Abbott Laboratories 2013 Annual Report Download - page 55

ABBOTT 2013 ANNUAL REPORT
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 14 — SEGMENT AND GEOGRAPHIC AREA INFORMATION
Abbott’s principal business is the discovery, development, manufac-
ture and sale of a broad line of health care products. Abbott’s products
are generally sold directly to retailers, wholesalers, hospitals, health
care facilities, laboratories, physicians’ offices and government
agencies throughout the world. As a result of the separation
of AbbVie, Abbott no longer has a Proprietary Pharmaceutical
Products segment and this business has been removed from the
2012 and 2011 historical information presented below. Abbott’s
reportable segments are as follows:
Established Pharmaceutical Products — International sales
of a broad line of branded generic pharmaceutical products.
Nutritional Products — Worldwide sales of a broad line of adult
and pediatric nutritional products.
Diagnostic Products — Worldwide sales of diagnostic systems and
tests for blood banks, hospitals, commercial laboratories and
alternate-care testing sites. For segment reporting purposes, the
Core Laboratories Diagnostics, Molecular Diagnostics, Point of
Care and Ibis diagnostic divisions are aggregated and reported
as the Diagnostic Products segment.
Vascular Products — Worldwide sales of coronary, endovascular,
structural heart, vessel closure and other medical device products.
Non-reportable segments include the Diabetes Care and Medical
Optics segments.
Abbott’s underlying accounting records are maintained on a legal
entity basis for government and public reporting requirements.
Segment disclosures are on a performance basis consistent with
internal management reporting. The cost of some corporate
functions and the cost of certain employee benefits are charged to
segments at predetermined rates that approximate cost. Remaining
costs, if any, are not allocated to segments. In addition, effective
January 1, 2013, intangible asset amortization is not allocated to
operating segments, and intangible assets and goodwill are not
included in the measure of each segment’s assets. The segment
information below for 2012 and 2011 has been adjusted to exclude
intangible asset amortization from operating earnings and intangi-
ble assets and goodwill from the total segment asset information.
The tax effect of the differences that give rise to deferred tax
assets and liabilities were as follows:
(in millions) 2013 2012
Deferred tax assets:
Compensation and employee benefits $ 862 $ 1,936
Other, primarily reserves not currently deductible,
and NOL’s and credit carryforwards 2,908 3,278
Trade receivable reserves 155 557
Inventory reserves 137 211
Deferred intercompany profit 274 1,095
State income taxes 196 197
Total deferred tax assets 4,532 7,274
Deferred tax liabilities:
Depreciation (72) (75)
Other, primarily the excess of book basis
over tax basis of intangible assets (1,774) (2,447)
Total deferred tax liabilities (1,846) (2,522)
Total net deferred tax assets $ 2,686 $ 4,752
Abbott has incurred losses in a foreign jurisdiction where
realization of the future economic benefit is so remote that the
benefit is not reflected as a deferred tax asset. Valuation allow‑
ances for recorded deferred tax assets were not significant.
The following table summarizes the gross amounts of unrecognized
tax benefits without regard to reduction in tax liabilities or addi‑
tions to deferred tax assets and liabilities if such unrecognized tax
benefits were settled:
(in millions) 2013 2012
January 1 $2,257 $2,123
Increase due to current year tax positions 244 673
Increase due to prior year tax positions 152 62
Decrease due to prior year tax positions (541) (438)
Lapse of statute (23) —
Settlements (124) (163)
December 31 $1,965 $2,257
The total amount of unrecognized tax benefits that, if recognized,
would impact the effective tax rate is approximately $1.7 billion.
Abbott believes that it is reasonably possible that the recorded
amount of gross unrecognized tax benefits may decrease by
$350 million to $425 million, including cash adjustments, within
the next twelve months as a result of concluding various domestic
and international tax matters.