Medtronic 2015 Annual Report Download - page 53

accordance with accepted valuation methodologies. There is risk that actual results will differ materially from the original cash
flow projections, due to the uncertainty associated with R&D projects. In addition, there are risks associated with achieving
product commercialization. These risks include, but are not limited to, delays or failure to obtain regulatory approvals to
conduct clinical trials, delays or failure to obtain required market clearances, or delays or issues with patent issuance, validity,
and litigation.
Our impairment reviews of other intangible assets are based on a discounted future cash flow approach that requires significant
judgment with respect to future revenue and expense growth rates, appropriate discount rate, asset groupings, and other
assumptions and estimates. We use estimates that are consistent with our business plans and a market participant view of the
assets being evaluated. The results of our annual impairment test are discussed in Note 6 to the consolidated financial statements
in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. Actual results may differ from
our estimates due to a number of factors including, among others, changes in competitive conditions, timing of regulatory
approval, results of clinical trials, changes in worldwide economic conditions, and fluctuations in foreign currency exchange
rates. These risk factors are discussed in “Item 1A. Risk Factors” in this Annual Report on Form 10-K. Other intangible assets,
net of accumulated amortization, were $28.101 billion and $2.286 billion as of April 24, 2015 and April 25, 2014, respectively.
Goodwill Goodwill is the excess of the purchase price consideration over the estimated fair value of net assets of acquired
businesses. The test for goodwill impairment requires us to make several estimates about fair value, most of which are based on
projected future cash flows. Our estimates associated with the goodwill impairment test are considered critical due to the
amount of goodwill recorded on our consolidated balance sheets and the judgment required in determining fair value, including
projected future cash flows. The results of annual impairment test are discussed in Note 6 to the consolidated financial
statements in “Item 8. Financial Statements and Supplementary Data” in this Annual Report on Form 10-K. Goodwill was
$40.530 billion and $10.593 billion as of April 24, 2015 and April 25, 2014, respectively.
Contingent Consideration Contingent consideration is recorded at the acquisition date at estimated fair value. The fair value
of the contingent consideration is remeasured each reporting period with the change in fair value recognized as income or
expense within acquisition-related items in our consolidated statements of income. Changes to the fair value of contingent
consideration can result from changes in discount rates, the timing and amount of revenue estimates, or in the timing or
probability of achieving the milestones which trigger payment. The fair value of contingent consideration was $264 million and
$68 million as of April 24, 2015 and April 25, 2014, respectively.
Net Sales
In the fourth quarter of fiscal year 2015, we amended the way in which we evaluate performance and allocate resources with the
acquisition of Covidien. As a result, we began to operate under four reportable segments and four operating segments, the
Cardiac and Vascular Group (composed of Cardiac Rhythm & Heart Failure, Coronary & Structural Heart and Aortic &
Peripheral Vascular businesses), the Minimally Invasive Therapies Group (composed of Surgical Solutions and Patient
Monitoring & Recovery), the Restorative Therapies Group (composed of the Spine, Neuromodulation, Surgical Technologies,
Neurovascular businesses), and the Diabetes Group. See Note 18 to the consolidated financial statements in “Item 8. Financial
Statements and Supplementary Data” in this Annual Report on Form 10-K for additional discussion related to our segment
reporting.
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