McKesson 2011 Annual Report Download - page 86

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
80
The Facility contains requirements relating to the performance of the accounts receivable and covenants relating
to the SPE and the Company. If we do not comply with these covenants, our ability to use the Facility may be
suspended and repayment of any outstanding balances under the Facility may be required. At March 31, 2011, we
were in compliance with all covenants. Should we default under the Facility, the Purchaser Groups are entitled to
receive only collections on the accounts receivable owned by the SPE.
Prior to 2011, transactions in the Facility were accounted for as sales because we met the requirements of the
existing accounting guidance, including relinquishing control of the accounts receivable. Accordingly, accounts
receivable sold would have been excluded from accounts receivable, net in the accompanying March 31, 2010
consolidated balance sheet had any balances been outstanding in the Facility at that date. On April 1, 2010, we
adopted amended accounting guidance for transfers of financial assets. Transactions under the Facility no longer
meet the requirements for sale as defined in the amended accounting guidance primarily because the Company’s
retained interest in the pool of accounts receivable is subordinated to the Purchaser Groups to the extent there is any
outstanding balance in the Facility. Consequently, the related accounts receivable would continue to be recognized
on our consolidated balance sheets and proceeds from the Purchaser Groups would be shown as secured borrowings.
Commencing in 2011, fee charges from the Purchaser Groups are recorded in interest expense within the
consolidated statements of operations. Prior to 2011, these fee charges were recorded in Corporate administrative
expenses. Additionally, any proceeds from these accounts receivable transactions would be reflected in the
financing section within the statements of cash flows.
We continue servicing the accounts receivable sold. No servicing asset is recorded at the time of utilization of
the facility because we do not receive any servicing fees from third parties or other income related to servicing the
receivable. We do not record any servicing liability at the time of the utilization of the facility as the accounts
receivable collection period is relatively short and the costs of servicing the accounts receivable over the servicing
period are insignificant. Servicing costs are recognized as incurred over the servicing period.
Information regarding receivables subject to borrowings as of March 31, 2011 or our outstanding balances
related to our interests in accounts receivable sold or qualifying receivables retained as of March 31, 2010 is as
follows:
March 31,
(In millions)
2011
2010
Receivables subject to borrowings or sold
$
—
$
—
Receivables retained, net of allowance for doubtful accounts
N/A
4,887
The following table summarizes the activity related to our interests in accounts receivable sold:
Years Ended March 31,
(In millions)
2011
2010
2009
Proceeds from accounts receivable sales
$
N/A
$
—
$
5,780
Fees and charges
(1)
9
11
10
(1) Recorded in interest expense in 2011 and operating expenses in 2010 and 2009 in the consolidated statements of operations.
The delinquency ratio for the qualifying receivables represented less than 1% of the total qualifying receivables
as of March 31, 2011 and 2010.