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Investment Accounting Policy

CASH, CASH EQUIVALENTS AND INVESTMENTS

Cash equivalents consist of bank time deposits, U.S. government securities money market funds and U.S. treasury bills with original maturities of three months or less. Abbott holds certain investments with a carrying value of approximately $235 million that are accounted for under the equity method of accounting. Investments held in a rabbi trust are accounted for as trading securities. All other investments in marketable equity 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 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 fair 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 fair 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

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

Abbott Laboratories, adjustment to Net Earnings

USD $ in millions

 
12 months ended Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net earnings (as reported)
Add: Unrealized gains (losses) on marketable equity securities, net of taxes
Net earnings (adjusted)

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

Abbott Laboratories, adjusted ratios

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
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 % % % % %
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 2015 to 2016 and from 2016 to 2017.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders' equity. Abbott Laboratories's adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Abbott Laboratories's adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.

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Adjusted Net Profit Margin

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net earnings (USD $ in millions)
Net sales (USD $ in millions)
Net profit margin1 % % % % %
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings (USD $ in millions)
Net sales (USD $ in millions)
Adjusted net profit margin2 % % % % %

2017 Calculations

1 Net profit margin = 100 × Net earnings ÷ Net sales
= 100 × ÷ = %

2 Adjusted net profit margin = 100 × Adjusted net earnings ÷ Net sales
= 100 × ÷ = %

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 2015 to 2016 and from 2016 to 2017.

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Adjusted Return on Equity (ROE)

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net earnings (USD $ in millions)
Total Abbott shareholders' investment (USD $ in millions)
ROE1 % % % % %
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings (USD $ in millions)
Total Abbott shareholders' investment (USD $ in millions)
Adjusted ROE2 % % % % %

2017 Calculations

1 ROE = 100 × Net earnings ÷ Total Abbott shareholders' investment
= 100 × ÷ = %

2 Adjusted ROE = 100 × Adjusted net earnings ÷ Total Abbott shareholders' investment
= 100 × ÷ = %

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 2015 to 2016 and from 2016 to 2017.

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Adjusted Return on Assets (ROA)

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net earnings (USD $ in millions)
Total assets (USD $ in millions)
ROA1 % % % % %
Adjusted: Mark to Market Available-for-sale Securities
Adjusted net earnings (USD $ in millions)
Total assets (USD $ in millions)
Adjusted ROA2 % % % % %

2017 Calculations

1 ROA = 100 × Net earnings ÷ Total assets
= 100 × ÷ = %

2 Adjusted ROA = 100 × Adjusted net earnings ÷ Total assets
= 100 × ÷ = %

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Abbott Laboratories's adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.

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