Pfizer 2009 Annual Report Download - page 14

Financial Review
Pfizer Inc. and Subsidiary Companies
more diversified healthcare company, with product offerings in human, animal, and consumer health, including vaccines, biologics,
small molecules and nutrition across developed and emerging markets. The acquisition of Wyeth also added to our pipeline of
biopharmaceutical development projects endeavoring to develop medicines to help patients in critical areas, including oncology,
pain, inflammation, Alzheimer’s disease, psychoses and diabetes.
Recording of Assets Acquired and Liabilities Assumed
Our acquisition of Wyeth has been accounted for using the acquisition method of accounting, which generally requires that most
assets acquired and liabilities assumed be recorded at fair value as of the acquisition date (see the “Accounting Policies—Fair
Value” section of this Financial Review). A single estimate of fair value results from a complex series of judgments about future
events and uncertainties and relies heavily on estimates and assumptions. Our judgments used to determine the estimated fair
value assigned to each class of assets acquired and liabilities assumed, as well as asset lives, can materially impact our results of
operations. For instance, the determination of asset lives can impact our results of operations as different types of assets will have
different useful lives and certain assets may even be considered to have indefinite useful lives. For example, the useful life of the
rights associated with a pharmaceutical product’s exclusive patent will be finite and will result in amortization expense being
recorded in our results of operations over a determinable period. However, the useful life associated with a brand that has no patent
protection but that retains, and is expected to retain, a distinct market identity, could be considered to be indefinite, and the asset
would not be amortized (see the “Accounting Policies—Estimates and Assumptions” section of this Financial Review).
The following table summarizes the provisional recording of assets acquired and liabilities assumed as of the acquisition date:
(MILLIONS OF DOLLARS)
AMOUNTS RECOGNIZED
AS OF ACQUISITION
DATE
Working capital, excluding inventories(a) $ 16,342
Inventories 8,388
Property, plant and equipment 10,054
Identifiable intangible assets, excluding in-process research and development 37,595
In-process research and development 14,918
Other noncurrent assets 2,394
Long-term debt (11,187)
Benefit obligations (3,211)
Net tax accounts(b) (24,773)
Other noncurrent liabilities (1,908)
Total identifiable net assets 48,612
Goodwill 19,954
Net assets acquired 68,566
Less: Amounts attributable to noncontrolling interests (330)
Total consideration transferred $ 68,236
(a) Includes cash and cash equivalents, short-term investments, accounts receivable, other current assets, assets held for sale, accounts payable and
other current liabilities.
(b) As of the acquisition date, included in Current deferred tax assets and other current assets ($1.2 billion), Noncurrent deferred tax assets and other
noncurrent assets ($2.7 billion), Income taxes payable ($0.6 billion), Current deferred tax liabilities and other current liabilities ($11.1 billion),
Noncurrent deferred tax liabilities ($14.9 billion) and Other taxes payable ($2.1 billion, including accrued interest of $300 million).
Below is a summary of the methodologies and significant assumptions used in estimating the fair value of certain classes of assets
and liabilities of Wyeth, as well as other information about recorded amounts.
For financial instruments acquired from Wyeth, our valuation approach was consistent with our valuation methodologies used for our
legacy Pfizer financial instruments. For additional information on the valuation of our financial instruments, see Notes to
Consolidated Financial Statements—Note 9. Financial Instruments.
•Inventories—The fair value of acquired inventory was determined as follows:
OFinished goods—Estimated selling price, less an estimate of costs to be incurred to sell the inventory, and an estimate of a
reasonable profit allowance for that selling effort.
OWork in process—Estimated selling price of an equivalent finished good, less an estimate of costs to be incurred to complete the
work-in-process inventory, an estimate of costs to be incurred to sell the inventory and an estimate of a reasonable profit allowance
for those manufacturing and selling efforts.
ORaw materials and supplies—Estimated cost to replace the raw materials and supplies.
12 2009 Financial Report