Amgen 2011 Annual Report Download - page 143

AMGEN INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
cumulative amount of these earnings was approximately $19.5 billion. If these earnings were repatriated to the
United States, we would be required to accrue and pay approximately $6.9 billion of additional income taxes
based on the current tax rates in effect.
Our total foreign income before income taxes was approximately $2.6 billion, $3.1 billion and $3.1 billion
for the years ended December 31, 2011, 2010 and 2009, respectively.
Commencing January 1, 2011, Puerto Rico imposes a temporary excise tax on the acquisition of goods and
services from a related manufacturer in Puerto Rico. The excise tax is imposed over a six year period beginning
in 2011 with the excise tax rate declining in each year (4% in 2011, 3.75% in 2012, 2.75% in 2013, 2.5% in
2014, 2.25% in 2015, and 1% in 2016). We account for the excise tax as a manufacturing cost that is capitalized
in inventory and expensed in cost of sales when the related products are sold. For U.S. income tax purposes, the
excise tax results in foreign tax credits that are generally recognized in our provision for income taxes in the year
in which the excise tax is incurred.
One or more of our legal entities file income tax returns in the U.S. federal jurisdiction, various U.S. state
jurisdictions and certain foreign jurisdictions. Our income tax returns are routinely audited by the tax authorities
in those jurisdictions. Significant disputes may arise with these tax authorities involving issues of the timing and
amount of deductions, the use of tax credits and allocations of income among various tax jurisdictions because of
differing interpretations of tax laws and regulations. We are no longer subject to U.S. federal income tax
examinations for tax years ending on or before December 31, 2006, or to California state income tax
examinations for tax years ending on or before December 31, 2003.
Income taxes paid during the years ended December 31, 2011, 2010 and 2009, totaled $595 million, $1,344
million and $497 million, respectively.
5. Earnings per share
The computation of basic earnings per share (EPS) is based on the weighted-average number of our
common shares outstanding. The computation of diluted EPS is based on the weighted-average number of our
common shares outstanding and dilutive potential common shares, which principally include: shares that may be
issued under our stock option, RSU and performance unit awards, determined using the treasury stock method;
our outstanding convertible notes, as discussed below; and our outstanding warrants (collectively “dilutive
securities”). The convertible note hedges purchased in connection with the issuance of our convertible notes are
excluded from the calculation of diluted EPS because their impact is always anti-dilutive. For further information
regarding our convertible notes and warrants, see Note 14, Financing arrangements.
Upon conversion of our convertible notes, the principal amount would be settled in cash, and the excess of
the conversion value, as defined, over the principal amount may be settled in cash and/or shares of our common
stock. Therefore, only the shares of our common stock potentially issuable with respect to the excess of the
notes’ conversion value over their principal amount, if any, are considered as dilutive potential common shares
for purposes of calculating diluted EPS. For the years ended December 31, 2011, 2010 and 2009, the conversion
values for our convertible notes were less than the related principal amounts and, accordingly, no shares were
assumed to be issued for purposes of computing diluted EPS.
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