Abbott Laboratories 2013 Annual Report Download - page 45

ABBOTT 2013 ANNUAL REPORT
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 4 — ACCUMULATED OTHER COMPREHENSIVE INCOME
The components of the changes in accumulated other comprehensive
income from continuing operation, net of income taxes, are as follows:
Cumulative Gains
Cumulative Net Actuarial Cumulative on Derivative
Foreign Currency Losses and Prior Unrealized Gains Instruments
Translation Service Costs on Marketable Designated as
(in millions) Adjustments and Credits Equity Securities Cash Flow Hedges Total
Balance at December 31, 2012 $ (79) $(3,596) $ 31 $ 50 $(3,594)
Separation of AbbVie (400) 1,402 — 8 1,010
Other comprehensive income (loss) before reclassifications (239) 771 22 (23) 531
Income (loss) amounts reclassified from
accumulated other comprehensive income (a) — 111 (40) (30) 41
Net current period comprehensive income (loss)
from continuing operations (239) 882 (18) (53) 572
Balance at December 31, 2013 $(718) $(1,312) $ 13 $ 5 $(2,012)
(a) Reclassified amounts for foreign currency translation are recorded in the Consolidated Statement of Earnings as Net Foreign exchange loss (gain); gains on marketable equity securities
are recorded as Other (income) expense and gains/losses related to cash flow hedges are recorded as Cost of product sold. Net actuarial losses and prior service cost is included as a component
of net periodic benefit plan cost – see Note 12 for additional information.
NOTE 5 — BUSINESS ACQUISITIONS
In August 2013, Abbott acquired 100 percent of IDEV Technologies,
net of debt, for $310 million, in cash. The acquisition of IDEV
Technologies expands Abbott’s endovascular portfolio. The alloca‑
tion of the fair value of the acquisition resulted in non‑deductible
acquired in‑process research and development of approximately
$170 million which is accounted for as an indefinite‑lived intangible
asset until regulatory approval or discontinuation, non‑deductible
definite‑lived intangible assets of approximately $66 million, non‑
deductible goodwill of approximately $123 million and net deferred
tax liabilities of $56 million. Acquired intangible assets consist of
developed technology and are being amortized over 11 years.
In August 2013, Abbott acquired 100 percent of OptiMedica for
$260 million, in cash, plus additional payments up to $150 million
to be made upon completion of certain development, regulatory
and sales milestones. The acquisition of OptiMedica provides
Abbott with an immediate entry point into the laser assisted
cataract surgery market. The allocation of the fair value of the
acquisition resulted in non‑deductible definite‑lived intangible
assets of approximately $160 million; non‑deductible acquired
in‑process research and development of approximately $60 mil‑
lion, which is accounted for as an indefinite‑lived intangible asset
until regulatory approval or discontinuation; non‑deductible
goodwill of approximately $151 million, net deferred tax liabilities
of $70 million and contingent consideration of approximately
$70 million. The fair value of the contingent consideration was
determined based on an independent appraisal. Acquired intangi‑
ble assets consist primarily of developed technology that is being
amortized over 18 years.
The preliminary allocations of fair value of these acquisitions will
be finalized when valuations are completed. Had the above acqui‑
sitions taken place on January 1 of the previous year, consolidated
net sales and income would not have been significantly different
from reported amounts.
NOTE 6 — GOODWILL AND INTANGIBLE ASSETS
Abbott recorded goodwill of approximately $274 million in 2013
related to the acquisitions of IDEV Technologies and OptiMedica.
Goodwill related to the IDEV acquisition was allocated to the
Vascular Products segment and goodwill related to OptiMedica
was allocated to a non‑reportable segment. Foreign currency
translation and other adjustments decreased goodwill in 2013 and
2011 by $168 million and $225 million, respectively, and increased
goodwill in 2012 by $69 million. In addition, in connection with
the separation of AbbVie on January 1, 2013, Abbott transferred
approximately $6.1 billion of goodwill to AbbVie. The amount of
goodwill related to reportable segments at December 31, 2013 was
$2.9 billion for the Established Pharmaceutical Products segment,
$286 million for the Nutritional Products segment, $444 million
for the Diagnostic Products segment, and $3.1 billion for the
Vascular Products segment. Other than the effects of the separa‑
tion of AbbVie, there were no reductions of goodwill relating to
the disposal of all or a portion of a business. There was no reduc‑
tion of goodwill relating to impairments.
The gross amount of amortizable intangible assets, primarily
product rights and technology was $12.2 billion and $17.6 billion
as of December 31, 2013 and 2012, respectively, and accumulated
amortization was $6.8 billion and $9.7 billion as of December 31,
2013 and 2012, respectively. Indefinite‑lived intangible assets,
which relate to in‑process research and development acquired
in a business combination, were approximately $266 million and
$691 million at December 31, 2013 and 2012, respectively. Gross
amortizable intangible assets, accumulated amortization and
indefinite‑lived intangible assets of $5.7 billion, $3.8 billion and
$417 million, respectively, were transferred to AbbVie as part of
the separation on January 1, 2013. In 2012 and 2011, Abbott
recorded impairment charges of $69 million and $125 million,
respectively, for certain research and development assets due to
changes in the projected development and regulatory timelines
for the projects. The charges relate to non‑reportable segments.