McKesson 2015 Annual Report Download - page 51

McKESSON CORPORATION
FINANCIAL REVIEW (Continued)
the issuance of long-term debt. PSSI markets and distributes medical products and services throughout the United
States. The acquisition of PSSI expanded our existing Medical-Surgical business. Financial results for PSSI since
the acquisition date are included in the results of operations within our Medical-Surgical distribution and services
business, which is part of our Distribution Solutions segment.
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.
Refer to Financial Notes 2 and 15, “Business Combinations” and “Debt and Financing Activities,” to the
consolidated financial statements appearing in this Annual Report on Form 10-K for additional information.
2016 Outlook
Information regarding the Company’s 2016 outlook is contained in our Form 8-K dated May 12, 2015. This
Form 8-K should be read in conjunction with the sections Item 1—Business—Forward-Looking Statements and
Item 1A—Risk Factors in Part 1 of this Annual Report on Form 10-K.
CRITICAL ACCOUNTING POLICIES AND ESTIMATES
We consider an accounting estimate to be critical if the estimate requires us to make assumptions about
matters that were uncertain at the time the accounting estimate was made and if different estimates that we
reasonably could have used in the current period, or changes in the accounting estimate that are reasonably likely
to occur from period to period, could have a material impact on our financial condition or results from
operations. Below are the estimates that we believe are critical to the understanding of our operating results and
financial condition. Other accounting policies are described in Financial Note 1, “Significant Accounting
Policies,” to the consolidated financial statements appearing in this Annual Report on Form 10-K. Because of the
uncertainty inherent in such estimates, actual results may differ from these estimates.
Allowance for Doubtful Accounts: We provide short-term credit and other customer financing arrangements
to customers who purchase our products and services. Other customer financing primarily relates to guarantees
provided to our customers, or their creditors, regarding the repurchase of inventories. We also provide financing
to certain customers related to the purchase of pharmacies, which serve as collateral for the loans. We estimate
the receivables for which we do not expect full collection based on historical collection rates and specific
knowledge regarding the current creditworthiness of our customers and record an allowance in our consolidated
financial statements for these amounts.
In determining the appropriate allowance for doubtful accounts, which includes portfolio and specific
reserves, the Company reviews accounts receivable aging, industry trends, customer financial strength, credit
standing, historical write-off trends and payment history to assess the probability of collection. If the frequency
and severity of customer defaults due to our customers’ financial condition or general economic conditions
change, our allowance for uncollectible accounts may require adjustment. As a result, we continuously monitor
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