McKesson 2008 Annual Report Download - page 91

Download and view the complete annual report

Please find page 91 of the 2008 McKesson annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 119

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
84
Actuarial gain or loss for the postretirement welfare benefit plan is amortized to income over a three-year
period. The assumed healthcare cost trends used in measuring the accumulated postretirement benefit obligation
were 10% and 12% for prescription drugs, 9% for medical and 7% for dental in 2008 and 2007. The healthcare cost
trend rate assumption has a significant effect on the amounts reported. For 2008, 2007 and 2006, a one-percentage-
point increase and a one-percentage-point decrease in the assumed healthcare cost trend rate would impact total
service and interest cost components by approximately $1 million to $2 million and the postretirement benefit
obligation by approximately $12 million to $15 million.
15. Income Taxes
Years Ended March 31,
(In millions) 2008 2007 2006
Income from continuing operations before income taxes
U.S. $ 1,059 $ 987 $ 927
Foreign 398 310 244
Total income from continuing operations before income
taxes $ 1,457 $ 1,297 $ 1,171
The provision for income taxes related to continuing operations consists of the following:
Years Ended March 31,
(In millions) 2008 2007 2006
Current
Federal $ 189 $ 71 $ (14)
State and local 59 69 19
Foreign 22 22 16
Total current 270 162 21
Deferred
Federal 178 204 361
State and local 16 (18) 38
Foreign 4 (19) 6
Total deferred 198 167 405
Income tax provision $ 468 $ 329 $ 426
In 2008, the IRS completed an examination of our consolidated income tax returns for 2000 to 2002 resulting in
a signed Revenue Agent Report (“RAR”), which was approved by the Joint Committee on Taxation during the third
quarter. The IRS and the Company have agreed to certain adjustments, primarily related to transfer pricing and
income tax credits. As a result of the approved RAR, we recognized approximately $25 million of net federal and
state income tax benefits. We are in the process of amending state income tax returns for 2000 to 2002 to reflect the
IRS settlement. We recorded the anticipated state tax impact of the IRS examination in our 2008 income tax
provision and do not anticipate any material impact when the final amended state tax returns have been completed.
In Canada, we received an assessment from the Canada Revenue Agency for a total of $9 million related to transfer
pricing for 2003. We plan to further pursue this issue and will appeal the assessment. We believe we have
adequately provided for any potential adverse results for 2003 and future years. During 2008, we have also
favorably concluded various foreign examinations, which resulted in the recognition of approximately $4 million of
income tax benefits. In nearly all jurisdictions, the tax years prior to 1999 are no longer subject to examination. We
believe that we have made adequate provision for all remaining income tax uncertainties. Income tax expense for
2008 was also impacted by a non-tax deductible $13 million increase in a legal reserve.