Medtronic 2015 Annual Report Download - page 82

Medtronic plc
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Policies
Nature of Operations Medtronic plc (Medtronic plc, Medtronic or the Company), the successor registrant to Medtronic, Inc.,
a Minnesota corporation, was incorporated in Ireland on June 12, 2014 as a private limited company, and was re-registered
effective January 26, 2015 as a public limited company. The Company was established for the purpose of facilitating the
acquisition of Covidien plc, a public limited company organized under the laws of Ireland (Covidien), which closed on
January 26, 2015 (Acquisition Date). Upon completion of this transaction, Medtronic replaced Medtronic, Inc., as the ultimate
parent company of the Medtronic group. This part of the transaction was accounted for in the consolidated financial statements
as a merger between entities under common control; accordingly, the historical consolidated financial statements of Medtronic,
Inc. for periods prior to this transaction are considered to be the historical financial statements of the Company.
Principles of Consolidation The consolidated financial statements include the accounts of Medtronic plc and its consolidated
subsidiaries. All significant intercompany transactions and accounts have been eliminated. The preparation of the consolidated
financial statements in conformity with generally accepted accounting principles in the United States (U.S. GAAP) requires
management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent
assets and liabilities, and the reported amounts of revenues and expenses in the consolidated financial statements and
accompanying notes. Actual results could differ materially from those estimates.
Fiscal Year-End The Company utilizes a 52/53-week fiscal year, ending the last Friday in April. The Company’s fiscal years
2015, 2014, and 2013 ended on April 24, 2015, April 25, 2014, and April 26, 2013, respectively, all of which were 52-week
years. Fiscal year 2016 is a 53-week year, with the extra week occurring during the first quarter.
Cash Equivalents The Company considers highly liquid investments with maturities of three months or less from the date of
purchase to be cash equivalents. These investments are carried at cost, which approximates fair value.
Investments Investments in marketable equity securities and certain debt securities are classified and accounted for as
available-for-sale. Debt securities include corporate debt securities, U.S. and foreign government and agency securities,
certificates of deposit, mortgage-backed securities, other asset-backed securities, debt funds, and auction rate securities. These
investments are recorded at fair value in the consolidated balance sheets. The change in fair value for available-for-sale
securities is recorded, net of taxes, as a component of accumulated other comprehensive loss on the consolidated balance sheets.
Management determines the appropriate classification of its investments in debt and equity securities at the time of purchase
and reevaluates such determinations at each balance sheet date. The classification of marketable securities as current or long-
term is based on the nature of the securities and their availability for use in current operations consistent with how the Company
manages its capital structure and liquidity.
Investments in securities that are classified and accounted for as trading securities primarily include exchange-traded funds and
are recorded at fair value on the consolidated balance sheets. The Company seeks to offset changes in liabilities related to equity
and other market risks of certain deferred compensation arrangements. The change in fair value for trading securities is recorded
as a component of interest expense, net on the consolidated statements of income.
Certain of the Company’s investments in equity and other securities are long-term, strategic investments in companies that are
in varied stages of development. These investments are included in other assets on the consolidated balance sheets. The
Company accounts for these investments under the cost or the equity method of accounting, as appropriate. Certain of these
investments are publicly traded companies and are therefore accounted for as available for sale. The valuation of equity and
other securities accounted for under the cost method considers all available financial information related to the investee,
including valuations based on recent third-party equity investments in the investee. If an unrealized loss for any investment is
considered to be other-than-temporary, the loss is recognized in the consolidated statements of income in the period the
determination is made. Equity securities accounted for under the equity method are initially recorded at the amount of the
Company’s investment and are adjusted each period for the Company’s share of the investee’s income or loss and dividends
paid. Equity securities accounted for under both the cost and equity methods are reviewed quarterly for changes in circumstance
or the occurrence of events that suggest the Company’s investment may not be recoverable. See Note 5 for discussion of the
gains and losses recognized on equity and other securities.
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