BIIB » Topics » Marketable Securities and Investments

This excerpt taken from the BIIB 10-K filed Feb 21, 2007.
Marketable Securities and Investments
 
We invest in various types of securities, including:
 
  •  short-term and long-term marketable securities, principally corporate notes and government securities, in which our excess cash balances are invested;
 
  •  equity securities in certain publicly-traded biotechnology companies with which we have collaborative agreements; and
 
  •  equity securities of certain companies whose securities are not publicly traded and where fair value is not readily available.
 
These investments are accounted for in accordance with Statement of Financial Accounting Standards No. 115, or SFAS 115, Accounting for Certain Investments in Debt and Equity Securities, or APB 18, The Equity Method of Accounting for Investments in Common, as appropriate.
 
In accounting for investments we evaluate if a decline in the fair value of a marketable security below our cost basis is other-than-temporary, and if so, we record an impairment charge in our consolidated statement of income. The factors that we consider in our assessments include the fair market value of the security, the duration of the


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security’s decline, prospects for the investee, including favorable clinical trial results, new product initiatives and new collaborative agreements and our intent and ability to hold to recovery. The determination of whether a loss is other than temporary is highly judgmental and can have a material impact on our results.
 
During 2006, 2005 and 2004, we recorded charges related to impairments that were determined to be other than temporary, of $34.4 million, $15.4 million, and $18.5 million, respectively, related to equity securities.
 
This excerpt taken from the BIIB 10-K filed Mar 3, 2006.
Marketable Securities and Investments
 
We invest our excess cash balances in short-term and long-term marketable securities, principally corporate notes and government securities. At December 31, 2005, substantially all of our securities were classified as “available-for-sale.” All available-for-sale securities are recorded at fair market value and unrealized gains and losses are included in accumulated other comprehensive loss in shareholders’ equity, net of related tax effects. Realized gains and losses and declines in value, if any, judged to be other-than-temporary on available-for-sale securities are reported in other expense. The cost of available-for-sale securities sold is based on the specific identification method. We have established guidelines that maintain safety and provide adequate liquidity in our available-for-sale portfolio. These guidelines are periodically reviewed and modified to take advantage of trends in yields and interest rates. In 2005, we recognized a charge of approximately $3.1 million for certain unrealized losses on available-for-sale securities that were determined to be other-than-temporary, because we expected that the securities would be sold prior to a potential recovery of their decline in value.
 
As part of our strategic product development efforts, we invest in equity securities of certain biotechnology companies with which we have collaborative agreements. As a matter of policy, we determine on a quarterly basis whether any decline in the fair value of a marketable security is temporary or other-than-temporary. Unrealized gains and losses on marketable securities are included in accumulated other comprehensive loss in shareholders’ equity, net of related tax effects. If a decline in the fair value of a marketable security below our cost basis is determined to be other-than-temporary, such marketable security is written-down to its estimated fair value with a charge to current earnings. The factors that we consider in our assessments include the fair market value of the security, the duration of the security’s decline, and prospects for the company, including favorable clinical trial results, new product initiatives and new collaborative agreements. In 2005, we recognized a $9.2 million charge for the impairment of an investment that was determined to be other-than-temporary following a decline in value during the first quarter of 2005 due to unfavorable clinical results and the future prospects for the company. Any future determinations that unrealized losses are other-than-temporary could have an impact on earnings.
 
We also invest in equity securities of certain companies whose securities are not publicly traded and fair value is not readily available. These investments are recorded using the cost method of accounting and are adjusted only for other-than-temporary declines in fair value, distributions of earnings and additional investments. As a matter of policy, we monitor these investments in private securities on a quarterly basis and determine whether any impairment in their value would require a charge to current earnings, based on the implied value from any recent rounds of financing completed by the investee, market prices of comparable public companies and general market conditions.
 
In the third quarter of 2005, we recorded a $4.6 million charge for the impairment of an investment that completed an initial public offering during the period, when we determined that the offering price and our unrealized loss related to the entity as of September 30, 2005 was not likely to be recovered to our carrying value prior to the company being publicly traded. In the fourth quarter of 2005, we recorded a $1.6 million charge for the impairment of an investment that was determined to be other-than-temporary due to the future prospects for the company. There were no significant charges to current earnings in 2004 or 2003 for impairments of these investments. Additional recognition of impairments for these securities may cause variability in earnings.


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BIOGEN IDEC INC. AND SUBSIDIARIES
 
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)

 

EXCERPTS ON THIS PAGE:

10-K
Feb 21, 2007
10-K
Mar 3, 2006
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