Amgen 2012 Annual Report Download - page 108

Download and view the complete annual report

Please find page 108 of the 2012 Amgen annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 150

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150

F-9
Income taxes
We provide for income taxes based on pretax income, applicable tax rates and tax planning opportunities available in the
various jurisdictions in which we operate.
We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be
sustained upon examination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in
the financial statements for a particular tax position is based on the largest benefit that is more likely than not to be realized. The
amount of unrecognized tax benefits (UTBs) is adjusted as appropriate for changes in facts and circumstances, such as significant
amendments to existing tax law, new regulations or interpretations by the taxing authorities, new information obtained during a
tax examination, or resolution of an examination. We recognize both accrued interest and penalties, where appropriate, related to
UTBs in income tax expense. See Note 4, Income taxes.
Business combinations
Business combinations are accounted for using the acquisition method of accounting. Under the acquisition method, assets
acquired, including in-process research and development (IPR&D) projects, and liabilities assumed are recorded at their respective
fair values as of the acquisition date in our consolidated financial statements. The excess of the fair value of consideration transferred
over the fair value of the net assets acquired 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 upon 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.