Inventory Accounting Policy

Inventories consist of finished goods held for sale and distribution, raw materials and work in process. Inventory includes brand pharmaceutical and medical aesthetic products which represent Food and Drug Administration ("FDA") approved or likely to be approved indications. Inventory valuation reserves are established based on a number of factors/situations including, but not limited to, raw materials, work in process or finished goods not meeting product specifications, product obsolescence, or application of the lower of cost (first-in, first-out method) or market (net realizable value) concepts. The determination of events requiring the establishment of inventory valuation reserves, together with the calculation of the amount of such reserves may require judgment. Assumptions utilized in Allergan's quantification of inventory reserves include, but are not limited to, estimates of future product demand, consideration of current and future market conditions, product net selling price, anticipated product launch dates, potential product obsolescence and other events relating to special circumstances surrounding certain products. No material adjustments have been required to Allergan's inventory reserve estimates for the periods presented. Adverse changes in assumptions utilized in Allergan's inventory reserve calculations could result in an increase to the inventory valuation reserves and higher cost of sales.

Source: Allergan PLC, Annual Report


Inventory Disclosure

Allergan PLC, Statement of Financial Position, Inventory

USD $ in thousands

Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Raw materials 326,900  297,100  242,300  625,300  522,000 
Work-in-process 158,100  145,400  149,700  205,300  168,900 
Finished goods 527,800  357,700  706,300  1,421,600  1,250,300 
Inventories, gross 1,012,800  800,200  1,098,300  2,252,200  1,941,200 
Inventory reserves (108,300) (82,200) (88,600) (176,700) (154,900)
Inventories 904,500  718,000  1,009,700  2,075,500  1,786,300 

Source: Based on data from Allergan PLC 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. Allergan PLC'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. Allergan PLC's work-in-process declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.
Finished goods Carrying amount as of the balance sheet date of merchandise or goods held by the company that are readily available for sale. Allergan PLC's finished goods declined from 2015 to 2016 but then slightly increased 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). Allergan PLC's inventories declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.