McKesson 2016 Annual Report Download - page 84

Download and view the complete annual report

Please find page 84 of the 2016 McKesson annual report below. You can navigate through the pages in the report by either clicking on the pages listed below, or by using the keyword search tool below to find specific information within the annual report.

Page out of 156

  • 1
  • 2
  • 3
  • 4
  • 5
  • 6
  • 7
  • 8
  • 9
  • 10
  • 11
  • 12
  • 13
  • 14
  • 15
  • 16
  • 17
  • 18
  • 19
  • 20
  • 21
  • 22
  • 23
  • 24
  • 25
  • 26
  • 27
  • 28
  • 29
  • 30
  • 31
  • 32
  • 33
  • 34
  • 35
  • 36
  • 37
  • 38
  • 39
  • 40
  • 41
  • 42
  • 43
  • 44
  • 45
  • 46
  • 47
  • 48
  • 49
  • 50
  • 51
  • 52
  • 53
  • 54
  • 55
  • 56
  • 57
  • 58
  • 59
  • 60
  • 61
  • 62
  • 63
  • 64
  • 65
  • 66
  • 67
  • 68
  • 69
  • 70
  • 71
  • 72
  • 73
  • 74
  • 75
  • 76
  • 77
  • 78
  • 79
  • 80
  • 81
  • 82
  • 83
  • 84
  • 85
  • 86
  • 87
  • 88
  • 89
  • 90
  • 91
  • 92
  • 93
  • 94
  • 95
  • 96
  • 97
  • 98
  • 99
  • 100
  • 101
  • 102
  • 103
  • 104
  • 105
  • 106
  • 107
  • 108
  • 109
  • 110
  • 111
  • 112
  • 113
  • 114
  • 115
  • 116
  • 117
  • 118
  • 119
  • 120
  • 121
  • 122
  • 123
  • 124
  • 125
  • 126
  • 127
  • 128
  • 129
  • 130
  • 131
  • 132
  • 133
  • 134
  • 135
  • 136
  • 137
  • 138
  • 139
  • 140
  • 141
  • 142
  • 143
  • 144
  • 145
  • 146
  • 147
  • 148
  • 149
  • 150
  • 151
  • 152
  • 153
  • 154
  • 155
  • 156

McKESSON CORPORATION
FINANCIAL NOTES (Continued)
If the arrangement does not contain a software license, it is accounted for as a service contract. The amended
guidance will become effective for us commencing in the first quarter of 2017. Early adoption is permitted. We
do not expect the adoption of this amended guidance to have a material effect on our consolidated financial
statements.
Debt Issuance Costs: In April 2015, amended guidance was issued for the balance sheet presentation of debt
issuance costs. The amended guidance requires debt issuance costs related to a recognized debt liability to be
reported in the balance sheet as a direct deduction from the carrying amount of that debt liability. The recognition
and measurement guidance for debt issuance costs are not affected by the amended guidance. In August 2015, a
clarification was added to this amended guidance that debt issuance costs related to line-of-credit arrangements
can continue to be deferred and presented as an asset on the balance sheet. The amended guidance will become
effective for us commencing in the first quarter of 2017. Early adoption is permitted. We do not expect the
adoption of this amended guidance to have a material effect on our consolidated financial statements.
Consolidation: In February 2015, amended guidance was issued for consolidating legal entities in which a
reporting entity holds a variable interest. The amended guidance modifies the evaluation of whether limited
partnerships and similar legal entities are VIEs and changes the consolidation analysis of reporting entities that
are involved with VIEs that have fee arrangements and related party relationships. The amended guidance will
become effective for us commencing in the first quarter of 2017. Early adoption is permitted. We do not expect
the adoption of this amended guidance to have a material effect on our consolidated financial statements.
Revenue Recognition: In May 2014, amended guidance was issued for recognizing revenue from contracts
with customers. The amended guidance eliminates industry specific guidance and applies to all
companies. Revenues will be recognized when an entity satisfies a performance obligation by transferring control
of a promised good or service to a customer in an amount that reflects the consideration to which the entity
expects to be entitled for that good or service. Revenue from a contract that contains multiple performance
obligations is allocated to each performance obligation generally on a relative standalone selling price basis. The
amended guidance also requires additional quantitative and qualitative disclosures. In March 2016, amended
guidance was issued to clarify implementation guidance on principal versus agent considerations. In April 2016,
another amended guidance was issued to permit an entity, as an accounting policy election, to account for
shipping and handling activities that occur after the customer has obtained control of a good as an activity to
fulfill the promise to transfer the good. The April 2016 amendment also provided clarifications on determining
whether a promised license provides a customer with a right to use or a right to access an entity’s intellectual
property. These amended standards are all effective for us commencing in the first quarter of 2019 and allow for
either full retrospective adoption or modified retrospective adoption. Early adoption is permitted but not prior to
our first quarter of 2018. We are currently evaluating the impact of this amended guidance on our consolidated
financial statements.
2. Business Combinations
Acquisition of Celesio AG
On February 6, 2014, we completed the acquisition of 77.6% of the then outstanding common shares of
Celesio and certain convertible bonds of Celesio for cash consideration of $4.5 billion, net of cash acquired (the
“Acquisition”). Upon the acquisition, our ownership of Celesio’s fully diluted common shares was 75.6% and, as
required, we consolidated Celesio’s debt with a fair value of $2.3 billion as a liability on our consolidated
balance sheet. The Acquisition was initially funded by utilizing a senior bridge loan, our existing accounts
receivable sales facility and cash on hand. Celesio is an international wholesale and retail company and a
provider of logistics and services to the pharmaceutical and healthcare sectors. Celesio’s headquarters is in
78