Cardinal Health 2008 Annual Report Download - page 92

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CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Cardinal Health, Inc., an Ohio corporation formed in 1979, is a leading provider of products and services
that improve the safety and productivity of healthcare. References to the “Company” in these consolidated
financial statements shall be deemed to be references to Cardinal Health, Inc. and its majority-owned subsidiaries
unless the context otherwise requires.
The Company reports financial information for four reportable segments: Healthcare Supply Chain
Services—Pharmaceutical; Healthcare Supply Chain Services—Medical; Clinical Technologies and Services;
and Medical Products and Technologies.
Effective the first quarter of fiscal 2008, the former Medical Products Manufacturing segment was renamed
Medical Products and Technologies in connection with the Company’s acquisition of VIASYS Healthcare Inc.
(“Viasys”), which was completed during the fourth quarter of fiscal 2007. There were no other changes to the
Company’s reportable segments during fiscal 2008.
Basis of Presentation. The consolidated financial statements of the Company include the accounts of all
majority-owned subsidiaries, and all significant inter-company amounts have been eliminated.
During fiscal 2008, 2007 and 2006, the Company completed several acquisitions that were accounted for
under the purchase method of accounting. The consolidated financial statements include the results of operations
from each of these business combinations as of the date of acquisition. Additional disclosure related to the
Company’s acquisitions is provided in Note 2.
Effective the second quarter of fiscal 2007, the Company reclassified the former Pharmaceutical
Technologies and Services segment, other than certain generic-focused businesses (the segment, excluding the
certain generic-focused businesses that were not sold, is referred to as the “PTS Business”) to discontinued
operations. Effective the third quarter of fiscal 2006, the Company reclassified a significant portion of its
healthcare marketing services business (“HMS Disposal Group”) and its United Kingdom-based Intercare
pharmaceutical distribution business (“IPD”) to discontinued operations. In addition, effective the first quarter of
fiscal 2006, the Company reclassified its sterile pharmaceutical manufacturing business in Humacao, Puerto Rico
(“Humacao”) to discontinued operations. Prior period financial results were reclassified to conform to these
changes in presentation. See Note 8 for additional information regarding discontinued operations.
The preparation of financial statements in conformity with generally accepted accounting principles in the
United States (“GAAP”) requires management to make estimates and assumptions that affect amounts reported
in the consolidated financial statements and accompanying notes. Such estimates include, but are not limited to,
allowance for doubtful accounts, inventory valuation, goodwill and intangible asset impairment, preliminary and
final purchase accounting allocations including acquired in-process research and development costs (“IPR&D”),
vendor reserves, equity-based compensation, income taxes, loss contingencies, self insurance accruals and
restructuring charge reserves. Actual amounts may differ from these estimated amounts.
Cash Equivalents. The Company considers all liquid investments purchased with a maturity of three months
or less to be cash equivalents. The carrying value of these cash equivalents approximates fair value.
Short-term Investments. At June 30, 2008, the Company did not hold any short-term investments. The
Company’s short-term investments at June 30, 2007 included $132.0 million in tax exempt auction rate
securities. These short-term investments were classified as available-for-sale on the Company’s consolidated
balance sheet. The Company’s investments in these securities were recorded at cost, which approximated fair
market value due to their variable interest rates. See Note 4 for additional information regarding short-term
investments.
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