2	Accounting Changes

Inventories

During the fourth quarter of 2003, the Company changed its method of determining cost for its inventory previously determined under the LIFO method to the FIFO method. As a result of operating efficiencies and cost reductions, the Company believes that the FIFO method is preferable because it better measures the current cost of such inventories and provides a more appropriate matching of revenues and expenses. The change to the FIFO method has been retroactively applied by restating the accompanying financial statements. There was no impact to the Consolidated Statements of Income for all periods presented. The Consolidated Balance Sheets have been restated to reflect a reduction in inventories of $11,477, a reduction in retained earnings of $7,116 and a reduction in deferred tax liabilities of $4,361 for all periods presented.

Goodwill and Other Intangible Assets

Effective October 1, 2001, the Company adopted the provisions of SFAS No. 141, “Business Combinations,” and SFAS No. 142, “Goodwill and Other Intangible Assets.” SFAS No. 141, among other things, changes the criteria for recognizing intangible assets apart from goodwill. SFAS No. 142 stipulates that goodwill and indefinite-lived intangible assets will no longer be amortized, but instead will be periodically reviewed for impairment. Diluted earnings per share for fiscal 2002 reflect an approximate ten-cent benefit from the adoption of SFAS No. 142.

     Upon adoption of these Statements, the Company reclassified approximately $28,500 of assets from Other Intangibles, Net to Goodwill, Net, primarily related to assembled workforce. These assets did not meet the criteria for recognition apart from goodwill under SFAS No. 141. Of this amount, approximately $18,400 related to the Biosciences segment and approximately $10,100 related to the Medical segment. The Company also ceased amortizing certain trademarks that were deemed to have indefinite lives as they are expected to generate cash flows indefinitely. The following table reconciles reported net income to that which would have been reported if the current method of accounting for goodwill and indefinite-lived asset amortization was used for the year ended September 30, 2001:

		2003			2002			2001
Reported Net Income	$	547,056		$	479,982		$	401,652
Goodwill Amortization		—			—			25,943
Amortization of Indefinite-Lived
Intangible Assets		—			—			1,307
Adjusted Net Income	$	547,056		$	479,982		$	428,902
Basic Earnings Per Share	$	2.14		$	1.85		$	1.55
Goodwill Amortization		—			—			.10
Amortization of Indefinite-Lived
Intangible Assets		—			—			.01
Adjusted Basic Earnings
Per Share	$	2.14		$	1.85		$	1.66
Diluted Earnings Per Share	$	2.07		$	1.79		$	1.49
Goodwill Amortization		—			—			.10
Amortization of Indefinite-Lived
Intangible Assets		—			—			—
Adjusted Diluted Earnings
Per Share	$	2.07		$	1.79		$	1.59

     Intangible amortization expense was $36,388, $37,753 and $73,985 in 2003, 2002 and 2001, respectively. The estimated aggregate amortization expense for the fiscal years ending September 30, 2004 to 2008 are as follows: 2004–$34,100; 2005–$32,700; 2006–$30,000; 2007–$29,800; 2008–$28,900.

Intangible assets at September 30 consisted of:

	2003						2002
	Gross						Gross
	Carrying			Accumulated			Carrying			Accumulated
	Amount			Amortization			Amount			Amortization
Amortized intangible assets
Core and Developed Technology	$	352,372		$	109,689		$	370,044		$	86,878
Patents, Trademarks, & Other		314,211			217,635			308,202			199,065
Total	$	666,583		$	327,324		$	678,246		$	285,943
Unamortized intangible assets
Goodwill(a)	$	536,788					$	492,327
Trademarks(b)		15,137						17,621
Total	$	551,925					$	509,948

     The change in the carrying amount of goodwill for the year ended September 30, 2003 relates to foreign currency translation adjustments.

     During the third quarter of fiscal 2003, the Company decided to discontinue the development of certain products and product applications associated with the BD IMAGN instrument platform in the Biosciences segment. As a result, the Company recorded an impairment loss of $26,717 in cost of products sold. This loss included the write-down of $25,230 of core and developed technology, $960 of indefinite-lived trademarks, and $527 of licenses. The impairment loss was calculated in accordance with SFAS No. 144 “Accounting for the Impairment or Disposal of Long-Lived Assets.” During 2003, additional asset impairment losses of indefinite-lived trademarks amounted to $1,524.

Revenue Recognition

Effective October 1, 2000, the Company changed its method of revenue recognition for certain products in accordance with Staff Accounting Bulletin No. 101, “Revenue Recognition in Financial Statements,” (“SAB 101”). As a result, the Company recorded the following accounting changes.

     The Company changed its accounting method for revenue recognition related to branded insulin syringe products that are sold to distributors in the U.S. consumer trade channel. These products were predominately sold under incentive programs, and these distributors have implied rights of return on unsold merchandise held by them. The Company previously recognized this revenue upon shipment to these distributors, net of appropriate allowances for sales returns. Effective October 1, 2000, the Company changed its method of accounting for revenue related to these product sales to recognize such revenues upon the sell-through of the respective product from the distribution channel partner to the end customer using inventories reported by such distributors. The Company believes this change in accounting principle is the preferable method. The cumulative effect of this change in accounting method was a charge of $52,184 or $30,789, net of taxes.

     The Company also changed its accounting method for recognizing revenue on certain instruments in the Biosciences segment. Prior to the adoption of SAB 101, the Company’s accounting policy was to recognize revenue upon delivery of instruments to customers but prior to installation at the customer’s site. The Company had routinely completed such installation services successfully in the past, but a substantive effort is required for the installation of these instruments and only the Company can perform the service. Therefore, effective October 1, 2000, the Company began to recognize revenues for these instruments upon completion of installation at the customer’s site. The cumulative effect of this change in accounting method was a charge of $9,772, or $5,961 net of taxes.

     The total cumulative effect of these accounting changes on prior years resulted in an after-tax charge to income of $36,750 for the year ended September 30, 2001. Of the $80,700 of revenues included in the cumulative effect adjustment, $44,300 and $28,500 were included in the restated revenues for the first and second quarters of fiscal 2001, respectively, with the remainder substantially recognized by the end of the third quarter. The adoption of SAB 101 increased Biosciences revenues for 2001 by approximately $3,400 and decreased Medical revenues for 2001 by about $3,100. Consequently, the adoption of SAB 101 did not have a material effect on revenues for the year ended September 30, 2001.

     As of September 30, 2003 and 2002, the deferred profit balances recorded as Accrued Expenses were $14,474 and $10,807, respectively.

Adoption of New Accounting Standards

On April 30, 2003, the FASB issued Statement No. 149, “Amendment of Statement No. 133 on Derivative Instruments and Hedging Activities.” This Statement amends and clarifies the financial accounting and reporting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under Statement No. 133, “Accounting for Derivative Instruments and Hedging Activities.” Statement No. 149 includes decisions made as part of the Derivatives Implementation Group process that effectively required amendments to Statement No. 133. Statement No. 149 is effective for contracts entered into or modified after June 30, 2003 and for hedging relationships designated after June 30, 2003. The provisions of Statement No. 149 that relate to Statement No. 133 implementation issues and that have been effective for fiscal quarters that began prior to June 15, 2003 will continue to be applied in accordance with their respective effective dates. This Statement had no impact on the Company’s consolidated financial position or results of operations in 2003.

     In January 2003, the Financial Accounting Standards Board (“FASB”) issued Interpretation No. 46, “Consolidation of Variable Interest Entities” (“FIN 46”). FIN 46 significantly changes whether entities included in its scope are consolidated by their sponsors, transferors or investors. The Interpretation introduces a new consolidation model, “the variable interests model,” which determines control based on potential variability in gains and losses of the entity being evaluated for consolidation. Under FIN 46, variable interest entities are to be consolidated if certain conditions are met. Variable interests are contractual, ownership or other interests in an entity that expose their holders to the risks and rewards of the variable interest entity. Variable interests include equity investments, leases, derivatives, guarantees and other instruments whose values change with changes in the variable interest entity’s assets. The provisions of the Interpretation, as amended by FIN 46-6 “Effective Date of FASB Interpretation No. 46, Consolidation of Variable Interest Entities,” are effective for the Company as of March 31, 2004, for variable interest entities acquired before February 1, 2003 and immediately for any variable interest entities acquired after January 31, 2003. The Company is in the process of evaluating the applicability and impact of FIN 46 to certain interests entered into prior to February 1, 2003, although the Company does not expect that FIN 46 will have a material impact on its consolidated financial position or results of operations in 2004.