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IPR&D
Under IFRS, acquired IPR&D is separately identified and recorded as an intangible
asset subject to annual impairment tests for all post-March 31, 2004 business
combinations. Under US GAAP, IPR&D is considered to be a separate asset that needs
to be written- off immediately following the acquisition as the feasibility of
the acquired research and development has not been fully tested and the technology
has no alternative future use. During 2005, IPR&D arose on the acquisition of
Hexal AG and Eon Labs Inc., of USD 619 million. During 2004, IPR&D arose on the
acquisition of 100% of the shares of Sabex Inc. (USD 132 million) and Durascan
A/S (USD 7 million). During 2005, the impairment charge
under IFRS for intangible assets that were already expensed as IPR&D under US
GAAP were USD 418 million ( 2004: nil). This amount mainly relates to the impairment
of NKS 104. Also with effect from January 1, 2005,
Novartis capitalizes acquired development, which it expenses under US GAAP. During
2005, this amounted to an expense of USD 211 million under US GAAP.
The total additional net IPR&D expense for 2005 was USD 412 million (2004: USD
139 million). The impact of IPR&D reduced US GAAP equity by USD 838 million (2004:
USD 151 million). Refinements to the treatment of
the purchase price allocations in 2006 for the Hexal, Eon Labs, and over-the-counter
business of Bristol-Myers Squibb acquisitions under IFRS will be treated differently
under US GAAP, except for any adjustments relating to completion of the environmental
impact study underway at a Hexal manufacturing site.
34.5) PROPERTY, PLANT AND EQUIPMENT: The
principal income statement difference of USD 53 million (2004: USD 77 million)
results from the purchase accounting of the Ciba-Geigy acquisition of USD 55 million
(2004: USD 55 million). There are also differences between IFRS and US GAAP in
relation to capitalized interest under US GAAP resulting in an expense of USD
2 million (2004: income USD 22 million). The balance
sheet differences total USD 409 million (2004: USD 558 million) and results from
the proportionate reduction of long-term assets due to the negative goodwill from
the Ciba-Geigy acquisition of USD 575 million (2004: USD 726 million) and an increase
from capitalized interest of USD 166 million (2004: USD 168 million) under US
GAAP.
34.6)
PENSIONS AND OTHER POST-EMPLOYMENT BENEFITS: Under the Group’s adoption
of new IFRS guidelines from January 1, 2005, with retrospective application, actuarial
gains and losses arising from differences between expected and actual changes
in the fair | | value
of assets and liabilities in the Group’s pension and postemployment defined benefit
plans are recognized immediately in the statement of recognized income and expense.
Under US GAAP, these differences are recognized in the income statement only when
they exceed specified levels. Differences in the amounts
of net periodic benefit costs and the prepaid benefit cost also exist due to different
transition date rules, pre-1999 accounting rule differences and different provisions
for recognition of a prepaid pension asset. The following is a reconciliation
of the balance sheet and income statement amounts recognized for IFRS and US GAAP
for pension plans: 
The
funded status of other post-employment benefit plans under US GAAP is comparable
to that presented in note 26. The plans are substantially foreign and the differences
in income statement and balance sheet treatment of actuarial losses is as follows:  | |
