McKesson 2015 Annual Report Download - page 75

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
associated with the business. In addition, we compare the aggregate of the reporting units’ fair value to the
Company’s market capitalization as a further corroboration of the fair values. The testing requires a complex
series of assumptions and judgment by management in projecting future operating results, selecting guideline
companies for comparisons and assessing risks. The use of alternative assumptions and estimates could affect the
fair values and change the impairment determinations.
Intangible Assets: Currently all of our intangible assets are subject to amortization and are amortized based
on the pattern of their economic consumption or on a straight-line basis over their estimated useful lives, ranging
from one to thirty-eight years. We review intangible assets for impairment whenever events or changes in
circumstances indicate that the carrying value of the assets may not be recoverable. Determination of
recoverability is based on the lowest level of identifiable estimated future undiscounted cash flows resulting from
use of the asset and its eventual disposition. Measurement of any impairment loss is based on the excess of the
carrying value of the asset over its fair market value.
Capitalized Software Held for Sale: Development costs for software held for sale, which primarily pertain to
our Technology Solutions segment, are capitalized once a project has reached the point of technological
feasibility. Completed projects are amortized after reaching the point of general availability using the straight-
line method based on an estimated useful life of approximately three years. At each balance sheet date, or earlier
if an indicator of an impairment exists, we evaluate the recoverability of unamortized capitalized software costs
based on estimated future undiscounted revenues net of estimated related costs over the remaining amortization
period.
Capitalized Software Held for Internal Use: We capitalize costs of software held for internal use during the
application development stage of a project and amortize those costs over their estimated useful lives ranging
from one to ten years. As of March 31, 2015 and 2014, capitalized software held for internal use was $435
million and $508 million, net of accumulated amortization of $1,112 million and $1,004 million, and was
included in other assets in the consolidated balance sheets.
Insurance Programs: Under our insurance programs, we seek to obtain coverage for catastrophic exposures
as well as those risks required to be insured by law or contract. It is our policy to retain a significant portion of
certain losses primarily related to workers’ compensation and comprehensive general, product and vehicle
liability. Provisions for losses expected under these programs are recorded based upon our estimate of the
aggregate liability for claims incurred as well as for claims incurred but not yet reported. Such estimates utilize
certain actuarial assumptions followed in the insurance industry.
Revenue Recognition:
Distribution Solutions
Revenues for our Distribution Solutions segment are recognized when product is delivered and title passes
to the customer or when services have been rendered and there are no further obligations to the customer.
Revenues are recorded net of sales returns, allowances, rebates and other incentives. Our sales return policy
generally allows customers to return products only if they can be resold for value or returned to suppliers for full
credit. Sales returns are accrued based on estimates at the time of sale to the customer. Sales returns from
customers were approximately $2.7 billion in 2015 and $1.9 billion in 2014 and 2013. Taxes collected from
customers and remitted to governmental authorities are presented on a net basis; that is, they are excluded from
revenues.
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