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Healthcare Technology Net Asset Exchange | 6 Months Ended
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Sep. 30, 2017
Equity Method Investments and Joint Ventures [Abstract] |
Healthcare Technology Net Asset Exchange | Healthcare Technology Net Asset Exchange On March 1, 2017, we contributed the majority of our McKesson Technology Solutions businesses (“Core MTS Business”) to the newly formed joint venture, Change Healthcare, under the terms of a contribution agreement previously entered into between McKesson and Change Healthcare Holdings, Inc. (“Change”) and others including shareholders of Change. We retained our RelayHealth Pharmacy (“RHP”) and Enterprise Information Solutions (“EIS”) businesses. In exchange for the contribution, we own 70% of the joint venture with the remaining equity ownership held by shareholders of Change. The joint venture is jointly governed by us and shareholders of Change. Gain from Healthcare Technology Net Asset Exchange We accounted for this transaction as a sale of the Core MTS Business and a subsequent purchase of a 70% interest in the newly formed joint venture. Accordingly, in the fourth quarter of 2017, we deconsolidated the Core MTS Business and recorded a pre-tax gain of $3,947 million (after-tax gain of $3,018 million). Additionally, in the first quarter of 2018, we recorded a pre-tax gain of approximately $37 million (after-tax gain of $22 million) upon the finalization of net working capital and other adjustments in operating expenses in the accompanying condensed consolidated statement of operations. During the second quarter of 2018, we received $126 million in cash from Change Healthcare representing the final settlement of the net working capital and other adjustments. Equity Method Investment in Change Healthcare Our investment in the joint venture is accounted for using the equity method of accounting on a one-month lag reporting. During the second quarter and first six months of 2018, we recorded our proportionate share of loss from Change Healthcare of $61 million and $181 million, which included transaction and integration expenses incurred by the joint venture and fair value adjustments including amortization expenses associated with equity method intangible assets. This amount was recorded under the caption, “Loss from Equity Method Investment in Change Healthcare,” in our condensed consolidated statement of operations. At September 30, 2017, the carrying value of our investment was $3,795 million, which exceeded our proportionate share of the joint venture’s book value of net assets by approximately $4,671 million, primarily reflecting equity method intangible assets, goodwill and other fair value adjustments. Summarized financial information (unaudited) of Change Healthcare is as follows:
(In millions) | Six Months Ended September 30, 2017
Revenues | $ | 1,695 |
Loss from Continuing Operations | (13 | )
Net Loss | (13 | )
Our proportionate share of Change Healthcare’s reported net loss was $9 million ($13 million at our 70% ownership). Adjustments from their carrying value to our fair value basis of accounting resulted in a total reported net loss of $181 million for McKesson for the first six months of 2018. The amortization of fair value adjustments included incremental intangible amortization and removal of profit associated with the recognition of deferred revenue, as well as basis differences in long-term debt. Related Party Transactions In connection with the transaction, McKesson, Change Healthcare and certain shareholders of Change entered into various ancillary agreements, including transition services agreements (“TSA”), a transaction and advisory fee agreement (“Advisory Agreement”), a tax receivable agreement (“TRA”) and certain other commercial agreements. At September 30, 2017 and March 31, 2017, we had a $136 million noncurrent liability payable to shareholders of Change associated with the TRA. The amount is based on certain estimates and could become payable in periods after a disposition of our investment in Change Healthcare. The total fees charged by us to the joint venture for various transition services under the TSA were $10 million and $47 million for the second quarter and first six months of 2018. Transition services fees are included within operating expenses in our condensed consolidated statements of operations. During the second quarter and first six months of 2018, we did not earn material transaction and advisory fees under the Advisory Agreement. Revenues recorded and expenses incurred under commercial arrangements with Change Healthcare were not material during the second quarter and first six months of 2018. At September 30, 2017, receivables due from the joint venture were $58 million and at March 31, 2017, receivables due from the joint venture were not material.

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- Definition The entire disclosure for equity method investments and joint ventures. Equity method investments are investments that give the investor the ability to exercise significant influence over the operating and financial policies of an investee. Joint ventures are entities owned and operated by a small group of businesses as a separate and specific business or project for the mutual benefit of the members of the group. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=66011266&loc=d3e33918-111571 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 35 -URI http://asc.fasb.org/extlink&oid=64825282&loc=d3e32847-111569 Reference 3: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.12) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 Reference 4: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 323 -SubTopic 10 -Section 35 -Paragraph 32 -URI http://asc.fasb.org/extlink&oid=64825282&loc=d3e32787-111569 + Details
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