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Basis of presentation | 9 Months Ended
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Sep. 30, 2024
Basis of presentation | Note 1 – Basis of presentation:
| a. | Basis of presentation
The accompanying unaudited consolidated financial statements have been prepared on the same basis as the annual consolidated financial statements. In the opinion of management, the financial statements reflect all normal and recurring adjustments necessary to fairly state the financial position and results of operations of Teva. The information included in this Quarterly Report on Form 10-Q should be read in conjunction with the consolidated financial statements and accompanying notes included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023, as filed with the Securities and Exchange Commission (“SEC”). The year-end balance sheet data was derived from the audited consolidated financial statements as of December 31, 2023, but not all disclosures required by generally accepted accounting principles in the United States (“U.S. GAAP”) are included. In preparing the Company’s consolidated financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets, liabilities, equity and disclosure of contingent liabilities and assets at the dates of the financial statements and the reported amounts of revenues and expenses during the reported years. Actual results could differ from those estimates. In preparing the Company’s consolidated financial statements, management also considered the economic implications of inflation expectations on its critical and significant accounting estimates. As applicable to these consolidated financial statements, the most significant estimates and assumptions relate to determining the valuation and recoverability of IPR&D assets, marketed product rights and goodwill, assessing sales reserves and allowances in the United States, uncertain tax positions, valuation allowances and contingencies. These estimates could be impacted by higher costs and the ability to pass on such higher costs to customers, which is highly uncertain. Government actions taken to address macroeconomic developments, as well as their economic impact on Teva’s third-party manufacturers and suppliers, customers and markets, could also impact such estimates and may change in future periods. In February 2022, Russia launched an invasion of Ukraine. As of the date of these consolidated financial statements, sustained conflict and disruption in the region is ongoing. Russia and Ukraine markets are included in Teva’s International Markets segment results. Teva has no manufacturing or R&D facilities in these markets. During the three and nine months ended September 30, 2024, the impact of this conflict on Teva’s results of operation and financial condition continues to be immaterial. In October 2023, Israel was attacked by a terrorist organization and entered a state of war o n several fronts. As of the date of these consolidated financial statements, sustained conflict in the region is ongoing. Israel is included in Teva’s International Markets segment results. Teva’s global headquarters and several manufacturing and R&D facilities are located in Israel. Currently, such activities in Israel remain largely unaffected. Teva continues to maintain contingency plans with backup production locations for key products. During the three and nine months ended September 30, 2024, the impact of this war on Teva’s results of operations and financial condition is immaterial, but such impact may increase, which could be material, as a result of the continuation, escalation or expansion of such war. Teva’s results of operations for the three and nine months ended September 30, 2024 are not necessarily indicative of results that could be expected for the entire fiscal year. Certain amounts in the consolidated financial statements and associated notes may not add up due to rounding. All percentages have been calculated using unrounded amounts.
| b. | Significant accounting policies
Recently adopted accounting pronouncements None. Recently issued accounting pronouncements, not yet adopted In December 2023, the FASB issued ASU 2023-09 “Income Taxes (Topic 740): Improvements to Income Tax Disclosures”. This guidance is intended to enhance the transparency and decision-usefulness of income tax disclosures. The amendments in ASU 2023-09 address investor requests for enhanced income tax information primarily through changes to disclosure regarding rate reconciliation and income taxes paid both in the U.S. and in foreign jurisdictions. ASU 2023-09 is effective for fiscal years beginning after December 15, 2024 on a prospective basis, with the option to apply the standard retrospectively. Early adoption is permitted. The Company is currently evaluating this guidance to determine the impact it may have on its consolidated financial statements disclosures. In November 2023, the FASB issued ASU 2023-07 “Segment Reporting: Improvements to Reportable Segment Disclosures”. This guidance expands public entities’ segment disclosures primarily by requiring disclosure of significant segment expenses that are regularly provided to the chief operating decision maker and included within each reported measure of segment profit or loss, an amount and description of its composition for other segment items, and interim disclosures of a reportable segment’s profit or loss and assets. The guidance is effective for fiscal years beginning after December 15, 2023, and interim periods within fiscal years beginning after December 15, 2024, with early adoption permitted. The amendments are required to be applied retrospectively to all prior periods presented in an entity’s financial statements. The Company does not expect the adoption of the ASU to have a material impact on its consolidated financial statements related disclosures. In October 2023, the FASB issued ASU 2023-06 “Disclosure Improvements: Codification Amendments in Response to the SEC’s Disclosure Update and Simplification Initiative,” which incorporates certain SEC disclosure requirements into the FASB Accounting Standards Codification (“Codification”). The amendments in the ASU are expected to clarify or improve disclosure and presentation requirements of a variety of Codification topics, allow investors to more easily compare entities subject to the SEC’s existing disclosures with those entities that were not previously subject to the requirements, and align the requirements in the Codification with the SEC’s regulations. The effective date for each amendment will be the date on which the SEC’s removal of that related disclosure from Regulation S-X or Regulation S-K becomes effective, with early adoption prohibited. The amendments in this ASU should be applied prospectively. The Company does not expect ASU 2023-06 will have a material impact to its consolidated financial statements.
| c. | Revision of Previously Reported Consolidated Financial Statements
In connection with the preparation of the consolidated financial statements as of and for the year ended December 31, 2023, the Company identified errors in a single contingent consideration liability and related expenses in connection with estimated future royalty payments, along with corresponding deferred tax adjustments, that aggregated into an understatement of the contingent consideration liability of approximately $132 million, of which $98 million related to 2022 and $34 million related to 2023. These errors resulted from the exclusion of royalty payments that should have been included in the fair value re-measurement calculation of the contingent consideration liability as of and for the year ended December 31, 2022, and the quarterly and year-to-date periods ended June 30, September 30 and December 31, 2022, and March 31, June 30 and September 30, 2023. These errors did not impact the Company’s actual royalty payments, as well as total cash flows from operating activities, financing activities and investing activities in the periods stated above. The Company evaluated the errors, individually and in the aggregate, considering both qualitative and quantitative factors, and concluded that these errors did not have a material impact on any of the prior periods stated above. However, the aggregate amount of the prior period errors in 2022, would have been material to the consolidated financial statements for fiscal year 2023. Therefore, the Company has revised the prior periods impacted for these errors. The tables below present the impact of the revision on the line items within the Company’s consolidated financial statements for the relevant periods:
|  | Three months ended |  |  | Nine months ended |
|  | September 30, 2023 |  |  | September 30, 2023 |
|  | U.S $ in millions (except per share amounts) |
|  | (Unaudited) |
|  | As previously reported |  |  | Adjustment |  |  | As revised |  |  | As previously reported |  |  | Adjustment |  |  | As revised |
Other asset impairments, restructuring and other items |  | $ | 46 |  |  |  | 11 |  |  |  | 57 |  |  | $ | 241 |  |  |  | 34 |  |  |  | 276 |
Operating income (loss) |  |  | 355 |  |  |  | (11 | ) |  |  | 344 |  |  |  | (289 | ) |  |  | (34 | ) |  |  | (323 | )
Income (loss) before income taxes |  |  | 75 |  |  |  | (11 | ) |  |  | 64 |  |  |  | (1,097 | ) |  |  | (34 | ) |  |  | (1,131 | )
Income taxes (benefit) |  |  | (12 | ) |  |  | § |  |  |  | (12 | ) |  |  | (48 | ) |  |  | § |  |  |  | (48 | )
Net income (loss) |  |  | 88 |  |  |  | (11 | ) |  |  | 77 |  |  |  | (1,048 | ) |  |  | (34 | ) |  |  | (1,082 | )
Net income (loss) attributable to Teva |  |  | 80 |  |  |  | (11 | ) |  |  | 69 |  |  |  | (988 | ) |  |  | (34 | ) |  |  | (1,022 | )
Earnings (loss) per share attributable to ordinary shareholders: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
Basic and diluted loss per share |  | $ | 0.07 |  |  |  | (0.01 | ) |  |  | 0.06 |  |  | $ | (0.88 | ) |  |  | (0.04 | ) |  |  | (0.91 | )
§ | Represents an amount less than $0.5 million.
|  | September 30, 2023 |
|  | As previously reported |  |  | Adjustment |  |  | As revised |
|  | (Unaudited) |
Deferred income taxes |  | $ | 1,748 |  |  |  | 7 |  |  |  | 1,755 |
Total assets |  |  | 42,088 |  |  |  | 7 |  |  |  | 42,095 |
Other taxes and long-term liabilities |  |  | 3,818 |  |  |  | 132 |  |  |  | 3,950 |
Total long-term liabilities |  |  | 23,182 |  |  |  | 132 |  |  |  | 23,314 |
Total liabilities |  |  | 34,576 |  |  |  | 132 |  |  |  | 34,708 |
Teva shareholders’ equity: |  |  |  |  |  |  |  |  |  |  |  |
Accumulated deficit |  |  | (13,870 | ) |  |  | (125 | ) |  |  | (13,995 | )
Total equity |  |  | 7,512 |  |  |  | (125 | ) |  |  | 7,387 |
Total liabilities and equity |  | $ | 42,088 |  |  |  | 7 |  |  |  | 42,095 |

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- Definition The entire disclosure for the basis of presentation and significant accounting policies concepts. Basis of presentation describes the underlying basis used to prepare the financial statements (for example, US Generally Accepted Accounting Principles, Other Comprehensive Basis of Accounting, IFRS). Accounting policies describe all significant accounting policies of the reporting entity. + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 235 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org/235/tableOfContent + Details
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