Restructuring Charges and Other Costs Associated with Acquisitions and Cost-Reduction/Productivity Initiatives (Tables)

12 Months Ended

Dec. 31, 2012

Restructuring and Related Activities [Abstract]

Schedule of Costs Associated with Cost-Reduction/Productivity Initiatives and Acquisition Activity



The following table provides the components of costs associated with acquisitions and cost-reduction/productivity initiatives:
	Year Ended December 31,
(MILLIONS OF DOLLARS)	2012		2011		2010
Transaction costs^(a)	$	1	$	30	$	22
Integration costs^(b)	405		725		1,001
Restructuring charges:^(c)
Employee termination costs	997		1,794		1,062
Asset impairments	328		256		869
Exit costs	149		125		191
Restructuring charges and certain acquisition-related costs	1,880		2,930		3,145
Additional depreciation––asset restructuringrecorded in our consolidated statements of income as follows:^(d)
Cost of sales	267		555		520
Selling, informational and administrative expenses	20		75		227
Research and development expenses	296		605		34
Total additional depreciation––asset restructuring	583		1,235		781
Implementation costs recorded in our consolidated statements of income as follows:^(e)
Cost of sales	31		250		—
Selling, informational and administrative expenses	129		25		—
Research and development expenses	232		72		—
Total implementation costs	392		347		—
Total costs associated with acquisitions and cost-reduction/productivity initiatives	$	2,855	$	4,512	$	3,926


^(a)	Transaction costs represent external costs directly related to acquired businesses and primarily include expenditures for banking, legal, accounting and other similar services.


^(b)	Integration costs represent external, incremental costs directly related to integrating acquired businesses, and primarily include expenditures for consulting and the integration of systems and processes.

^(c)

From the beginning of our cost-reduction and transformation initiatives in 2005 through December 31, 2012, Employee termination costs represent the expected reduction of the workforce by approximately 62,200 employees, mainly in manufacturing, sales and research, of which approximately 51,700 employees have been terminated as of December 31, 2012. In 2012, substantially all employee termination costs represent additional costs with respect to approximately 4,800 employees.

The restructuring charges in 2012 are associated with the following:

•

Primary Care operating segment ($295 million), Specialty Care and Oncology operating segment ($175 million), Established Products and Emerging Markets operating segment ($125 million), Animal Health operating segment ($59 million), Consumer Healthcare operating segment ($45 million), research and development operations ($6 million income), manufacturing operations ($265 million) and Corporate ($516 million).

The restructuring charges in 2011 are associated with the following:

•

Primary Care operating segment ($593 million), Specialty Care and Oncology operating segment ($220 million), Established Products and Emerging Markets operating segment ($110 million), Animal Health operating segment ($45 million), Consumer Healthcare operating segment ($8 million), research and development operations ($490 million), manufacturing operations ($287 million) and Corporate ($422 million).

The restructuring charges in 2010 are associated with the following:

•

Primary Care operating segment ($71 million), Specialty Care and Oncology operating segment ($197 million), Established Products and Emerging Markets operating segment ($43 million), Animal Health operating segment ($34 million), Consumer Healthcare operating segment ($12 million), research and development operations ($297 million), manufacturing operations ($1.1 billion) and Corporate ($350 million).


^(d)	Additional depreciation––asset restructuring represents the impact of changes in the estimated useful lives of assets involved in restructuring actions.


^(e)	Implementation costs represent external, incremental costs directly related to implementing our non-acquisition-related cost-reduction/productivity initiatives.

Schedule of Restructuring Accruals



The following table provides the components of and changes in our restructuring accruals:
(MILLIONS OF DOLLARS)	Employee Termination Costs			Asset Impairment Charges				Exit Costs			Accrual
Balance, January 1, 2011	$	2,149		$	—			$	101		$	2,250
Provision	1,794			256				125			2,175
Utilization and other^(a)	(1,518		)	(256		)	—	(134		)	(1,908		)
Balance, December 31, 2011^(b)	2,425			—				92			2,517
Provision	997			328				149			1,474
Utilization and other^(a)	(1,629		)	(328		)		(84		)	(2,041		)
Balance, December 31, 2012^(c)	$	1,793		$	—			$	157		$	1,950


^(a)	Includes adjustments for foreign currency translation.


^(b)	Included in Other current liabilities ($1.6 billion) and Other noncurrent liabilities ($930 million).


^(c)	Included in Other current liabilities ($1.2 billion) and Other noncurrent liabilities ($731 million).

Schedule of Asset Impairment Charges Included In Restructuring Charges


^(a)	The fair value amount is presented as of the date of impairment, as these assets are not measured at fair value on a recurring basis. See also Note 1E. Basis of Presentation and Significant Accounting Policies: Fair Value.

^(b)

Reflects property, plant and equipment and other long-lived held-for-sale assets written down to their fair value of $139 million, less costs to sell of $3 million (a net of $136 million), in 2012. The impairment charges of $210 million are included in Restructuring charges and certain acquisition-related costs. Fair value is determined primarily using a market approach, with various inputs, such as recent sales transactions.

- Definition

Tabular disclosure for impairment of long-lived assets held and used by an entity which includes a description of the impaired long-lived asset and facts and circumstances leading to the impairment, aggregate amount of the impairment loss and where the loss is located in the income statement, method(s) for determining fair value, and the segment in which the impaired long-lived asset is reported.

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- Definition

Tabular disclosure of restructuring and related costs by type of restructuring including the description of the restructuring costs, such as the expected cost; the costs incurred during the period; the cumulative costs incurred as of the balance sheet date; the income statement caption within which the restructuring charges recognized for the period are included; and changes to an entity's restructuring reserve that occurred during the period associated with the exit from or disposal of business activities or restructurings for each major type of cost.

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