McKesson 2012 Annual Report Download - page 71

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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
67
The following table summarizes the preliminary recording of the fair values of the assets acquired and liabilities
assumed as of the acquisition date:
(In millions)
Amounts
Recognized as of
Acquisition Date
(Provisional)
Current assets, net of cash acquired $ 33
Goodwill 506
Intangible assets 441
Other long-term assets 15
Current liabilities (37)
Long-term deferred tax liabilities (39)
N
et assets acquired, less cash and cash equivalents $ 919
Due to the recent timing of the acquisition, these amounts are subject to change within the measurement period
as our fair value assessments are finalized.
Included in the purchase price allocation are acquired identifiable intangibles of $441 million, the fair value of
which was determined by using Level 3 inputs, which are estimated using significant unobservable inputs. Acquired
intangibles primarily consist of $317 million of service agreements and $114 million of trademarks and trade names.
Service agreements, trademarks and trade names and total acquired intangibles assets each has an estimated
weighted average life of 20 years. The excess of the purchase price over the net tangible and intangible assets of
approximately $506 million was recorded as goodwill, which primarily reflects the expected future benefits to be
realized upon integrating the business. The amount of goodwill expected to be deductible for tax purposes is
$287 million.
Financial results for the acquired Katz Assets were not included in the results of operations for 2012 as they
were not material. These results will be included in the results of operations within our Canadian pharmaceutical
distribution and services, which is part of our Distribution Solutions segment, beginning in the first quarter of 2013.
During the last three years, we also completed a number of other smaller acquisitions within both of our
operating segments. Financial results for our business acquisitions have been included in our consolidated financial
statements since their respective acquisition dates. Purchase prices for our business acquisitions have been allocated
based on estimated fair values at the date of acquisition.
Goodwill recognized for our business acquisitions is generally not expected to be deductible for tax purposes.
However, if we acquire the assets of a company, the goodwill may be deductible for tax purposes. The pro forma
results of operations for our business acquisitions and the results of operations for these acquisitions since the
acquisition date have not been presented because the effects were not material to the consolidated financial
statements on either an individual or an aggregate basis.
3. Share-Based Compensation
We provide share-based compensation for our employees, officers and non-employee directors, including stock
options, an employee stock purchase plan, restricted stock units (“RSUs”) and performance-based restricted stock
units (“PeRSUs”) (collectively, “share-based awards”). Most of our share-based awards are granted in the first
quarter of each fiscal year.
Compensation expense for the share-based awards is recognized for the portion of awards ultimately expected
to vest. We estimate the number of share-based awards, which will ultimately vest primarily based on historical
experience. The estimated forfeiture rate established upon grant is re-assessed throughout the requisite service
period. As required, the forfeiture estimates are adjusted to reflect actual forfeitures when an award vests. The
actual forfeitures in future reporting periods could be higher or lower than current estimates.