Eli Lilly 2008 Annual Report Download - page 42

FINANCIALS
40
contracts entered into on or after the effective date.
We adopted the provisions of FASB Statement No. 157 (SFAS 157), Fair Value Measurements, on January 1,
2008. SFAS 157 defi nes fair value, establishes a framework for measuring fair value in GAAP, and expands disclo-
sures about fair value measurements. The implementation of this Statement was not material to our consolidated
fi nancial position or results of operations.
In December 2007, the FASB revised and issued Statement No. 141, Business Combinations (SFAS 141(R)).
SFAS 141(R) changes how the acquisition method is applied in accordance with SFAS 141. The primary revisions
to this Statement require an acquirer in a business combination to measure assets acquired, liabilities assumed,
and any noncontrolling interest in the acquiree at the acquisition date, at their fair values as of that date, with
limited exceptions specifi ed in the Statement. This Statement also requires the acquirer in a business combination
achieved in stages to recognize the identifi able assets and liabilities, as well as the noncontrolling interest in the
acquiree, at the full amounts of their fair values (or other amounts determined in accordance with the Statement).
Assets acquired and liabilities assumed arising from contractual contingencies as of the acquisition date are to be
measured at their acquisition-date fair values, and assets or liabilities arising from all other contingencies as of
the acquisition date are to be measured at their acquisition-date fair value, only if it is more likely than not that they
meet the defi nition of an asset or a liability in FASB Concepts Statement No. 6, Elements of Financial Statements.
This Statement signifi cantly amends other Statements and authoritative guidance, including FASB Interpretation
No. 4, Applicability of FASB Statement No. 2 to Business Combinations Accounted for by the Purchase Method,
and now requires the capitalization of research and development assets acquired in a business combination at
their acquisition-date fair values, separately from goodwill. SFAS No. 109, Accounting for Income Taxes, was also
amended by this Statement to require the acquirer to recognize changes in the amount of its deferred tax benefi ts
that are recognizable because of a business combination either in income from continuing operations in the period
of the combination or directly in contributed capital, depending on the circumstances. This Statement is effective
for us for business combinations for which the acquisition date is on or after January 1, 2009.
In December 2007, in conjunction with SFAS 141(R), the FASB issued Statement No. 160, Accounting for
Noncontrolling Interests. This Statement amends Accounting Research Bulletin No. 51, Consolidated Financial
Statements (ARB 51), by requiring companies to report a noncontrolling interest in a subsidiary as equity in its con-
solidated fi nancial statements. Disclosure of the amounts of consolidated net income attributable to the parent and
the noncontrolling interest will be required. This Statement also clarifi es that transactions that result in a change
in a parent’s ownership interest in a subsidiary that do not result in deconsolidation will be treated as equity trans-
actions, while a gain or loss will be recognized by the parent when a subsidiary is deconsolidated. This Statement
is effective for us January 1, 2009, and we do not anticipate the implementation will be material to our consolidated
fi nancial position or results of operations.
In December 2007, the FASB ratifi ed the consensus reached by the EITF on Issue No. 07-1 (EITF 07-1), Account-
ing for Collaborative Arrangements. EITF 07-1 defi nes collaborative arrangements and establishes reporting
requirements for transactions between participants in a collaborative arrangement and between participants in
the arrangement and third parties. This Issue is effective for us beginning January 1, 2009 and will be applied
retrospectively to all prior periods presented for all collaborative arrangements existing as of the effective date.
The implementation of this Issue will not be material to our consolidated fi nancial position or results of operations.
We adopted the provisions of FASB Interpretation (FIN) No. 48, Accounting for Uncertainty in Income Taxes,
on January 1, 2007. FIN 48 prescribes a recognition threshold and measurement attribute for the fi nancial state-
ment recognition and measurement of a tax position taken or expected to be taken in a tax return. See Note 12 for
further discussion of the impact of adopting this Interpretation.
Note 3: Acquisitions
During 2008 and 2007, we acquired several businesses. These acquisitions were accounted for as business combi-
nations under the purchase method of accounting. Under the purchase method of accounting, the assets acquired
and liabilities assumed were recorded at their respective fair values as of the acquisition date in our consolidated
fi nancial statements. The determination of estimated fair value required management to make signifi cant esti-
mates and assumptions. The excess of the purchase price over the fair value of the acquired net assets, where
applicable, has been recorded as goodwill. The results of operations of these acquisitions are included in our
consolidated fi nancial statements from the date of acquisition.
Most of these acquisitions included in-process research and development (IPR&D), which represented
compounds, new indications, or line extensions under development that had not yet achieved regulatory approval