Amgen 2012 Annual Report Download - page 79

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(1) Long-term debt obligations include contractual interest payments and principal repayment of our debt obligations. In order
to hedge our exposure to foreign currency exchange rate risk associated with certain of our pound sterling and euro
denominated long-term debt issued in 2012 and 2011, we entered into cross-currency swap contracts that effectively convert
interest payments and principal repayment on this debt from pounds sterling/euros to U.S. dollars. For purposes of this table,
we used the contracted exchange rates in the cross-currency swap contracts to compute the net amounts of future interest
payments and principal repayments on this debt. See Note 17, Derivative instruments, to the Consolidated Financial
Statements for further discussion of our cross-currency swap contracts.
(2) Interest payments and the repayment of principal on our 4.375% 2018 euro Notes were translated into U.S. dollars at the
foreign currency exchange rate in effect at December 31, 2012. See Note 14, Financing arrangements, to the Consolidated
Financial Statements for further discussion of our long-term debt obligations.
(3) Purchase obligations relate primarily to (i) our long-term supply agreements with third-party manufacturers, which are based
on firm commitments for the purchase of production capacity; (ii) R&D commitments (including those related to clinical
trials) for new and existing products; (iii) capital expenditures; and (iv) open purchase orders for the acquisition of goods
and services in the ordinary course of business. Our obligation to pay certain of these amounts may be reduced based on
certain future events.
(4) Liabilities for UTBs (net of foreign tax credits and federal tax benefit of state taxes) and related accrued interest and penalties
totaling approximately $1.1 billion at December 31, 2012, are not included in the table above because, due to their nature,
there is a high degree of uncertainty regarding the timing of future cash outflows and other events that extinguish these
liabilities.
In addition to amounts in the table above, we are contractually obligated to pay additional amounts, which in the aggregate
are significant, upon the achievement of various development, regulatory and commercial milestones for agreements we have
entered into with third parties, including contingent consideration incurred with the acquisition of BioVex Group, Inc. (BioVex).
These payments are contingent upon the occurrence of various future events, substantially all of which have a high degree of
uncertainty of occurring. These contingent payments have not been included in the table above, and, except with respect to the
fair value of the BioVex contingent consideration, are not recorded on our Consolidated Balance Sheets. As of December 31, 2012,
the maximum amount that may be payable in the future for agreements we have entered into with third parties is approximately
$2.5 billion, including $575 million in connection with the acquisition of BioVex. See Note 2, Business combinations, to the
Consolidated Financial Statements.
Summary of Critical Accounting Policies
The preparation of our consolidated financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the amounts reported in the financial statements and the notes to the financial statements.
Some of those judgments can be subjective and complex, and therefore, actual results could differ materially from those estimates
under different assumptions or conditions.
Product sales and sales deductions
Revenues from sales of our products are recognized when the products are shipped and title and risk of loss have passed.
Product sales are recorded net of accruals for estimated rebates, wholesaler chargebacks, cash discounts and other deductions
(collectively, “sales deductions”) and returns, which are established at the time of sale.