McKesson 2010 Annual Report Download - page 69

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
63
Loss Contingencies: We are subject to various claims, other pending and potential legal actions for damages,
investigations relating to governmental laws and regulations and other matters arising out of the normal conduct of
our business. We record a provision for a liability when management believes that it is both probable that a liability
has been incurred and the amount of the loss can be reasonably estimated. Management reviews these provisions at
least quarterly and adjusts them to reflect the impact of negotiations, settlements, rulings, advice of legal counsel
and other information and events pertaining to a particular case. Because litigation outcomes are inherently
unpredictable, these decisions often involve a series of complex assessments by management about future events
that can rely heavily on estimates and assumptions and it is possible that the actual cost of these matters could
impact our earnings, either negatively or positively, in the period of their resolution.
Recently Adopted Accounting Pronouncements
Accounting Standards CodificationTM: Effective July 1, 2009, we adopted the Financial Accounting Standards
Board (“FASB”) Accounting Standards CodificationTM (“ASC” or “Codification”) as the source of authoritative
U.S. GAAP recognized by the FASB to be applied by nongovernmental entities. Rules and interpretive releases of
the U.S. Securities and Exchange Commission (“SEC”) under authority of federal securities laws are also sources of
authoritative U.S. GAAP for SEC registrants. The Codification superseded all then-existing non-SEC accounting
and reporting standards. The adoption of the Codification did not have a material effect on our consolidated
financial statements.
Fair Value Measurements and Disclosures: In September 2006, the FASB issued new standards that provide a
consistent definition of fair value that focuses on exit price, prioritizes the use of market-based inputs over entity-
specific inputs for measuring fair value and establishes a three-level hierarchy for fair value measurements. In
February 2008, the FASB permitted companies to defer the effective date of these standards 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 the fair value measurements and
disclosures for financial assets and financial liabilities and for nonfinancial assets and nonfinancial liabilities that are
remeasured at least annually. At that time, we elected to defer adoption of the standards for one year, to April 1,
2009, for nonfinancial assets and nonfinancial liabilities that are recognized or disclosed at fair value in the financial
statements on a nonrecurring basis. The standards were applied prospectively and their adoption did not have a
material effect on our consolidated financial statements. In April 2009, the FASB issued new standards for
estimating fair value when an asset or liability experiences a significant decrease in volume and activity relative to
its normal market activity. In addition, these standards identify circumstances that may indicate whether a
transaction is not orderly. Retrospective application to a prior interim or annual reporting period was not permitted.
On April 1, 2009, we adopted this standard, which did not have a material effect on our consolidated financial
statements.
Effective October 1, 2009, we adopted amended standards on two issues: 1) determining the fair value of a
liability when a quoted price in an active market for an identical liability is not available and 2) measuring and
disclosing the fair value of certain investments on the basis of the investments’ net asset value per share or its
equivalent. This adoption did not have a material effect on our consolidated financial statements. However, these
amended standards may affect the valuation of future investments.
In January 2010, the FASB issued amended standards that clarify and provide additional disclosure
requirements related to recurring and non-recurring fair value measurements. These standards also amend
requirements for employers’ disclosures about postretirement benefit plan assets to conform to the fair value
disclosure requirement. On January 1, 2010, we adopted these amended standards, except for the disclosures about
the roll forward of activity in level 3 fair value measurements, which are effective for us on April 1, 2011. The
adoption of these standards on January 1, 2010 did not have a material effect on our consolidated financial
statements.