Cardinal Health 2011 Annual Report Download - page 74

Accounting
f
or Vendor Reserves
.
In the ordinary course of business, our vendors may dispute deduction
s
ta
k
en aga
i
nst payments ot
h
erw
i
se
d
ue to t
h
em or assert ot
h
er
billi
ng
di
sputes. T
h
ese
di
spute
d
transact
i
ons are
researched and resolved based upon our polic
y
and findin
g
s of the research performed. At an
yg
iven time, ther
e
a
re outstanding items in various stages of research and resolution. In determining appropriate reserves for area
s
of
exposure w
i
t
h
our ven
d
ors, we assess
hi
stor
i
ca
l
exper
i
ence an
d
current outstan
di
ng c
l
a
i
ms. We
h
ave
established various levels of reserves based on the t
y
pe of claim and status of review. Thou
g
h the transaction
types are relatively consistent, we periodically refine our estimate methodology by updating the reserve estimate
percentages to re
fl
ect actua
lhi
stor
i
ca
l
exper
i
ence. T
h
eu
l
t
i
mate outcome o
f
certa
i
nc
l
a
i
ms may
b
e
diff
erent t
h
a
n
o
ur ori
g
inal estimate and ma
y
require an ad
j
ustment. All ad
j
ustments to vendor reserves are included in cost of
products sold. In addition, the reserve balance will fluctuate due to variations of outstanding claims from perio
d
to per
i
o
d
,t
i
m
i
ng o
f
sett
l
ements an
d
spec
ifi
c ven
d
or
i
ssues, suc
h
as
b
an
k
ruptc
i
es. T
h
e
f
o
ll
ow
i
ng ta
bl
e summar
i
zes
v
endor reserves at June 30, 2011 and 2010:
June 30,
(
in millions
)
2011
2010
V
endor reser
v
e
s
.......................................................
$41.0 $27.8
T
hird-part
y
returns are excluded from the vendor reserves above. See separate section in Note 1 for
a
d
escr
i
pt
i
on o
f
t
hi
r
d
-party returns
.
Accounting for Ven
d
or Incentives.
F
ees
f
or serv
i
ces an
d
ot
h
er
i
ncent
i
ves rece
i
ve
df
rom ven
d
ors re
l
at
i
ng to
the purchase or distribution of inventor
y
are
g
enerall
y
reported as a reduction of cost of products sold in th
e
consolidated statements of earnings. We consider these fees and other incentives to represent product discounts,
a
n
d
as a resu
l
tt
h
e amounts are recor
d
e
d
as a re
d
uct
i
on o
f
pro
d
uct cost an
d
are recogn
i
ze
d
t
h
roug
h
cost o
f
products sold upon sale of the related inventor
y
.
O
ther Accrued Liabilities.
O
ther accrued liabilities represent various current obli
g
ations, includin
g
certai
n
a
ccrue
d
operat
i
ng expenses an
d
taxes paya
bl
e
.
Sh
are-Base
d
Compensation
.
A
ll
s
h
are-
b
ase
d
compensat
i
on to emp
l
o
y
ees,
i
nc
l
u
di
n
gg
rants o
f
stoc
k
opt
i
ons
,
is reco
g
nized in the consolidated statements of earnin
g
s based on the
g
rant date fair value of the awards. The fair
v
a
l
ue o
f
stoc
k
opt
i
ons
i
s
d
eterm
i
ne
d
us
i
ng a
l
att
i
ce va
l
uat
i
on mo
d
e
l
.We
b
e
li
eve t
h
e
l
att
i
ce mo
d
e
l
prov
id
es
f
or
b
etter est
i
mates
b
ecause
i
t
h
as t
h
ea
bili
t
y
to ta
k
e
i
nto account emp
l
o
y
ee exerc
i
se patterns
b
ase
d
on c
h
an
g
es
i
n our
stock price and other variables and it provides for a ran
g
e of input assumptions
.
T
he compensation expense recognized for all share-based awards is net of estimated forfeitures and i
s
recogn
i
ze
d
rata
bl
y over t
h
e serv
i
ce per
i
o
d
o
f
t
h
e awar
d
s. We c
l
ass
if
ys
h
are-
b
ase
d
compensat
i
on expense w
i
t
hi
n
d
istribution, sellin
g
,
g
eneral and administrative (“SG&A”) expenses to correspond with the same line item as the
majority of the cash compensation paid to employees. However, certain share-based compensation incurred i
n
connect
i
on w
i
t
h
t
h
eSp
i
n-O
ff i
sc
l
ass
ifi
e
d
w
i
t
hi
n restructur
i
ng an
d
emp
l
oyee severance. See Note 17
f
or
a
dditional information re
g
ardin
g
share-based compensation
.
Di
v
idends. The followin
g
table summarizes the cash dividends per Common Share that we paid for fiscal
2011
,
2010 an
d
2009
:
F
iscal Year Ende
d
J
une
30,
2
0
1
1
2
0
1
0
2009
C
ash dividends
p
er Common Share
.
.........................................
.
$
0.78
$
0.70
$
0.56
Revenue Reco
g
n
i
t
i
on. We recogn
i
ze revenue w
h
en persuas
i
ve ev
id
ence o
f
an arrangement ex
i
sts, pro
d
uc
t
d
e
li
ver
yh
as occurre
d
or t
h
e serv
i
ces
h
ave
b
een ren
d
ere
d
,t
h
epr
i
ce
i
s
fi
xe
d
or
d
eterm
i
na
bl
e, an
d
co
ll
ecta
bili
t
yi
s
reasonabl
y
assured. Revenue is reco
g
nized net of sales returns and allowances.
Ph
armaceut
i
ca
l
.T
hi
s segment recogn
i
zes
di
str
ib
ut
i
on revenue w
h
en t
i
t
l
e trans
f
ers to
i
ts customers an
d
t
he
b
us
i
ness
h
as no
f
urt
h
er o
blig
at
i
on to prov
id
e serv
i
ces re
l
ate
d
to suc
h
merc
h
an
di
se
.
48