Note 2 — Separation of AbbVie Inc.

On January 1, 2013, Abbott completed the separation of AbbVie Inc. (AbbVie), which was formed to hold Abbott’s research-based proprietary pharmaceuticals business. Abbott and AbbVie entered into transitional services agreements prior to the separation pursuant to which Abbott and AbbVie are providing to each other, on an interim transitional basis, various services.  Transition services may be provided for up to 24 months with an option for a one-year extension by the recipient.  Services being provided by Abbott include certain information technology and back office support.  Billings by Abbott under these transitional services agreements are recorded as a reduction of the costs to provide the respective service in the applicable expense category in the Condensed Consolidated Statement of Earnings.  This transitional support will enable AbbVie to establish its stand-alone processes for various activities that were previously provided by Abbott and does not constitute significant continuing support of AbbVie’s operations.

For a small portion of AbbVie’s operations, the legal transfer of AbbVie’s assets (net of liabilities) did not occur with the separation of AbbVie on January 1, 2013, in certain countries,  due to the time required to transfer marketing authorizations and other regulatory requirements in each of these countries.  Under the terms of the separation agreement with Abbott, AbbVie is subject to the risks and entitled to the benefits generated by these operations and assets.  The majority of these operations were transferred to AbbVie in 2013 with the remainder expected to be transferred in 2014 or 2015.  These assets and liabilities have been presented as held for disposition in the Condensed Consolidated Balance Sheet.  At June 30, 2014, the assets and liabilities held for disposition consist of trade accounts receivable of $137 million, inventories of $89 million, equipment of $16 million, other assets of $62 million, trade accounts payable and accrued liabilities of $242 million and other liabilities of $1 million. Abbott’s obligation to transfer the net assets held for disposition to AbbVie of $61 million is included in Other accrued liabilities.

Abbott has retained all liabilities for all U.S. federal and foreign income taxes on income prior to the separation, as well as certain non-income taxes attributable to AbbVie’s business.  AbbVie generally will be liable for all other taxes attributable to its business.

Earnings from discontinued operations in the second quarter and first six months of 2014 reflect the recognition of $6 million and $42 million, respectively, of net tax benefits primarily as a result of the resolution of various tax positions related to AbbVie’s operations for years prior to the separation.