Pfizer 2010 Annual Report Download - page 50

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Financial Review
Pfizer Inc. and Subsidiary Companies
Contingencies). We also evaluate tax matters that are sustainable under the “more-likely-than-not” standard in determining our
accruals for income tax contingencies. We record accruals for all other contingencies to the extent that we conclude their occurrence
is probable and the related damages are estimable, and we record anticipated recoveries under existing insurance contracts when
assured of recovery. If a range of liability is probable and estimable and some amount within the range appears to be a better
estimate than any other amount within the range, we accrue that amount. If a range of liability is probable and estimable and no
amount within the range appears to be a better estimate than any other amount within the range, we accrue the minimum of such
probable range. Many claims involve highly complex issues relating to causation, label warnings, scientific evidence, actual
damages and other matters. Often these issues are subject to substantial uncertainties and, therefore, the probability of loss and an
estimation of damages are difficult to ascertain. Consequently, we cannot reasonably estimate the maximum potential exposure or
the range of possible loss in excess of amounts accrued for these contingencies. These assessments can involve a series of
complex judgments about future events and can rely heavily on estimates and assumptions (see Notes to Consolidated Financial
Statements—Note 1C. Significant Accounting Policies: Estimates and Assumptions). Our assessments are based on estimates and
assumptions that have been deemed reasonable by management. Litigation is inherently unpredictable, and excessive verdicts do
occur. Although we believe we have substantial defenses in these matters, we could in the future incur judgments or enter into
settlements of claims that could have a material adverse effect on our results of operations in any particular period.
Patent claims include challenges to the coverage and/or validity of our patents on various products or processes. Although we
believe we have substantial defenses to these challenges with respect to all our material patents, there can be no assurance as to
the outcome of these matters, and a loss in any of these cases could result in a loss of patent protection for the drug at issue, which
could lead to a significant loss of sales of that drug and could materially affect future results of operations.
48 2010 Financial Report