Wecan also evaluate new product introductions result

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("pipeline") as well as newly patented drugs. Wecan also evaluate new product introductions result- ing from R&D expenditures. However, the disclosures for technology companies (and most otb companies) are typically not as detailed. For those companies, we must seek information about ne product introductions and other successes that management highlights in the MD&A. BUSINESS INSIGHT R&D at Pfizer and its Peers --------- ----- -------------- ------------------- Pfizer spent $9.4 billion in 2010 for R&D compared with its revenues of $67.8 billion, or aboiz 13.9%. This reflects a high percent of revenues devoted to R&D for the pharmaceutical indus Following is the R&D-expense-to-sales ratio for Pfizer and some of its competitors. 20102009 13.9% 18.3 23.9 21.2 10.6 15.7% 19.4 21.3 19.8 8.9 16.5% 19.8 20.1 18.9 9.1 Pfizer . Bristol-Meyers Squibb . Merck . Eli Lilly . Abbott Laboratories .
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Module 5 I Revenue Recognition and Operating Income 5-16 ~I:!i"ructuring Expenses and Incentives turing expenses are substantial in many income statements. Because of their magnitude, •• "D requires enhanced disclosure, either as a separate line item in the income statement or as _~_~,~te. Restructuring costs typically include three components: ~ployee severance or relocation costs __. et write-downs 3l:her restructuring costs The first part, employee severance or relocation costs, represents accrued (estimated) costs ;:::"J::::::;:;li'nate or relocate employees as part of a restructuring program. To accrue those expenses, the y must: ~-timate total costs of terminating or relocating selected employees; these costs might include severance pay (typically a number of weeks of pay based on the employee's tenure with the .:ompany), outplacement costs, and relocation or retraining costs for remaining employees. eport total estimated costs as an expense (and a liability) in the period the restructuring :::mgram is announced. Subsequent payments to employees reduce the restructuring accrual jre liability). ~e second part of restructuring costs is asset write-downs, also called write-offs or charge- estructuring activities usually involve closure or relocation of manufacturing or administra- -=.., ilities. This can require the write-down of assets whose fair value is less than book value. example, restructurings can necessitate the write-down of long-term assets (such as plant or goodwill) and of inventories. Recall that asset cost is first recorded on the balance sheet -. ubsequently transferred from the balance sheet to the income statement as expense when t is used. The write-down of an asset accelerates this process for a portion, or all, of the cost. Write-downs have no cash flow effects unless the write-down has some potential tax ences. The third part of restructuring costs is typically labeled "Other" and includes costs of vacating ~~lIi've facilities, fees to terminate contracts (such as lease agreements and service contracts), edier exit costs (such as legal and asset-appraisal fees). Companies estimate and accrue these and reduce the restructuring liability as those costs are paid in cash.
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