McKesson 2012 Annual Report Download - page 92

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
88
Information regarding the changes in benefit obligations for our postretirement welfare plans is as follows:
Years Ended March 31,
(In millions) 2012 2011
Benefit obligation at beginning of period $
152
$ 154
Service cost
2
1
Interest cost
7
8
Actuarial loss (gain)
(4)
2
Benefit payments
(13)
(13)
Benefit obligation at end of period $
144
$ 152
The components of the amount recognized in accumulated other comprehensive income for the Company’s
other postretirement benefits at March 31, 2012 and 2011 were net actuarial losses of $2 million and $5 million and
net prior service credits of $2 million and $2 million. Other changes in benefit obligations recognized in other
comprehensive income were net actuarial gain of $3 million in 2012 and losses of $6 million and $51 million in
2011 and 2010.
We estimate that the amortization of the actuarial loss from stockholders’ equity to other postretirement expense
in 2013 will be $1 million. Comparable 2012 amounts were $1 million.
Other postretirement benefits are funded as claims are paid. Expected benefit payments for our postretirement
welfare benefit plans, net of expected Medicare subsidy receipts of $1 million annually, are as follows: $11 million
annually for 2013 to 2017 and $50 million cumulatively for 2018 through 2022. Expected benefit payments are
based on the same assumptions used to measure the benefit obligations and include estimated future employee
service. Expected contributions to be made for our postretirement welfare benefit plans are $13 million for 2013.
Weighted-average discount rates used to estimate postretirement welfare benefit expenses were 5.09%, 5.33%
and 7.86% for 2012, 2011 and 2010. Weighted-average discount rates for the actuarial present value of benefit
obligations were 4.44%, 5.09% and 5.33% for 2012, 2011 and 2010.
Actuarial gain or loss for the postretirement welfare benefit plan is amortized to income or expense over a three-
year period. The assumed healthcare cost trends used in measuring the accumulated postretirement benefit
obligation were 8.0% and 8.5% for prescription drugs, 7.5% and 7.5% for medical and 5.5% and 5.8% for dental in
2012 and 2011. For 2012, 2011 and 2010, a one-percentage-point increase or decrease in the assumed healthcare
cost trend rate would not have a material impact on the postretirement benefit obligations.
16. Financial Instruments and Hedging Activities
At March 31, 2012 and 2011, the carrying amounts of cash and cash equivalents, restricted cash, marketable
securities, receivables, drafts and accounts payable, short-term borrowings and other current liabilities approximated
their estimated fair values because of the short maturity of these financial instruments. All highly liquid debt
instruments purchased with original maturity of three months or less at the date of acquisition are included in cash
and cash equivalents. Included in cash and cash equivalents at March 31, 2012 and 2011, were money market fund
investments of $0.8 billion and $1.7 billion, which are reported at fair value. The fair value of these investments
was determined by using quoted prices for identical investments in active markets, which are considered to be Level
1 inputs under the fair value measurements and disclosures guidance. The carrying value of all other cash
equivalents approximates fair value due to their relatively short-term nature.