Medtronic 2015 Annual Report Download - page 96

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Medtronic plc
Notes to Consolidated Financial Statements (Continued)
Fiscal Year 2013
The fair values of the assets acquired and liabilities assumed for acquisitions accounted for as business combinations during
fiscal year 2013 are as follows:
(in millions)
China Kanghui
Holdings
Current assets $ 106
Property, plant, and equipment 56
Intangible assets 341
Goodwill 409
Other assets 11
Total assets acquired 923
Current liabilities 29
Long-term deferred tax liabilities, net 77
Other long-term liabilities 1
Total liabilities assumed 107
Net assets acquired $ 816
China Kanghui Holdings
On November 1, 2012, the Company acquired China Kanghui Holdings (Kanghui). Kanghui is a Chinese manufacturer and
distributor of orthopedic products in trauma, spine, and joint reconstruction. Total consideration for the transaction was
approximately $816 million. The total value of the transaction, net of Kanghui’s cash, was approximately $797 million. Based
on the acquisition valuation, the Company acquired $288 million of technology-based assets and $53 million of tradenames and
customer-related intangible assets that each had a weighted average estimated useful life of 11 years and $409 million of
goodwill. The acquired goodwill is not deductible for tax purposes.
The Company accounted for the acquisition of Kanghui as business combinations using the acquisition method of accounting.
Acquisition-Related Items
During fiscal year 2013, the Company recorded net income from acquisition-related items of $49 million, primarily including
income of $62 million related to the change in fair value of contingent consideration associated with acquisitions subsequent to
April 29, 2009. The change in fair value of contingent consideration primarily related to adjustments in Ardian contingent
consideration. Additionally, the Company recorded transaction-related expenses of $13 million. These amounts are included
within acquisition-related items in the consolidated statements of income.
Contingent Consideration
Certain of the Company’s business combinations and purchases of intellectual property involve the potential for the payment of
future contingent consideration upon the achievement of certain product development milestones and/or various other favorable
operating conditions. Payment of the additional consideration is generally contingent on the acquired company reaching certain
performance milestones, including attaining specified revenue levels or achieving product development targets. For business
combinations subsequent to April 24, 2009, a liability is recorded for the estimated fair value of the contingent consideration on
the acquisition date. The fair value of the contingent consideration is remeasured at each reporting period with the change in fair
value recognized as income or expense within acquisition-related items in the consolidated statements of income. The Company
measures the liability on a recurring basis using Level 3 inputs. See Note 6 for further information regarding fair value
measurements.
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