Eli Lilly 2015 Annual Report Download - page 82

F70
FINANCIAL REPORT
Several methods may be used to determine the estimated fair value of other intangibles acquired in a
business combination. We utilize the “income method,” which is a Level 3 fair value measurement and applies
a probability weighting that considers the risk of development and commercialization to the estimated future
net cash flows that are derived from projected revenues and estimated costs. These projections are based on
factors such as relevant market size, patent protection, historical pricing of similar products, and expected
industry trends. The estimated future net cash flows are then discounted to the present value using an
appropriate discount rate. This analysis is performed for each asset independently. The acquired IPR&D
assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at
which time the assets are tested for impairment and amortized over the remaining useful life or written off, as
appropriate.
See Note 3 for further discussion of intangible assets acquired in recent business combinations and Note 4
for additional discussion of recent capitalized milestone payments. The increases in marketed products and
acquired IPR&D assets in 2015 are primarily due to the acquisition of Novartis AH and the transfer of the
Erbitux commercialization rights discussed in Notes 3 and 4, respectively.
Other indefinite-lived intangible assets are reviewed for impairment at least annually and when impairment
indicators are present. When required, a comparison of fair value to the carrying amount of assets is
performed to determine the amount of any impairment. When determining the fair value of indefinite-lived
acquired IPR&D assets for impairment testing purposes, we utilize the "income method" discussed above.
Finite-lived intangible assets are reviewed for impairment when an indicator of impairment is present. No
material impairments occurred with respect to the carrying value of other intangible assets for the years
ended December 31, 2015, 2014 and 2013.
Intangible assets with finite lives are capitalized and are amortized over their estimated useful lives, ranging
from 3 to 20 years. As of December 31, 2015, the remaining weighted-average amortization period for finite-
lived intangible assets is approximately 12 years.
Amortization expense related to finite-lived intangible assets was as follows:
2015 2014 2013
Amortization expense $ 631.8 $ 535.9 $ 555.0
The estimated amortization expense associated with our current finite-lived intangible assets for each of the
next five years is as follows:
2016 2017 2018 2019 2020
Estimated amortization expense $ 674.7 $ 641.8 $ 480.4 $ 302.7 $ 301.4
Amortization expense is included in either cost of sales, marketing, selling, and administrative or research and
development depending on the nature of the intangible asset being amortized.