3. Change in Accounting Policy

Walgreens historically accounted for its investment and proportionate share of earnings in Alliance Boots utilizing a three-month reporting lag. Concurrent with the completion of the Second Step Transaction, the Company eliminated the three-month reporting lag. The Company determined that the elimination of the three-month reporting lag was preferable because having Alliance Boots and its subsidiaries have the same period-end reporting date improves overall financial reporting as business performance is reflected in the Company's consolidated financial statements on a more timely basis.

In accordance with ASC Topic 810, Consolidation, a change to eliminate a previously existing reporting lag is considered a change in accounting principle in accordance with ASC Topic 250, Accounting Changes and Error Corrections. Changes in accounting principles are to be reported through retrospective application of the new principle to all prior financial statement periods presented. Accordingly, the consolidated condensed financial statements have been recast to reflect the period specific effects of eliminating the three-month reporting lag. The acquisition of the initial 45% interest was reflected in the Company's August 31, 2012 balance sheet. The Company's equity earnings and income statement for the year ended August 31, 2012, were not recasted as the impact was not material.

The elimination of the three-month reporting lag for the equity investment in Alliance Boots resulted in the adjustments as of and for the periods indicated below (in millions, except per share amounts). The impact of the change in accounting policy on the current period financial statements is not material.

	Three Months Ended February 28, 2014									Six Months Ended February 28, 2014
	As Reported			Adjustments			After Change in Accounting Principle			As Reported			Adjustments			After Change in Accounting Principle

Consolidated Condensed Statements of Earnings
Equity earnings in Alliance Boots	$	194		$	(58	)	$	136		$	345		$	(15	)	$	330
Operating Income		1,275			(58	)		1,217			2,199			(15	)		2,184
Earnings Before Income Tax Provision		1,179			(58	)		1,121			2,287			(15	)		2,272
Income tax provision		411			(20	)		391			815			(5	)		810
Net Earnings		768			(38	)		730			1,472			(10	)		1,462
Net Earnings Attributable to Walgreens Boots Alliance, Inc.		754			(38	)		716			1,449			(10	)		1,439
Net earnings per common share attributable to Walgreens Boots Alliance, Inc. – basic		0.79			(0.04	)		0.75			1.52			(0.01	)		1.51
Net earnings per common share attributable to Walgreens Boots Alliance, Inc. – diluted		0.78			(0.04	)		0.74			1.51			(0.02	)		1.49

Consolidated Condensed Statements of Comprehensive Income
Net Earnings		768			(38	)		730			1,472			(10	)		1,462
Share of other comprehensive loss of Alliance Boots		(36	)		17			(19	)		(70	)		14			(56	)
Cumulative translation adjustments		191			(75	)		116			253			28			281
Total Other Comprehensive Income		104			(58	)		46			224			42			266
Total Comprehensive Income		872			(96	)		776			1,696			32			1,728
Comprehensive Income Attributable to Walgreens Boots Alliance, Inc.	$	858		$	(96	)	$	762		$	1,673		$	32		$	1,705

	As of August 31, 2014
	As Reported		Adjustments			After Change in Accounting Principle
Consolidated Condensed Balance Sheet
Non-Current Assets:
Equity investment in Alliance Boots	$	7,248	$	88		$	7,336
Total Non-Current Assets		24,940		88			25,028
Total Assets		37,182		88			37,270
Non-Current Liabilities:
Deferred income taxes		1,048		32			1,080
Total Non-Current Liabilities		7,726		32			7,758
Equity:
Retained earnings		22,229		98			22,327
Accumulated other comprehensive income		178		(42	)		136
Total Walgreens Boots Alliance, Inc. Shareholders' Equity		20,457		56			20,513
Total Equity		20,561		56			20,617
Total Liabilities and Equity	$	37,182	$	88		$	37,270

	Six Months Ended February 28, 2014
	As Reported			Adjustments			After Change in Accounting Principle
Consolidated Condensed Statement of Cash Flows
Cash Flows from Operating Activities:
Net earnings	$	1,472		$	(10	)	$	1,462
Deferred income taxes		34			(5	)		29
Equity earnings in Alliance Boots		(345	)		15			(330	)

The cumulative effect of eliminating the three-month reporting lag was recorded as an after-tax increase to retained earnings of $98 million as of September 1, 2013, the first day of the Company's 2014 fiscal year.