Amgen 2013 Annual Report Download - page 85

amount of unrecognized tax benefits (UTBs) is adjusted as appropriate for changes in facts and circumstances, such as significant amendments to existing
tax law, new regulations or interpretations by the taxing authorities, new information obtained during a tax examination, or resolution of an examination. We
recognize both accrued interest and penalties, where appropriate, related to UTBs in income tax expense. See Note 4, Income taxes.
Business combinations
Business combinations are accounted for using the acquisition method of accounting. Under the acquisition method, assets acquired, including in-
process research and development (IPR&D) projects, and liabilities assumed are recorded at their respective fair values as of the acquisition date in our
consolidated financial statements. The excess of the fair value of consideration transferred over the fair value of the net assets acquired is recorded as goodwill.
Contingent consideration obligations incurred in connection with a business combination (including the assumption of an acquiree's liability arising from a
business combination it consummated prior to our acquisition) are recorded at their fair values on the acquisition date and remeasured at their fair values each
subsequent reporting period until the related contingencies are resolved. The resulting changes in fair values are recorded in earnings. See Note 2, Business
combinations, and Note 16, Fair value measurement.
Cash equivalents
We consider cash equivalents to be only those investments which are highly liquid, readily convertible to cash and which mature within three months
from the date of purchase.
Available-for-sale investments
We consider our investment portfolio available-for-sale and, accordingly, these investments are recorded at fair value with unrealized gains and losses
generally recorded in other comprehensive income. Investments with maturities beyond one year, other than Restricted investments, may be classified as short-
term marketable securities in the Consolidated Balance Sheets due to their highly liquid nature and because they represent the Company's investments that are
available for current operations. See Note 9, Available-for-sale investments, and Note 16, Fair value measurement.
Inventories
Inventories are stated at the lower of cost or market. Cost, which includes amounts related to materials, labor and overhead, is determined in a manner
that approximates the first-in, first-out method. See Note 10, Inventories.
Derivatives
We recognize all of our derivative instruments as either assets or liabilities at fair value in the Consolidated Balance Sheets. The accounting for changes
in the fair value of a derivative instrument depends upon whether it has been formally designated and qualifies as part of a hedging relationship under the
applicable accounting standards and, further, on the type of hedging relationship. For derivatives formally designated as hedges, we assess both at inception
and quarterly thereafter, whether the hedging derivatives are highly effective in offsetting changes in either the fair value or cash flows of the hedged item. Our
derivatives that are not designated and do not qualify as hedges are adjusted to fair value through current earnings. See Note 16, Fair value measurement, and
Note 17, Derivative instruments.
Property, plant and equipment, net
Property, plant and equipment is recorded at historical cost, net of accumulated depreciation, amortization and, if applicable, impairment charges. We
review our property, plant and equipment assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset
may not be recoverable. Depreciation is provided over the assets’ useful lives on a straight-line basis. Leasehold improvements are amortized on a straight-line
basis over the shorter of their estimated useful lives or lease terms. See Note 11, Property, plant and equipment.
Goodwill and other intangible assets
Finite-lived intangible assets are recorded at cost, net of accumulated amortization and, if applicable, impairment charges. Amortization of finite-lived
intangible assets is provided over their estimated useful lives on a straight-line basis. We review our finite-lived intangible assets for impairment whenever
events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. See Note 12, Goodwill and other intangible assets.
The estimated fair values of IPR&D projects acquired in a business combination which are not complete are capitalized and accounted for as indefinite-
lived intangible assets until completion or abandonment of the related R&D efforts. Upon successful
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