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ACQUISITION OF BUSINESS | 9 Months Ended
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Mar. 31, 2020
Business Combinations [Abstract] |
ACQUISITION OF BUSINESS | NOTE 2 – ACQUISITION OF BUSINESS On December 18, 2019, the Company acquired the remaining 66.66% equity interest in Have&Be Co. Ltd. (“Have & Be”), the global skin care company behind Dr. Jart+ and men’s grooming brand Do The Right Thing, for $1,268 million in cash. This acquisition is expected to further strengthen the Company’s leadership position in skin care and expand its consumer reach in Asia/Pacific, North America, the United Kingdom and travel retail. We originally acquired a minority interest in Have & Be in December 2015, and that investment structure included a formula-based call option for the remaining equity interest. The original minority interest was accounted for as an equity method investment, which had a carrying value of $133 million at the acquisition date. The acquisition of the remaining equity interest in Have & Be was considered a step acquisition, whereby the Company remeasured the previously held equity method investment to its fair value of $682 million, resulting in the recognition of a gain of $549 million. The acquisition of the remaining equity interest also resulted in the recognition of a previously unrealized foreign currency gain of $4 million, which was reclassified from accumulated OCI. The total gain on the Company’s previously held equity method investment of $553 million is included in Other income, net in the accompanying consolidated statements of earnings (loss) for the nine months ended March 31, 2020. The fair value of the previously held equity method investment was determined based upon a valuation of the acquired business, as of the date of acquisition, using an equal weighting of the income and market approaches, utilizing estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of the cash flows, as well as valuation multiples derived from comparable publicly traded companies. As of March 31, 2020, the accounting for the Have & Be business combination is provisional pending the calculation of the final purchase price, finalization of the opening balance sheet (working capital adjustments), the final valuation report, and allocation of the total consideration transferred. The amount paid at closing was funded by cash on hand including the proceeds from the issuance of debt. In anticipation of the closing, the Company transferred cash to a foreign subsidiary for purposes of making the closing payment. As a result, the Company recognized a foreign currency gain of $23 million, which is also included in Other income, net in the accompanying consolidated statements of earnings (loss) for the nine months ended March 31, 2020. The Company recorded a preliminary allocation of the total consideration transferred, which includes the cash paid at closing and the fair value of its previously held equity method investment, to the tangible and identifiable intangible assets acquired and liabilities assumed based on their fair value at the acquisition date. The excess of the total consideration transferred over the fair value of the net tangible and intangible assets acquired was recorded as goodwill. The preliminary allocation of the total consideration transferred, including immaterial measurement period adjustments as of March 31, 2020, has been recorded as follows:
(In millions, unaudited) |  |
Cash |  | $ | 228 |
Accounts receivable |  | 13 |
Inventory |  | 91 |
Other current assets |  | 5 |
Property, plant and equipment |  | 3 |
Right-of-use assets |  | 3 |
Intangible assets |  | 1,427 |
Goodwill |  | 573 |
Other long-term assets |  | 4 |
Total assets acquired |  | 2,347 |
Accounts payable |  | 15 |
Other accrued liabilities |  | 25 |
Deferred income taxes |  | 352 |
Lease liability |  | 1 |
Total liabilities assumed |  | 393 |
Total consideration transferred |  | $ | 1,954 |
The results of operations of Have & Be are reported on a one-month lag to facilitate consolidated reporting. For the three and nine months ended March 31, 2020, the Company's consolidated statements of earnings (loss) included approximately $67 million of net sales and $11 million net of tax, of net loss, inclusive of acquisition-related costs, related to Have & Be. Acquisition-related costs, which primarily include financial advisory, accounting and legal fees, in the amount of $1 million and $7 million are included in Selling, general and administrative expenses in the accompanying consolidated statements of earnings (loss) for the three and nine months ended March 31, 2020, respectively. Pro forma results of operations reflecting the acquisition of Have & Be are not presented, as the impact on the Company’s consolidated financial results would not have been material.

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- Definition The entire disclosure for a business combination (or series of individually immaterial business combinations) completed during the period, including background, timing, and recognized assets and liabilities. The disclosure may include leverage buyout transactions (as applicable). + References Reference 1: http://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 805 -URI http://asc.fasb.org/topic&trid=2303972 + Details
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- References No definition available. + Details
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