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Healthcare Technology Net Asset Exchange | 3 Months Ended
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Jun. 30, 2018
Equity Method Investments and Joint Ventures [Abstract] |
Healthcare Technology Net Asset Exchange | Healthcare Technology Net Asset Exchange In the fourth quarter of 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 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). 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 in the accompanying condensed consolidated statement of operations upon the finalization of 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 with a one-month reporting lag. During the first quarters of 2019 and 2018, we recorded our proportionate share of loss from Change Healthcare of $56 million and $120 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. These amounts were recorded under the caption, “Loss from Equity Method Investment in Change Healthcare,” in our condensed consolidated statement of operations. At June 30, 2018 and March 31, 2018, the carrying value of our investment was $3,672 million and $3,728 million, which exceeded our proportionate share of the joint venture’s book value of net assets by approximately $4,422 million and $4,472 million, primarily reflecting equity method intangible assets, goodwill and other fair value adjustments. Summarized financial information (unaudited) of Change Healthcare is as follows:
| Quarter Ended June 30,
(In millions) | 2018 |  | 2017
Revenues | $ | 856 |  |  | $ | 865 |
Income (Loss) from Continuing Operations | 7 |  |  | (84 | )
Net Income (Loss) | 7 |  |  | (84 | )
Our proportionate share of Change Healthcare’s net income or loss as reported for the first quarters of 2019 and 2018 was net income of $5 million (our 70% ownership of $7 million) and net loss of $59 million (our 70% ownership of $84 million). The effects of fair value adjustments from the joint venture’s carrying value to the initial fair value basis of accounting for McKesson were $61 million and $120 million for the first quarters of 2019 and 2018, which were included in our proportionate share of income or loss from this equity method investment. The amortization of fair value adjustments primarily included incremental intangible amortization and removal of profit associated with the recognition of deferred revenue, as well as the basis differences of long-term debt. There were also certain initial basis differences between the joint venture and McKesson. 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. Fees incurred or earned from TSA and Advisory agreements were not material for the first quarters of 2019 and 2018. At June 30, 2018 and March 31, 2018, we had a $90 million noncurrent liability payable to Change Healthcare shareholders associated with the TRA. 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. Revenues recognized and expenses incurred under commercial arrangements with Change Healthcare were not material during the first quarters of 2019 and 2018. At June 30, 2018 and March 31, 2018, 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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