Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2018


	Pharmacy				Intersegment		Consolidated
In millions	Services		Retail/LTC		Eliminations		Totals
Major goods/services lines:
Pharmacy	$	30,762	$	15,500	$	(6,957)	$	39,305
Front Store		—		4,726		—		4,726
Other		1,456		206		—		1,662
Total	$	32,218	$	20,432	$	(6,957)	$	45,693

Pharmacy Services distribution channel:
Mail choice (1)	$	11,208
Retail network (2)		19,554
Other		1,456
Total	$	32,218

(1)

Pharmacy Services mail choice is defined as claims filled at a Pharmacy Services mail facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at retail, as well as prescriptions filled at our retail pharmacies under the Maintenance Choice program.

(2)

Pharmacy Services retail network net revenues do not include Maintenance Choice® activity, which is included within the mail choice category. Retail network is defined as claims filled at retail and specialty retail pharmacies, including our retail pharmacies and long-term care pharmacies, but excluding Maintenance Choice activity.

Schedule of contract balances and activity

Contract Balances

Contract liabilities primarily represent the Company’s obligation to transfer additional goods or services to a customer for which the Company has received consideration, for example ExtraBucks® Rewards and unredeemed CVS Health gift cards. The consideration received remains a contract liability until goods or services have been provided to the retail customer. In addition, the Company recognizes breakage on CVS Health gift cards based on historical redemption patterns.

The following table provides information about receivables and contract liabilities from contracts with customers:


In millions	March 31, 2018		December 31, 2017
Receivables (included in accounts receivable, net)	$	6,875	$	7,873
Contract liabilities (included in accrued expenses)		71		53

During the three months ended March 31, 2018, the contract liabilities balance includes increases related to customers’ earnings in ExtraBucks Rewards or issuances of CVS Health gift cards and decreases for revenues recognized during the period as a result of the redemption of ExtraBucks Rewards or CVS Health gift cards and breakage of CVS Health gift cards. Below is a summary of the changes:


In millions
Balance, December 31, 2017	$	53
Adoption of ASU 2014-09		17
Loyalty program earnings and gift card issuances		79
Redemption and breakage		(78)
Balance, March 31, 2018	$	71

Schedule of new accounting pronouncements and changes in accounting principles


	March 31,		December 31,
In millions	2018		2017
Cash and cash equivalents	$	42,023	$	1,696
Restricted cash (included in other current assets)		14		14
Restricted cash (included in other assets)		227		190
Total cash, cash equivalents and restricted cash in the statement of cash flows	$	42,264	$	1,900

Reconciliation of condensed consolidated statement of cash flows


	As Previously
In millions	Reported		Adjustments		As Revised
Three Months Ended March 31, 2017
Acquisitions (net of cash acquired) and other investments	$	(110)	$	17	$	(93)
Net cash used in investing activities		(554)		17		(537)
Net decrease in cash, cash equivalents and restricted cash (1)		(1,154)		17		(1,137)
Cash, cash equivalents, and restricted cash at the beginning of the period (1)		3,371		149		3,520
Cash, cash equivalents, and restricted cash at the end of the period (1)		2,217		166		2,383

(1)

Prior to the adoption of ASU 2016-18, these financial statement captions excluded restricted cash. The financial statement captions have been renamed to reflect the inclusion of restricted cash subsequent to the adoption of ASU 2016-18 on January 1, 2018.

ASU 2014-09

Schedule of new accounting pronouncements and changes in accounting principles


	Impact of Change in Accounting Policy
	As Reported				Adjusted
In millions	December 31, 2017		Adjustments		January 1, 2018
Condensed Consolidated Balance Sheet:
Accrued expenses	$	6,609	$	17	$	6,626
Deferred income taxes		2,996		(4)		2,992
Total liabilities		57,436		13		57,449
Retained earnings		43,556		(13)		43,543
Total CVS Health shareholders' equity		37,691		(13)		37,678
Total shareholders' equity		37,695		(13)		37,682

The following table compares the reported condensed consolidated balance sheet, income statement, and statement of cash flows, as of and for the three months ended March 31, 2018, to the pro forma amounts had the previous revenue accounting guidance remained in effect:


	Impact of Change in Accounting Policy
	As Reported				Balances
	As of/For the				Without
	Three Months Ended				Adoption of
In millions	March 31, 2018		Adjustments		Topic 606
Condensed Consolidated Statement of Income:
Net revenues	$	45,693	$	7	$	45,700
Cost of revenues		38,834		4		38,838
Gross profit		6,859		3		6,862
Operating profit		1,946		3		1,949
Income before income tax provision		1,470		3		1,473
Income tax provision		472		1		473
Income from continuing operations		998		2		1,000
Net income		998		2		1,000
Net income attributable to CVS Health		998		2		1,000

Condensed Consolidated Balance Sheet:
Accrued expenses		7,724		(20)		7,704
Deferred income taxes		3,058		5		3,063
Total liabilities		96,462		(15)		96,447
Retained earnings		44,040		15		44,055
Total CVS Health shareholders' equity		38,673		15		38,688
Total shareholders' equity		38,677		15		38,692
Total liabilities and shareholders' equity		135,139		—		135,139

Condensed Consolidated Statement of Cash Flow:
Reconciliation of net income to net cash provided by operating activities:
Net income		998		2		1,000
Deferred income taxes and other noncash items		62		1		63
Accrued expenses		1,231		(3)		1,228