acquisitions, see Notes to Consolidated Financial Statements— Note 2. Acquisitions, Divestitures, Collaborative Arrangements and Equity-Method Investments.

For a discussion about the application of Fair Value to our investments, see Notes to Consolidated Financial Statements—Note 7. Financial Instruments.

For a discussion about the application of Fair Value to our benefit plan assets, see Notes to Consolidated Financial Statements–– Note 11. Pension and Postretirement Benefit Plans and Defined Contribution Plans.

For a discussion about the application of Fair Value to our asset impairment reviews, see “Asset Impairment Reviews––Long-Lived Assets” below.

Revenues

As is typical in the biopharmaceutical industry, our gross product sales are subject to a variety of deductions that are generally estimated and recorded in the same period that the revenues are recognized and primarily represent rebates and discounts to government agencies, wholesalers, distributors and managed care organizations with respect to our biopharmaceutical products. See also Notes to Consolidated Financial Statements––Note 1G. Significant Accounting Policies: Revenues for a detailed description of the nature of our sales deductions and our procedures for estimating our obligations. For example,

• For Medicaid, Medicare and contract rebates, we use experience ratios, which may be adjusted to better match our current experience or our expected future experience.

• For contractual or legislatively mandated deductions outside of the U.S., we use estimated allocation factors, based on historical payments and some third-party reports, to project the expected level of reimbursement.

• For sales returns, we perform calculations in each market that incorporate the following, as appropriate: local returns policies and practices; returns as a percentage of sales; an understanding of the reasons for past returns; estimated shelf life by product; and an estimate of the amount of time between shipment and return or lag time; and any other factors that could impact the estimate of future returns, such as loss of exclusivity, product recalls or a changing competitive environment.

• For sales incentives, we use our historical experience with similar incentives programs to predict customer behavior.

If any of our ratios, factors, assessments, experiences or judgments, are not indicative or accurate predictors of our future experience, our results could be materially affected. Although the amounts recorded for these sales deductions are heavily dependent on estimates and assumptions, historically, our adjustments to actual have not been material; on a quarterly basis, they generally have been less than 1.0% of biopharmaceutical net sales and can result in a net increase to income or a net decrease to income. The sensitivity of our estimates can vary by program, type of customer and geographic location. However, estimates associated with U.S. Medicaid and contract rebates are most at-risk for material adjustment because of the extensive time delay between the recording of the accrual and its ultimate settlement, an interval that can range up to one year. Because of this time lag,