite-lived intangible assets subject to impairment
testing until completion or abandonment of the project. Capitalized IPR&D projects are tested for impairment
annually and whenever events or changes in circumstances indicate that the carrying amount may not be
recoverable. Upon successful completion of the project, the capitalized amount is amortized over its estimated
useful life. If a project is abandoned, all remaining capitalized amounts are written-off immediately.
Goodwill relates principally to our 2002 acquisition of Immunex Corporation (Immunex). We perform an
impairment test of goodwill annually and whenever events or changes in circumstances indicate that the carrying
amount may not be recoverable.
Convertible debt
The debt and equity components of convertible debt instruments that may be partially or wholly cash settled
(cash settleable convertible notes), including our 0.125% 2011 Convertible Notes and 0.375% 2013 Convertible
Notes, are bifurcated and accounted for separately. The debt component of cash settleable convertible notes,
which excludes the associated equity conversion option, is recorded at fair value as of the issuance date. The
difference between the amount allocated to the debt component and the proceeds received upon issuance of the
debt is allocated to the equity component and recorded in Common stock and additional paid-in capital in the
Consolidated Balance Sheets. The reduced or discounted carrying value of cash settleable convertible notes
resulting from bifurcation is subsequently accreted back to its principal amount through the recognition of
non-cash interest expense. This results in recognizing interest expense on the borrowing at an effective rate
approximating what would have been incurred had nonconvertible debt with otherwise similar terms been issued.
See Note 14, Financing arrangements.
Recent accounting pronouncements
In June 2011, a new accounting standard was issued that changed the disclosure requirements for the
presentation of other comprehensive income (OCI) in the financial statements, including the elimination of the
option to present OCI in the statement of stockholders’ equity. OCI and its components will be required to be
presented for both interim and annual periods either in a single financial statement, the statement of
comprehensive income, or in two separate but consecutive financial statements, consisting of a statement of
income followed by a separate statement presenting OCI. This standard is required to be applied retrospectively
beginning January 1, 2012, except for certain provisions for which adoption was delayed.
2. Business combinations
BioVex Group, Inc.
On March 4, 2011, we acquired all of the outstanding stock of BioVex Group, Inc. (BioVex), a privately
held biotechnology company developing treatments for cancer and for the prevention of infectious disease,
including talimogene laherparepvec (formerly referred to as OncoVEXGM-CSF), a novel oncolytic vaccine in phase
3 clinical development for the treatment of malignant melanoma. This transaction, which was accounted for as a
business combination, provides us with an opportunity to expand our efforts to bring novel therapeutics to
market. Upon its acquisition, BioVex became a wholly owned subsidiary of Amgen, and its operations have been
included in our consolidated financial statements commencing on the acquisition date.
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