Medtronic 2016 Annual Report Download - page 82

Table of Contents
Medtronic plc
Notes to Consolidated Financial Statements (Continued)
79
The fair values of the assets acquired and liabilities assumed are as follows:
(estimated in millions)
Accounts receivable $ 1,349
Inventories 2,219
Other current assets 3,181
Property, plant, and equipment 2,293
Goodwill 29,979
Intangible assets 26,210
Other assets 761
Total assets acquired 65,992
Short-term borrowings 1,011
Other current liabilities 2,434
Long-term debt 4,623
Long-term deferred tax liabilities 4,745
Other long-term liabilities 3,191
Total liabilities assumed 16,004
Net assets acquired $ 49,988
Goodwill has been allocated to the Minimally Invasive Therapies Group, Cardiac and Vascular Group, Restorative Therapies
Group, and Diabetes Group. Goodwill is calculated as the excess of the consideration transferred over the net assets recognized
and represents the expected revenue and cost synergies of the combined company, which are further described above. Goodwill
recognized as a result of the acquisition is not deductible for tax purposes. See Note 6 for additional information about goodwill
and other intangible assets.
Contingent liabilities assumed as part of the Acquisition total $2.7 billion and are included in accrued income taxes, other accrued
expenses, long-term accrued income taxes, and other long-term liabilities. These contingent liabilities include $1.5 billion related
to income taxes (including uncertain tax positions and guarantee commitments), and $1.2 billion related to legal claims (including
product liability and environmental matters). Contingent liabilities are recorded at their estimated fair values, aside from those
pertaining to uncertainty in income taxes which are an exception to the fair value basis of accounting. Legal matters and certain
environmental matters that are legal in nature are recorded at their respective probable and estimable amounts. See Note 15 for
additional background on contingent liabilities.
Actual and Pro Forma Impact
The Company's consolidated financial statements for the fiscal year ended April 24, 2015 include Covidien's results of operations
from the Acquisition Date through April 24, 2015. Net sales and operating loss attributable to Covidien during this period and
included in Medtronic's consolidated financial statements for the fiscal year ended April 24, 2015 total $2.7 billion and $423
million, respectively. The $423 million operating loss includes $623 million of amortization from the step-up in fair value of
inventory acquired, $379 million of intangible asset amortization, $218 million of acquisition-related charges, and $142 million
of restructuring charges, net, all of which relate to the Covidien acquisition.
The following unaudited pro forma information gives effect to Medtronic's acquisition of Covidien as if the acquisition had occurred
on April 27, 2013, the first day of fiscal year 2014, and had been included in the Company's consolidated statements of income
for fiscal years 2015 and 2014.
(in millions) 2015 2014
Pro forma net sales $ 28,369 $ 27,380
Pro forma net income $ 3,944 $ 3,280