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WALGREENS BOOTS ALLIANCE, INC. AND SUBSIDIARIES
NOTES TO FINANCIAL STATEMENTS
Note 1. Organization
Walgreens Boots Alliance, Inc. (“Walgreens Boots Alliance”) and subsidiaries are a global pharmacy-led
wellbeing enterprise. Its operations are conducted through three reportable segments (Retail Pharmacy USA,
Retail Pharmacy International and Pharmaceutical Wholesale). See Note 19, Segment Reporting for additional
discussion.
On December 31, 2014, Walgreens Boots Alliance became the successor of Walgreen Co. (“Walgreens”)
pursuant to a merger designed to effect a reorganization of Walgreens into a holding company structure (the
“Reorganization”). Pursuant to the Reorganization, Walgreens became a wholly-owned subsidiary of Walgreens
Boots Alliance, a newly-formed Delaware corporation, and each issued and outstanding share of Walgreens
common stock, par value $0.078125, converted on a one-to-one basis into Walgreens Boots Alliance common
stock, par value $0.01.
On December 31, 2014, following the completion of the Reorganization, Walgreens Boots Alliance completed
the acquisition of the remaining 55% of Alliance Boots GmbH (“Alliance Boots”) that Walgreens did not
previously own (the “Second Step Transaction”) in exchange for £3.133 billion in cash and approximately
144.3 million shares of Walgreens Boots Alliance common stock pursuant to the Purchase and Option
Agreement dated June 18, 2012, as amended (the “Purchase and Option Agreement”). Alliance Boots became a
consolidated subsidiary and ceased being accounted for under the equity method immediately upon completion
of the Second Step Transaction. For financial reporting and accounting purposes, Walgreens Boots Alliance was
the acquirer of Alliance Boots. The consolidated financial statements (and other data) reflect the results of
operations and financial position of Walgreens and its subsidiaries for periods prior to December 31, 2014 and of
Walgreens Boots Alliance and its subsidiaries for periods from and after the effective time of the Reorganization
on December 31, 2014.
References to the “Company” refer to Walgreens Boots Alliance and its subsidiaries from and after the effective
time of the Reorganization on December 31, 2014 and, prior to that time, to the predecessor registrant Walgreens
and its subsidiaries, except as otherwise indicated or the context otherwise requires.
Note 2. Summary of Major Accounting Policies
Basis of Presentation
The consolidated financial statements include all subsidiaries in which the Company holds a controlling interest.
Investments in less than majority-owned companies in which the Company does not have a controlling interest,
but does have significant influence are accounted for as equity method investments. All intercompany
transactions have been eliminated. The preparation of financial statements in accordance with accounting
principles generally accepted in the United States of America requires management to use judgment in the
application of accounting policies, including making estimates and assumptions. The Company bases its
estimates on the information available at the time, its experience and on various other assumptions believed to be
reasonable under the circumstances. Adjustments may be made in subsequent periods to reflect more current
estimates and assumptions about matters that are inherently uncertain. Actual results may differ.
Because of the acquisition of Alliance Boots, influence of certain holidays, seasonality, foreign currency rates,
changes in vendor, payer and customer relationships and terms and other factors on the Company’s operations,
net earnings for any period may not be comparable to the same period in previous years. In addition, the positive
impact on gross profit margins and gross profit dollars typically has been significant in the first several months
after a generic version of a drug is first allowed to compete with the branded version, which is generally referred
to as a “generic conversion”. In any given year, the number of major brand name drugs that undergo a conversion
-66-