ANNUAL REPORT 2021
LUNDBECK
ANNUAL REPORT 2021
E CONTENTS
CONSOLIDATED FINANCIAL STATEMENTS
NOTE 25
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25 SIGNIFICANT ACCOUNTING POLICIES - CONTINUED
Statement of profit or loss
Revenue
Revenue comprises invoiced sales less expected return of goods for the year, discounts, rebates and
revenue-based taxes. Revenue is recognized when the goods are delivered at the agreed destination (point
in time), meaning that control of products has transferred to the buyer and it is probable that the Group will
collect the consideration to which it is entitled for transferring the products.
Revenue is measured at the amount of consideration to which the Group expects to be entitled to in exchange
for transferring the products. Revenue is recognized net of sales deductions, including product returns as
well as discounts, rebates and revenue based taxes.
Moreover, revenue includes licensing income and royalties from out-licensed products, non-refundable down
payments and milestone payments relating to research and development collaborations, and income from
collaborations on commercialization of products.
Sales-based licensing and royalty income from out-licensed products are recognized in profit or loss under
revenue, when the Group provides access to its product rights as it exists throughout the license period. As
the performance obligations are satisfied over time, revenue is also recognized over time.
When the Group provides a customer the right to use the product rights as it exists at the point in time at
which the license is granted, revenue is recognized at a point in time when control is transferred to the
licensee and the license period begins when the customer's rights to the intellectual property is transferred.
Non-refundable down payments and milestone payments received relating to research collaborations are
recognized in profit or loss under revenue.
Cost of sales
Cost of sales comprises cost of goods sold, which includes the cost of raw materials, transportation costs,
consumables and goods for resale, direct labour and indirect costs of production, including operating costs,
and amortization/depreciation and impairment losses relating to product rights and manufacturing facilities.
Sales and distribution costs
Sales and distribution costs comprise costs incurred for the sale and distribution of the Group's products sold
during the year. This includes costs incurred for sales campaigns, training and administration of the sales
force and for direct distribution, marketing and promotion. Also included are salaries and other costs for the
sales, distribution and marketing functions, amortization/depreciation and impairment losses and other
indirect costs.
Administrative expenses
Administrative expenses comprise expenses incurred for the management and administration of the Group,
i.e. salaries and other expenses relating to e.g. management, HR, IT and finance functions as well as
amortization/depreciation and impairment losses and other indirect costs.
Research and development costs
Research and development costs comprise costs incurred for the Group's research and development
functions, i.e. employee costs, amortization/depreciation and impairment losses and other indirect costs as
well as costs relating to research and development collaborations.
Research costs are always recognized in profit or loss as they are incurred.
Due to a very long development period and the significant uncertainties inherent in the development of new
products, development costs are expensed as incurred in line with industry practice. Consequently, the
development costs do not qualify for capitalization as intangible assets until marketing approval by a
regulatory authority is obtained or considered highly probable.
Other operating expenses
Other operating expenses comprise other income and expenses relating to operating activities of a
secondary nature to the Group. Other operating expenses include integration and transaction costs relating
to material acquisitions, income and expenses relating to legal settlements and material gains and losses on
the sale or retirement of items of property, plant and equipment.
Financial income and financial expenses
Financial income and financial expenses include interest income and expenses, net gain or loss on securities
and other financial assets, including dividends, fair value adjustment of contingent consideration, fair value
adjustment of other financial liabilities, foreign currency gains or losses and other financial income and
expenses.
Interest income or expense is recognized using the effective interest method.View entire presentation