Abbott Laboratories (ABT)

Investment Accounting Policy

Cash equivalents consist of bank time deposits and U.S. treasury bills with original maturities of three months or less. Investments in marketable equity securities and certain investments in debt securities are classified as available-for-sale and are recorded at fair value with any unrealized holding gains or losses, net of tax, included in Accumulated other comprehensive income (loss). Investments in equity securities that are not traded on public stock exchanges are recorded at cost. Investments in other debt securities are classified as held-to-maturity, as management has both the intent and ability to hold these securities to maturity, and are reported at cost, net of any unamortized premium or discount. Income relating to these securities is reported as interest income.

Abbott reviews the carrying value of investments each quarter to determine whether an other than temporary decline in market value exists. Abbott considers factors affecting the investee, factors affecting the industry the investee operates in and general equity market trends. Abbott considers the length of time an investment's market value has been below carrying value and the near-term prospects for recovery to carrying value. When Abbott determines that an other than temporary decline has occurred, the investment is written down with a charge to Other (income) expense, net.

Source: Abbott Laboratories, Annual Report

Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Abbott Laboratories, adjustment to Net Earnings

USD $ in thousands

12 months ended	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Net earnings (as reported)	5,962,920	4,728,449	4,626,172	5,745,838	4,880,719
Add: Unrealized gains (losses) on marketable equity securities, net of taxes	(7,066)	14,442	106	6,842	(49,000)
Net earnings (adjusted)	5,955,854	4,742,891	4,626,278	5,752,680	4,831,719

Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Abbott Laboratories, adjusted ratios

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Net Profit Margin
Reported net profit margin	14.95%	12.17%	13.15%	18.68%	16.53%
Adjusted net profit margin	14.94%	12.21%	13.16%	18.70%	16.36%
Return on Equity (ROE)
Reported ROE	22.32%	19.35%	20.66%	25.14%	27.92%
Adjusted ROE	22.29%	19.41%	20.66%	25.17%	27.64%
Return on Assets (ROA)
Reported ROA	8.87%	7.84%	7.78%	10.96%	11.51%
Adjusted ROA	8.86%	7.87%	7.78%	10.97%	11.39%

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Abbott Laboratories's adjusted net profit margin deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by shareholders' equity.	Abbott Laboratories's adjusted ROE deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by total assets.	Abbott Laboratories's adjusted ROA improved from 2010 to 2011 and from 2011 to 2012.

Adjusted Net Profit Margin

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Net earnings (USD $ in thousands)	5,962,920	4,728,449	4,626,172	5,745,838	4,880,719
Net sales (USD $ in thousands)	39,873,910	38,851,259	35,166,721	30,764,707	29,527,552

Net profit margin¹	14.95%	12.17%	13.15%	18.68%	16.53%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings (USD $ in thousands)	5,955,854	4,742,891	4,626,278	5,752,680	4,831,719
Net sales (USD $ in thousands)	39,873,910	38,851,259	35,166,721	30,764,707	29,527,552

Adjusted net profit margin²	14.94%	12.21%	13.16%	18.70%	16.36%

2012 Calculations

¹ Net profit margin = 100 × Net earnings ÷ Net sales
= 100 × 5,962,920 ÷ 39,873,910 = 14.95%

² Adjusted net profit margin = 100 × Adjusted net earnings ÷ Net sales
= 100 × 5,955,854 ÷ 39,873,910 = 14.94%

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Abbott Laboratories's adjusted net profit margin deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.

Adjusted Return On Equity (ROE)

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Net earnings (USD $ in thousands)	5,962,920	4,728,449	4,626,172	5,745,838	4,880,719
Total Abbott shareholders' investment (USD $ in thousands)	26,720,961	24,439,833	22,388,135	22,855,627	17,479,551

ROE¹	22.32%	19.35%	20.66%	25.14%	27.92%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings (USD $ in thousands)	5,955,854	4,742,891	4,626,278	5,752,680	4,831,719
Total Abbott shareholders' investment (USD $ in thousands)	26,720,961	24,439,833	22,388,135	22,855,627	17,479,551

Adjusted ROE²	22.29%	19.41%	20.66%	25.17%	27.64%

2012 Calculations

¹ ROE = 100 × Net earnings ÷ Total Abbott shareholders' investment
= 100 × 5,962,920 ÷ 26,720,961 = 22.32%

² Adjusted ROE = 100 × Adjusted net earnings ÷ Total Abbott shareholders' investment
= 100 × 5,955,854 ÷ 26,720,961 = 22.29%

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by shareholders' equity.	Abbott Laboratories's adjusted ROE deteriorated from 2010 to 2011 but then improved from 2011 to 2012 exceeding 2010 level.

Adjusted Return On Assets (ROA)

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Net earnings (USD $ in thousands)	5,962,920	4,728,449	4,626,172	5,745,838	4,880,719
Total assets (USD $ in thousands)	67,234,944	60,276,893	59,462,266	52,416,623	42,419,204

ROA¹	8.87%	7.84%	7.78%	10.96%	11.51%
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings (USD $ in thousands)	5,955,854	4,742,891	4,626,278	5,752,680	4,831,719
Total assets (USD $ in thousands)	67,234,944	60,276,893	59,462,266	52,416,623	42,419,204

Adjusted ROA²	8.86%	7.87%	7.78%	10.97%	11.39%

2012 Calculations

¹ ROA = 100 × Net earnings ÷ Total assets
= 100 × 5,962,920 ÷ 67,234,944 = 8.87%

² Adjusted ROA = 100 × Adjusted net earnings ÷ Total assets
= 100 × 5,955,854 ÷ 67,234,944 = 8.86%

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by total assets.	Abbott Laboratories's adjusted ROA improved from 2010 to 2011 and from 2011 to 2012.