McKesson 2011 Annual Report Download - page 26

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McKESSON CORPORATION
20
We may be required to record a significant charge to earnings if our goodwill or intangible assets become
impaired.
We are required under U.S. generally accepted accounting principles (“GAAP”) to test our goodwill for
impairment, annually or more frequently if indicators for potential impairment exist. Indicators that are considered
include significant changes in performance relative to expected operating results, significant changes in the use of
the assets, significant negative industry, or economic trends or a significant decline in the Company’s stock price
and/or market capitalization for a sustained period of time. In addition, we periodically review our intangible assets
for impairment when events or changes in circumstances indicate the carrying value may not be recoverable.
Factors that may be considered a change in circumstances indicating that the carrying value of our intangible assets
may not be recoverable include slower growth rates and the loss of a significant customer. We may be required to
record a significant charge to earnings in our consolidated financial statements during the period in which any
impairment of our goodwill or intangible assets is determined. This could have a material adverse impact on our
results of operations. There are inherent uncertainties in management’s estimates, judgments and assumptions used
in assessing recoverability of goodwill and intangible assets. Any changes in key assumptions, including failure to
meet business plans, a further deterioration in the market or other unanticipated events and circumstances, may
affect the accuracy or validity of such estimates and could potentially result in an impairment charge.
Our foreign operations may subject us to a number of operating, economic, political and regulatory risks that
may have a material adverse impact on our financial condition and results of operations.
We have operations based in foreign countries, including Canada, the United Kingdom, Ireland, other European
countries and Israel and we have a large investment in Mexico. In the future, we look to continue to grow our
foreign operations both organically and through acquisitions and investments; however, increasing our foreign
operations carries additional risks. Operations outside of the United States may be affected by changes in trade
protection laws, policies, measures and other regulatory requirements affecting trade and investment; unexpected
changes in regulatory requirements for software, social, political, labor or economic conditions in a specific country
or region; import/export regulations in both the United States and foreign countries and difficulties in staffing and
managing foreign operations. Political changes and natural disasters, some of which may be disruptive, can interfere
with our supply chain, our customers and all of our activities in a particular location. Additionally, foreign
operations expose us to foreign currency fluctuations that could adversely impact our results of operations based on
the movements of the applicable foreign currency exchange rates in relation to the U.S. dollar.
Foreign operations are also subject to risks of violations of laws prohibiting improper payments and bribery,
including the U.S. Foreign Corrupt Practices Act and similar regulations in foreign jurisdictions. Failure to comply
with these laws could subject us to civil and criminal penalties that could have a material adverse impact on our
financial condition and results of operations.
We also may experience difficulties and delays inherent in sourcing products and contract manufacturing from
foreign countries, including but not limited to (1) difficulties in complying with the requirements of applicable
federal, state and local governmental authorities in the United States and of foreign regulatory authorities, (2)
inability to increase production capacity commensurate with demand or the failure to predict market demand (3)
other manufacturing or distribution problems including changes in types of products produced, limits to
manufacturing capacity due to regulatory requirements or physical limitations that could impact continuous supply,
and (4) damage to our reputation due to real or perceived quality issues. Manufacturing difficulties could result in
production shutdowns, product shortages and other similar delays in product manufacturing that could have a
material adverse impact on our financial condition and results of operations.