McKesson 2014 Annual Report Download - page 71

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
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Business Combinations: We account for acquired businesses using the acquisition method of accounting, which requires that
once control is obtained of a business, 100% of the assets acquired and liabilities assumed, including amounts attributed to
noncontrolling interests, be recorded at the date of acquisition at their respective fair values. Any excess of the purchase price
over the estimated fair values of the net assets acquired is recorded as goodwill. Acquisition-related expenses and related
restructuring costs are expensed as incurred.
Several valuation methods may be used to determine the fair value of assets acquired and liabilities assumed. For intangible
assets, we typically use the income method. This method starts with a forecast of all of the expected future net cash flows for each
asset. These cash flows are then adjusted to present value by applying an appropriate discount rate that reflects the risk factors
associated with the cash flow streams. Some of the more significant estimates and assumptions inherent in the income method or
other methods include the amount and timing of projected future cash flows, the discount rate selected to measure the risks inherent
in the future cash flows and the assessment of the asset’s life cycle and the competitive trends impacting the asset, including
consideration of any technical, legal, regulatory, or economic barriers to entry. Determining the useful life of an intangible asset
also requires judgment as different types of intangible assets will have different useful lives and certain assets may even be
considered to have indefinite useful lives.
Recently Adopted Accounting Pronouncements
Comprehensive Income: In the first quarter of 2014, we adopted disclosure guidance related to the reporting of amounts
reclassified out of Accumulated Other Comprehensive Income (“AOCI”). The guidance requires disclosure of amounts reclassified
out of AOCI by component. In addition, an entity is required to present either on the face of the statement of operations or in the
notes, significant amounts reclassified out of AOCI by the respective line items of net income but only if the amount reclassified
is required to be reclassified to net income in its entirety in the same reporting period. For amounts not reclassified in their entirety
to net income, an entity is required to cross-reference to other disclosures that provide additional detail about those amounts. This
guidance did not have a material effect on our consolidated financial statements.
Balance Sheet Offsetting: In the first quarter of 2014, we adopted disclosure guidance related to the offsetting of assets and
liabilities. The guidance requires an entity to disclose information about offsetting assets and liabilities for derivatives, repurchase
agreements and reverse purchase agreements, and securities borrowing and securities lending transactions that are either offset in
accordance with specific GAAP criteria or subject to a master netting arrangement or similar agreement. The amended guidance
did not have a material effect on our consolidated financial statements.
Recently Issued Accounting Pronouncements Not Yet Adopted
Cumulative Translation Adjustments: In March 2013, amended guidance was issued for parent’s accounting for the cumulative
translation adjustment upon derecognition of certain subsidiaries or group of assets within a foreign entity or of an investment in
a foreign entity. The amended guidance requires the release of any cumulative translation adjustment into net income only upon
complete or substantially complete liquidation of a controlling interest in a subsidiary or a group of assets within a foreign entity.
Also, it requires the release of all or a pro rata portion of the cumulative translation adjustment to net income in case of sale of an
equity method investment that is a foreign entity. The amended guidance is applicable to us effective first quarter of fiscal 2015.
Early adoption is permitted. We are currently evaluating the impact of this amended guidance on our consolidated financial
statements.
Discontinued Operations: In April 2014, amended guidance was issued for reporting of discontinued operations and disclosures
of disposals of components. The amended guidance raises the threshold for disposals to qualify as discontinued operations and
permits significant continuing involvement and continuing cash flows with the discontinued operation. In addition, the amended
guidance requires additional disclosures for discontinued operations and new disclosures for individually material disposal
transactions that do not meet the definition of a discontinued operation. The amended guidance is effective for us prospectively
commencing in the first quarter of 2016. Early adoption is permitted. We are currently evaluating the impact of this amended
guidance on our consolidated financial statements.