Merck & Co. Inc. (MRK) | Analysis of Investments

Investment Accounting Policy

Investments in marketable debt and equity securities classified as available-for-sale are reported at fair value. Fair values of Merck's investments are determined using quoted market prices in active markets for identical assets or liabilities or quoted prices for similar assets or liabilities or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Changes in fair value that are considered temporary are reported net of tax in Other Comprehensive Income ("OCI"). For declines in the fair value of equity securities that are considered other-than-temporary, impairment losses are charged to Other (income) expense, net. Merck considers available evidence in evaluating potential impairments of its investments, including the duration and extent to which fair value is less than cost and, for equity securities, Merck's ability and intent to hold the investments. For debt securities, an other-than-temporary impairment has occurred if Merck does not expect to recover the entire amortized cost basis of the debt security. If Merck does not intend to sell the impaired debt security, and it is not more likely than not it will be required to sell the debt security before the recovery of its amortized cost basis, the amount of the other-than-temporary impairment recognized in earnings, recorded in Other (income) expense, net, is limited to the portion attributed to credit loss. The remaining portion of the other-than-temporary impairment related to other factors is recognized in OCI. Realized gains and losses for both debt and equity securities are included in Other (income) expense, net.

Source: Merck & Co. Inc., Annual Report

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

Merck & Co. Inc., adjustment to Net Income Attributable To Merck & Co., Inc.

	12 months ended	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	Net income attributable to Merck & Co., Inc. (as reported)
	Add: Net unrealized gain (loss) on investments
	Less: Net (gain) loss realization
	Net income attributable to Merck & Co., Inc. (adjusted)

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

Merck & Co. Inc., adjusted ratios

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	Net Profit Margin
	Reported net profit margin	%	%	%	%	%
	Adjusted net profit margin	%	%	%	%	%
	Return on Equity (ROE)
	Reported ROE	%	%	%	%	%
	Adjusted ROE	%	%	%	%	%
	Return on Assets (ROA)
	Reported ROA	%	%	%	%	%
	Adjusted ROA	%	%	%	%	%

Adjusted Net Profit Margin

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Net income attributable to Merck & Co., Inc. (USD $ in millions)
	Sales (USD $ in millions)
	Net profit margin1	%	%	%	%	%
	Adjusted: Mark to Market Available-for-sale Securities
	Adjusted net income attributable to Merck & Co., Inc. (USD $ in millions)
	Sales (USD $ in millions)
	Adjusted net profit margin2	%	%	%	%	%

2011 Calculations

Adjusted Return On Equity (ROE)

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Net income attributable to Merck & Co., Inc. (USD $ in millions)
	Merck & Co., Inc. stockholders’ equity (USD $ in millions)
	ROE1	%	%	%	%	%
	Adjusted: Mark to Market Available-for-sale Securities
	Adjusted net income attributable to Merck & Co., Inc. (USD $ in millions)
	Merck & Co., Inc. stockholders’ equity (USD $ in millions)
	Adjusted ROE2	%	%	%	%	%

2011 Calculations

Adjusted Return On Assets (ROA)

		Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008	Dec 31, 2007
	As Reported
	Net income attributable to Merck & Co., Inc. (USD $ in millions)
	Total assets (USD $ in millions)
	ROA1	%	%	%	%	%
	Adjusted: Mark to Market Available-for-sale Securities
	Adjusted net income attributable to Merck & Co., Inc. (USD $ in millions)
	Total assets (USD $ in millions)
	Adjusted ROA2	%	%	%	%	%

2011 Calculations