| The
Group has hedged the purchase price of certain acquisitions. Under IFRS, the hedging
gains and losses are included in the purchase price. However, under US GAAP, hedging
of business combination purchases is not allowed. During 2005 hedging losses of
USD 118 million (2004: nil) related to the acquisition of Hexal and Eon Labs were
expensed under US GAAP. Additionally, under IFRS a deferred tax liability of USD
241 million (2004: nil) was recorded related to acquired IPR&D that was recorded
as an asset. As a result of recording the deferred tax, goodwill was increased
by the same amount. Under US GAAP, IPR&D is expensed without tax effect and the
carrying value of goodwill is lower under US GAAP by the amount of the deferred
tax. The total of these items was USD 359 million (2004: USD nil).
The income statement differences between IFRS and US GAAP due to impairment and
amortization of goodwill was an additional expense of USD 28 million (2004: income
of USD 47 million). The changes in the carrying amount
of goodwill under US GAAP for the years ended December 31, 2005 and 2004 are as
follows: 
PRODUCT RIGHTS AND TRADEMARKS
The differences in the product right
and trademarks between IFRS and US GAAP of USD 2 863 million is mainly on account
of the fair value of the Ciba-Geigy AG products at the time of the merger with
Sandoz. The additional amortization under US GAAP for product rights and trademarks
amounted to USD 680 million (2004: USD 498 million). | | The
total carrying value of marketed products and significant capitalized trademarks
and product rights are as follows: 
Novartis
usually applies the straight-line amortization method. For Pharmaceuticals Division
products the patent life generally reflects the useful life although in certain
circumstances a value is also given to the non-patent protected period. For other
Divisions the maximum useful life used is 20 years.
FAMVIR The value of Famvir has been bifurcated,
with the majority of the value assigned to its sales under patent protection.
This portion is amortized over the remaining patent life until 2010.
The remainder is amortized over an additional 10 year period representing its
value as a branded non-patent protected product. This amortization charge is half
of the amount during the patent period.
VOLTAREN
Voltaren is a branded pain relief drug sold primarily in Europe where it
is off patent in most countries. Novartis applies a straightline amortization
period and the useful life is considered to end in 2011.
TEGRETOL Tegretol is off-patent. Novartis
applies a straight-line amortization period and the useful life is considered
to end in 2011.
The Group estimates that the aggregate
amortization expense for intangible assets subject to amortization for each of
the five succeeding financial years will increase by approximately USD 50 million
due to the 2005 business combinations. | |
