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Analysis of Inventory

Difficulty: Advanced


Inventory Accounting Policy

Inventories are stated at the lower of cost or net realizable value. Cost, which includes amounts related to materials, labor and overhead, is determined in a manner that approximates the first-in, first-out method. Net realizable value is the estimated selling price in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.

Source: Amgen Inc., Annual Report


Inventory Disclosure

Amgen Inc., Statement of Financial Position, Inventory

USD $ in millions

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Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Raw materials 232  225  201  198  217 
Work in process 1,668  1,608  1,529  1,551  2,064 
Finished goods 934  912  705  898  738 
Inventories 2,834  2,745  2,435  2,647  3,019 

Source: Based on data from Amgen Inc. Annual Reports

Item Description The company
Raw materials Carrying amount as of the balance sheet date of unprocessed items to be consumed in the manufacturing or production process. Also includes purchased parts that will be used as components of a finished product. Amgen Inc.'s raw materials increased from 2015 to 2016 and from 2016 to 2017.
Work in process Carrying amount as of the balance sheet date of merchandise or goods which are partially completed, are generally comprised of raw materials, labor and factory overhead costs, and which require further materials, labor and overhead to be converted into finished goods, and which generally require the use of estimates to determine percentage complete and pricing. Amgen Inc.'s work in process increased from 2015 to 2016 and from 2016 to 2017.
Finished goods Carrying amount as of the balance sheet date of merchandise or goods held by the company that are readily available for sale. Amgen Inc.'s finished goods increased from 2015 to 2016 and from 2016 to 2017.
Inventories Carrying amount (lower of cost or market) as of the balance sheet date of inventories less all valuation and other allowances. Excludes noncurrent inventory balances (expected to remain on hand past one year or one operating cycle, if longer). Amgen Inc.'s inventories increased from 2015 to 2016 and from 2016 to 2017.