Cardinal Health 2009 Annual Report Download - page 92

Download and view the complete annual report

Please find page 92 of the 2009 Cardinal Health annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 154

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154

Company operates. Deferred taxes are not provided on the unremitted earnings of subsidiaries outside of the
U.S. when it is expected that these earnings are permanently reinvested.
The Company accounts for uncertain tax positions in accordance with the provisions of FASB Interpretation
(“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes.” FIN No. 48 clarifies the accounting for
uncertainty in income taxes recognized in the financial statements in accordance with SFAS No. 109. This
standard provides that a tax benefit from an uncertain tax position may be recognized when it is more likely than
not that the position will be sustained upon examination, including resolutions of any related appeals or litigation
processes, based on the technical merits. The amount recognized is measured as the largest amount of tax benefit
that is greater than 50% likely of being realized upon settlement.
Accounting for Vendor Reserves. In the ordinary course of business, vendors may challenge deductions or
billings taken against payments otherwise due to them from the Company. These contested transactions are
researched and resolved based upon Company policy and findings of the research performed. At any given time,
there are outstanding items in various stages of research and resolution. In determining an appropriate vendor
reserve, the Company assesses historical information and current outstanding claims. The ultimate outcome of
certain claims may be different than the Company’s original estimate and may require adjustment. All
adjustments to vendor reserves are included in cost of products sold.
Other Accrued Liabilities. Other accrued liabilities represent various obligations of the Company including
certain accrued operating expenses and taxes payable.
Equity-Based Compensation. The Company accounts for equity-based compensation in accordance with
SFAS No. 123(R), “Share-Based Payment.” This Statement requires all equity-based payments to employees,
including grants of options, to be recognized in the consolidated statement of earnings based on the grant date
fair value of the award. The fair values of options granted after the Company adopted this Statement were
determined using a lattice valuation model and all options granted prior to adoption of this Statement were
valued using a Black-Scholes model. The Company’s estimate of an option’s fair value is dependent on a
complex estimation process that requires management to make assumptions about future uncertain events. These
estimates include, but are not limited to, stock price volatility, the expected option life, expected dividend yield
and option forfeiture rates.
The compensation expense recognized for all equity-based awards is net of estimated forfeitures and is
recognized ratably over the awards’ service period. The Company classifies equity-based compensation expense
within selling, general and administrative (“SG&A”) expenses to correspond with the same line item as the
majority of the cash compensation paid to employees. See Note 18 for additional information regarding equity-
based compensation.
Dividends. The Company paid cash dividends per Common Share of $0.56, $0.48 and $0.36 for the fiscal
years ended June 30, 2009, 2008 and 2007, respectively.
Revenue Recognition. In accordance with U.S. Securities and Exchange Commission (“SEC”) Staff
Accounting Bulletin (“SAB”) No. 104, “Revenue Recognition,” the Company recognizes revenue when
persuasive evidence of an arrangement exists, product delivery has occurred or the services have been rendered,
the price is fixed or determinable and collectability is reasonably assured. Revenue is recognized net of sales
returns and allowances.
Healthcare Supply Chain Services. This segment recognizes distribution revenue when title transfers to its
customers and the business has no further obligation to provide services related to such merchandise.
Revenue within this segment includes revenue from bulk customers. Most deliveries to bulk customers
consist of product shipped in the same form as the product is received from the manufacturer. Bulk customers
70