Abbott Laboratories 2015 Annual Report Download - page 75

FINANCIAL REVIEW
73
ABBOTT 2015 ANNUAL REPORT
CONTINGENT OBLIGATIONS
Abbott has periodically entered into agreements with other com-
panies in the ordinary course of business, such as assignment of
product rights, which has resulted in Abbott becoming secondarily
liable for obligations that Abbott was previously primarily liable.
Since Abbott no longer maintains a business relationship with the
other parties, Abbott is unable to develop an estimate of the maxi-
mum potential amount of future payments, if any, under these
obligations. Based upon past experience, the likelihood of pay-
ments under these agreements is remote. In addition, Abbott
periodically acquires a business or product rights in which Abbott
agrees to pay contingent consideration based on attaining certain
thresholds or based on the occurrence of certain events.
LEGISLATIVE ISSUES
Abbott’s primary markets are highly competitive and subject to
substantial government regulations throughout the world. Abbott
expects debate to continue over the availability, method of deliv-
ery, and payment for health care products and services. It is not
possible to predict the extent to which Abbott or the health care
industry in general might be adversely aected by these factors in
the future. A more complete discussion of these factors is con-
tained in Item1, Business, and Item1A, Risk Factors.
RECENTLY ISSUED ACCOUNTING STANDARDS
In January 2016, the Financial Accounting Standards Board
(FASB) issued Accounting Standards Update (ASU) 2016-01,
Financial Instruments—Recognition and Measurement of
Financial Assets and Financial Liabilities, which provides new
guidance for the recognition, measurement, presentation, and
disclosure of financial assets and liabilities. The standard becomes
eective for Abbott beginning in the first quarter of 2018 and early
adoption is permitted. Abbott is currently evaluating the eect, if
any, that the standard will have on its consolidated financial state-
ments and related disclosures.
CONTRACTUAL OBLIGATIONS
The table below summarizes Abbott’s estimated contractual obligations as of December31, 2015.
(inmillions)
Payments Due By Period
Total 2016 2017-2018 2019-2020 2021 and Thereafter
Long-term debt, including current maturities $÷5,814 $÷÷÷«3 $÷÷÷«3 $2,296 $3,512
Interest on debt obligations 3,077 239 477 366 1,995
Operating lease obligations 638 163 201 132 142
Capitalized auto lease obligations 45 15 30 — —
Purchase commitments (a) 1,919 1,822 65 32 —
Other long-term liabilities 1,188 — 686 354 148
Total (b) $12,681 $2,242 $1,462 $3,180 $5,797
(a) Purchase commitments are for purchases made in the normal course of business to meet operational and capital expenditure requirements.
(b) Net unrecognized tax benefits totaling approximately $600million are excluded from the table above as Abbott is unable to reasonably estimate the period of cash settlement with the respective
taxing authorities on such items. See Note 14—Taxes on Earnings from Continuing Operations for further details. The company has employee benefit obligations consisting of pensions and other
postemployment benefits, including medical and life, which have been excluded from the table. A discussion of the company’s pension and postretirement plans, including funding matters is
included in Note 13—Post-employment Benefits.
In November 2015, the FASB issued ASU 2015-17, Balance Sheet
Classification of Deferred Taxes, which requires entities to classify
all deferred tax assets and liabilities as non-current on the balance
sheet. The standard may be adopted on either a prospective or
retrospective basis. The standard is eective for fiscal years begin-
ning after December 15, 2016, and early adoption is permitted.
Eective December 31, 2015, Abbott adopted ASU 2015-17 and
applied the new standard retrospectively. As a result of applying
ASU 2015-17 to the previously reported Consolidated Balance
Sheet as of December 31, 2014, Deferred income taxes within the
Total Current Assets line decreased and the Deferred income taxes
and other assets line increased by approximately $1.7billion,
respectively; Other accrued liabilities within the Total Current
Liabilities line decreased by $65million and the Post-employment
obligations and other long-term liabilities line increased by
$12million. Reclassification of the deferred tax balances from
current to noncurrent aected the netting of these balances as
adeferred tax asset or liability in various jurisdictions.
In April 2015, the FASB issued ASU 2015-03,Simplifying the
Presentation of Debt Issuance Costs. This ASU, which is eective
for fiscal years and interim periods beginning after December 15,
2015, requires debt issuance costs to be presented in the balance
sheet as a direct deduction from the related debt liability rather
than as an asset. Early adoption is permitted and retrospective
application is required. Eective December 31, 2015, Abbott
adopted ASU 2015-03 and the Consolidated Balance Sheet was
retrospectively adjusted to reflect the new presentation. The
adoption of ASU 2015-03 did not have a material impact to
Abbott’s consolidated financial statements.
In May 2014, the FASB issued ASU No. 2014-09, Revenue from
Contracts with Customers, which provides a single comprehensive
model for accounting for revenue from contracts with customers
and will supersede most existing revenue recognition guidance.
The standard becomes eective for Abbott in the first quarter of
2018. Abbott is currently evaluating the eect, if any, that the
standard will have on its consolidated financial statements and
related disclosures.