2. Significant Accounting Policies

Special Items—We recognize expenses resulting directly from our business combinations, employee termination benefits, certain research and development (“R&D”) agreements, certain contract terminations, consulting and professional fees and asset impairment or loss on disposal charges connected with global restructuring, quality and operational excellence initiatives, and other items as “Special items” in our condensed consolidated statement of earnings. “Special items” included (in millions):


	Three Months Ended September 30,				Nine Months Ended September 30,
	2016		2015		2016		2015
Biomet-related
Merger consideration compensation expense	$	—	$	—	$	—	$	164.1
Retention plans		—		—		—		73.0
Consulting and professional fees		59.0		28.0		138.4		114.6
Employee termination benefits		7.1		14.2		14.3		79.1
Dedicated project personnel		21.9		36.8		64.8		45.9
Relocated facilities		9.5		1.6		17.5		2.5
Contract terminations		3.5		59.2		28.8		75.1
Information technology integration		4.8		1.1		9.3		1.1
Intangible asset impairment		—		—		28.0		—
Other		8.0		5.7		12.4		7.6

Total Biomet-related		113.8		146.6		313.5		563.0
Other
Consulting and professional fees		14.6		30.2		30.3		109.5
Employee termination benefits		3.2		1.1		3.2		1.9
Dedicated project personnel		8.2		6.4		11.5		28.9
Impairment/loss on disposal of assets		—		—		1.1		2.3
LDR merger consideration compensation expense		24.1		—		24.1		—
Relocated facilities		—		—		0.2		—
Certain litigation matters		3.7		—		3.7		20.3
Contract terminations		0.1		—		1.1		—
Information technology integration		0.8		1.8		1.1		1.8
Contingent consideration adjustments		—		0.1		—		2.4
Accelerated software amortization		—		—		—		1.5
Other		1.9		9.7		7.2		20.3

Total Other		56.6		49.3		83.5		188.9

Special items	$	170.4	$	195.9	$	397.0	$	751.9

Consulting and professional fees related to third-party integration consulting performed in a variety of areas such as tax, compliance, logistics and human resources for our business combinations and merger with Biomet; legal fees related to the consummation of mergers and acquisitions and certain litigation and compliance matters; third-party consulting and professional fees and contract labor related to our quality and operational excellence initiatives; third-party fees related to severance and termination benefits matters; and third-party consulting fees related to certain information system integrations.

Dedicated project personnel expenses include the salary, benefits, travel expenses and other costs directly associated with employees who are 100 percent dedicated to our integration of acquired businesses, employees who have been notified of termination, but are continuing to work on transferring their responsibilities and employees working on our quality and operational excellence initiatives.

As part of the Biomet merger, we recognized $209.0 million of intangible assets for in-process research and development (“IPR&D”) projects. During the nine month period ended September 30, 2016, we recorded an impairment loss of $28.0 million related to these IPR&D intangible assets. The impairment was primarily due to the termination of certain IPR&D projects.

On July 13, 2016, we completed our acquisition of LDR Holding Corporation (“LDR”). Pursuant to the LDR merger agreement, all outstanding LDR stock options and LDR stock-based awards vested immediately prior to the effective time of the merger, and holders of these options and awards received a portion of the aggregate merger consideration. Some of these options and awards were already vested under the terms of LDR’s equity incentive plans. We accounted for the fair value of the consideration we paid in exchange for previously vested options and awards as consideration to complete the merger. As part of the merger agreement terms, all previously unvested options and awards vested immediately prior to the effective time of the merger. Under LDR’s equity incentive plans, certain unvested options and awards would have otherwise been forfeited. We have concluded that the discretionary accelerated vesting of these unvested options and awards was for the economic benefit of the combined company, and, therefore, we classified the fair value of the merger consideration we paid to holders of such unvested options and awards of $24.1 million as compensation expense.

A further detailed description of expenses included in “Special items” can be found in Note 3 to our Consolidated Financial Statements in our Annual Report on Form 10-K for the year ended December 31, 2015.

After the closing date of the Biomet merger, we started to implement our integration plans to drive operational synergies. Part of these integration plans included termination of employees and certain contracts. Expenses attributable to these integration plans that were recognized in the three and nine month periods ended September 30, 2016 and 2015 as part of “Special items” related to employee termination benefits and contract termination expense associated with agreements with independent agents, distributors, suppliers and lessors. Our integration plans are expected to last through 2018 and we expect to incur a total of $170 million for employee termination benefits and $130 million for contract termination expense in that time period. As of September 30, 2016, we have incurred a cumulative total of $115.3 million for employee termination benefits and $123.8 million for contract termination expense. The following table summarizes the liabilities related to these integration plans (in millions):


	Employee Termination Benefits			Contract Terminations			Total
Balance at December 31, 2015	$	46.8		$	56.0		$	102.8
Additions		14.3			28.8			43.1
Cash payments		(30.3	)		(55.0	)		(85.3	)
Foreign currency exchange rate changes		(0.4	)		0.1			(0.3	)

Balance at September 30, 2016	$	30.4		$	29.9		$	60.3

Recent Accounting Pronouncements—In May 2014, the Financial Accounting Standards Board (“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09—Revenue from Contracts with Customers (Topic 606). This ASU provides a five-step model for revenue recognition that all industries will apply to recognize revenue when a customer obtains control of a good or service. The ASU will be effective for us beginning January 1, 2018. We are in the initial phases of our adoption plans and, accordingly, we are unable to estimate any effect this may have on our revenue recognition practices.

In April 2015, the FASB issued ASU 2015-03—Simplifying the Presentation of Debt Issuance Costs. This ASU requires debt issuance costs to be presented in the balance sheet as a direct deduction from the carrying value of the associated debt liability, consistent with the presentation of a debt discount. This ASU does not affect the measurement and recognition of debt issuance costs in our statement of earnings. We adopted ASU 2015-03 during the first quarter of 2016 on a retrospective basis. Accordingly, we reclassified the debt issuance costs on our December 31, 2015 consolidated balance sheet, which decreased long-term debt by $58.9 million, other current assets by $9.2 million and other assets by $49.7 million.

In February 2016, the FASB issued ASU 2016-02—Leases. This ASU requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet. This ASU will be effective for us beginning January 1, 2019. Early adoption is permitted. The ASU must be adopted using a modified retrospective transition approach at the beginning of the earliest comparative period in the consolidated financial statements. We own most of our manufacturing facilities, but lease various office space throughout the world. We are currently evaluating the impact this ASU will have on our consolidated financial statements.

In March 2016, the FASB issued ASU 2016-09—Improvements to Employee Share-Based Payment Accounting. This ASU simplifies several aspects of the accounting for employee share-based payments, including the accounting for employer tax withholding on share-based compensation, forfeitures and the financial statement presentation of excess tax benefits and deficiencies. The ASU also clarifies the statement of cash flows presentation for certain components of share-based awards.

We elected to early adopt ASU 2016-09 during the second quarter of 2016, which required us to revise applicable items in the first quarter of 2016, since it was an interim period in the year of adoption. As a result of the adoption, we are required to recognize excess tax benefits in our provision for income taxes, rather than paid-in capital, for all periods in 2016.

Additionally, ASU 2016-09 requires us to amend the presentation of employee shared-based payment-related items in our statement of cash flows as follows: (i) excess tax benefits are presented as an operating activity (such cash flows were previously included in cash flows from financing activities), and (ii) cash paid for employee taxes on withheld shares from equity awards is presented as a financing activity (such cash flows were previously included in cash flows from operating activities). We elected to apply the change in cash flow classification for excess tax benefits on a prospective basis. Further, we applied the change in cash flow classification for cash paid for withheld shares on a retrospective basis, as required.

We also elected to continue to estimate the number of forfeitures related to share-based payments, rather than account for forfeitures as they occur.

We recognized excess tax benefits of $5.6 million and $12.5 million in our provision for income taxes rather than paid-in capital for the three and nine month periods ended September 30, 2016, respectively. The retrospective application of cash paid for withheld shares resulted in a $10.5 million reclassification of these cash outflows from net cash provided by operating activities to net cash used in financing activities on our condensed consolidated statement of cash flows for the nine month period ended September 30, 2015.

There are no other recently issued accounting pronouncements that we have not yet adopted that are expected to have a material effect on our financial position, results of operations or cash flows.