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Healthcare Technology Net Asset Exchange | 12 Months Ended
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Mar. 31, 2018
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. The EIS business was subsequently sold to a third party in the third quarter of 2018. 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). The pre-tax gain was calculated based on the difference between the fair value of our 70% equity interest in the joint venture, less the carrying amount of the contributed Core MTS Business’ net assets of $1,132 million and $1,258 million of promissory notes, a $136 million noncurrent liability associated with a tax receivable agreement (as described below) and transaction and other related expenses. The $1,258 million of promissory notes were subsequently repaid in cash from proceeds of Change Healthcare’s long term debt issuance. Additionally, in the first quarter of 2018, we recorded a pre-tax gain of $37 million (after-tax gain of $22 million) in operating expenses upon the finalization of net working capital and other adjustments. 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 reporting lag. In 2018, we recorded our proportionate share of loss from Change Healthcare of $248 million, which included transaction and integration expenses incurred by the joint venture and fair value adjustments including incremental intangible assets amortization associated with basis differences, partially offset by a provisional tax benefit of $76 million recognized by Change Healthcare primarily due to a reduction in the future applicable tax rate related to the December 2017 enactment of the 2017 Tax Act. This amount was recorded under the caption, “Loss from Equity Method Investment in Change Healthcare,” in our consolidated statement of operations. At March 31, 2018 and 2017, our carrying value in our investment was $3,728 million and $4,063 million, which exceeded our proportionate share of the joint venture’s book value of net assets by approximately $4,472 million and $4,762 million, primarily reflecting equity method intangible assets, goodwill and other fair value adjustments. 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. Pursuant to the TRA, McKesson may be required to make certain payments or may be entitled to receive certain payments related to the cash tax savings attributable to the utilization of certain tax attributes, including certain amortizable tax basis in software contributed by McKesson to Change Healthcare. No such payments were required to be made or received for 2017 and 2018. At March 31, 2018 and 2017, we had $90 million and $136 million of noncurrent liability payable to shareholders of Change associated with the TRA. During 2018, we recorded a credit of $46 million in operating expense to reduce this liability to $90 million reflecting a reduction in future applicable tax rate related to the 2017 Tax Act. The TRA liability remained at $90 million at March 31, 2018. The amount of liability is determined 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 $91 million in 2018 and were not material in 2017. Transition services fees are included within operating expenses in our consolidated statements of operations. In 2018 and 2017, we did not earn material transaction and advisory fees under the Advisory Agreement. Revenues recognized and expenses incurred under commercial arrangements with Change Healthcare were not material during 2018 and 2017. At March 31, 2018 and 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 -URI http://asc.fasb.org/topic&trid=2196965 + Details
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