Annual Report and Form 20-F Information 2009

• Financial Statements
• Notes to the Financial Statements (Group)
• Notes to the Financial Statements (Company)

Notes to the Financial Statements (Group)

9 Intangible assets

	Product, marketing and distribution rights $m	Other intangibles $m	Software development costs $m	Total $m
Cost
At 1 January 2007	4,173	910	786	5,869
Additions - through business combinations	6,946	1,477	-	8,423
Additions - separately acquired	299	33	178	510
Disposals	(52)	(82)	-	(134)
Exchange adjustments	183	47	12	242
At 31 December 2007	11,549	2,385	976	14,910
Additions - separately acquired	2,743	20	178	2,941
Disposals	-	(33)	(30)	(63)
Exchange adjustments	(770)	(197)	(133)	(1,100)
At 31 December 2008	13,522	2,175	991	16,688
Additions - separately acquired	764	46	193	1,003
Disposals	(200)	(1)	-	(201)
Exchange adjustments	267	84	28	379
At 31 December 2009	14,353	2,304	1,212	17,869
Amortisation and impairment losses
At 1 January 2007	1,859	443	460	2,762
Amortisation for year	364	112	78	554
Disposals	(52)	(81)	-	(133)
Impairment	98	22	-	120
Exchange adjustments	104	32	4	140
At 31 December 2007	2,373	528	542	3,443
Amortisation for year	529	182	96	807
Disposals	-	(9)	(10)	(19)
Impairment	516	91	24	631
Exchange adjustments	(357)	(104)	(36)	(497)
At 31 December 2008	3,061	688	616	4,365
Amortisation for year	481	162	86	729
Disposals	(67)	-	-	(67)
Impairment	93	273	49	415
Exchange adjustments	159	25	17	201
At 31 December 2009	3,727	1,148	768	5,643
Net book value
At 31 December 2007	9,176	1,857	434	11,467
At 31 December 2008	10,461	1,487	375	12,323
At 31 December 2009	10,626	1,156	444	12,226

Other intangibles consist mainly of licensing and rights to contractual income streams.

Amortisation charges are recognised in profit as follows:

	Product, marketing and distribution rights $m	Other intangibles $m	Software development costs $m	Total $m
Year ended 31 December 2007
Selling, general and administrative costs	364	27	78	469
Other operating income and expense	-	85	-	85
	364	112	78	554
Year ended 31 December 2008
Cost of sales	39	-	-	39
Research and development	10	-	-	10
Selling, general and administrative costs	480	35	96	611
Other operating income and expense	-	147	-	147
	529	182	96	807
Year ended 31 December 2009
Cost of sales	48	-	-	48
Selling, general and administrative costs	433	27	86	546
Other operating income and expense	-	135	-	135
	481	162	86	729

Impairment charges are recognised in profit as follows:

	Product, marketing and distribution rights $m	Other intangibles $m	Software development costs $m	Total $m
Year ended 31 December 2007
Research and development	98	22	-	120
Year ended 31 December 2008
Cost of sales	115	-	-	115
Research and development	144	-	-	144
Selling, general and administrative costs	257	-	24	281
Other operating income and expense	-	91	-	91
	516	91	24	631
Year ended 31 December 2009
Research and development	93	7	-	100
Selling, general and administrative costs	-	1	49	50
Other operating income and expense	-	265	-	265
	93	273	49	415

Amortisation and impairment charges

The write down in value of the intangible assets in relation to these income streams was determined based on value in use calculations using discounted risk-adjusted projections of the products' expected cash flows over a period reflecting the patent-protected lives of the individual products. The full period of projections is covered by internal budgets and forecasts. In arriving at the appropriate discount rate to use for each product, we adjust AstraZeneca's post-tax weighted average cost of capital (7.6% for 2009; 7.6% in 2008) to reflect the impact of risks and tax effects specific to the individual products. The weighted average pre-tax discount rate we used was approximately 14% (2008: 14%).

The 2009 impairment of product marketing and distribution rights results from the termination of development projects during the year. The 2009 impairment of other intangibles results from a reassessment of the future royalties expected to be received relating to the HPV cervical cancer vaccine and a reassessment of other future licensing and contractual income expected to be earned within our biologics business.

The 2008 impairment of product, marketing and distribution rights results, in part, from the settlement of the Pulmicort Respules patent litigation with Teva ($115m) and the 'at risk' launch of a generic competitor to Ethyol ($257m). The 2008 impairment of other intangibles results from a reassessment of the future royalties expected to be received relating to the HPV cervical cancer vaccine. These impairment charges were determined using value in use calculations applying the same considerations as above. The post-tax weighted average cost of capital was 7.6%. The remaining $144m impairment of product, marketing and distribution rights results from the termination of projects in development during the year.

The impairment in 2007 was in relation to the termination of a product in development acquired with MedImmune and four collaboration agreements.

Significant assets

	Description	Carrying value $m	Remaining amortisation period
Intangible assets arising from joint venture with Merck1	Product, marketing and distribution rights	227	4 and 8 years
Advance payment1	Product, marketing and distribution rights	516	9 years
Partial retirement (non-refundable deposit)1	Product, marketing and distribution rights	1,656	Not amortised
Partial retirement1	Product, marketing and distribution rights	792	12-18 years
Intangible assets arising from the acquisition of CAT2	Product, marketing and distribution rights	409	6 and 11 years
Intangible assets arising from the acquisition of KuDOS2	Product, marketing and distribution rights	285	Not amortised
RSV franchise assets arising from the acquisition of MedImmune3	Product, marketing and distribution rights	4,884	16-22 years
Intangible assets arising from the acquisition of MedImmune3	Licensing and contractual income	720	2-10 years
Intangible assets arising from the acquisition of MedImmune3	Product, marketing and distribution rights	637	22 years
Intangible assets arising from the collaboration with BMS4	Product, marketing and distribution rights	416	13-14 years

¹

These assets are associated with the restructuring of the joint venture with Merck & Co., Inc. Further information can be found in Note 25.

²

Assets in development are not amortised but are tested annually for impairment.

³

An allocation of the cost of these assets to Therapy Area is given in Note 22.

⁴

These assets arise from the collaboration agreement with BMS for Onglyza^TM.