McKesson 2010 Annual Report Download - page 83

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
77
The following table summarizes the activity related to our gross unrecognized tax benefits for the last three
years:
Years Ended March 31,
(In millions) 2010 2009 2008
Unrecognized tax benefits at beginning of period $ 526 $ 496 $ 465
Additions based on tax positions related to prior years 50 77 —
Reductions based on tax positions related to prior years (12) — —
Additions based on tax positions related to current year 72 61 58
Reductions based on settlements (16) (41) (27)
Reductions based on the lapse of the applicable statutes of
limitations (1) (67) —
Unrecognized tax benefits at end of period $ 619 $ 526 $ 496
Of the total $619 million in unrecognized tax benefits at March 31, 2010, $396 million would reduce income
tax expense and the effective tax rate if recognized. During the next twelve months, it is reasonably possible that
audit resolutions and the expiration of statutes of limitations could potentially reduce our unrecognized tax benefits
by up to $23 million. However, this amount may change because we continue to have ongoing negotiations with
various taxing authorities throughout the year.
We continue to report interest and penalties on tax deficiencies as income tax expense. At March 31, 2010,
before any tax benefits, our accrued interest on unrecognized tax benefits amounted to $118 million. We recognized
an income tax expense of $17 million, before any tax effect, related to interest in our consolidated statements of
operations during 2010. We have no material amounts accrued for penalties.
7. Discontinued Operations
No charges for discontinued operations were incurred during 2010 and 2009. In 2008, discontinued operations
included $1 million from the Company’s Acute Care business, which was sold in 2007.
8. Earnings Per Common Share
Basic earnings per common share are computed by dividing net income by the weighted average number of
common shares outstanding during the reporting period. Diluted earnings per common share are computed similar
to basic earnings per common share except that it reflects the potential dilution that could occur if dilutive securities
or other obligations to issue common stock were exercised or converted into common stock.