Cardinal Health 2009 Annual Report Download - page 89

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CARDINAL HEALTH, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION AND 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.
Basis of Presentation. The consolidated financial statements of the Company include the accounts of all
majority-owned subsidiaries. All significant intercompany transactions and amounts have been eliminated.
Certain prior year balances have been reclassified to conform to the current year presentation. The results of
businesses acquired or disposed of are included in the consolidated financial statements from the effective date of
the acquisition or up to the date of the disposal.
Effective the fourth quarter of fiscal 2009, the Company reclassified its United Kingdom-based Martindale
injectable manufacturing business (“Martindale”), a leading manufacturer and supplier of a large range of
pharmaceutical products and services in the United Kingdom, to discontinued operations. 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.
Use of Estimates. The consolidated financial statements are prepared in accordance with accounting
principles generally accepted in the United States (“GAAP”). The preparation of financial statements in
accordance with GAAP requires management to make estimates, judgments and assumptions that affect the
amounts reported in the consolidated financial statements and accompanying notes. Estimates, judgments and
assumptions are used in the accounting and disclosure related to, among other items, allowance for doubtful
accounts, inventory valuation, goodwill and intangible asset impairment, preliminary and final purchase
accounting valuations including acquired in-process research and development costs (“IPR&D”), vendor
reserves, equity-based compensation, income taxes, loss contingencies, self insurance accruals and accrued
restructuring costs. Actual amounts could ultimately differ from these estimated amounts.
Spin-Off of CareFusion Corporation. On September 29, 2008, the Company announced that it intended to
separate its clinical and medical products businesses from its other businesses, including its healthcare supply
chain services business, through a pro rata distribution to its shareholders (the “distribution” or “Spin-Off”) of
common stock of a wholly owned subsidiary, CareFusion Corporation (“CareFusion”), formed for the purpose of
holding the clinical and medical products businesses. The Company will retain certain surgical and exam gloves,
drapes and apparel and fluid management businesses that are part of its Clinical and Medical Products segment.
On July 10, 2009, the Company’s Board of Directors approved the distribution to its shareholders of 80.1%
or more of the shares of CareFusion common stock on the basis of 0.5 shares of CareFusion common stock for
each common share of the Company. The distribution will be made after the close of trading on August 31, 2009
to the Company’s shareholders of record as of 5 p.m. EDT on August 25, 2009. Following the Spin-Off, the
Company will retain no more than 19.9% of CareFusion common stock. The Company is required to dispose of
the retained shares of CareFusion common stock within five years of the distribution.
The distribution is subject to a number of conditions, including, among others:
• the private letter ruling that the Company received from the IRS not being revoked or modified in any
material respect;
• the receipt of opinions from counsel to the Company to the effect that the contribution and distribution
will qualify as a transaction that is described in Sections 355(a) and 368(a)(1)(D) of the Internal
Revenue Code if 1986, as amended (the “Code”);
67