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57
Medtronic, Inc.
and it is not expected to have a material impact on the Company’s
consolidated financial statements.
In January 2010, the FASB updated the disclosure requirements
for fair value measurements. The updated guidance requires
companies to disclose separately the investments that transfer in
and out of Levels 1 and 2 and the reasons for those transfers.
Additionally, in the reconciliation for fair value measurements
using significant unobservable inputs (Level 3), companies should
present separately information about purchases, sales, issuances,
and settlements. The updated guidance was effective for the
Company beginning in the fourth quarter of fiscal year 2010,
except for the disclosures about purchases, sales, issuances, and
settlements in the Level 3 reconciliation, which are effective for
the Company beginning in the first quarter of fiscal year 2012. As
this guidance only requires additional disclosures, the adoption of
this guidance is not expected to have a material impact on the
Company’s consolidated financial statements. Refer to Note 6 for
additional information on Levels 1, 2, and 3.
In December 2010, the FASB updated the accounting guidance
relating to the annual goodwill impairment test. The updated
guidance requires companies to perform the second step of the
impairment test to measure the amount of impairment loss, if any,
when it is more likely than not that goodwill impairment exists
when the carrying amount of a reporting unit is zero or negative.
In considering whether it is more likely than not that goodwill
impairment exists, an entity shall evaluate whether there are
adverse qualitative factors. The updated guidance is effective for
the Company beginning in the first quarter of fiscal year 2012.
The adoption of this guidance is not expected to have a material
impact on the Company’s consolidated financial statements.
In May 2011, the FASB updated the accounting guidance related
to fair value measurements. The updated guidance results in a
consistent definition of fair value and common requirements
for measurement of and disclosure about fair value between
U.S. GAAP and International Financial Reporting Standards (IFRS).
The updated guidance is effective for the Company beginning in
the third quarter of fiscal year 2012. The Company is currently
evaluating the impact of adoption of this accounting guidance on
its consolidated financial statements.
In June 2011, the FASB updated the disclosure requirements
for comprehensive income. The updated guidance requires
companies to disclose the total of comprehensive income,
the components of net income, and the components of other
comprehensive income either in a single continuous statement of
comprehensive income or in two separate but consecutive
statements. The updated guidance does not affect how earnings
per share is calculated or presented. The updated guidance is
effective for the Company beginning in the fourth quarter of
fiscal year 2012. The Company is currently evaluating the impact
of adoption of this accounting guidance on its consolidated
financial statements.
2. Special Charges and Certain Litigation Charges, Net
Special Charges
In fiscal years 2011 and 2010, there were no special charges.
In fiscal year 2009, consistent with the Company’s commitment
to improving the health of people and communities throughout
the world, the Company recorded a $100 million contribution to
The Medtronic Foundation, which is a related party non-profit
organization. The contribution to The Medtronic Foundation was
paid in the fourth quarter of fiscal year 2009.
Certain Litigation Charges, Net
The Company classifies material litigation reserves and gains
recognized as certain litigation charges, net. In fiscal year 2011,
the Company recorded certain litigation charges, net of $245
million related primarily to a $221 million settlement involving the
Sprint Fidelis family of defibrillation leads and accounting charges
for Other Matters litigation. The Sprint Fidelis settlement related
to the resolution of certain outstanding product liability litigation
related to the Sprint Fidelis family of defibrillation leads that were
subject to a field action announced October 15, 2007. Refer to
Note 16 for additional information.
In fiscal year 2010, the Company recorded certain litigation
charges, net of $374 million related to settlements with Abbott
Laboratories (Abbott) and W.L. Gore & Associates, Inc. (Gore). The
Abbott settlement accounted for $444 million in litigation charges
and the Gore settlement accounted for a $70 million litigation
gain. The Abbott settlement related to the resolution of all
outstanding intellectual property litigation. The terms of the
Abbott agreement stipulate that neither party will sue the other
in the field of coronary stent and stent delivery systems for a
period of at least 10 years, subject to certain conditions. Both
parties also agreed to a cross-license of the disputed patents
within the defined field. The $444 million settlement amount
included a $400 million payment made to Abbott and a $42
million success payment made to evYsio Medical Devices, LLC
(evYsio). In addition, a $2 million payment was made to evYsio in