SEC Comment Letter for NOVARTIS AG (NVS, NVSEF) (CIK 0001114448) (NVS) — May 3, 2013
NOVARTIS AG (NVS, NVSEF) (CIK 0001114448)
Date: May 3, 2013 · CIK: 0001114448 · Accession: 0000000000-13-024433
AI Filing Summary & Sentiment
File numbers found in text: 001-15024
Letter
May 3, 2013 Via E-mail Mr. Jonathan Symonds Chief Financial Officer Novartis AG CH-4056 Basel Switzerland
Re: Novartis AG Form 20-F for Fiscal Year Ended December 31, 201 2 Filed January 23, 2013 File No. 001-15024
Dear Mr. Symonds :
We have reviewed your April 3, 2013 response to our March 20, 2013 letter and have the following comments.
Please respond to this letter within 10 business days by providing the requested information or by advising us when you will provide the requested response. If you do not believe a comment applies to your facts and circumstances, please tell us why in your response. Please furnish us a letter on EDGAR under the form type label CORRESP that keys your responses to our comments.
After reviewing the information provided, we may raise additional comments and/or request that you amend your filing .
Item 18. Fi nancial Statements Notes to Consolidated Financial Statements 1. Significant Accounting Policies Intangible Assets Available For Use, page F-11
1. We found your response to our prior comment 1 confusing. For example, we did not understand your references to “as a practical matter,” “economic rent,” and “more properly ,” as well as your proposed disclosure which referenced the costs of inventories “at period end.” Please provide a more fulsome analysis of whether the amortization of intangible assets included within currently marketed products, marketing know -how, and a portion of technologies, which you classify as cost of goods sold, represent s inventoriable costs and are accounted for as such. Please include in your response, but do not limit it to, an eva luation of each material intangible asset within these three categories in the context of the requirements in
Mr. Jonathan Symonds Novartis AG May 3, 201 3 Page 2
IAS 2, paragraphs 10 to 18, with particular focus on production and non - production overhead, as well as IAS 38, paragraph s 97 to 99.
2. As a furthe r follow -up to your proposed disclosure that amortization of intangible assets is not included in the costs of inventories at period end, please tell us whether you have applied this policy consistently for all periods presented. If you have applied this policy consistently, please help us understand the apparent change in policy between 2010 and 2011 , suggested by the following disclosure. We note on page 128 that your consolidated amortization expense recognized in the income statement increased $1.9 bi llion, from $1.1 billion in 2010 to $3.0 billion in 2011 “… as a result of a full year of incorporating Alcon.” We also note on pages 122 and 137 that Alcon’s amortization of intangible assets recognized in the income statement was $1.9 billion for each o f 2011 and 2012. Because the increase in your consolidated amortization expense from 2010 to 2011 equaled a full year of amortization expense on Alcon acquired intangible assets and the changes in amortizable intangible assets in 2011 as disclosed in Note 11 to the consolidated financial statements appear to be relatively insignificant, the disclosure suggests that amortization of the Alcon intangible assets acquired may not have been recognized in the 2010 income statement and thus remained capitalized on the balance sheet as of the 2010 period end.
2. Contingent Consideration, page F -15
3. Please refer to prior comment 2. Please provide us proposed disclosure to be included in future filings that describes the factors that you consider in determining when those future events that will trigger a payment obligation outside of a business combination are reasonably likely to occur and result in corresponding liability recognition. Also, quantify for us those possibl e future payment obligations relating to these asset acquisitions that have not been recorded or reflected in the table of aggregate contractual obligations on page 198.
Please contact Frank Wyman, Staff Accountant, at (202) 551 -3660 or Mark Brunhofer, Senior Staff Accountant , at (202) 551 -3638, if you have any questions regarding th e comment s. In this regard, do not hesitate to contact me at (202) 551 -3679.
Sincerely,
/s/ Jim B. Rosenberg
Show Raw Text
May 3, 2013
Via E-mail
Mr. Jonathan Symonds
Chief Financial Officer
Novartis AG
CH-4056 Basel
Switzerland
Re: Novartis AG
Form 20-F for Fiscal Year Ended December 31, 201 2
Filed January 23, 2013
File No. 001-15024
Dear Mr. Symonds :
We have reviewed your April 3, 2013 response to our March 20, 2013 letter and have
the following comments.
Please respond to this letter within 10 business days by providing the requested
information or by advising us when you will provide the requested response. If you do not
believe a comment applies to your facts and circumstances, please tell us why in your
response. Please furnish us a letter on EDGAR under the form type label CORRESP that
keys your responses to our comments.
After reviewing the information provided, we may raise additional comments and/or
request that you amend your filing .
Item 18. Fi nancial Statements
Notes to Consolidated Financial Statements
1. Significant Accounting Policies
Intangible Assets Available For Use, page F-11
1. We found your response to our prior comment 1 confusing. For example, we did
not understand your references to “as a practical matter,” “economic rent,” and
“more properly ,” as well as your proposed disclosure which referenced the costs
of inventories “at period end.” Please provide a more fulsome analysis of whether
the amortization of intangible assets included within currently marketed products,
marketing know -how, and a portion of technologies, which you classify as cost of
goods sold, represent s inventoriable costs and are accounted for as such. Please
include in your response, but do not limit it to, an eva luation of each material
intangible asset within these three categories in the context of the requirements in
Mr. Jonathan Symonds
Novartis AG
May 3, 201 3
Page 2
IAS 2, paragraphs 10 to 18, with particular focus on production and non -
production overhead, as well as IAS 38, paragraph s 97 to 99.
2. As a furthe r follow -up to your proposed disclosure that amortization of intangible
assets is not included in the costs of inventories at period end, please tell us
whether you have applied this policy consistently for all periods presented. If you
have applied this policy consistently, please help us understand the apparent
change in policy between 2010 and 2011 , suggested by the following
disclosure. We note on page 128 that your consolidated amortization expense
recognized in the income statement increased $1.9 bi llion, from $1.1 billion in
2010 to $3.0 billion in 2011 “… as a result of a full year of incorporating
Alcon.” We also note on pages 122 and 137 that Alcon’s amortization of
intangible assets recognized in the income statement was $1.9 billion for each o f
2011 and 2012. Because the increase in your consolidated amortization expense
from 2010 to 2011 equaled a full year of amortization expense on Alcon acquired
intangible assets and the changes in amortizable intangible assets in 2011 as
disclosed in Note 11 to the consolidated financial statements appear to be
relatively insignificant, the disclosure suggests that amortization of the Alcon
intangible assets acquired may not have been recognized in the 2010 income
statement and thus remained capitalized on the balance sheet as of the 2010
period end.
2. Contingent Consideration, page F -15
3. Please refer to prior comment 2. Please provide us proposed disclosure to be
included in future filings that describes the factors that you consider in
determining when those future events that will trigger a payment obligation
outside of a business combination are reasonably likely to occur and result in
corresponding liability recognition. Also, quantify for us those possibl e future
payment obligations relating to these asset acquisitions that have not been
recorded or reflected in the table of aggregate contractual obligations on page
198.
Please contact Frank Wyman, Staff Accountant, at (202) 551 -3660 or Mark
Brunhofer, Senior Staff Accountant , at (202) 551 -3638, if you have any questions
regarding th e comment s. In this regard, do not hesitate to contact me at (202) 551 -3679.
Sincerely,
/s/ Jim B. Rosenberg
Jim B. Rosenberg
Senior Assistant Chief
Accountant