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Goodwill Impairment Charges | 12 Months Ended
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Mar. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract] |
Goodwill Impairment Charges | Goodwill Impairment Charges We recorded non-cash pre-tax goodwill impairment charges of $1,738 million within the Distribution Solutions segment in 2018 and $290 million within the Technology Solutions segment in 2017. The charges were recorded under the caption, “Goodwill Impairment Charges” in the accompanying consolidated statements of operations. Goodwill impairment testing is conducted at the reporting unit level, which is generally defined as an operating segment or one level below an operating segment (also known as a component), for which discrete financial information is available and segment management regularly reviews the operating results of that reporting unit. We evaluate goodwill for impairment on an annual basis as of January 1 each year and at an interim date, if indicators of potential impairment exist. The fair value of the reporting unit was determined using a combination of an income approach based on a DCF model and a market approach based on guideline public companies’ revenues and earnings before interest, tax, depreciation and amortization multiples. Fair value estimates result from a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions that have been deemed reasonable by management as of the measurement date. Any changes in key assumptions, including failure to improve operations of certain retail pharmacy stores, additional government reimbursement reductions, deterioration in the financial market, an increase in interest rates or an increase in the cost of equity financing by market participants within the industry, or other unanticipated events and circumstances, may affect such estimates. Fair value assessments of the reporting unit are considered a Level 3 measurement due to the significance of unobservable inputs developed using company specific information. Fiscal 2018 McKesson Europe In 2018, we recorded total non-cash pre-tax and after-tax charges of $1,283 million to impair the carrying value of goodwill for our McKesson Europe reporting unit within our Distribution Solutions segment, as further described below. There were no tax benefits associated with these goodwill impairment charges. At March 31, 2018, this reporting unit had a remaining goodwill balance of $1,851 million. During the second quarter of 2018, our McKesson Europe reporting unit had a decline in its estimated future cash flows, primarily in our United Kingdom (“U.K.”) retail business, driven by significant government reimbursement reductions affecting retail pharmacy economics across the U.K. market. Accordingly, we performed an interim one-step goodwill impairment test under the amended goodwill guidance for this reporting unit prior to our annual impairment test. As a result of the interim impairment test, the estimated fair value of this reporting unit was determined to be lower than the carrying value and we recorded a non-cash goodwill impairment charge (pre-tax and after-tax) of $350 million. The discount rate and terminal growth rate used in our 2018 second quarter impairment testing were 7.5% and 1.25% compared to 7.0% and 1.5% in our 2017 annual impairment test. Additionally, as a result of the 2018 annual impairment test, we determined that the carrying value of the McKesson Europe reporting unit further exceeded its estimated fair value and recognized a non-cash goodwill impairment charge (pre-tax and after-tax) of $933 million in the fourth quarter of 2018. This reporting unit had a further decline in its estimated future cash flows driven by weakening script growth outlook in our U.K. business and by a more competitive environment in France during the fourth quarter of 2018. The discount rate and terminal growth rate used in our 2018 annual impairment testing were 8.0% and 1.25%. Rexall Health As a result of the 2018 annual impairment test, we determined that the carrying value of our Rexall Health reporting unit within our Distribution Solutions segment exceeded its estimated fair value and recognized a non-cash goodwill impairment charge (pre-tax and after-tax) of $455 million in the fourth quarter of 2018. The impairment was the result of a decline in estimated future cash flows primarily driven by significant generics reimbursement reductions across Canada and minimum wage increases in multiple provinces which can only be partially mitigated through the business’ cost saving efforts. The discount rate and terminal growth rate used in our impairment testing for this reporting unit were 10.0% and 2.0%. At March 31, 2018, the Rexall Health reporting unit had no remaining goodwill related to our acquisition of Rexall Health. Other risks, expenses and future developments that we were unable to anticipate as of the testing dates in 2018 may require us to further revise the future projected cash flows, which could adversely affect the fair value of our reporting units in future periods. As a result, we may be required to record additional impairment charges. Also, refer to Financial Note 4, “Restructuring and Asset Impairment Charges,” for more information. Fiscal 2017 Enterprise Information Solutions In conjunction with the 2017 Healthcare Technology Net Asset Exchange, we evaluated strategic options for our EIS business, which was a reporting unit within our Technology Solutions segment. In the second quarter of 2017, we recorded a non-cash pre-tax charge of $290 million ($282 million after-tax) to impair the carrying value of this reporting unit’s goodwill. The impairment primarily resulted from a decline in estimated cash flows. The amount of goodwill impairment for the EIS business was determined under the former accounting guidance on goodwill impairment testing, and computed as the excess of the carrying value of the reporting unit’s goodwill over its implied fair value of its goodwill. The charge was recorded under the caption, “Goodwill Impairment Charges,” in the accompanying consolidated statements of operations. Most of the goodwill impairment for this reporting unit was not deductible for income tax purposes. Refer to Financial Note 5, “Divestitures” for more information on the sale of the EIS business. Refer to Financial Note 21, “Fair Value Measurements,” for more information on this nonrecurring fair value measurement.

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- Definition The entire disclosure for the details of the charge against earnings resulting from the aggregate write down of all assets from their carrying value to their fair value. Disclosure may also include a description of the impaired asset and facts and circumstances leading to the impairment, amount of the impairment loss and where the loss is located in the income statement, method(s) for determining fair value, and the segment in which the impaired asset is reported. + References No definition available. + Details
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