Gilead Sciences Inc. (GILD)
Analysis of Inventory
High level of difficulty
Accounting Policy on Inventory
Inventories are recorded at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. Gilead periodically reviews the inventories to identify obsolete, slow-moving, excess or otherwise unsaleable items. If obsolete, excess or unsaleable items are observed and there are no alternate uses for the inventory, Gilead records an inventory valuation reserve through a charge to Cost of goods sold on the Consolidated Statements of Income. The establishment of inventory valuation reserves, together with the calculation of the amount of such reserves, requires judgment including consideration of many factors, such as estimates of future product demand, product net selling prices, current and future market conditions and potential product obsolescence, among others.
When future commercialization is considered probable and the future economic benefit is expected to be realized, based on management’s judgment, Gilead capitalizes pre-launch inventory costs prior to regulatory approval. A number of factors are taken into consideration, including the current status in the regulatory approval process, potential impediments to the approval process such as safety or efficacy, anticipated R&D initiatives that could impact the indication in which the compound will be used, viability of commercialization and marketplace trends. As of December 31, 2018 and 2017, the amount of pre-launch inventory on Gilead’s Consolidated Balance Sheets was not significant.
Source: 10-K (filing date: 2019-02-26).
Gilead Sciences Inc., balance sheet: inventory
US$ in millions
|Dec 31, 2018||Dec 31, 2017||Dec 31, 2016||Dec 31, 2015||Dec 31, 2014|
|Work in process|
|Inventories||Amount after valuation and LIFO reserves of inventory expected to be sold, or consumed within one year or operating cycle, if longer.||Gilead Sciences Inc.’s inventories declined from 2016 to 2017 and from 2017 to 2018.|