Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2018


	June 30,		December 31,
In millions	2018		2017
Trade receivables	$	6,611	$	7,873
Vendor and manufacturer receivables		7,038		5,109
Other receivables		509		199
Total accounts receivable, net	$	14,158	$	13,181

Schedule of revenue disaggregation


	Pharmacy				Intersegment		Consolidated
In millions	Services		Retail/LTC		Eliminations		Totals
Three Months Ended June 30, 2018
Major goods/services lines:
Pharmacy	$	32,353	$	15,805	$	(7,211)	$	40,947
Front Store		—		4,707		—		4,707
Other		894		160		—		1,054
Total	$	33,247	$	20,672	$	(7,211)	$	46,708

Pharmacy Services distribution channel:
Mail choice (1)	$	11,787
Pharmacy network (2)		20,566
Other		894
Total	$	33,247

Six Months Ended June 30, 2018
Major goods/services lines:
Pharmacy	$	63,115	$	31,305	$	(14,168)	$	80,252
Front Store		—		9,433		—		9,433
Other		2,350		366		—		2,716
Total	$	65,465	$	41,104	$	(14,168)	$	92,401

Pharmacy Services distribution channel:
Mail choice (1)	$	22,995
Pharmacy network (2)		40,120
Other		2,350
Total	$	65,465

(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 pharmacy 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, which is included within the mail choice category.

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:


	June 30,		December 31,
In millions	2018		2017
Trade receivables (included in accounts receivable, net)	$	6,611	$	7,873
Contract liabilities (included in accrued expenses)		72		53

During the six months ended June 30, 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		166
Redemption and breakage		(164)
Balance, June 30, 2018	$	72

Schedule of new accounting pronouncements and changes in accounting principles


	June 30,		December 31,
In millions	2018		2017
Cash and cash equivalents	$	43,815	$	1,696
Restricted cash (included in other current assets)		14		14
Restricted cash (included in other assets)		228		190
Total cash, cash equivalents and restricted cash in the statement of cash flows	$	44,057	$	1,900

Reconciliation of condensed consolidated statement of cash flows


	As Previously
In millions	Reported		Adjustments		As Revised
Six Months Ended June 30, 2017
Acquisitions (net of cash acquired) and other investments	$	(315)	$	40	$	(275)
Net cash used in investing activities		(1,174)		40		(1,134)
Net decrease in cash, cash equivalents and restricted cash (1)		(1,277)		40		(1,237)
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)		2,094		189		2,283

(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 tables compare the reported condensed consolidated balance sheet, statement of operations, and statement of cash flows, as of and for the three and six months ended June 30, 2018, to the pro forma amounts had the previous revenue accounting guidance remained in effect:


	Impact of Change in Accounting Policy
	As Reported				Balances
	For the				Without
	Three Months Ended				Adoption of
In millions	June 30, 2018		Adjustments		Topic 606
Condensed Consolidated Statement of Operations:
Net revenues	$	46,708	$	3	$	46,711
Cost of revenues		39,507		2		39,509
Gross profit		7,201		1		7,202
Operating profit (loss)		(1,587)		1		(1,586)
Income (loss) before income tax provision		(2,065)		1		(2,064)
Income tax provision		497		—		497
Income (loss) from continuing operations		(2,562)		1		(2,561)
Net income (loss)		(2,563)		1		(2,562)
Net income (loss) attributable to CVS Health		(2,563)		1		(2,562)


	Impact of Change in Accounting Policy
	As Reported				Balances
	As of/For the				Without
	Six Months Ended				Adoption of
In millions	June 30, 2018		Adjustments		Topic 606
Condensed Consolidated Statement of Operations:
Net revenues	$	92,401	$	10	$	92,411
Cost of revenues		78,341		6		78,347
Gross profit		14,060		4		14,064
Operating profit		359		4		363
Income (loss) before income tax provision		(595)		4		(591)
Income tax provision		969		1		970
Income (loss) from continuing operations		(1,564)		3		(1,561)
Net income (loss)		(1,565)		3		(1,562)
Net income (loss) attributable to CVS Health		(1,565)		3		(1,562)

Condensed Consolidated Balance Sheet:
Accrued expenses		7,640		(21)		7,619
Deferred income taxes		3,054		5		3,059
Total liabilities		97,679		(16)		97,663
Retained earnings		40,965		16		40,981
Total CVS Health shareholders' equity		35,607		16		35,623
Total shareholders' equity		35,611		16		35,627

Condensed Consolidated Statement of Cash Flow:
Reconciliation of net income (loss) to net cash provided by operating activities:
Net income (loss)		(1,565)		3		(1,562)
Deferred income taxes and other noncash items		252		1		253
Accrued expenses		1,143		(4)		1,139