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Significant Accounting Policies (Tables)

12 Months Ended

Dec. 31, 2023

Schedule of Reconciliation of Cash and Cash Equivalents

The following is a reconciliation of cash and cash equivalents on the consolidated balance sheets to total cash, cash equivalents and restricted cash on the consolidated statements of cash flows as of December 31, 2023, 2022 and 2021:


In millions	2023		2022		2021
Cash and cash equivalents	$	8,196	$	12,945	$	9,408
Restricted cash (included in other current assets)	90		144		3,065
Restricted cash (included in other assets)	239		216		218
Total cash, cash equivalents and restricted cash in the consolidated statements of cash flows	$	8,525	$	13,305	$	12,691

Schedule of Accounts Receivable, Net

Accounts receivable, net was composed of the following at December 31, 2023 and 2022:


In millions	2023		2022
Trade receivables	$	11,908	$	8,983
Vendor and manufacturer receivables	15,711		12,395
Premium receivables	3,714		2,676
Other receivables	3,894		3,449
Total accounts receivable, net (1)	$	35,227	$	27,503

_____________________________________

(1)Includes accounts receivable of $227 million which were accounted for as assets held for sale and were included in assets held for sale on the consolidated balance sheet at December 31, 2022. See Note 2 ‘‘Acquisitions, Divestitures and Asset Sales’’ for additional information.

Rollforward of Deferred Acquisition Costs

The following is a roll forward of deferred acquisition costs for the years ended December 31, 2023 and 2022:


In millions	2023		2022
Deferred acquisition costs, beginning of the period	$	1,219	$	879
Capitalizations	548		564
Amortization expense	(265)		(224)

Deferred acquisition costs, end of the period	$	1,502	$	1,219

Schedule of Property and Equipment

Property and equipment consisted of the following at December 31, 2023 and 2022:


In millions	2023		2022
Land	$	1,958	$	1,996
Building and improvements	4,571		4,545
Fixtures and equipment	11,024		12,978
Leasehold improvements	6,511		6,238
Software	9,818		8,843
Total property and equipment	33,882		34,600
Accumulated depreciation and amortization	(20,699)		(21,483)
Property and equipment, net (1)	$	13,183	$	13,117

_____________________________________

(1)Includes property and equipment of $244 million which were accounted for as assets held for sale and were included in assets held for sale on the consolidated balance sheet at December 31, 2022. See Note 2 ‘‘Acquisitions, Divestitures and Asset Sales’’ for additional information.

Schedule of Disaggregation of Revenue

The following table disaggregates the Company’s revenue by major source in each segment for the years ended December 31, 2023, 2022 and 2021:


In millions	Health Care Benefits		Health Services		Pharmacy & Consumer Wellness		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
2023
Major goods/services lines:
Pharmacy	$	—	$	180,710	$	92,111	$	—	$	(49,369)	$	223,452
Front Store	—		—		22,458		—		—		22,458
Premiums	99,144		—		—		48		—		99,192

Net investment income (loss)	765		(1)		(5)		394		—		1,153
Other	5,737		6,134		2,199		9		(2,558)		11,521
Total	$	105,646	$	186,843	$	116,763	$	451	$	(51,927)	$	357,776

Health Services distribution channel:
Pharmacy network (1)			$	112,718
Mail & specialty (2)			67,992
Net investment income (loss)			(1)
Other			6,134
Total			$	186,843

2022
Major goods/services lines:
Pharmacy	$	—	$	166,793	$	83,480	$	—	$	(45,154)	$	205,119
Front Store	—		—		22,780		—		—		22,780
Premiums	85,274		—		—		56		—		85,330

Net investment income (loss)	476		—		(44)		406		—		838
Other	5,600		2,783		2,380		68		(2,431)		8,400
Total	$	91,350	$	169,576	$	108,596	$	530	$	(47,585)	$	322,467

Health Services distribution channel:
Pharmacy network (1)			$	102,968
Mail & specialty (2)			63,825

Other			2,783
Total			$	169,576


In millions	Health Care Benefits		Health Services		Pharmacy & Consumer Wellness		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
2021
Major goods/services lines:
Pharmacy	$	—	$	150,646	$	77,886	$	—	$	(43,913)	$	184,619
Front Store	—		—		21,315		—		—		21,315
Premiums	76,064		—		—		68		—		76,132

Net investment income	586		—		17		596		—		1,199
Other	5,469		3,246		2,402		57		(2,328)		8,846
Total	$	82,119	$	153,892	$	101,620	$	721	$	(46,241)	$	292,111


Health Services distribution channel:
Pharmacy network (1)			$	96,834
Mail & specialty (2)			53,812

Other			3,246
Total			$	153,892

_____________________________________________

(1)Health Services pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies. Effective January 1, 2023, pharmacy network also includes activity associated with Maintenance Choice®, which permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS pharmacy retail store for the same price as mail order. Maintenance Choice activity was previously reflected in mail & specialty. Segment financial information has been revised to reflect these changes.

(2)Health Services mail & specialty is defined as specialty mail claims inclusive of Specialty Connect® claims picked up at a retail pharmacy, as well as mail order and specialty claims fulfilled by the Pharmacy & Consumer Wellness segment. Effective January 1, 2023, mail & specialty excludes Maintenance Choice activity, which is now reflected within pharmacy network. Segment financial information has been revised to reflect these changes.

Schedule of Receivables and Contract Liabilities from Contracts with Customers

The following table provides information about receivables and contract liabilities from contracts with customers as of December 31, 2023 and 2022:


In millions	2023		2022
Trade receivables (included in accounts receivable, net)	$	11,908	$	8,983
Contract liabilities (included in accrued expenses)	149		71

Below is a summary of such changes:


In millions	2023		2022
Contract liabilities, beginning of period	$	71	$	87

Rewards earnings and gift card issuances	357		340
Redemption and breakage	(363)		(356)
Acquired contract liabilities	109		—
Other	(25)		—
Contract liabilities, end of period	$	149	$	71

Schedule of Variable Interest Entities

Physician Groups VIE assets and liabilities included on the consolidated balance sheet at December 31, 2023 were as follows:


In millions	2023
Total assets	$	1,515
Total liabilities	1,503

Other variable interest holder VIE assets included in long-term investments on the consolidated balance sheets at December 31, 2023 and 2022 were as follows:


In millions	2023		2022
Hedge fund investments	$	859	$	589
Private equity investments	840		707
Real estate partnerships	319		241
Total	$	2,018	$	1,537

Schedule of Adjustments Resulting from Applying New Accounting Standard

The following summarizes changes in the balances of long-duration insurance liabilities as a result of the adoption of the long-duration insurance standard effective January 1, 2021:


In millions	Large Case Pensions		Long-Term Care		Other
Balance at December 31, 2020, net of reinsurance	$	3,224	$	1,142	$	480
Add: Reinsurance recoverable	—		—		274
Balance at December 31, 2020	3,224		1,142		754
Change in discount rate assumptions	604		553		44
Removal of shadow adjustments in accumulated other comprehensive income	(181)		—		—
Adjusted balance at January 1, 2021	3,647		1,695		798
Less: Reinsurance recoverable	—		—		308
Adjusted balance at January 1, 2021, net of reinsurance	$	3,647	$	1,695	$	490

Impact of New Long-Duration Insurance Contracts Standard on Financial Statement Line Items

As a result of applying the long-duration insurance standard using a modified retrospective method, the following adjustments were made to amounts reported in the consolidated statement of operations for the years ended December 31, 2022 and 2021:


	Impact of Change in Accounting Policy
In millions	As Reported December 31, 2022		Adjustments		Adjusted December 31, 2022
Consolidated Statement of Operations:
Operating costs:
Health care costs	$	71,281	$	(208)	$	71,073
Total operating costs	314,721		(208)		314,513
Operating income	7,746		208		7,954
Income before income tax provision	5,628		208		5,836
Income tax provision	1,463		46		1,509

Net income	4,165		162		4,327
Net income attributable to CVS Health	4,149		162		4,311
Net income per share attributable to CVS Health:

Basic	$	3.16	$	0.13	$	3.29


Diluted	$	3.14	$	0.12	$	3.26


	Impact of Change in Accounting Policy
In millions	As Reported December 31, 2021		Adjustments		Adjusted December 31, 2021
Consolidated Statement of Operations:
Operating costs:
Health care costs	$	64,260	$	(72)	$	64,188
Operating expenses	37,066		(45)		37,021
Total operating costs	278,918		(117)		278,801
Operating income	13,193		117		13,310
Income before income tax provision	10,420		117		10,537
Income tax provision	2,522		26		2,548

Net income	7,898		91		7,989
Net income attributable to CVS Health	7,910		91		8,001
Net income per share attributable to CVS Health:

Basic	$	6.00	$	0.07	$	6.07


Diluted	$	5.95	$	0.07	$	6.02


	Impact of Change in Accounting Policy
In millions	As Reported December 31, 2022		Adjustments		Adjusted December 31, 2022
Consolidated Balance Sheet:
Other current assets	$	2,685	$	(49)	$	2,636
Total current assets	65,682		(49)		65,633
Intangible assets, net	24,754		49		24,803
Total assets	228,275		—		228,275
Health care costs payable	10,406		(264)		10,142
Other insurance liabilities	1,140		(51)		1,089
Total current liabilities	69,736		(315)		69,421
Deferred income taxes	3,880		136		4,016
Other long-term insurance liabilities	6,108		(273)		5,835
Other long-term liabilities	6,732		(2)		6,730
Total liabilities	156,960		(454)		156,506
Retained earnings	56,145		253		56,398
Accumulated other comprehensive loss	(1,465)		201		(1,264)
Total CVS Health shareholders’ equity	71,015		454		71,469
Total shareholders’ equity	71,315		454		71,769
Total liabilities and shareholders’ equity	228,275		—		228,275

As a result of applying the long-duration insurance standard using a modified retrospective method, the following adjustments were made to amounts reported in the consolidated statement of cash flows for the years ended December 31, 2022 and 2021:


	Impact of Change in Accounting Policy
In millions	As Reported December 31, 2022		Adjustments		Adjusted December 31, 2022
Consolidated Statement of Cash Flows:
Reconciliation of net income to net cash provided by operating activities:
Net income	$	4,165	$	162	$	4,327
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,247		(23)		4,224
Deferred income taxes	(2,075)		46		(2,029)
Change in operating assets and liabilities, net of effects from acquisitions:
Other assets	(566)		75		(491)
Health care costs payable and other insurance liabilities	1,247		(255)		992
Other liabilities	6,468		(5)		6,463


	Impact of Change in Accounting Policy
In millions	As Reported December 31, 2021		Adjustments		Adjusted December 31, 2021
Consolidated Statement of Cash Flows:
Reconciliation of net income to net cash provided by operating activities:
Net income	$	7,898	$	91	$	7,989
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	4,512		(26)		4,486
Deferred income taxes	(428)		26		(402)
Change in operating assets and liabilities, net of effects from acquisitions:
Other assets	(3)		(27)		(30)
Health care costs payable and other insurance liabilities	169		(68)		101
Other liabilities	2,852		4		2,856

- Definition

Tabular disclosure of the significant judgments and assumptions made in determining whether a variable interest (as defined) held by the entity requires the variable interest entity (VIE) (as defined) to be consolidated and (or) disclose information about its involvement with the VIE, individually or in aggregate (as applicable); the nature of restrictions, if any, on the consolidated VIE's assets and on the settlement of its liabilities reported by an entity in its statement of financial position, including the carrying amounts of such assets and liabilities; the nature of, and changes in, the risks associated with involvement in the VIE; how involvement with the VIE affects the entity's financial position, financial performance, and cash flows; the lack of recourse if creditors (or beneficial interest holders) of the consolidated VIE have no recourse to the general credit of the primary beneficiary (if applicable); the terms of arrangements, giving consideration to both explicit arrangements and implicit variable interests, if any, that could require the entity to provide financial support to the VIE, including events or circumstances that could expose the entity to a loss; the methodology used by the entity for determining whether or not it is the primary beneficiary of the variable interest entity; the significant factors considered and judgments made in determining that the power to direct the activities of a VIE that most significantly impact the VIE's economic performance are shared (as defined); the carrying amounts and classification of assets and liabilities of the VIE included in the statement of financial position; the entity's maximum exposure to loss, if any, as a result of its involvement with the VIE, including how the maximum exposure is determined and significant sources of the entity's exposure to the VIE; a comparison of the carrying amounts of the assets and liabilities and the entity's maximum exposure to loss; information about any liquidity arrangements, guarantees, and (or) other commitments by third parties that may affect the fair value or risk of the entity's variable interest in the VIE; whether or not the entity has provided financial support or other support (explicitly or implicitly) to the VIE that it was not previously contractually required to provide or whether the entity intends to provide that support, including the type and amount of the support and the primary reasons for providing the support; and supplemental information the entity determines necessary to provide.

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