2.4.0.82102100 - Disclosure - Significant Accounting Policiestruefalsefalse1false falsefalseD2013Q2YTDhttp://www.sec.gov/CIK0001113481duration2013-01-01T00:00:002013-06-30T00:00:001true 1us-gaap_AccountingPoliciesAbstractus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalse1falsefalsefalse00falsefalsefalsexbrli:stringItemTypestringfalse0Accounting Policies [Abstract]2false 2us-gaap_SignificantAccountingPoliciesTextBlockus-gaap_truenadurationfalsefalsefalsefalsefalsefalsefalsefalseverboseLabel1falsefalsefalse00<div style="font-family:Times New Roman;font-size:10pt;"><div style="line-height:120%;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-weight:bold;">Significant Accounting Policies</font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company's significant accounting policies are described in note 2 of the notes to the consolidated financial statements included in the Company's annual report on Form 10-K for the year ended </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">December&#160;31, 2012</font><font style="font-family:inherit;font-size:10pt;"> as filed with the Securities and Exchange Commission (SEC).</font></div><div style="line-height:120%;padding-bottom:16px;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Basis of Presentation</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The accompanying consolidated financial statements have been prepared in accordance with U.S. generally accepted accounting principles (GAAP)&#160;for interim financial information and with the instructions to Form 10-Q. Accordingly, they do not include all the information and footnotes required by GAAP for complete financial statements. In the opinion of management, the accompanying financial statements include all adjustments, consisting of normal recurring accruals, considered necessary for a fair presentation of the Company's financial position, results of operations, and cash flows for the periods presented.</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The consolidated financial statements include the accounts of the Company and its wholly owned and majority owned subsidiaries. All significant intercompany balances and transactions have been eliminated in consolidation. The Company records net income (loss) attributable to non-controlling interest, if any, in the Company's consolidated financial statements equal to the percentage of ownership interest retained in the respective operations by the non-controlling parties. The Company has no unconsolidated subsidiaries or significant investments accounted for under the equity method.</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company's results of operations for the </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">three and six</font><font style="font-family:inherit;font-size:10pt;"> months ended </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">June&#160;30, 2013</font><font style="font-family:inherit;font-size:10pt;"> are not necessarily indicative of the results that may be expected from the Company for the entire fiscal year or any other quarter of the fiscal year ending </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">December&#160;31, 2013</font><font style="font-family:inherit;font-size:10pt;">. These consolidated financial statements should be read in conjunction with the Company's audited financial statements included in the Company's annual report on Form 10-K for the year ended </font><font style="font-family:inherit;font-size:10pt;color:#000000;text-decoration:none;">December&#160;31, 2012</font><font style="font-family:inherit;font-size:10pt;"> as filed with the SEC.</font></div><div style="line-height:120%;padding-bottom:16px;text-align:left;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Use of Estimates</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs, expenses and accumulated other comprehensive loss that are reported in the consolidated financial statements and accompanying disclosures. Actual results may be different. </font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Contingencies</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company may be, from time to time, a party to various disputes and claims arising from normal business activities. The Company continually assesses litigation to determine if an unfavorable outcome would lead to a probable loss or reasonably possible loss which could be estimated. In accordance with the guidance of the Financial Accounting Standards Board (FASB) on accounting for contingencies, the Company accrues for all contingencies at the earliest date at which the Company deems it probable that a liability has been incurred and the amount of such liability can be reasonably estimated. If the estimate of a probable loss is a range and no amount within the range is more likely than another, the Company accrues the minimum of the range. In the cases where the Company believes that a reasonably possible loss exists, the Company discloses the facts and circumstances of the litigation, including an estimable range, if possible.</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Intangible Assets</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Intangible assets with definite useful lives are amortized over their estimated useful lives and reviewed for impairment if certain events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">In-Process Research and Development </font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The cost of in-process research and development (IPR&amp;D) acquired directly in a transaction other than a business combination is capitalized if the projects have an alternative future use; otherwise they are expensed. The fair values of IPR&amp;D projects acquired in business combinations are capitalized. Several methods may be used to determine the estimated fair value of the IPR&amp;D acquired in a business combination. The Company utilizes the "income method," which applies a probability weighting that considers the risk of development and commercialization to the estimated future net cash flows that are derived from projected sales revenues and estimated costs. These projections are based on factors such as relevant market size, patent protection, historical pricing of similar products and expected industry trends. The estimated future net cash flows are then discounted to the present value using an appropriate discount rate. This analysis is performed for each project independently. These assets are treated as indefinite-lived intangible assets until completion or abandonment of the projects, at which time the assets are amortized over the remaining useful life or written off, as appropriate. IPR&amp;D intangible assets which are determined to have had a drop in their fair value are adjusted downward and an expense recognized on the statement of income. These are tested at least annually or when a triggering event occurs that could indicate a potential impairment. </font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Goodwill</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Goodwill represents the excess consideration in a business combination over the fair value of identifiable net assets acquired. Goodwill is not amortized, but subject to impairment testing at least annually or when a triggering event occurs that could indicate a potential impairment. The Company determines whether goodwill may be impaired by comparing the carrying value of its reporting unit to the fair value of its reporting unit. A reporting unit is defined as an operating segment.</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Contingent Purchase Price from Business Combinations&#160;&#160;&#160;&#160;</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Subsequent to the acquisition date, the Company measures contingent consideration arrangements at fair value for each period with changes in fair value recognized in operating earnings. Changes in fair values reflect new information about the likelihood of the payment of the contingent consideration and the passage of time. In the absence of new information, changes in fair value reflect only the passage of time as development work towards the achievement of the milestones progresses. </font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Impairment of Long-Lived Assets</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Long-lived assets, such as property, plant and equipment and certain other long-term assets are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to the estimated undiscounted future cash flows expected to be generated by the asset or asset group. If the carrying amount of the assets exceed their estimated future undiscounted net cash flows, an impairment charge is recognized for the amount by which the carrying amount of the assets exceed the fair value of the assets. </font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Research and Development</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">Research and development costs are expensed as incurred. Clinical study costs are accrued over the service periods specified in the contracts and adjusted as necessary based upon an ongoing review of the level of effort and costs actually incurred. Payments for a product license prior to regulatory approval of the product and payments for milestones achieved prior to regulatory approval of the product are expensed in the period incurred as research and development. Milestone payments made in connection with regulatory approvals are capitalized and amortized to cost of revenue over the remaining useful life of the asset.</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Other Comprehensive Income</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">The Company's accumulated comprehensive loss is comprised of gains and losses on available for sale securities and recorded and presented net of income tax and foreign currency translation.</font></div><div style="line-height:120%;padding-bottom:16px;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;font-style:italic;font-weight:bold;">Recent Accounting Pronouncements</font></div><div style="line-height:120%;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;">In February 2013, the FASB amended its guidance to require an entity to present the effect of certain significant reclassifications out of accumulated other comprehensive income on the respective line items in net income. The new accounting guidance does not change the items that must be reported in other comprehensive income or when an item of other comprehensive income must be reclassified to net income. The guidance is effective prospectively for fiscal years beginning after December 15, 2012. The Company adopted these new provisions for the quarter beginning January 1, 2013. As the guidance requires additional presentation only, there was no impact to the Company's consolidated results of operations or financial position.</font></div><div style="line-height:120%;text-align:justify;text-indent:18px;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div><div style="line-height:120%;text-align:left;font-size:10pt;"><font style="font-family:inherit;font-size:10pt;"><br clear="none"/></font></div></div>falsefalsefalsenonnum:textBlockItemTypenaThe entire disclosure for all significant accounting policies of the reporting entity.Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18780-107790 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 1 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18726-107790 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 6 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18861-107790 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 2 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18743-107790 Reference 5: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 235 -SubTopic 10 -Section 50 -Paragraph 5 -URI http://asc.fasb.org/extlink&oid=6367646&loc=d3e18854-107790 false0Significant Accounting PoliciesfalseSignificant Accounting PoliciesUnKnownUnKnownUnKnownUnKnowntruefalsefalseSheethttp://www.themedicinescompany.com/role/SignificantAccountingPolicies12