Nature of Operations and Summary of Significant Accounting Policies

6 Months Ended

Jun. 27, 2015

Nature of Operations and Summary of Significant Accounting Policies [Abstract]

Nature of Operations and Summary of Significant Accounting Policies [Text Block]

Note 1. Nature of Operations and Summary of Significant Accounting Policies

Nature of Operations

Thermo Fisher Scientific Inc. (the company or Thermo Fisher) enables customers to make the world healthier, cleaner and safer by providing analytical instruments, equipment, reagents and consumables, software and services for research, manufacturing, analysis, discovery and diagnostics. Markets served include pharmaceutical and biotech companies, hospitals and clinical diagnostic labs, universities, research institutions and government agencies, as well as environmental and industrial process control settings.

Interim Financial Statements

The interim consolidated financial statements presented herein have been prepared by the company, are unaudited and, in the opinion of management, reflect all adjustments of a normal recurring nature necessary for a fair statement of the financial position at June 27,2015, the results of operations for the three- and six-month periods ended June 27,2015, and June 28,2014, and the cash flows for the six-month periods ended June 27,2015, and June 28,2014. Interim results are not necessarily indicative of results for a full year.

The consolidated balance sheet presented as of December 31, 2014, has been derived from the audited consolidated financial statements as of that date. The consolidated financial statements and notesare presented as permitted by Form 10-Q and do not contain all information that is included in the annual financial statements and notes thereto of the company. The consolidated financial statements and notesincluded in this report should be read in conjunction with the 2014 financial statements and notesincluded in the company’s Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC).

Note 1 to the consolidated financial statements for 2014 describes the significant accounting estimates and policies used in preparation of the consolidated financial statements. There have been no material changes in the company’s significant accounting policies during the six months ended June 27,2015.

Warranty Obligations

Product warranties are included in other accrued expenses in the accompanying balance sheet. The changes in the carrying amount of standard product warranty obligations are as follows:

			Six Months Ended
		June 27,			June 28,
(In millions)			2015			2014
Beginning Balance			$	57.5		$	49.8
	Provision charged to income			38.3			38.2
	Usage			(38.2)			(39.2)
	Acquisitions			0.5			7.2
	Adjustments to previously provided warranties, net			(2.0)			0.9
	Currency translation			(1.8)			—
Ending Balance			$	54.3		$	56.9

Inventories

The components of inventories are as follows:

	June 27,			December 31,
(In millions)			2015	2014
Raw Materials		$	470.9	$	441.6
Work in Process			233.4		207.6
Finished Goods			1,258.0		1,210.3
Inventories		$	1,962.3	$	1,859.5

Property, Plant and Equipment

Property, plant and equipment consists of the following:

	June 27,			December 31,
(In millions)			2015	2014
Land		$	279.4	$	281.8
Buildings and Improvements			979.1		955.1
Machinery, Equipment and Leasehold Improvements			2,733.3		2,632.0
Property, Plant and Equipment, at Cost			3,991.8		3,868.9
Less: Accumulated Depreciation and Amortization			1,584.9		1,442.4
Property, Plant and Equipment, at Cost, Net		$	2,406.9	$	2,426.5

Acquisition-related Intangible Assets

Acquisition-related intangible assets are as follows:

		June 27, 2015							December 31, 2014
				Accumulated							Accumulated
(In millions)		Gross			Amortization		Net		Gross			Amortization		Net
Definite Lived:
	Customer relationships	$	11,826.7		$	(3,745.3)	$	8,081.4	$	11,866.8		$	(3,340.6)	$	8,526.2
	Product technology		4,831.2			(1,630.7)		3,200.5		4,898.1			(1,501.3)		3,396.8
	Tradenames		1,320.0			(503.1)		816.9		1,333.0			(448.7)		884.3
	Other		33.8			(33.4)		0.4		34.2			(33.3)		0.9
			18,011.7			(5,912.5)		12,099.2		18,132.1			(5,323.9)		12,808.2
Indefinite Lived:
	Tradenames		1,234.8			—		1,234.8		1,234.8			—		1,234.8
	In-process research and development		49.7			—		49.7		67.1			—		67.1
			1,284.5			—		1,284.5		1,301.9			—		1,301.9
Acquisition-related Intangible Assets		$	19,296.2		$	(5,912.5)	$	13,383.7	$	19,434.0		$	(5,323.9)	$	14,110.1

Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. In addition, significant estimates were made in estimating future cash flows to assess potential impairment of assets and in determining the fair value of acquired intangible assets (Note 2) and the ultimate loss from abandoning leases at facilities being exited (Note 14). Actual results could differ from those estimates.

Recent Accounting Pronouncements

In April 2015, the FASB issued new guidance that requires the presentation of debt issuance costs in the balance sheet as a deduction from the carrying amount of the related debt liability, consistent with the current treatment of debt discounts. The guidance is effective for annual reporting periods beginning after December 15, 2015, but early adoption is permitted. Adoption of this standard will not have a material impact on the company’s consolidated balance sheet.

In January 2015, the FASB issued new guidance to simplify income statement classification by removing the concept of extraordinary items from U.S. GAAP. As a result, items that are both unusual and infrequent will no longer be separately reported net of tax after continuing operations. The company adopted this guidance effective January 2015. The adoption of this standard in 2015 did not have a material impact on the company’s consolidated financial statements.

In May 2014, the FASB issued new revenue recognition guidance which provides a single comprehensive model for entities to use in accounting for revenue arising from contracts with customers and will supersede most current revenue recognition guidance. The new standard also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity's nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. The guidance is currently effective for the company in 2018. Early adoption is permitted in 2017. The company is currently evaluating the impact the standard will have on its consolidated financial statements.

In April 2014, the FASB issued new guidance on reporting discontinued operations and disclosures of disposals. Under the new guidance, only disposals representing a strategic shift that has or will have a major effect on operations will be presented as discontinued operations. The new guidance also requires disclosure of the pre-tax income attributable to a disposal of a significant part of the company that does not qualify for discontinued operations reporting. The company adopted this guidance effective January 2015. The adoption of this standard in 2015 did not have a material impact on the company’s consolidated financial statements.