2012 Annual Report  Note 1 ACCOUNTING POLICIES  Basis of Consolidation  Use of Estimates  Reclassifications  Revenue Recognition  Income Taxes  Cash and Cash Equivalents  The consolidated financial statements are prepared in conformity with United States (U.S.) generally accepted accounting principles  (GAAP), including the accounts of Bristol-Myers Squibb Company (which may be referred to as Bristol-Myers Squibb, BMS, or the  Company) and all of its controlled majority-owned subsidiaries. All intercompany balances and transactions are eliminated. Material  subsequent events are evaluated and disclosed through the report issuance date.  Codevelopment, cocommercialization and license arrangements are assessed to determine whether the terms provide economic or  other control over the entity requiring consolidation of an entity. Entities controlled by means other than a majority voting interest are  referred to as variable interest entities. There were no arrangements with material variable interest entities during any of the periods  presented.  The preparation of financial statements requires the use of management estimates and assumptions. The most significant assumptions  are employed in estimates used in determining the fair value and potential impairment of intangible assets; sales rebate and return  accruals; legal contingencies; income taxes; and pension and postretirement benefits. Actual results may differ from estimated results. Certain prior period amounts were reclassified to conform to the current period presentation. The presentation of depreciation and  amortization in the consolidated statements of cash flows includes the depreciation of property, plant and equipment, the amortization  of intangible assets and deferred income. The provision for restructuring, equity in net income of affiliates, and litigation expense,  net, previously presented separately on the consolidated statements of earnings are currently presented as components of other  (income)/expense.  Revenue is recognized when persuasive evidence of an arrangement exists, the sales price is fixed and determinable, collectability is  reasonably assured and title and substantially all risks and rewards of ownership is transferred, generally at time of shipment. However, certain sales of non-U.S. businesses are recognized on the date of receipt by the purchaser. See Note 3 “Alliances and  Collaborations” for further discussion of revenue recognition related to alliances. Provisions are made at the time of revenue  recognition for expected sales returns, discounts, rebates and estimated sales allowances based on historical experience updated for  changes in facts and circumstances including the impact of applicable healthcare legislation. Such provisions are recognized as a  reduction of revenue.  Revenue is deferred until the right of return no longer exists or sufficient historical experience to estimate sales returns is developed  when a new product is not an extension of an existing line of product or there is no historical experience with products in a similar  therapeutic category.  The provision for income taxes includes income taxes paid or payable for the current year plus the change in deferred taxes during the  year. Deferred taxes result from differences between the financial and tax basis of assets and liabilities and are adjusted for changes in  tax rates and tax laws when changes are enacted. Valuation allowances are recognized to reduce deferred tax assets when it is more  likely than not that a tax benefit will not be realized. The assessment of whether or not a valuation allowance is required often  requires significant judgment including the long-range forecast of future taxable income and the evaluation of tax planning initiatives. Adjustments to the deferred tax valuation allowances are made to earnings in the period when such assessments are made.  We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on  examination by the taxing authorities based on the technical merits of the position. The tax benefit recognized in the financial  statements for a particular tax position is based on the largest benefit that is more likely than not to be realized upon settlement.  Cash and cash equivalents include U.S. Treasury securities, government agency securities, bank deposits, time deposits and money  market funds. Cash equivalents consist of highly liquid investments with original maturities of three months or less at the time of  purchase and are recognized at cost, which approximates fair value.  33 