McKesson 2009 Annual Report Download - page 86

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
80
During the last three years, we also completed a number of other smaller acquisitions and investments within
both of our operating segments. Financial results for our business acquisitions have been included in our
consolidated financial statements since their respective acquisition dates. Purchase prices for our business
acquisitions have been allocated based on estimated fair values at the date of acquisition and for certain recent
acquisitions, may be subject to change as we continue to evaluate and implement various restructuring initiatives.
Goodwill recognized for our business acquisitions is generally not expected to be deductible for tax purposes. Pro
forma results of operations for our business acquisitions have not been presented because the effects were not
material to the consolidated financial statements on either an individual or an aggregate basis.
3. Share-Based Payment
We provide share-based compensation for our employees, officers and non-employee directors, including stock
options, an employee stock purchase plan, restricted stock (“RS”), restricted stock units (“RSUs”) and performance-
based restricted stock units (“PeRSUs”) (collectively, “share-based awards.”) On April 1, 2006, we adopted SFAS
No. 123(R), “Share-Based Payment.” Accordingly, we began to recognize compensation expense for the fair value
of share-based awards granted, modified, repurchased or cancelled from April 1, 2006 forward. Compensation
expense is recognized for the portion of the awards that is ultimately expected to vest. For the unvested portion of
awards issued prior to and outstanding as of April 1, 2006, the expense is recognized at the grant-date fair value as
the remaining requisite service is rendered.
We develop an estimate of the number of share-based awards which will ultimately vest primarily based on
historical experience. The estimated forfeiture rate established upon grant is re-assessed throughout the requisite
service period. As required, the forfeiture estimates will be adjusted to reflect actual forfeitures when an award
vests. The actual forfeitures in future reporting periods could be higher or lower than our current estimates. The
weighted-average forfeiture rate is approximately 4% at March 31, 2009. As a result, the future share-based
compensation expense may differ from the Company’s historical amounts.
The compensation expense recognized under SFAS No. 123(R) has been classified in the consolidated
statements of operations or capitalized on the consolidated balance sheets in the same manner as cash compensation
paid to our employees. There was no material share-based compensation expense capitalized as part of the cost of
an asset in 2009, 2008 and 2007.
We utilize the “short-cut” method for calculating the tax effects of share-based compensation. Under this
method, a simplified calculation is applied in establishing the beginning additional paid-in capital (“APIC”) pool
balance as well as determining the future impact on the APIC pool and our consolidated statements of cash flows
relating to the tax effects of share-based compensation.