Express Scripts 2012 Annual Report Download - page 68

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Express Scripts 2012 Annual Report66
present items of net income and other comprehensive income in a single continuous statement or in two separate but
consecutive statements. This statement was effective for financial statements issued for annual periods beginning on
or after December 15, 2011, with early adoption permitted. In December 2011, the FASB issued additional guidance
delaying the portion of this update relating to the presentation of reclassification adjustments out of other
comprehensive income. We elected to early adopt the guidance as permitted by the new standard. Adoption of the
standard impacted the presentation of certain information within the financial statements, but did not impact our
financial position, results of operations or cash flows.
In September 2011, the FASB issued authoritative guidance allowing entities testing goodwill for
impairment to perform a qualitative assessment to determine whether further impairment testing is necessary. If
entities determine, on the basis of qualitative factors, that it is more likely than not that a reporting unit’s fair value is
greater than the carrying amount, a quantitative calculation may not be needed. This update was effective for annual
and interim goodwill impairment tests performed for fiscal years beginning after December 15, 2011. We elected to
early adopt the guidance as permitted by the new standard. Adoption of the standard did not have a material impact
on our financial position, results of operations or cash flows.
2. Fair value measurements
FASB guidance regarding fair value measurement establishes a three-tier fair value hierarchy which
prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as
quoted prices in active markets for identical assets or liabilities; Level 2, defined as inputs other than quoted prices
for similar assets and liabilities in active markets that are either directly or indirectly observable; and Level 3,
defined as unobservable inputs for which little or no market data exists, therefore requiring an entity to develop its
own assumptions.
Financial assets accounted for at fair value on a recurring basis at December 31, 2012 and 2011 include
cash equivalents of $1,572.3 million and $1,817.4 million, restricted cash and investments of $19.6 million and
$17.8 million, and trading securities of $15.8 million and $14.1 million (included in other assets), respectively.
These assets are carried at fair value based on quoted market prices for identical securities (Level 1 inputs). Cash
equivalents include investments in AAA-rated money market mutual funds with maturities of less than 90 days.
FASB guidance allows a company to elect to measure eligible financial assets and financial liabilities at
fair value. Unrealized gains and losses on items for which the fair value option has been elected are reported in
earnings at each subsequent reporting date. Eligible items include, but are not limited to, accounts and loans
receivable, equity method investments, accounts payable, guarantees, issued debt and firm commitments. Currently,
we have not elected to account for any of our eligible items using the fair value option under this guidance.