1. Summary of significant accounting policies

Business

Amgen Inc. is a global biotechnology company that discovers, develops, manufactures and markets human therapeutics based on advances in cellular and molecular biology.

Basis of presentation

The financial information for the three and six months ended June 30, 2009 and 2008 is unaudited but includes all adjustments (consisting of only normal recurring adjustments, unless otherwise indicated), which Amgen Inc., including its subsidiaries (referred to as “Amgen,” “the Company,” “we,” “our” or “us”), considers necessary for a fair presentation of the results of operations for those periods. Interim results are not necessarily indicative of results for the full fiscal year.

The condensed consolidated financial statements should be read in conjunction with our consolidated financial statements and the notes thereto contained in our Annual Report on Form 10-K for the year ended December 31, 2008.

Change in method of accounting for convertible debt instruments

Effective January 1, 2009, we adopted Financial Accounting Standards Board’s (“FASB”) Staff Position (“FSP”) No. APB 14-1, “Accounting for Convertible Debt Instruments That May Be Settled in Cash upon Conversion (Including Partial Cash Settlement)” (“FSP APB 14-1”) and, as required by this new standard, we retrospectively applied this change in accounting to all prior periods for which we had applicable outstanding convertible debt. Under this method of accounting, the debt and equity components of our convertible notes are bifurcated and accounted for separately. The equity components of our convertible notes, including our 2011 Convertible Notes, 2013 Convertible Notes and 2032 Modified Convertible Notes, are included in “Common stock and additional paid-in capital” in the Condensed Consolidated Balance Sheets, with a corresponding reduction in the carrying values of these convertible notes as of the date of issuance or modification, as applicable. The reduced carrying values of our convertible notes are being accreted back to their principal amounts through the recognition of non-cash interest expense. This results in recognizing interest expense on these borrowings at effective rates approximating what we would have incurred had we issued nonconvertible debt with otherwise similar terms. See Note 2, “Change in method of accounting for convertible debt instruments” and Note 9, “Financing arrangements.”

Principles of consolidation

The condensed consolidated financial statements include the accounts of Amgen as well as its wholly owned subsidiaries. We do not have any significant interests in any variable interest entities. All material intercompany transactions and balances have been eliminated in consolidation.

Use of estimates

The preparation of condensed consolidated financial statements in conformity with accounting principles generally accepted in the United States (“GAAP”) requires management to make estimates and assumptions that affect the amounts reported in the condensed consolidated financial statements and accompanying notes. Actual results may differ from those estimates.

Fair value measurement

We adopted the provisions of the FASB’s Statement of Financial Accounting Standards (“SFAS”) No. 157, “Fair Value Measurements” (“SFAS 157”), effective January 1, 2008, for financial assets and liabilities and effective January 1, 2009, with respect to the fair value measurement requirements for non-financial assets and liabilities that are not remeasured on a recurring basis. Under this standard, fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (i.e., the “exit price”) in an orderly transaction between market participants at the measurement date. The adoption of SFAS 157 did not have a material impact on our condensed consolidated results of operations, financial position or cash flows.

During the three months ended June 30, 2009, we adopted the provisions of the FASB’s FSP SFAS No. 115-2 and SFAS 124-2, “Recognition and Presentation of Other-Than-Temporary Impairments” (“FSP SFAS 115-2 and SFAS 124-2”). FSP SFAS 115-2 and SFAS 124-2 modifies the guidance to determine whether the impairment of a debt security is other-than-temporary. This new standard also amends the presentation and disclosure requirements of other-than-temporarily impaired debt and equity securities in the financial statements. The adoption of FSP SFAS 115-2 and SFAS 124-2 did not have a material impact on our condensed consolidated results of operations, financial position or cash flows.

 

During the three months ended June 30, 2009, we adopted the provisions of the FASB’s FSP SFAS No. 157-4, “Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly” and FASB’s FSP SFAS No. 107-1 and APB 28-1, “Interim Disclosures About Fair Value of Financial Instruments.” The adoption of these FSP’s resulted in additional interim disclosures and did not have a material impact on our condensed consolidated results of operations, financial position or cash flows.

Derivative instruments

Effective January 1, 2009, we adopted the provisions of the FASB’s SFAS No. 161, “Disclosures about Derivative Instruments and Hedging Activities – an amendment of FASB Statement No. 133” (“SFAS 161”) for our derivative instruments. SFAS 161 requires that the objectives for using derivative instruments be disclosed to better convey the purpose of derivative use in terms of the risks that we are intending to manage. This new standard also requires disclosure of how derivatives and related hedged items affect our financial statements. The adoption of SFAS 161 did not have a material impact on our condensed consolidated results of operations, financial position or cash flows. See Note 12, “Derivative instruments.”

Inventories

Inventories are stated at the lower of cost or market. Cost, which includes amounts related to materials, labor and overhead, is determined in a manner which approximates the first-in, first-out (“FIFO”) method.

Property, plant and equipment, net

Property, plant and equipment are recorded at historical cost, net of accumulated depreciation of $4.4 billion and $4.1 billion as of June 30, 2009 and December 31, 2008, respectively.

Goodwill

Goodwill principally relates to the acquisition of Immunex Corporation (“Immunex”). We perform an impairment test annually and whenever events or changes in circumstances indicate that the carrying amount of goodwill may not be recoverable.

Product sales

Product sales primarily consist of sales of Aranesp® (darbepoetin alfa), EPOGEN® (Epoetin alfa), Neulasta® (pegfilgrastim), NEUPOGEN® (Filgrastim) and Enbrel® (etanercept).

Sales of our products are recognized when shipped and title and risk of loss have passed. Product sales are recorded net of accruals for estimated rebates, wholesaler chargebacks, discounts and other incentives (collectively “sales incentives”) and returns. Taxes assessed by government authorities on the sale of the Company’s products, primarily in Europe, are excluded from revenues.

We have the exclusive right to sell Epoetin alfa for dialysis, certain diagnostics and all non-human, non-research uses in the United States. We sell Epoetin alfa under the brand name EPOGEN®. We granted to Ortho Pharmaceutical Corporation (which has assigned its rights under the product license agreement to Ortho Biotech Products, L.P. (“Ortho Biotech”)), a subsidiary of Johnson & Johnson (“J&J”), a license relating to Epoetin alfa for sales in the United States for all human uses except dialysis and diagnostics. This license agreement, which is perpetual, may be terminated for various reasons, including upon mutual agreement of the parties, or default. The parties are required to compensate each other for Epoetin alfa sales that either party makes into the other party’s exclusive market, sometimes referred to as “spillover.” Accordingly, we do not recognize product sales we make into the exclusive market of J&J and do recognize the product sales made by J&J into our exclusive market. Sales in our exclusive market are derived from our sales to our customers, as adjusted for spillover. We are employing an arbitrated audit methodology to measure each party’s spillover based on estimates of and subsequent adjustments thereto of third-party data on shipments to end users and their usage.

 

Research and development costs

Research and development (“R&D”) costs are expensed as incurred and primarily include salaries, benefits and other staff-related costs; facilities and overhead costs; clinical trial and related clinical manufacturing costs; contract services and other outside costs; information systems’ costs and amortization of acquired technology used in R&D with alternative future uses. R&D expenses also include costs incurred under R&D arrangements with our corporate partners, such as activities performed on behalf of Kirin-Amgen Inc. (“KA”), and costs and cost recoveries associated with collaborative R&D and in-licensing arrangements, including upfront fees and milestones paid to collaboration partners in connection with technologies that have no alternative future use. Net payment or reimbursement of R&D costs for R&D collaborations is recognized when the obligations are incurred or as we become entitled to the cost recovery.

Selling, general and administrative costs

Selling, general and administrative (“SG&A”) expenses are primarily comprised of salaries, benefits and other staff-related costs associated with sales and marketing, finance, legal and other administrative personnel; facilities and overhead costs; outside marketing, advertising and legal expenses and other general and administrative costs.

SG&A expenses include costs and cost recoveries associated with certain collaborative arrangements. Net payment or reimbursement of SG&A costs for collaborations is recognized when the obligations are incurred or as we become entitled to the cost recovery.

Subsequent events

In May 2009, the FASB issued SFAS No. 165, “Subsequent Events”, (“SFAS 165”). SFAS 165 is effective for financial statements ending after June 15, 2009, and we adopted SFAS 165 during the three months ended June 30, 2009. SFAS 165 establishes general standards of accounting for and disclosure of subsequent events that occur after the balance sheet date. Entities are also required to disclose the date through which subsequent events have been evaluated. We have evaluated subsequent events through the date of issuance of our financial statements in this Form 10-Q.

Recent accounting pronouncements

In June 2009, the FASB issued SFAS No. 167, “Amendments to FASB Interpretation No. 46(R)” (“SFAS 167”), which amends guidance regarding consolidation of variable interest entities to address the elimination of the concept of a qualifying special purpose entity. SFAS 167 also replaces the quantitative-based risks and rewards calculation for determining which enterprise has a controlling financial interest in a variable interest entity with an approach focused on identifying which enterprise has the power to direct the activities of the variable interest entity, and the obligation to absorb losses of the entity or the right to receive benefits from the entity. Additionally, SFAS 167 requires any enterprise that holds a variable interest in a variable interest entity to provide enhanced disclosures that will provide users of financial statements with more transparent information about an enterprise’s involvement in a variable interest entity. SFAS 167 is effective for interim and annual reporting periods beginning after November 30, 2009. We are currently evaluating the potential impact of SFAS 167 on our financial statements.

In June 2009, the FASB issued SFAS No. 168 “The FASB Accounting Standards Codification^™ and the Hierarchy of Generally Accepted Accounting Principles—a replacement of FASB Statement No. 162” (“SFAS 168”), which will be effective for interim and annual periods ending after September 15, 2009. The FASB Accounting Standards Codification (“Codification”) will become the source of authoritative GAAP recognized by the FASB. Rules and interpretive releases of the Securities and Exchange Commission (“SEC”) under authority of federal securities laws continue to be sources of authoritative GAAP for SEC registrants. All existing FASB accounting standards and guidance are superseded as described in SFAS 168. Subsequently, instead of issuing new accounting standards in the form of statements, FASB staff positions, and Emerging Issues Task Force (“EITF”) abstracts, the FASB will issue Accounting Standards Updates that will update the Codification. Adoption of the Codification will not have a significant impact on our financial statements.

3. Income taxes

The effective tax rates for the three and six months ended June 30, 2009 and June 30, 2008 are different from the statutory rate primarily as a result of indefinitely invested earnings of our foreign operations. In addition, the effective tax rate for the three and six months ended June 30, 2009 was further reduced by favorable resolution of certain non-routine transfer pricing matters with the Internal Revenue Service (“IRS”) for prior periods. We do not provide for U.S. income taxes on undistributed earnings of our foreign operations that are intended to be invested indefinitely outside the United States.

One or more of our legal entities file income tax returns in the U.S. federal jurisdiction, various U.S. state jurisdictions and certain foreign jurisdictions. Our income tax returns are routinely audited by the tax authorities in those jurisdictions. Significant disputes can arise with these tax authorities involving issues of the timing and amount of deductions, the use of tax credits and allocations of income among various tax jurisdictions because of differing interpretations of tax laws and regulations. We are no longer subject to U.S. federal income tax examinations for years ending on or before December 31, 2004 or to California state income tax examinations for years ending on or before December 31, 2003.

The IRS is currently examining our U.S. income tax returns for the years ended December 31, 2005 and 2006. As of June 30, 2009, the Company and the IRS have agreed to certain non-routine transfer pricing adjustments and the Company has accordingly adjusted its liability for unrecognized tax benefits (“UTBs”). The remainder of this examination is currently anticipated to be completed in 2009.

During the three and six months ended June 30, 2009, the gross amount of our UTBs increased approximately $55 million and $145 million, respectively, as a result of tax positions taken during the current year. During the six months ended June 30, 2009, the gross amount of our UTBs decreased approximately $170 million primarily as a result of resolving certain non-routine transfer pricing matters related to prior periods. The majority of our UTBs as of June 30, 2009, if recognized, would affect our effective tax rate.

As of June 30, 2009, we believe that it is reasonably possible that our gross liabilities for UTBs may decrease by approximately $100 million within the succeeding twelve months due to potential tax settlements.

5. Related party transactions

We own a 50% interest in KA, a corporation formed in 1984 with Kirin Holdings Company, Limited (“Kirin”) for the development and commercialization of certain products based on advanced biotechnology. We account for our interest in KA under the equity method and include our share of KA’s profits or losses in “Selling, general and administrative” in the Condensed Consolidated Statements of Income. During the three and six months ended June 30, 2009, our share of KA’s profits was $17 million and $36 million, respectively. During the three and six months ended June 30, 2008, our share of KA’s profits was $17 million and $31 million, respectively. As of June 30, 2009 and December 31, 2008, the carrying value of our equity method investment in KA, net of dividends paid, was $392 million and $356 million, respectively, and is included in non-current “Other assets” in the Condensed Consolidated Balance Sheets. KA’s revenues consist of royalty income related to its licensed technology rights. All of our rights to manufacture and market certain products, including darbepoetin alfa, pegfilgrastim, granulocyte colony-stimulating factor (“G-CSF”) and recombinant human erythropoietin, are pursuant to exclusive licenses from KA, which we currently market under the brand names Aranesp®, Neulasta®, NEUPOGEN® and EPOGEN®, respectively. KA receives royalty income from us, as well as from Kirin, J&J and F. Hoffmann-La Roche Ltd. (“Roche”) under separate product license agreements for certain geographic areas outside of the United States. During the three and six months ended June 30, 2009, KA earned royalties from us of $81 million and $152 million, respectively. During the three and six months ended June 30, 2008, KA earned royalties from us of $83 million and $158 million, respectively. These amounts are included in “Cost of sales (excludes amortization of certain acquired intangible assets)” in the Condensed Consolidated Statements of Income. As of June 30, 2009 and December 31, 2008, we owed KA $88 million and $82 million, respectively, which were included in “Accrued liabilities” in the Condensed Consolidated Balance Sheets.

KA’s expenses primarily consist of costs related to R&D activities conducted on its behalf by Amgen and Kirin. KA pays Amgen and Kirin for such services at negotiated rates. During the three and six months ended June 30, 2009, we earned revenues from KA of $25 million and $54 million, respectively, for certain R&D activities performed on KA’s behalf. During the three and six months ended June 30, 2008, we earned revenues from KA of $27 million and $59 million, respectively, for certain R&D activities performed on KA’s behalf. These amounts are included in “Other revenues” in the Condensed Consolidated Statements of Income.

 

 

9. Financing arrangements

The following table reflects the carrying value of our long-term borrowings under our various financing arrangements as of June 30, 2009 and December 31, 2008 (in millions):

 

		June 30,       2009			December 31,   2008
0.125% convertible notes due 2011 (2011 Convertible Notes)		$	2,273		$	2,206
0.375% convertible notes due 2013 (2013 Convertible Notes)			2,028			1,970
5.85% notes due 2017 (2017 Notes)			1,099			1,099
4.85% notes due 2014 (2014 Notes)			1,000			1,000
4.00% notes due 2009 (2009 Notes)			1,000			1,000
5.70% notes due 2019 (2019 Notes)			998			-
6.40% notes due 2039 (2039 Notes)			995			-
6.375% notes due 2037 (2037 Notes)			899			899
6.15% notes due 2018 (2018 Notes)			499			499
6.90% notes due 2038 (2038 Notes)			498			498
Zero coupon modified convertible notes due in 2032 (2032 Modified Convertible Notes)			82			81
Other			100			100
Total borrowings			11,471			9,352
Less current portion			1,000			1,000
Total non-current debt		$	10,471		$	8,352

2019 Notes and 2039 Notes

In January 2009, we issued $1.0 billion aggregate principal amount of notes due in 2019 (the “2019 Notes”) and $1.0 billion aggregate principal amount of notes due in 2039 (the “2039 Notes”) in a registered offering. The 2019 Notes and 2039 Notes pay interest at fixed annual rates of 5.70% and 6.40%, respectively. The 2019 Notes and 2039 Notes may be redeemed at any time at our option, in whole or in part, at 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest, if any, and a “make-whole” amount, as defined. Upon the occurrence of a change in control triggering event, as defined, we may be required to purchase for cash all or a portion of the 2019 Notes and the 2039 Notes at a price equal to 101% of the principal amount of the notes plus accrued interest. The total debt discount on issuance and debt issuance costs were $7 million and $13 million, respectively, and are being amortized over the lives of the notes.

Convertible notes

Effective January 1, 2009, we adopted FSP APB 14-1 and, as required by this new standard, we retrospectively applied this change in accounting to all prior periods for which we had applicable outstanding convertible debt (see Note 2, “Change in method of accounting for convertible debt instruments”). Under this method of accounting, the debt and equity components of our convertible notes are bifurcated and accounted for separately. The equity components of our convertible notes, including our 2011 Convertible Notes, 2013 Convertible Notes and 2032 Modified Convertible Notes, are included in “Common stock and additional paid-in capital” in the Condensed Consolidated Balance Sheets, with a corresponding reduction in the carrying values of these convertible notes as of the date of issuance or modification, as applicable. The reduced carrying values of our convertible notes are being accreted back to their principal amounts through the recognition of non-cash interest expense. This results in recognizing interest expense on these borrowings at effective rates approximating what we would have incurred had we issued nonconvertible debt with otherwise similar terms.

The 2011 Convertible Notes and the 2013 Convertible Notes were issued at par and pay interest at a rate of 0.125% and 0.375%, respectively. The discounts associated with these notes resulting from the adoption of FSP APB 14-1 are being amortized over periods that end on the scheduled maturity dates of these notes and result in effective interest rates of approximately 6.24% for the 2011 Convertible Notes and approximately 6.35% for the 2013 Convertible Notes.

For the three and six months ended June 30, 2009, interest expense for the 2011 Convertible Notes was approximately $1 million and $2 million, respectively, based on the contractual coupon rates. For the three and six months ended June 30, 2008, interest expense for the 2011 Convertible Notes was approximately $1 million and $2 million, respectively, based on the contractual coupon rates. For the three and six months ended June 30, 2009, interest expense for the 2013 Convertible Notes was approximately $2 million and $5 million, respectively, based on the contractual coupon rates. For the three and six months ended June 30, 2008, interest expense for the 2013 Convertible Notes was approximately $2 million and $5 million, respectively, based on the contractual coupon rates.

For the three and six months ended June 30, 2009, amortization of the discount for the 2011 Convertible Notes was approximately $34 million and $67 million, respectively. For the three and six months ended June 30, 2008, amortization of the discount for the 2011 Convertible Notes was approximately $32 million and $63 million, respectively. For the three and six months ended June 30, 2009, amortization of the discount for the 2013 Convertible Notes was approximately $29 million and $58 million, respectively. For the three and six months ended June 30, 2008, amortization of the discount for the 2013 Convertible Notes was approximately $27 million and $54 million, respectively.

The 2011 Convertible Notes and the 2013 Convertible Notes may, subject to certain conditions, be converted based on a conversion rate of 12.5247 and 12.5814 shares, respectively, per $1,000 principal amount of notes (which represents a conversion price of approximately $79.84 and $79.48 per share, respectively). Upon conversion, a holder would receive the conversion value, as defined, in: (i) cash equal to the lesser of the principal amount of the note or the conversion value and (ii) shares of our common stock, cash or a combination of common stock and cash, at our option, to the extent the conversion value exceeds the principal amount of the note. As of June 30, 2009, these notes were not convertible and the principal values exceeded the conversion values.

The principal balances, unamortized discounts and net carrying amounts of the liability components and the equity components for our 2011 Convertible Notes and 2013 Convertible Notes as of June 30, 2009 and December 31, 2008 are as follows (in millions):

 

		Liability Component									Equity Component
		Principal     Balance			Unamortized   Discount			Net Carrying   Amount			Net Carrying   Amount
Balance as of June 30, 2009
2011 Convertible Notes		$	2,500		$	227		$	2,273		$	643
2013 Convertible Notes		$	2,500		$	472		$	2,028		$	829
Balance as of December 31, 2008
2011 Convertible Notes		$	2,500		$	294		$	2,206		$	643
2013 Convertible Notes		$	2,500		$	530		$	1,970		$	829

The 2032 Modified Convertible Notes were issued in 2005 in exchange for zero-coupon, 30-year convertible notes that we issued in 2002. Like the notes for which they were exchanged, no interest is currently payable on the 2032 Modified Convertible Notes. These notes were issued at a discount from their principal amount (prior to the adoption of FSP APB 14-1). The reduced carrying value resulting from issuing these notes at a discount is being accreted back to the principal amount based on a contractual interest rate of 1.125% over the life of the notes. In March 2007, substantially all of the holders of the 2032 Modified Convertible Notes exercised their option to put these convertible notes to us. The additional discount on the 2032 Modified Convertible Notes recognized pursuant to the retrospective application of FSP APB 14-1 (in excess of the discount recognized under the contractual terms of these securities) was amortized as non-cash interest expense prior to the holders putting these convertible notes to us. We continue to recognize interest expense for the amortization of the discount based on the contractual rate for the 2032 Modified Convertible Notes that remain outstanding. Such amounts were not material for the three and six months ended June 30, 2009 and 2008.

Holders of the remaining outstanding 2032 Modified Convertible Notes may, subject to certain conditions, convert each of their notes based on a conversion rate of 8.8601 shares of common stock. The conversion price per share of the convertible notes as of any day will equal the accreted value on that day, divided by the conversion rate, or $87.52, as of June 30, 2009. If converted, the 2032 Modified Convertible Notes will be settled in cash for an amount equal to the lesser of the accreted value of the 2032 Modified Convertible Notes at the conversion date or the conversion value, as defined, and shares of common stock, if any, to the extent the conversion value exceeds the amount paid in cash. As of June 30, 2009, these notes were not convertible and the accreted value exceeded the amount that would have been received upon conversion. As of June 30, 2009 and December 31, 2008, the equity component for the 2032 Modified Convertible Notes was approximately $29 million.

Other facilities

As of June 30, 2009, we have a $2.3 billion syndicated unsecured revolving credit facility which matures in November 2012 and is available for general corporate purposes, or as a liquidity backstop to our commercial paper program. In late 2008, a participating financial institution in the credit facility who had provided $178 million of such commitment declared bankruptcy. Subsequently, this financial institution, which is a subsidiary of Lehman Brothers Holdings, Inc. (“Lehman”), was removed from the credit facility and the aggregate commitment was reduced to its current level of $2.3 billion.

11. Fair value measurement

In determining the fair value of its financial assets and liabilities, the Company uses various valuation approaches. SFAS 157 establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that observable inputs be used when available. Observable inputs are inputs that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the inputs that market participants would use in pricing the asset or liability and are developed based on the best information available in the circumstances. The fair value hierarchy is broken down into three levels based on the source of inputs as follows:

 

Level 1		—		Valuations based on unadjusted quoted prices in active markets for identical assets or liabilities that the Company has the ability to access
Level 2		—		Valuations based on quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active and models for which all significant inputs are observable, either directly or indirectly
Level 3		—		Valuations based on inputs that are unobservable and significant to the overall fair value measurement.

The availability of observable inputs can vary among the various types of financial assets and liabilities. To the extent that the valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for financial statement disclosure purposes, the level in the fair value hierarchy within which the fair value measurement is categorized is based on the lowest level input that is significant to the overall fair value measurement.

Our derivative assets and liabilities include interest rate swaps and foreign currency forward and option contracts. The fair values of these derivatives are determined using models based on market observable inputs, including interest rate curves and both forward and spot prices for foreign currencies.

The following fair value hierarchy table presents information about each major category of the Company’s financial assets and liabilities measured at fair value on a recurring basis as of June 30, 2009 and December 31, 2008 (in millions):

 

		Fair value measurement at June 30, 2009 using:
		Quoted prices in     active markets for     identical assets (Level 1)			Significant other     observable inputs     (Level 2)			Significant     unobservable     inputs (Level 3)			Total
Assets:
Available-for-sale securities:
U.S. Treasury securities		$	1,273		$	-		$	-		$	1,273
Obligations of U.S. government agencies and FDIC guaranteed bank debt			-			4,127			-			4,127
Corporate debt securities			-			2,950			-			2,950
Mortgage and asset backed securities			-			334			-			334
Other short-term interest bearing securities			2,614			470			-			3,084
Equity securities			71			-			-			71
			3,958			7,881			-			11,839
Derivatives			-			191			-			191
Total		$	3,958		$	8,072		$	-		$	12,030
Liabilities:
Derivatives		$	-		$	95		$	-		$	95
Total		$	-		$	95		$	-		$	95

 

		Fair value measurement at December 31, 2008 using:
		Quoted prices in   active markets for   identical assets (Level 1)			Significant other   observable inputs   (Level 2)			Significant     unobservable     inputs (Level 3)			Total
Assets:
Available-for-sale securities		$	3,575		$	5,927		$	-		$	9,502
Derivatives			-			415			-			415
Total		$	3,575		$	6,342		$	-		$	9,917
Liabilities:
Derivatives		$	-		$	66		$	-		$	66
Total		$	-		$	66		$	-		$	66

There were no material remeasurements to fair value during the six months ended June 30, 2009 and 2008 of assets and liabilities that are not measured at fair value on a recurring basis.

Following is a summary of the fair value of other financial instruments:

Short-term assets and liabilities

The fair values of cash equivalents, accounts receivable and accounts payable approximate their carrying values due to the short-term nature of these financial instruments.

Notes

The following table presents the carrying value and fair value information for our convertible notes, modified convertible notes and other long-term notes. The fair values shown are based on significant other observable inputs (Level 2) (in millions):

 

		June 30, 2009
		Carrying value			Fair value
2011 Convertible Notes		$	2,273		$	2,427
2013 Convertible Notes			2,028			2,234
2017 Notes			1,099			1,200
2014 Notes			1,000			1,055
2009 Notes			1,000			1,013
2019 Notes			998			1,091
2039 Notes			995			1,080
2037 Notes			899			965
2018 Notes			499			560
2038 Notes			498			573
2032 Modified Convertible Notes			82			60
Other			100			112
Total		$	11,471		$	12,370

 

		December 31, 2008
		Carrying value			Fair value
2011 Convertible Notes		$	2,206		$	2,300
2013 Convertible Notes			1,970			2,080
2017 Notes			1,099			1,140
2014 Notes			1,000			994
2009 Notes			1,000			1,017
2037 Notes			899			948
2018 Notes			499			536
2038 Notes			498			567
2032 Modified Convertible Notes			81			58
Other			100			111
Total		$	9,352		$	9,751