Amgen 2007 Annual Report Download - page 71

Financial Instruments Indexed to, and Potentially Settled in, a Company’s Own Stock,” including our outstanding
convertible debt securities, is currently classified in its entirety as debt. No portion of the carrying value of such a
security related to the conversion option indexed to our stock is classified as equity. In addition, interest expense
is recognized at the stated coupon rate. The coupon rate of interest for convertible debt securities, including our
convertible debt securities, is typically lower than what an issuer would be required to pay for nonconvertible
debt with otherwise similar terms.
The EITF considered in 2007 whether the accounting for convertible debt securities that requires or permits
settlement in cash either in whole or in part upon conversion (“cash settled convertible debt securities”) should
be changed, but was unable to reach a consensus and discontinued deliberations on this issue. Subsequently, in
July 2007, the Financial Accounting Standards Board (“FASB”) voted unanimously to reconsider the current ac-
counting for cash settled convertible debt securities, which includes our convertible debt securities. In August
2007, the FASB exposed for public comment a proposed FASB Staff Position (“FSP”) that would change the
method of accounting for such securities and would require the proposed method to be retrospectively applied.
The FASB expects to begin deliberations on the proposed FSP in February 2008. The FSP, if issued as proposed,
would become effective for calendar year end companies like us in the first quarter of 2008. Under this proposed
method of accounting, the debt and equity components of our convertible debt securities would be bifurcated and
accounted for separately in a manner that would result in recognizing interest on these securities at effective rates
more comparable to what we would have incurred had we issued nonconvertible debt with otherwise similar
terms. The equity component of our convertible debt securities would be included in the paid-in-capital section
of stockholders’ equity on our Consolidated Balance Sheet and, accordingly, the initial carrying values of these
debt securities would be reduced. Our net income for financial reporting purposes would be reduced by recogniz-
ing the accretion of the reduced carrying values of our convertible debt securities to their face amounts as
additional non-cash interest expense. Therefore, if the proposed method of accounting for cash settled convertible
debt securities is adopted by the FASB as described above, it would have an adverse impact on our past and fu-
ture reported financial results. As the final guidance has not been issued, we cannot predict its ultimate outcome.
We also cannot predict any other changes in accounting principles generally accepted in the United States
(“GAAP”) that may be made affecting accounting for convertible debt securities, some of which could have an
adverse impact on our past or future reported financial results.
Continual manufacturing process improvement efforts may result in the carrying value of certain existing
manufacturing facilities or other assets becoming impaired.
In connection with our ongoing process improvement activities associated with products we manufacture,
we continually invest in our various manufacturing practices and related processes with the objective of increas-
ing production yields and success rates to gain increased cost efficiencies and capacity utilization. We are
investigating alternative manufacturing processes that do not require the use of certain biologically-sourced raw
materials. The development or implementation of such processes could result in changes to or redundancies with
our existing manufacturing operations. Depending on the timing and outcomes of these efforts and our other
estimates and assumptions regarding future product sales, the carrying value of certain manufacturing facilities or
other assets may not be fully recoverable and could result in the recognition of an impairment in the carrying
value at the time that such effects are identified. The recognition of impairment in the carrying value, if any,
could have a material and adverse affect on our results of operations.
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