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2.2.0.7 false SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 10101 - Disclosure - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES true false false false 1 USD false false Unit12 Standard http://www.xbrl.org/2003/iso4217 USD iso4217 0 Unit13 Standard http://www.xbrl.org/2003/instance pure xbrli 0 Unit1 Standard http://www.xbrl.org/2003/instance shares xbrli 0 Unit14 Divide http://www.xbrl.org/2003/iso4217 USD iso4217 http://www.xbrl.org/2003/instance shares xbrli 0 $ 5 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES 3 us-gaap_SignificantAccountingPoliciesTextBlock us-gaap true na duration No definition available. false false false false false false false false false false false false 1 false false false false 0 0 <div> <div> 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES <div class="MetaData"> <div class="MetaData"> <div class="MetaData"> Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been prepared in accordance with U.S. generally accepted accounting principles for interim financial information. The financial statements include all adjustments (consisting only of normal recurring adjustments) that the management of Gilead Sciences, Inc. (Gilead, we or us) believes are necessary for a fair presentation of the periods presented. These interim financial results are not necessarily indicative of results expected for the full fiscal year or for any subsequent interim period. The preparation of these Condensed Consolidated Financial Statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenues and expenses and related disclosures. On an ongoing basis, management evaluates its estimates, including critical accounting policies or estimates related to revenue recognition, intangible assets, allowance for doubtful accounts, prepaid royalties, clinical trial accruals, our tax provision and stock-based compensation. We base our estimates on historical experience and on various other market specific and other relevant assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ significantly from these estimates. The accompanying Condensed Consolidated Financial Statements include the accounts of Gilead, our wholly-owned subsidiaries and our joint ventures with Bristol-Myers Squibb Company (BMS), for which we are the primary beneficiary. We record a noncontrolling interest in our Condensed Consolidated Financial Statements to reflect BMS's interest in the joint ventures. Significant intercompany transactions have been eliminated. The Condensed Consolidated Financial Statements include the operating results of companies acquired by us from the date of each acquisition for the applicable reporting periods. The accompanying Condensed Consolidated Financial Statements and related financial information should be read in conjunction with the audited Consolidated Financial Statements and the related notes thereto for the year ended December 31, 2009, included in our Annual Report on Form 10-K filed with the U.S. Securities and Exchange Commission (SEC). Consolidation of Variable Interest Entities On January 1, 2010, we adopted amended guidance for the consolidation of variable interest entities. The amended guidance eliminates a mandatory quantitative approach to determine whether a variable interest gives the entity a controlling financial interest in a variable interest entity in favor of a qualitatively focused analysis. Additionally, the amended guidance requires an ongoing reassessment of whether the entity is a primary beneficiary. We adopted the provisions of this guidance on a prospective basis for our joint ventures with BMS, which we consolidate because we are the primary beneficiary. The adoption of this guidance did not have any impact on our Condensed Consolidated Financial Statements. </div></div></div> <div class="MetaData"> <div> Net Income Per Share Attributable to Gilead Common Stockholders </div></div></div> Basic net income per share attributable to Gilead common stockholders is calculated based on the weighted-average number of shares of our common stock outstanding during the period. Diluted net income per share attributable to Gilead common stockholders is calculated based on the weighted-average number of shares of our common stock outstanding and other dilutive securities outstanding during the period. The potential dilutive shares of our common stock resulting from the assumed exercise of outstanding stock options and equivalents (consisting primarily of performance shares) and the assumed exercise of warrants relating to the convertible senior notes due in 2011 (2011 Notes) and convertible senior notes due in 2013 (2013 Notes) (collectively, the Notes) are determined under the treasury stock method. Because the principal amount of the Notes will be settled in cash, only the conversion spread relating to the Notes is included in our calculation of diluted net income per share attributable to Gilead common stockholders. Our common stock resulting from the assumed settlement of the conversion spread of the Notes has a dilutive effect when the average market price of our common stock during the period exceeds the conversion prices of $38.75 and $38.10 for the 2011 Notes and 2013 Notes, respectively. The average market prices of our common stock during each of the three and six months ended June 30, 2010 and 2009 exceeded both of the conversion prices of the Notes and the dilutive effect is included in the table below. Warrants relating to the 2011 Notes and 2013 Notes have a dilutive effect when the average market price of our common stock during the period exceeds the warrants' exercise prices of $50.80 and $53.90, respectively. The average market prices of our common stock during each of the three and six months ended June 30, 2010 and 2009 did not exceed the warrants' exercise prices relating to the 2011 or the 2013 Notes; therefore, these warrants did not have a dilutive effect on our net income per share for those periods.   Stock options to purchase approximately 23.4 million and 19.5 million weighted-average shares of our common stock were outstanding during the three and six months ended June 30, 2010, respectively, but were not included in the computation of diluted net income per share attributable to Gilead common stockholders because the options' exercise prices were greater than the average market price of our common stock during these periods; therefore, their effect was antidilutive. Stock options to purchase approximately 18.6 million and 16.7 million weighted-average shares of our common stock were outstanding during the three and six months ended June 30, 2009, respectively, but were not included in the computation of diluted net income per share attributable to Gilead common stockholders because the options' exercise prices were greater than the average market price of our common stock during these periods; therefore, their effect was antidilutive. The following table is a reconciliation of the numerator and denominator used in the calculation of basic and diluted net income per share attributable to Gilead common stockholders (in thousands):   <table border="0" cellspacing="0" cellpadding="0" width="100%"> <tr><td width="66%"> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td> <td valign="bottom" width="2%"> </td> <td> </td> <td> </td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="5" align="center">Three Months Ended June 30,</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="5" align="center">Six Months Ended June 30,</td></tr> <tr><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2010</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2009</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2010</td> <td valign="bottom">  </td> <td style="border-bottom: #000000 1px solid;" valign="bottom" colspan="2" align="center">2009</td></tr> <tr bgcolor="#cceeff"><td valign="top"> Numerator:</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> Net income attributable to Gilead</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">712,061</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">571,398</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,566,962</td> <td valign="bottom">  </td> <td valign="bottom">$</td> <td valign="bottom" align="right">1,160,510</td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Denominator:</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> Weighted-average shares of common stock outstanding used in the calculation of basic net income per share attributable to Gilead common stockholders</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">881,802</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">905,611</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">891,649</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">907,684</td></tr> <tr bgcolor="#cceeff"><td valign="top"> Effect of dilutive securities:</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom"> </td></tr> <tr><td valign="top"> Stock options and equivalents</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">16,503</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">23,877</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">18,746</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">24,998</td></tr> <tr bgcolor="#cceeff"><td valign="top"> Conversion spread related to the 2011 Notes</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">81</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2,352</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,568</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2,766</td></tr> <tr><td valign="top"> Conversion spread related to the 2013 Notes</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">367</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">2,638</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">1,856</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">3,052</td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-top: #000000 1px solid;" valign="bottom"> </td> <td style="border-top: #000000 1px solid;" valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-top: #000000 1px solid;" valign="bottom"> </td> <td style="border-top: #000000 1px solid;" valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-top: #000000 1px solid;" valign="bottom"> </td> <td style="border-top: #000000 1px solid;" valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-top: #000000 1px solid;" valign="bottom"> </td> <td style="border-top: #000000 1px solid;" valign="bottom"> </td></tr> <tr bgcolor="#cceeff"><td valign="top"> Weighted-average shares of common stock outstanding used in the calculation of diluted net income per share attributable to Gilead common stockholders</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">898,753</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">934,478</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">913,819</td> <td valign="bottom">  </td> <td valign="bottom"> </td> <td valign="bottom" align="right">938,500</td></tr> <tr style="font-size: 1px;"><td valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td> <td valign="bottom">  </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td> <td style="border-top: #000000 3px double;" valign="bottom"> </td></tr></table> <div> <div class="MetaData"> <div> Concentrations of Risk </div></div></div> We are subject to credit risk from our portfolio of cash equivalents and marketable securities. Under our investment policy, we limit amounts invested in such securities by credit rating, maturity, industry group, investment type and issuer, except for securities issued by the U.S. government. We are not exposed to any significant concentrations of credit risk from these financial instruments. The goals of our investment policy, in order of priority, are as follows: safety and preservation of principal and diversification of risk; liquidity of investments sufficient to meet cash flow requirements; and a competitive after-tax rate of return. We are also subject to credit risk from our accounts receivable related to our product sales. The majority of our trade accounts receivable arises from product sales in the United States and Europe. To date, we have not experienced significant losses with respect to the collection of our accounts receivable. We believe that our allowance for doubtful accounts was adequate at June 30, 2010. <div class="MetaData"> <div> Recent Accounting Pronouncements </div></div> In October 2009, the FASB issued new standards for revenue recognition for agreements with multiple deliverables. These new standards impact the determination of when the individual deliverables included in a multiple element arrangement may be treated as separate units of accounting. Additionally, these new standards modify the manner in which the transaction consideration is allocated across the separately identified deliverables by no longer permitting the residual method of allocating arrangement consideration. These new standards are effective for us beginning in the first quarter of 2011; however, early adoption is permitted. We have not yet evaluated whether these new standards will have a material impact on our Condensed Consolidated Financial Statements. </div> 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying unaudited Condensed Consolidated Financial Statements have been false false false us-types:textBlockItemType textblock This element may be used to describe all significant accounting policies of the reporting entity. Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher AICPA -Name Accounting Principles Board Opinion (APB) -Number 22 -Paragraph 8 false 1 1 false UnKnown UnKnown UnKnown false true