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McKESSON CORPORATION
FINANCIAL NOTES
62
1. Significant Accounting Policies
Nature of Operations: McKesson Corporation (“McKesson,” the “Company,” the “Registrant” or “we” and other similar
pronouns) delivers pharmaceuticals, medical supplies and healthcare information technology that make healthcare safer while
reducing costs. We conduct our business through two operating segments, McKesson Distribution Solutions and McKesson
Technology Solutions, as further described in Financial Note 25, “Segments of Business.”
Basis of Presentation: The consolidated financial statements and accompanying notes are prepared in accordance with U. S.
generally accepted accounting principles (“GAAP”). The consolidated financial statements of McKesson include the financial
statements of all wholly-owned subsidiaries and majority-owned or controlled companies. We also evaluate our ownership,
contractual and other interests in entities to determine if they are variable interest entities (“VIEs”), if we have a variable interest
in those entities and the nature and extent of those interests. These evaluations are highly complex and involve judgment and the
use of estimates and assumptions based on available historical information and management’s judgment, among other factors.
Based on our evaluations, if we determine we are the primary beneficiary of such VIEs we consolidate such entities into our
financial statements. Refer to Financial Note 15, “Variable Interest Entities” for more information on these VIEs. Investments in
business entities in which we do not have control, but have the ability to exercise significant influence over operating and financial
policies, are accounted for using the equity method and our proportionate share of income or loss is recorded in other income, net.
Equity investments in non-publicly traded entities are primarily accounted for using the cost method. Intercompany transactions
and balances have been eliminated.
Fiscal Period: The Company’s fiscal year begins on April 1 and ends on March 31. Unless otherwise noted, all references
to a particular year shall mean the Company’s fiscal year.
Reclassifications: Certain prior year amounts have been reclassified to conform to the current year presentation.
Use of Estimates: The preparation of financial statements in conformity with U.S. GAAP requires that we make estimates
and assumptions that affect the reported amounts in the consolidated financial statements and accompanying notes. Actual amounts
could differ from those estimated amounts.
Cash and Cash Equivalents: All highly liquid debt instruments purchased with original maturity of three months or less at
the date of acquisition are included in cash and cash equivalents.
Cash equivalents, which are available-for-sale, are carried at fair value. Cash equivalents are primarily invested in AAA rated
prime and U.S. government money market funds denominated in U.S. dollars, AAA rated prime money market funds denominated
in Euros, overnight repurchase agreements collateralized by U.S. Treasury bonds, Canadian government securities and/or securities
that are guaranteed or sponsored by the U.S. government and an AAA rated prime money market fund denominated in British
pound sterling.
The remaining cash and cash equivalents are deposited with several financial institutions. Deposits at U.S. banks exceed the
amount insured by the Federal Deposit Insurance Corporation. We mitigate the risk of our short-term investment portfolio by
depositing funds with reputable financial institutions and monitoring risk profiles and investment strategies of money market funds.
Within the Celesio operations, the majority of deposits are placed in Germany with only banks that are part of deposit protection
programs.
Restricted Cash: Cash that is subject to legal restrictions or is unavailable for general operating purposes is classified as
restricted cash and is included within prepaid expenses and other in the consolidated balance sheets. At March 31, 2014 and 2013
restricted cash was not material.
Marketable Securities Available-for-Sale: We carry our marketable securities, which are available-for-sale, at fair value and
they are included in prepaid expenses and other in the consolidated balance sheets. The unrealized gains and losses, net of the
related tax effect, computed in marking these securities to market have been reported within stockholders’ equity. At March 31,
2014 and 2013 marketable securities were not material.