McKesson 2016 Annual Report Download - page 118
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McKESSON CORPORATION
FINANCIAL NOTES (Continued)
These contracts will mature through December 2016 and none of these contracts were designated for hedge
accounting. Changes in the fair values for contracts not designated as hedges are recorded directly into earnings
and accordingly, net gains of $60 million and net losses of $189 million were recorded within operating expenses
in 2016 and 2015. The losses from these contracts are largely offset by changes in the value of the underlying
intercompany foreign currency loans. Gains and losses from these contracts were not material in 2014.
Information regarding the fair value of derivatives on a gross basis is as follows:
Balance
Sheet
Caption
March 31, 2016 March 31, 2015
Fair Value of
Derivative U.S.
Dollar
Notional
Fair Value of
Derivative U.S.
Dollar
Notional(In millions) Asset Liability Asset Liability
Derivatives designated for hedge
accounting
Foreign exchange contracts
(current)
Prepaid expenses
and other $ 16 $— $ 80 $ 14 $— $ 76
Foreign exchange contracts
(non-current)
Other Noncurrent
Assets 46 — 243 53 — 323
Cross currency swaps
(non-current)
Other Noncurrent
Liabilities — 8 546 — — —
Total $ 62 $ 8 $ 67 $—
Derivatives not designated for
hedge accounting
Foreign exchange contracts
(current)
Prepaid expenses
and other $ 23 $— $680 $ 7 $— $ 493
Foreign exchange contracts
(current)
Other accrued
liabilities — — 196 — 79 1,262
Total $ 23 $— $ 7 $ 79
Refer to Financial Note 21, “Fair Value Measurements,” for more information on these recurring fair value
measurements.
21. 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. 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.
112