Note 3. Change in Accounting Policy

Prior to completion of the Second Step Transaction, the Company 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 the Company’s 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 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).

	Three Months Ended November 30, 2014
	As Reported			Adjustments			After Change in Accounting Principle
Consolidated Condensed Statements of Earnings
Equity earnings in Alliance Boots	$	151		$	63		$	214
Operating Income		991			63			1,054
Earnings Before Income Tax Provision		1,135			63			1,198
Income tax provision		299			22			321
Net Earnings		836			41			877
Net Earnings Attributable to Walgreens Boots Alliance, Inc.		809			41			850
Net earnings per common share attributable to Walgreens Boots Alliance, Inc. – basic		0.86			0.04			0.90
Net earnings per common share attributable to Walgreens Boots Alliance, Inc. – diluted		0.85			0.04			0.89

Consolidated Condensed Statements of Comprehensive Income
Net Earnings		836			41			877
Share of other comprehensive income (loss) of Alliance Boots		(10	)		31			21
Cumulative translation adjustments		(32	)		(157	)		(189	)
Total Other Comprehensive Income		44			(126	)		(82	)
Total Comprehensive Income		880			(85	)		795
Comprehensive Income Attributable to Walgreens Boots Alliance, Inc.	$	853		$	(85	)	$	768

	Three Months Ended November 30, 2014
	As Reported			Adjustments			After Change in Accounting Principle
Consolidated Condensed Statement of Cash Flows
Cash Flows from Operating Activities:
Net earnings	$	836		$	41		$	877
Deferred income taxes		36			22			58
Equity earnings in Alliance Boots		(151	)		(63	)		(214	)

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, 2014, the first day of the Company’s 2015 fiscal year.