AbbVie 2012 Annual Report Download - page 74
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unrealized loss is recognized as a charge to income and removed from accumulated other
comprehensive income (loss) (AOCI).
Accounts Receivable
Accounts receivable are stated at their net realizable value. The allowance against gross accounts
receivable reflects the best estimate of probable losses inherent in the receivables portfolio determined
on the basis of historical experience, specific allowances for known troubled accounts and other
currently available information. Accounts receivable are written off after all reasonable means to collect
the full amount (including litigation, where appropriate) have been exhausted. The allowance was
$178 million at December 31, 2012 and $161 million at December 31, 2011.
Inventories
Inventories are valued at the lower of cost (first-in, first-out basis) or market. Cost includes material
and conversion costs. Inventories, net, consist of the following.
as of December 31 (in millions) 2012 2011
Finished goods $ 547 $429
Work-in-process 286 207
Materials 258 236
Inventories, net $1,091 $872
Property and Equipment
as of December 31 (in millions) 2012 2011
Land $ 94 $ 106
Buildings 1,278 1,305
Equipment 4,865 4,331
Construction in progress 305 206
Property and equipment, gross 6,542 5,948
Less accumulated depreciation (4,295) (3,804)
Property and equipment, net $ 2,247 $ 2,144
Depreciation for property and equipment is recorded on a straight-line basis over the estimated useful
lives of the assets. The estimated useful life for buildings ranges from 15 to 66 years, with an average
depreciation period of 25 years, and five to 35 years for equipment, with an average depreciation
period of 10 years. Leasehold improvements are amortized over the life of the related facility lease
(including any renewal periods, if appropriate) or the asset, whichever is shorter. Depreciation expense
for the years ended December 31, 2012, 2011 and 2010 was $525 million, $508 million and
$476 million, respectively. Equipment includes certain computer software and software development
costs incurred in connection with developing or obtaining software for internal use. Assets under capital
leases included in property and equipment in the combined balance sheets are not material.
Litigation
Loss contingency provisions are recorded for probable losses at management’s best estimate of a loss.
When a best estimate cannot be made, a minimum loss contingency amount is recorded. Legal fees are
expensed as incurred.
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