McKesson 2006 Annual Report Download - page 69

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
In February 2006, the FASB issued SFAS No. 155, “Accounting for Certain Hybrid Financial Instruments, an amendment of FASB
Statements No. 133 and 140.” SFAS No. 155 clarifies certain issues relating to embedded derivatives and beneficial interests in securitized
financial assets, including permitting fair value measurement for any hybrid financial instrument that contains an embedded derivative,
eliminating the prohibition on a qualifying special-purpose entity from holding certain derivative instruments, and providing clarification that
concentrations of credit risk in the form of subordination are not embedded derivatives. This standard is effective for us for all financial
instruments acquired or issued after 2008. We are currently assessing the impact of SFAS No. 155; however, we do not believe the adoption of
this standard will have a material impact on our consolidated financial statements.
In March 2006, the FASB issued SFAS No. 156, “Accounting for Servicing of Financial Assets - an amendment of FASB Statement
No. 140.” SFAS No. 156 changes the way entities account for servicing assets and obligations associated with financial assets acquired or
disposed of. SFAS No. 156 provides some relief for servicers that use derivatives to economically hedge fluctuations in the fair value of their
servicing rights and changes how gains and losses are computed in certain transfers or securitizations. This standard is effective for us in 2008.
We are currently assessing the impact of SFAS No. 156; however, we do not believe the adoption of this standard will have a material impact
on our consolidated financial statements.
64
2. Ac
q
uisitions and Investments
We made the following acquisitions and investments:
−
In the second quarter of 2006, we acquired substantially all of the issued and outstanding stock of D&K Healthcare Resources, Inc.
(“D&K”) of St. Louis, Missouri, for an aggregate cash purchase price of $479 million, including the assumption of D&K’s debt. D&K is
primarily a wholesale distributor of branded and generic pharmaceuticals and over-the-counter health and beauty products to independent
and regional pharmacies, primarily in the Midwest. The results of D&K’s operations have been included in the consolidated financial
statements within our Pharmaceutical Solutions segment since the acquisition date.
The following table summarizes the estimated fair values of the assets acquired and liabilities assumed in the acquisition as of March 31,
2006:
(In millions)
Assets:
Accounts receivable $138
Inventory 329
Goodwill 172
Intangible assets 43
Other assets 72
Liabilities:
Accounts Payable (183)
Other liabilities (92)
Net assets acquired, less cash and cash equivalents $ 479
Approximately $172 million of the purchase price has been assigned to goodwill, none of which is expected to be deductible for tax
purposes. Included in the purchase price are acquired identifiable intangibles of $43 million primarily representing customer lists and not-to-
compete covenants which have an estimated weighted-average useful life of nine years.