Held for Sale

9 Months Ended

Dec. 31, 2019

Discontinued Operations and Disposal Groups [Abstract]

Assets and liabilities to be disposed of by sale (“disposal groups”) are reclassified into “held for sale” if their carrying amounts are principally expected to be recovered through a sale transaction rather than through continuing use. The reclassification occurs when the disposal group is available for immediate sale and the sale is highly probable. These criteria are generally met when an agreement to sell exists, or management has committed to a plan to sell the assets within one year. Disposal groups are measured at the lower of carrying amount or fair value less costs to sell and are not depreciated or amortized. The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less costs to sell is reported as an adjustment to the carrying value of the disposal group. Assets and liabilities that have met the classification as held for sale were $856 million and $471 million as of December 31, 2019. These amounts primarily consist of the majority of the Company’s German pharmaceutical wholesale business described below.

German Wholesale Joint Venture

On December 12, 2019, the Company announced that it had entered into an agreement (the “Contribution Agreement”) with a third-party intending to contribute the majority of its German wholesale business to create a joint venture in which McKesson will have a non-controlling interest. This business is within the Company’s European Pharmaceutical Solutions segment. The agreement is subject to regulatory approvals and is expected to close within the next twelve months. The transaction does not meet the criteria to be reported as a discontinued operation as it does not constitute a significant strategic business shift. As of December 31, 2019, $813 million of assets, and $453 million of liabilities were classified as “Assets held for sale” and “Liabilities held for sale” on the condensed consolidated balance sheet.

As part of the transaction, the Company recorded a charge of $282 million (pre-tax and after-tax) to remeasure the disposal group to the lower of carrying value or fair value less costs to sell. This amount is included within operating expenses in the condensed consolidated statements of operations for the three and nine months ended December 31, 2019. The Company’s measurement of the fair value of the disposal group was based on the total consideration received by the Company as outlined in the Contribution Agreement. Certain components of the total consideration included fair value measurements that fall within Level 3 of the fair value hierarchy.

The total assets and liabilities of the German wholesale joint venture that have met the classification of held for sale as of December 31, 2019, are as follows:



(In millions)	December 31, 2019
Assets
Current Assets
Receivables, net	$	473
Inventories, net	540
Long-term assets	85
Remeasurement of assets of business held for sale to fair value less cost to sell⁽¹⁾	(285		)
Total Assets held for sale	$	813

Liabilities
Current Liabilities
Drafts and accounts payable	$	247
Other accrued liabilities	37
Long-term liabilities	169
Total Liabilities held for sale	$	453

(1)

Includes the effect of approximately $3 million of cumulative foreign currency translation adjustment.