McKesson 2009 Annual Report Download - page 80

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
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We continue servicing the receivables sold. No servicing asset is recorded at the time of sale because we do not
receive any servicing fees from third parties or other income related to servicing the receivables. We do not record
any servicing liability at the time of sale as the receivables collection period is relatively short and the costs of
servicing the receivables sold over the servicing period are insignificant. Servicing costs are recognized as incurred
over the servicing period. See Financial Note 12, “Long-Term Debt and Other Financing,” for additional
information.
Share-Based Payment: We account for all share-based payment transactions using a fair-value based
measurement method. The share-based compensation expense is recognized, for the portion of the awards that is
ultimately expected to vest, on a straight-line basis over the requisite service period for those awards with graded
vesting and service conditions. For awards with performance conditions and multiple vest dates, we recognize the
expense on a graded vesting basis. For awards with performance conditions and a single vest date, we recognize the
expense on a straight-line basis. The compensation expense recognized has been classified in the consolidated
statements of operations or capitalized on the consolidated balance sheets in the same manner as cash compensation
paid to our employees.
Recently Adopted Accounting Pronouncements: On April 1, 2007, we adopted Financial Accounting Standards
Board Interpretation (“FIN”) No. 48, “Accounting for Uncertainty in Income Taxes.” Among other things, FIN No.
48 requires application of a “more likely than not” threshold for the recognition and derecognition of tax positions.
It further requires that a change in judgment related to prior years’ tax positions be recognized in the quarter of such
change. The April 1, 2007 adoption of FIN No. 48 resulted in a reduction of our retained earnings by $46 million.
Effective March 31, 2007, we adopted SFAS No. 158, “Employers’ Accounting for Defined Benefit Pension
and Other Postretirement Plans.” SFAS No. 158 requires the recognition of an asset or a liability in the consolidated
balance sheets reflecting the funded status of pension and other postretirement benefits, with current year changes in
the funded status recognized in stockholders’ equity. SFAS No. 158 did not change the existing criteria for
measurement of periodic benefit costs, plan assets or benefit obligations. Additionally, SFAS No. 158 requires that
the measurement of defined benefit plan assets and obligations be performed as of the Company’s fiscal year-end.
The measurement date provision of SFAS No. 158 was adopted in the fourth quarter of 2009 and did not have a
material impact on our consolidated financial statements.
In September 2006, the Financial Accounting Standards Board (“FASB”) issued SFAS No. 157, “Fair Value
Measurements,” which provides a consistent definition of fair value that focuses on exit price and prioritizes the use
of market-based inputs over entity-specific inputs for measuring fair value. SFAS No. 157 requires expanded
disclosures about fair value measurements and establishes a three-level hierarchy for fair value measurements. In
February 2008, the FASB issued FASB Staff Position (“FSP”) Financial Accounting Standard (“FAS”) No. 157-1,
“Application of FASB Statement No. 157 to FASB Statement No. 13 and Other Accounting Pronouncements That
Address Fair Value Measurements for Purposes of Lease Classification or Measurement under Statement 13,” which
removes leasing from the scope of SFAS No. 157. In February 2008, the FASB also issued FSP FAS No. 157-2,
“Effective Date of FASB Statement No. 157,” which permits companies to partially defer the effective date of SFAS
No. 157 for one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value
in the consolidated financial statements on a nonrecurring basis.
On April 1, 2008, we adopted SFAS No. 157 for financial assets and financial liabilities and for nonfinancial
assets and nonfinancial liabilities that are remeasured at least annually. We have elected to defer adoption of SFAS
No. 157 for one year for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value
in the financial statements on a nonrecurring basis. Accordingly, we have not applied the provisions of SFAS No.
157 for the fair value measurement of the nonfinancial assets and nonfinancial liabilities that we recorded in
connection with our business acquisitions during the year. The provisions of SFAS No. 157 are applied
prospectively. The adoption of SFAS No. 157 on April 1, 2008 did not have a material impact on our consolidated
financial statements and no adjustment to retained earnings was required. We will adopt the provision of SFAS No.
157 regarding nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the
financial statements on a nonrecurring basis on April 1, 2009. We do not expect the adoption will have a material
impact on our consolidated financial statements.