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These excerpts taken from the AVNR 10-K filed Dec 17, 2008. Recent
Accounting Pronouncements
See Note 2, “Summary of Significant Accounting
Policies” in the Notes to Consolidated Financial Statements
for a discussion of recent accounting pronouncements and their
effect, if any, on the Company.
As described below, we are exposed to market risks related to
changes in interest rates. Because substantially all of our
revenue, expenses, and capital purchasing activities are
transacted in U.S. dollars, our exposure to foreign
currency exchange rates is immaterial. However, in the future we
could face increasing exposure to foreign currency exchange
rates if we expand international distribution of docosanol 10%
cream and purchase additional services from outside the
U.S. Until such time as we are faced with material amounts
of foreign currency exchange rate risks, we do not plan to use
derivative financial instruments, which can be used to hedge
such risks. We will evaluate the use of derivative financial
instruments to hedge our exposure as the needs and risks should
arise.
Recent Accounting Pronouncements See Note 2, “Summary of Significant Accounting Policies” in the Notes to Consolidated Financial Statements for a discussion of recent accounting pronouncements and their effect, if any, on the Company.
As described below, we are exposed to market risks related to changes in interest rates. Because substantially all of our revenue, expenses, and capital purchasing activities are transacted in U.S. dollars, our exposure to foreign currency exchange rates is immaterial. However, in the future we could face increasing exposure to foreign currency exchange rates if we expand international distribution of docosanol 10% cream and purchase additional services from outside the U.S. Until such time as we are faced with material amounts of foreign currency exchange rate risks, we do not plan to use derivative financial instruments, which can be used to hedge such risks. We will evaluate the use of derivative financial instruments to hedge our exposure as the needs and risks should arise. This excerpt taken from the AVNR 10-K filed Dec 21, 2007. Recent
accounting pronouncements
FASB Interpretation No. 48
(“FIN 48”). In July 2006, the FASB
issued FIN 48, “Accounting for Uncertainty in
Income Taxes, an interpretation of FASB No. 109”
which prescribes a recognition threshold and measurement process
for recording in the financial statements uncertain tax
positions taken or expected to be taken. Additionally,
FIN 48 provides guidance on derecognition, classification,
accounting in interim periods and disclosure requirements for
uncertain tax positions. The accounting provisions of
FIN 48 will be effective for us beginning October 1,
2007. We are in the process of determining the effect, if any,
of the adoption of FIN 48 will have on our consolidated
financial statements.
Financial Accounting Standards No. 157
(“FAS 157”). In September 2006,
the FASB issued FAS 157, “Fair Value
Measurements.” FAS 157 defines fair value,
established a framework for measuring fair value in generally
accepted accounting principles (GAAP) and expands disclosures
about fair value measurements. FAS 157 is effective for
financial statements issued for fiscal years beginning after
November 15, 2007. We do not expect the adoption of
FAS 157 to significantly affect our consolidated financial
condition or results of operations.
Financial Accounting Standards No. 159
(“FAS 159”). In February 2007, the
FASB issued FAS 159, The Fair Value Option for Financial
Assets and Financial Liabilities— Including an
amendment of FASB Statement 115, which provides companies
with an option to measure eligible financial assets and
liabilities in their entirety at fair value. The fair value
option may be applied instrument by instrument, and may be
applied only to entire instruments. If a company elects the fair
value option for an eligible item, changes in the item’s
fair value must be reported as unrealized gains and losses in
earnings at each subsequent reporting date. FAS 159 is
effective for fiscal years beginning after November 15,
2007. The Company is evaluating the options provided under
FAS 159 and their potential impact on its financial
condition and results of operations if implemented. We do not
expect the adoption of FAS 159 to significantly affect our
consolidated financial condition or results of operations.
Staff Accounting Bulletin No. 108
(“SAB 108”). In September 2006,
the SEC released SAB 108 to address diversity in practice
regarding consideration of the effects of prior year errors when
quantifying misstatements in current year financial statements.
The SEC staff concluded that registrants should quantify
financial statement errors using both a balance sheet approach
and an income statement approach and evaluate whether either
approach results in quantifying a misstatement that, when all
relevant quantitative and qualitative factors are considered, is
material. SAB 108 states that if correcting an error
in the current year materially affects the current year’s
income statement, the prior period financial statements must be
restated. SAB 108 is effective for fiscal years ending
after November 15, 2006. The Company adopted SAB 108
in fiscal 2007. The adoption of SAB 108 did not materially
affect the Company’s consolidated financial statements.
On May 24, 2006, pursuant to a Unit Purchase Agreement
dated May 22, 2006 (the “Acquisition Agreement”),
we acquired all of the outstanding equity interests in Alamo
from the former members of Alamo (the “Selling
Holders”) for approximately $30.0 million in
consideration, consisting of approximately $4.0 million in
cash, $25.1 million in promissory notes and $912,000 in
acquisition-related transaction costs. The purchase price
Table of Contents
Avanir
Pharmaceuticals
NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
exceeded the net assets acquired resulting in the recognition of
$22.1 million of goodwill. The results of operations of
Alamo have been included in our consolidated financial
statements since the date of acquisition. The Company intended
to leverage the FazaClo sales force to assist with the
commercial launch of Zenvia, which was planned for early 2007;
however, due to the receipt of the approvable letter and
resulting delay in the planned launch of Zenvia, we entered into
an agreement to sell FazaClo in July 2007. Details of the sale
of FazaClo are described below.
In connection with the Alamo acquisition, we also agreed to pay
the Selling Holders up to an additional $39,450,000 in
revenue-based earn-out payments, based on future sales of
FazaClo (clozapine USP), an orally disintegrating drug for the
treatment of refractory schizophrenia. On May 15, 2007, we
issued an additional $2,000,000 promissory note based on FazaClo
sales rates through that quarter and on August 15, 2007, we
issued a second promissory note, also in the principal amount of
$2,000,000. The remaining earn-out payments of $35,450,000 are
based on the achievement of certain target levels of FazaClo
sales in the U.S. from the closing date of the acquisition
through December 31, 2018. In connection with the FazaClo
sale, Azur assumed these remaining contingent payment
obligations; however, we are still contingently liable in the
event of default by Azur.
We also previously agreed to pay the Selling Holders one-half of
all net licensing revenues that we may receive through
December 31, 2018 from licenses of FazaClo outside of the
U.S., if any (“Non-US Licensing Revenues”). There were
no Non-US Licensing Revenues through August 3, 2007, the
date of sale of FazaClo, and these future obligations have been
assumed by Azur as described below. We also agreed to apply 20%
of any future net offering proceeds to repay the promissory
notes and through June 30, 2007, we paid approximately
$6.1 million of the principal amounts due under the notes.
In August 2007, we paid an additional $11 million of
outstanding principal and interest under these notes and amended
our agreement with the Selling Holders to partially suspend the
early payment obligations remaining under the promissory notes.
This excerpt taken from the AVNR 10-K filed Dec 18, 2006. Recent
accounting pronouncements
Financial Accounting Standards No. 154
(“FAS 154”). In May 2005, the FASB
issued FAS 154, “Accounting Changes and Error
Corrections.” FAS 154 establishes retrospective
application as the required method for reporting a change in
accounting principle in the absence of explicit transition
requirements specific to the newly adopted accounting principle.
FAS 154 also provides guidance for determining whether
retrospective application of a change in accounting principle is
impracticable and for reporting a change when retrospective
application is
Table of Contents
Avanir
Pharmaceuticals
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
impracticable. FAS 154 is effective for accounting changes
and corrections of errors made in fiscal years beginning after
December 15, 2005. We do not expect the adoption of
FAS 154 to significantly affect our financial condition or
results of operations.
Financial Accounting Standards No. 155
(“FAS 155”). In February 2006, the
FASB issued FAS 155, “Accounting for Certain Hybrid
Financial Instruments,” an amendment of Financial
Accounting Standards No. 133, “Accounting for
Derivative Instruments and Hedging Activities”
(“FAS 133”) and Financial Accounting
Standards No. 140, “Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of
Liabilities” (“FAS 140”). With respect
to FAS 133, FAS 155 simplifies accounting for certain
hybrid financial instruments by permitting fair value
remeasurement for any hybrid financial instrument that contains
an embedded derivative that otherwise would require bifurcation
and eliminates the interim guidance in Statement 133
Implementation Issue No. D1, “Application of
Statement 133 to Beneficial Interests in Securitized
Financial Assets,” which provided that beneficial
interests in securitized financial assets are not subject to the
provision of FAS 133. With respect to FAS 140,
FAS 155 eliminates a restriction on the passive derivative
instruments that a qualifying special-purpose entity may hold.
FAS 155 is effective for all financial instruments acquired
or issued after the beginning of an entity’s first fiscal
year that begins after September 15, 2006. We do not expect
the adoption of FAS 155 to significantly affect our
financial condition or results of operations.
FASB Interpretation No. 48
(“FIN 48”). In July 2006, the FASB
issued FIN 48, “Accounting for Uncertainty in
Income Taxes” which prescribes a recognition threshold
and measurement process for recording in the financial
statements uncertain tax positions taken or expected to be taken
in a tax return. Additionally, FIN 48 provides guidance on
derecognition, classification, accounting in interim periods and
disclosure requirements for uncertain tax positions. The
accounting provisions of FIN 48 will be effective for us
beginning October 1, 2007. We are in the process of
determining the effect, if any, the adoption of FIN 48 will
have on our financial statements.
Financial Accounting Standards No. 157
(“FAS 157”). In September 2006,
the FASB issued FAS 157, “Fair Value
Measurements.” FAS 157 defines fair value,
established a framework for measuring fair value in generally
accepted accounting principles (GAAP) and expands disclosures
about fair value measurements. FAS 157 is effective for
financial statements issued for fiscal years beginning after
November 15, 2007. We do not expect the adoption of
FAS 157 to significantly affect our financial condition or
results of operations.
Financial Accounting Standards No. 158
(“FAS 158”). In September 2006,
the FASB issued FAS 158, “Employers’
Accounting for Defined Benefit Pension and Other Postretirement
Plans-an Amendment of FASB Statements No. 87, 88, 106 and
132(R).” FAS 158 requires an employer to recognize
the overfunded or underfunded status of a defined benefit
postretirement plan (other than a multiemployer plan) as an
asset or liability in its statement of financial position and to
recognize the changes in that funded status in the year in which
the changes occur through comprehensive income of a business
entity or changes in unrestricted net assets of a
not-for-profit
organization. FAS 158 is effective for us as of the end of
the fiscal year ending after December 15, 2006. We do not
expect the adoption of FAS 158 to significantly affect our
financial condition or results of operations.
Staff Accounting Bulleting No. 108
(“SAB 108”). In September 2006,
the SEC released SAB 108 to address diversity in practice
regarding consideration of the effects of prior year errors when
quantifying misstatements in current year financial statements.
The SEC staff concluded that registrants should quantify
financial statement errors using both a balance sheet approach
and an income statement approach and evaluate whether either
approach results in quantifying a misstatement that, when all
relevant quantitative and qualitative factors are considered, is
material. SAB 108 states that if correcting an error
in the current year materially affects the current year’s
income statement, the prior period financial statements must be
restated. SAB 108 is effective for fiscal years ending
after November 15, 2006. We do not expect the adoption of
SAB 108 to significantly affect our financial condition or
results of operations.
FASB Staff Position
No. FAS 123R-5
(“FAS 123R-5”). In
October 2006, the FASB issued
FAS 123R-5,
“Amendment of FASB Staff Position
FAS 123R-1,”
to address whether a modification of an instrument in connection
Table of Contents
Avanir
Pharmaceuticals
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
with an equity restructuring should be considered a modification
for purposes of applying
FAS 123R-1,
“Classification and Measurement of Freestanding
Financial Instruments Originally Issued in Exchange for Employee
Services under FASB Statement
No. FAS 123(R).” The provisions in
FAS 123R-5
are effective for us in the quarter beginning January 1,
2007. We do not expect the adoption of
FAS 123R-5
to significantly affect our financial condition or results of
operations.
On May 24, 2006, pursuant to a Unit Purchase Agreement
dated May 22, 2006 (the “Acquisition Agreement”),
we acquired all of the outstanding equity interests in Alamo
from the former members of Alamo (the “Selling
Holders”) for approximately $30.0 million in
consideration, consisting of approximately $4.0 million in
cash, $25.1 million in promissory notes and $912,000 in
acquisition related transaction costs. The purchase price
exceeded the net assets acquired resulting in the recognition of
$22.1 million goodwill. The results of operations of Alamo
have been included in our consolidated financial statements
since the date of acquisition.
We also agreed to pay up to an additional $39,450,000 in
revenue-based earn-out payments, based on future sales of
FazaClo (clozapine USP), Alamo’s orally disintegrating drug
for the treatment of refractory schizophrenia. These earn-out
payments are based on FazaClo sales in the United States from
the closing date of the acquisition through December 31,
2018 (the “Contingent Payment Period”) and are payable
to the Selling Holders as follows:
Any of these additional revenue-based earn-out payments that are
ultimately paid upon satisfying the contingent conditions above
will be treated as additional consideration and recorded as
goodwill.
We have also agreed to pay the Selling Holders one-half of all
net licensing revenues that we received during the Contingent
Payment Period from licenses of FazaClo outside of the United
States (“Non-US Licensing Revenues”). Any amounts paid
to the Selling Holders on Non-US Licensing Revenues will be
recognized in the consolidated statement of operations in the
period such amounts are paid.
Table of Contents
Avanir
Pharmaceuticals
NOTES TO
CONSOLIDATED FINANCIAL
STATEMENTS — (Continued)
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