McKesson 2014 Annual Report Download - page 103

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
100
19. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction
between market participants at the measurement date. The analysis of fair value is conducted by our accounting and finance
personnel who organizationally report to the Chief Financial Officer. There is a three-level hierarchy that prioritizes the inputs
used in determining fair value by their reliability and preferred use, as follows:
Level 1 - Valuations based on quoted prices in active markets for identical assets or liabilities.
Level 2 - Valuations based on quoted prices in active markets for similar assets and liabilities, quoted prices for identical or
similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable
market data.
Level 3 - Valuations based on inputs that are both significant to the fair value measurement and unobservable.
At March 31, 2014 and 2013, the carrying amounts of cash, certain cash equivalents, restricted cash, receivables, drafts and
accounts payable, short-term borrowings, promissory notes and other current liabilities approximated their estimated fair values
because of the short maturity of these financial instruments.
Our long-term debt and other financing arrangements are carried at amortized cost. The carrying amounts and estimated fair
values of these liabilities were $10.4 billion and $10.8 billion at March 31, 2014 and $4.9 billion and $5.5 billion at March 31,
2013. The estimated fair values of our long-term debt and other financing were determined using quoted market prices in a less
active market and other observable inputs from available market information, which are considered to be Level 2 inputs, and may
not be representative of actual values that could have been realized or that will be realized in the future.
Assets Measured at Fair Value on a Recurring Basis
Our financial assets measured at fair value on a recurring basis consist of the following:
March 31, 2014 March 31, 2013
(In millions)Level 1 Level 2 Level 3 Total Level 1 Level 2 Level 3 Total
Cash Equivalents
Money market funds (1) $ 2,284 $ — $ — $ 2,284 $ 1,036 $ — $ — $ 1,036
Time deposits (2) — 12 — 12 — 95 — 95
Repurchase agreements (2) 569 — — 569 447 — — 447
Total cash equivalents $ 2,853 $ 12 $ — $ 2,865 $ 1,483 $ 95 $ — $ 1,578
(1) Gross unrealized gain and losses were not material for the years ended March 31, 2014 and 2013. Based on quoted prices of identical investments.
(2) The carrying amounts of these cash equivalents approximated their estimated fair values because of their short maturities.
Fair values of our marketable securities were determined using quoted prices in active markets for identical assets, which are
considered Level 1 inputs under the fair value measurements and disclosure guidance. Fair values for our marketable securities
were not material at March 31, 2014 and 2013.
Fair values of our forward foreign currency derivatives were determined using quoted market prices of similar instruments
in an active market and other observable inputs from available market information. These inputs are considered Level 2 under
the fair value measurements and disclosure guidance, and may not be representative of actual values that could have been realized
or that will be realized in the future. Refer to Financial Note 18, “Hedging Activities,” for more information on our forward foreign
currency derivatives.
There were no transfers between Level 1, Level 2 or Level 3 of the fair value hierarchy during the years ended March 31,
2014 and 2013.