Equity method investments

12 Months Ended

Aug. 31, 2020

Equity Method Investments and Joint Ventures [Abstract]

Equity method investments as of August 31, 2020 and 2019 were as follows (in millions, except percentages):


	2020					2019
	Carrying value		Ownership percentage	Carrying value		Ownership percentage
AmerisourceBergen	$	5,446	28%	$	5,211	27%
Others	1,892		8% - 50%	1,640		8% - 50%
Total	$	7,338		$	6,851

AmerisourceBergen Corporation (“AmerisourceBergen”) investment

As of August 31, 2020 and 2019, the Company owned 56,854,867 AmerisourceBergen common shares, representing approximately 28% and 27% of the outstanding AmerisourceBergen common stock, respectively, in each case based on the most recent share count information publicly reported by AmerisourceBergen as of that date. The Company accounts for its equity investment in AmerisourceBergen using the equity method of accounting, with the net earnings attributable to the Company’s investment being classified within the operating income of its Pharmaceutical Wholesale segment. Due to the timing and availability of financial information of AmerisourceBergen, the Company accounts for this equity method investment on a financial reporting lag of two months. Equity earnings from AmerisourceBergen are reported as a separate line in the Consolidated Statements of Earnings. The financial performance of AmerisourceBergen, including any charges which may arise relating to its ongoing opioid litigation, will impact the Company’s results of operations.

The Level 1 fair market value of the Company’s equity investment in AmerisourceBergen common stock at August 31, 2020 and 2019 were $5.5 billion and $4.7 billion, respectively. As of August 31, 2020, the Company’s investment in AmerisourceBergen carrying value exceeded its proportionate share of the net assets of AmerisourceBergen by $4.4 billion. This premium of $4.4 billion was recognized as part of the carrying value in the Company’s equity investment in AmerisourceBergen. The difference was primarily related to goodwill and the fair value of AmerisourceBergen intangible assets.

Other investments

The Company’s other equity method investments include its investments in Guangzhou Pharmaceuticals Corporation (“Guangzhou Pharmaceuticals”) and Nanjing Pharmaceutical Corporation Limited, the Company’s pharmaceutical wholesale investments in China; its investment in Sinopharm Holding Guoda Drugstores Co., Ltd., the Company's retail pharmacy investment in China, the Company’s investment in VillageMD, PharMerica Corporation, Shields Health Solutions and BioScrip (resulting from its merger with Option Care Inc.) in the United States.

The Company reported $41 million, $23 million and $53 million of post-tax equity earnings from other equity method investments, including equity method investments classified as operating, for the fiscal years ended August 31, 2020, 2019 and 2018, respectively.

During the fiscal year ended August 31, 2020, the Company recorded within other income (expense) impairment charges of $86 million in its other equity method investments using fair values primarily based on level 1 inputs. During the fiscal year ended August 31, 2018, the Company recorded an impairment of $170 million in its equity interest in Guangzhou Pharmaceuticals, which was included in other income (expense) in the Consolidated Statement of Earnings. The fair value of the Company’s equity interest in Guangzhou Pharmaceuticals was determined using the proposed sale price and thus represented Level 3 measurement. During the fiscal year ended August 31, 2018, the Company completed the sale of a 30 percent interest in Guangzhou Pharmaceuticals to its joint venture partner Guangzhou Baiyunshan Pharmaceutical Holdings resulting in a $172 million reduction in carrying value and a $8 million cumulative translation adjustment loss. In July 2018, the Company completed the sale of its minority equity interest in Premise Health Holding Corp., resulting in an after-tax gain on disposition of $245 million and a reduction in carrying value of $76 million.

Summarized financial information

Summarized financial information for the Company’s equity method investments in aggregate is as follows:

Balance sheet (in millions)


	Year ended August 31,
	2020		2019
Current assets	$	40,038	$	36,523
Non-current assets	18,313		15,710
Current liabilities	38,779		35,857
Non-current liabilities	10,628		9,633
Shareholders’ equity¹	8,944		6,743

Statements of earnings (in millions)


	Year ended August 31,
	2020		2019		2018
Sales	$	210,306	$	197,237	$	179,887
Gross profit	8,896		7,516		6,875
Net earnings	1,647		1,037		1,315
Share of earnings from equity method investments	382		187		245

¹Shareholders’ equity at August 31, 2020 and 2019 includes $387 million and $411 million, respectively, related to noncontrolling interests.

The summarized financial information for equity method investments has been included on an aggregated basis for all investments as reported at the end of each fiscal year end.