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Basis of Presentation and Summary of Significant Accounting Policies
 12 Months Ended
Jun. 30, 2024
Accounting Policies [Abstract]  
Basis of Presentation and Summary of Significant Accounting Policies
1. Basis of Presentation and Summary of Significant Accounting Policies
Cardinal Health, Inc. is a global healthcare services and products company providing customized solutions for hospitals, healthcare systems, pharmacies, ambulatory surgery centers, clinical laboratories and physician offices. We provide pharmaceuticals and medical products and cost-effective solutions that enhance supply chain efficiency. References to “we,” “our,” "us," and similar pronouns in these consolidated financial statements are to Cardinal Health, Inc. and its majority-owned or controlled subsidiaries, unless the context otherwise requires.
Our fiscal year ends on June 30. References to fiscal 2024, 2023 and 2022 in these consolidated financial statements are to the fiscal years ended June 30, 2024, 2023 and 2022, respectively.
Basis of Presentation
Our consolidated financial statements include the accounts of all majority-owned or consolidated subsidiaries, and all significant intercompany transactions and amounts have been eliminated. The results of businesses acquired or disposed of are included in the consolidated financial statements from the date of the acquisition or up to the date of disposal, respectively. Certain prior year amounts have been reclassified to conform to the current year presentation.
Revision of Prior Period Consolidated Financial Statements
In connection with the preparation of our Consolidated Financial Statements for fiscal 2024, we identified an accounting error related to revenue recognition from third party payors within the at-
Home Solutions operating segment. In accordance with ASC 250 – Accounting Changes and Error Corrections and Staff Accounting Bulletins No. 99 – Materiality and No. 108 – Considering the Effects of Prior Year Misstatements when Quantifying Misstatements in Current Year Financial Statements, we evaluated the materiality of the error and determined that the impacts were not material, individually or in the aggregate, to our previously issued Consolidated Financial Statements for any of the prior quarters or annual periods in which they occurred, but that correcting the error in the current period would be material to our results of operations for fiscal 2024.
We have revised our prior period financial statements to correct this error, as well as other unrelated immaterial errors, including an adjustment to an uncertain tax position. These revisions impacted each quarter of fiscal 2022, 2023 and 2024. These other immaterial errors were previously corrected in the periods they were identified; however, they are now reflected in the periods they originated. Revisions to our previously reported disclosures have been reflected in this Note; Note 3, "Divestitures"; Note 5, “Goodwill and Other Intangible Assets”; Note 6, "Leases"; Note 8, "Commitments, Contingent Liabilities and Litigation"; Note 9, "Income Taxes"; Note 12, "Shareholders' Equity/(Deficit)”; Note 13, "Earnings Per Share"; and Note 14 “Segment Information." A summary of the revisions to the previously reported financial statements is provided below and in Note 16, “Revision of Previously Issued Interim Financial Statements (Unaudited)”.

The following tables set forth our revisions to the consolidated statements of earnings/(loss) for fiscal 2023 and 2022.
Fiscal 2023Fiscal 2022
(in millions, except per common share amounts)As ReportedAdjustmentAs RevisedAs ReportedAdjustmentAs Revised
Revenue$205,012 $(33)$204,979 $181,364 $(38)$181,326 
Cost of products sold198,123 (18)198,105 174,819 23 174,842 
Gross margin6,889 (15)6,874 6,545 (61)6,484 
Distribution, selling, general and administrative expenses4,834 (34)4,800 4,557 (45)4,512 
Impairments and (gain)/loss on disposal of assets, net1,250 (4)1,246 2,050 10 2,060 
Litigation (recoveries)/charges, net(302)(2)(304)109 (15)94 
Operating earnings/(loss)727 25 752 (596)(11)(607)
Other (income)/expense, net(4)9 5 16 6 22 
Interest expense, net93 (9)84 149 (2)147 
Earnings/(loss) before income taxes638 25 663 (769)(15)(784)
Provision for/(benefit from) income taxes376 (44)332 163 (10)153 
Net earnings/(loss)262 69 331 (932)(5)(937)
Net earnings/(loss) attributable to Cardinal Health, Inc.261 69 330 (933)(5)(938)
Earnings/(loss) per common share attributable to Cardinal Health, Inc.
Basic$1.00 $0.27 $1.27 $(3.35)$(0.02)$(3.37)
Diluted1.00 0.26 1.26 (3.35)(0.02)(3.37)
The following tables set forth our revisions to the consolidated statements of comprehensive income/(loss) for fiscal 2023 and 2022.
Fiscal 2023Fiscal 2022
(in millions)As ReportedAdjustmentAs RevisedAs ReportedAdjustmentAs Revised
Net earnings/(loss)$262 $69 $331 $(932)$(5)$(937)
Total comprehensive income/(loss), net of tax
225 69 294 (1,012)(5)(1,017)
Total comprehensive income/(loss) attributable to Cardinal Health, Inc.
224 69 293 (1,013)(5)(1,018)

The following tables set forth our revisions to the consolidated balance sheets for fiscal 2023.
June 30, 2023
(in millions)As ReportedAdjustmentAs Revised
Cash and equivalents$4,043 $33 $4,076 
Trade receivables, net11,344 (236)11,108 
Inventories, net15,940 179 16,119 
Prepaid expenses and other2,362 (68)2,294 
Assets held for sale144 (4)140 
Total current assets33,833 (96)33,737 
Property and equipment, net2,462 (1)2,461 
Goodwill and other intangibles, net6,081 4 6,085 
Other assets1,041 25 1,066 
Total assets43,417 (68)43,349 
Accounts payable29,813 121 29,934 
Other accrued liabilities3,059 (87)2,972 
Total current liabilities33,706 34 33,740 
Deferred income taxes and other liabilities8,653 4 8,657 
Common shares, without par value2,747 (1)2,746 
Accumulated deficit(534)(108)(642)
Common shares in treasury, at cost: 83 million shares and 76 million shares at June 30, 2024 and 2023, respectively
(4,914)3 (4,911)
Total Cardinal Health, Inc. shareholders' deficit(2,852)(106)(2,958)
Total shareholders’ deficit(2,851)(106)(2,957)
Total liabilities and shareholders’ deficit43,417 (68)43,349 

The following tables set forth our revisions to the consolidated statements of shareholders' equity/(deficit) for fiscal 2023 and 2022.
Common Shares
Retained Earnings/(Accumulated Deficit)
Treasury Shares
Total Shareholders' Deficit
(in millions)
As Reported
Adjustment
As Revised
As Reported
Adjustment
As Revised
As Reported
Adjustment
As Revised
As Reported
Adjustment
As Revised
Balance at June 30, 2021$2,806 $— $2,806 $1,205 $(172)$1,033 $(2,186)$1 $(2,185)$1,794 $(171)$1,623 
Net earnings— — — (933)(5)(938)— — — (932)(5)(937)
Employee stock plans activity, net of shares withheld for employee taxes7 — 7 — — — 58 (1)57 65 (1)64 
Other— — — — 1 1 — — — (1)1 — 
Balance at June 30, 20222,813 — 2,813 (280)(176)(456)(3,128)— (3,128)(706)(176)(882)
Net earnings— — — 261 69 330 — — — 262 69 331 
Employee stock plans activity, net of shares withheld for employee taxes(66)99 33 — — — 121 3 124 55 102 157 
Share repurchase program activity— (100)(100)— — — (1,907)— (1,907)(1,907)(100)(2,007)
Other— — — — (1)(1)— — — — (1)(1)
Balance at June 30, 20232,747 (1)2,746 (534)(108)(642)(4,914)3 (4,911)(2,851)(106)(2,957)
The following tables set forth our revisions to the consolidated statements of cash flows for fiscal 2023 and 2022.
Fiscal 2023Fiscal 2022
(in millions)As ReportedAdjustmentAs RevisedAs ReportedAdjustmentAs Revised
Cash flows from operating activities:
Net earnings/(loss)$262 $69 $331 $(932)$(5)$(937)
Adjustments to reconcile net earnings/(loss) to net cash provided by operating activities:
Impairments and (gain)/loss on disposal of assets, net1,250 (4)1,246 2,050 10 2,060 
Provision for/(benefit from) deferred income taxes(31)(9)(40)7 7 14 
Provision for bad debts99 (44)55 68 (45)23 
Change in operating assets and liabilities, net of effects from acquisitions and divestitures:
Increase in trade receivables(947)(3)(950)(1,526)121 (1,405)
Increase in inventories(340)(72)(412)(1,071)(133)(1,204)
Increase in accounts payable2,718 98 2,816 3,428 127 3,555 
Other accrued liabilities and operating items, net(967)(30)(997)293 (29)264 
Net cash provided by operating activities2,839 5 2,844 3,122 53 3,175 
Net increase/(decrease) in cash and equivalents(674)5 (669)1,310 53 1,363 
Cash and equivalents at beginning of period4,717 28 4,745 3,407 (25)3,382 
Cash and equivalents at end of period4,043 33 4,076 4,717 28 4,745 
Use of Estimates
Our consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”). The preparation of financial statements in conformity with GAAP requires us to make estimates, judgments and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates, judgments and assumptions are used in the accounting and disclosure related to, among other items, allowance for doubtful accounts, inventory valuation and reserves, goodwill and other intangible asset impairment, vendor reserves, loss contingencies (including product liability and self-insurance accruals) and income taxes. Actual amounts may differ from these estimated amounts.
Updated Segment Reporting Structure
Effective January 1, 2024, we operated under an updated organizational structure and re-aligned our reporting structure under two reportable segments: Pharmaceutical and Specialty Solutions segment and Global Medical Products and Distribution ("GMPD") segment. The remaining operating segments, Nuclear and Precision Health Solutions, at-Home Solutions and OptiFreight® Logistics, are not significant enough to require separate reportable disclosures and are included in Other. The Pharmaceutical and Specialty Solutions reportable segment consists of all businesses formerly within our Pharmaceutical segment, excluding Nuclear and Precision Health Solutions. The Global Medical Products and Distribution reportable segment consists of all businesses formerly within our Medical segment, excluding at-Home Solutions and OptiFreight® Logistics. Our previously reported segment results have been recast to conform to this re-aligned reporting structure and reflect changes in the elimination of inter-segment revenue and allocated corporate technology and shared function expenses, which are driven by the reporting structure change. See Note 14 for segment results under the new reporting structure.
Cash Equivalents
We consider liquid investments purchased with an initial effective maturity of three months or less to be cash equivalents. The carrying value of cash equivalents approximates fair value.
Receivables and Allowance for Doubtful Accounts
Trade receivables are reported at their estimated collectible amounts and presented net of an allowance for doubtful accounts of $233 million and $240 million at June 30, 2024 and 2023, respectively. In addition to credit losses, the allowance also includes reserves related to customer disputes and late fees billed to customers, which are recognized within our consolidated statements of earnings/(loss) as reductions of revenue. An account is considered past due on the first day after its due date. In accordance with contract terms, we generally have the ability to charge customers service fees or higher prices if an account is considered past due. We regularly monitor past due accounts and establish appropriate reserves to cover potential losses, and consider historical experience, pricing discrepancies, the current economic environment, customer credit ratings or bankruptcies and reasonable and supportable forecasts to develop our allowance for credit losses. We review these factors quarterly to determine if any adjustments are needed to the allowance. We write off any amounts deemed uncollectible against the established allowance for doubtful accounts.
We provide financing to various customers. Such financing arrangements range from 1 year to 5 years at interest rates that are generally subject to fluctuation. Interest income on these arrangements is recognized as it is earned. The financings may be collateralized, guaranteed by third parties or unsecured. Finance notes, net and related accrued interest were $43 million (current portion $14 million) and $56 million (current portion $9 million) at June 30, 2024 and 2023, respectively, and are included in other assets (current portion is included in prepaid expenses and other) in the consolidated balance sheets. Finance notes receivable
allowance for doubtful accounts were $3 million and $6 million at June 30, 2024 and 2023, respectively. We estimate an allowance for these financing receivables based on historical collection rates and the creditworthiness of the customer. We write off any amounts deemed uncollectible against the established allowance for doubtful accounts.
Concentrations of Credit Risk
We maintain cash depository accounts with major banks, and we invest in high quality, short-term liquid instruments, and in marketable securities. Our short-term liquid instruments mature within three months and we have not historically incurred any related losses.
Our trade receivables and finance notes and related accrued interest are exposed to a concentration of credit risk with certain large customers and with customers in the retail and healthcare sectors. Credit risk can be affected by changes in reimbursement and other economic pressures impacting the healthcare industry. With respect to customers in the retail and healthcare sectors, such credit risk is limited due to supporting collateral and the diversity of the customer base, including its wide geographic dispersion. We perform regular credit evaluations of our customers’ financial conditions and maintain reserves for losses through the established allowance for doubtful accounts. Historically, such losses have been within our expectations. Refer to the "Receivables and Allowance for Doubtful Accounts" section within this Note for additional information on the accounting treatment of reserves for allowance for doubtful accounts.
Major Customers
CVS Health Corporation ("CVS Health") and OptumRx are our only customers that individually accounted for at least 10 percent of revenue and/or gross trade receivables in fiscal 2024. These customers were primarily serviced through our Pharmaceutical and Specialty Solutions segment. Our pharmaceutical distribution contracts with OptumRx expired at the end of June 2024.
The following table summarizes historical percent of revenue and gross trade receivables from CVS Health and OptumRx:
Percent of RevenuePercent of Gross Trade Receivables at June 30
20242023202220242023
CVS Health24 %25 %25 %22 %23 %
OptumRx17 %16 %16 %6 %6 %
We have entered into agreements with group purchasing organizations (“GPOs”) which act as purchasing agents that negotiate vendor contracts on behalf of their members. Vizient, Inc. and Premier, Inc. are our two largest GPO member relationships in terms of revenue. Sales to members of these two GPOs collectively accounted for 16 percent, 15 percent and 19 percent of revenue for fiscal 2024, 2023 and 2022, respectively. Our trade receivable balances are with individual members of the GPO, and therefore no significant concentration of credit risk exists with these types of arrangements.
Inventories
A portion of our inventories (50 percent and 54 percent at June 30, 2024 and 2023, respectively) are valued at the lower of cost, using the last-in, first-out ("LIFO") method, or market. These inventories are included within the core pharmaceutical distribution facilities of our Pharmaceutical and Specialty Solutions segment (“distribution facilities”) and are primarily merchandise inventories. The LIFO method presumes that the most recent inventory purchases are the first items sold, so LIFO helps us better match current costs and revenue. We believe that the average cost method of inventory valuation provides a reasonable approximation of the current cost of replacing inventory within the distribution facilities. As such, the LIFO reserve is the difference between (a) inventory at the lower of LIFO cost or market and (b) inventory at replacement cost determined using the average cost method of inventory valuation.
At June 30, 2024 and 2023, respectively, inventories valued at LIFO cost were $749 million and $476 million higher than the average cost value. We do not record inventories in excess of replacement cost. As such, we did not write-up the value of our inventory from average cost to LIFO cost at June 30, 2024 or 2023.
Our remaining inventory, including inventory in our GMPD segment and certain inventory in our Pharmaceutical and Specialty Solutions segment, that is not valued at the lower of LIFO cost or market is stated at the lower of cost, using the first-in, first-out method, or net realizable value. Net realizable value is defined as the estimated selling prices and estimated sales demand in the ordinary course of business, less reasonably predictable costs of completion, disposal and transportation.
We reserve for inventory obsolescence using estimates based on historical experience, historical and projected sales trends, specific categories of inventory, age and expiration dates of on-hand inventory and manufacturer return policies. Inventories presented in the consolidated balance sheets are net of reserves for excess and obsolete inventory which were $149 million and $139 million at June 30, 2024 and 2023, respectively.
Cash Discounts
Manufacturer cash discounts are recorded as a component of inventory cost and recognized as a reduction of cost of products sold as inventory is sold.
Property and Equipment
Property and equipment are carried at cost less accumulated depreciation. Property and equipment held for sale are recorded at the lower of cost less accumulated depreciation before the decision to dispose of the asset was made or fair value less cost to sell. When certain events or changes in operating conditions occur, an impairment assessment may be performed on the recoverability of the carrying amounts.
We capitalize project costs relating to computer software developed or obtained for internal use when the activities related to the project reach the application stage. Costs that are associated with the preliminary stage activities, training,
maintenance and all other post-implementation stage activities are expensed as they are incurred.
Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets, including finance lease assets which are depreciated over the terms of their respective leases. We generally use the following range of useful lives for our property and equipment categories: buildings and improvements—3 to 39 years; machinery and equipment—3 to 20 years; capitalized software held for internal use—3 to 7 years; and furniture and fixtures—3 to 7 years. We recorded depreciation and amortization of capitalized software of $470 million, $441 million and $412 million for fiscal 2024, 2023 and 2022, respectively.
The following table presents the components of property and equipment, net at June 30:
(in millions)20242023
Land, building and improvements$1,879 $1,789 
Machinery and equipment2,367 2,190 
Capitalized software held for internal use1,744 1,690 
Furniture and fixtures128 125 
Construction in progress577 516 
Total property and equipment, at cost6,695 6,310 
Accumulated depreciation and amortization(4,166)(3,849)
Property and equipment, net$2,529 $2,461 

Repairs and maintenance expenditures are expensed as incurred. Interest on long-term projects is capitalized using a rate that approximates the weighted-average interest rate on long-term obligations, which was 5 percent at June 30, 2024. The amount of capitalized interest was immaterial for all periods presented.
Business Combinations
The assets acquired and liabilities assumed in a business combination, including identifiable intangible assets, are recorded at their estimated fair values as of the acquisition date. The excess of the purchase price over the estimated fair value of the identifiable net assets acquired is recorded as goodwill. We base the fair values of identifiable intangible assets on detailed valuations that require management to make significant judgments, estimates and assumptions. Critical estimates and assumptions include: expected future cash flows for customer relationships, trade names, developed technology and other identifiable intangible assets; discount rates that reflect the risk factors associated with future cash flows; and estimates of useful lives. When an acquisition involves contingent consideration, we recognize a liability equal to the fair value of the contingent consideration obligation at the acquisition date. The estimate of fair value of a contingent consideration obligation requires subjective assumptions to be made regarding future business results, discount rates, discount periods and probabilities assigned to various potential business result scenarios. See Note 2 for additional information regarding our acquisitions.
Goodwill and Other Intangible Assets
Purchased goodwill and intangible assets with indefinite lives are not amortized, but instead are tested for impairment annually or when indicators of impairment exist.
Purchased goodwill is tested for impairment at least annually. Qualitative factors are first assessed to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. There is an option to bypass the qualitative assessment for any reporting unit in any period and proceed directly to performing the quantitative goodwill impairment test. We have elected to bypass the qualitative assessment for our annual goodwill impairment test in the current year. The quantitative goodwill impairment test involves a comparison of the estimated fair value of the reporting unit to the respective carrying amount.
Goodwill impairment testing involves judgment, including the identification of reporting units, qualitative evaluation of events and circumstances to determine if it is more likely than not that an impairment exists, and, if necessary, the estimation of the fair value of the applicable reporting unit.
Effective January 1, 2024, we implemented a new enterprise operating and segment reporting structure. Refer to the "Updated Segment Reporting Structure" section within this Note for additional information. This change in segment structure resulted in changes to the composition of our former Medical operating segment excluding at-Home Solutions reporting unit ("Medical Unit"). Effective January 1, 2024, our reporting units are: Pharmaceutical and Specialty Solutions, GMPD, Nuclear and Precision Health Solutions, at-Home Solutions and OptiFreight® Logistics. GMPD and OptiFreight® Logistics comprised our former Medical Unit.
Fair value can be determined using market, income or cost-based approaches. Our determination of estimated fair value of the reporting units is based on a combination of the income-based and market-based approaches. Under the income-based approach, we use a discounted cash flow model in which cash flows anticipated over several future periods, plus a terminal value at the end of that time horizon, are discounted to their present value using an appropriate risk-adjusted rate of return. We use our internal forecasts to estimate future cash flows, which we believe are consistent with those of a market participant, and include an estimate of long-term growth rates based on our most recent views of the long-term outlook for each reporting unit. Actual results may differ materially from those used in our forecasts. We use discount rates that are commensurate with the risks and uncertainty inherent in the respective reporting units and in our internally-developed forecasts. During fiscal 2024, discount rates used in our reporting unit valuations ranged from 10 to 11.5 percent. Under the market-based guideline public company method, we determine fair value by comparing our reporting units to similar businesses or guideline companies whose securities are actively traded in public markets. We also use the guideline transaction method to determine fair value based on pricing multiples derived from the sale of companies that are similar to our reporting units. To further confirm fair value, we compare the aggregate fair value of our
reporting units to our total market capitalization. Estimating the fair value of reporting units requires the use of estimates and significant judgments that are based on a number of factors including forecasted operating results. The use of alternate estimates and assumptions or changes in the industry or peer groups could materially affect the determination of fair value for each reporting unit and potentially result in goodwill impairment.
In fiscal 2024, 2023 and 2022, we performed annual impairment testing and concluded that there were no impairments of goodwill for Pharmaceutical and Specialty Solutions, Nuclear and Precision Health Solutions, at-Home Solutions, and OptiFreight® Logistics. However, there was a decline in the at-Home Solutions' estimated fair value resulting in the fair value exceeding the carrying amount by less than 1 percent during our fiscal 2024 annual impairment test. The decrease in at-Home Solutions' estimated fair value was primarily due to changes in operating expense estimates to better reflect the fair value from an external perspective. The fair values of the other three reporting units substantially exceeded their carrying amounts.
As discussed further in Note 5, during fiscal 2024, 2023 and 2022, we recognized goodwill impairment charges of $675 million, $1.2 billion and $2.1 billion, respectively, related to GMPD. These impairment charges are included in impairments and (gain)/loss on disposal of assets, net in our consolidated statements of earnings/(loss). See Note 9 for additional information regarding tax benefits related to these goodwill impairment charges. GMPD's goodwill balance was fully impaired as of March 31, 2024, therefore, no impairment test was required for this reporting unit during our fiscal 2024 annual impairment testing.
The impairment test for indefinite-lived intangibles other than goodwill involves first assessing qualitative factors to determine if it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount. If so, then a quantitative test is performed to compare the estimated fair value of the indefinite-lived intangible asset to the respective asset's carrying amount. Our qualitative evaluation requires the use of estimates and significant judgments and considers the weight of evidence and significance of all identified events and circumstances and most relevant drivers of fair value, both positive and negative, in determining whether it is more likely than not that the fair value of the indefinite-lived intangible asset is less than its carrying amount.
Intangible assets with finite lives, primarily customer relationships; trademarks, trade names and patents; and developed technology, are amortized using a combination of straight-line and accelerated methods based on the expected cash flows from the assets over their estimated useful lives. We review intangible assets with finite lives for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Determining whether an impairment loss occurred requires a comparison of the carrying amount to the sum of the future forecasted undiscounted cash flows expected to be generated by the asset group. Actual results may differ materially from those used in our forecasts.
Assets Held for Sale
We classify assets and liabilities (the “disposal group”) as held for sale when management commits to a plan to sell the disposal group in its present condition and at a price that is reasonable in relation to its current fair value. We also consider whether an active program to locate a buyer has been initiated and if it is probable that the sale will occur within one year without significant changes to the plan to sell. Upon classification of the disposal group as held for sale, we test the assets for impairment and cease related depreciation and amortization.
On May 24, 2024, we signed an agreement to sell the West Campus Dublin, Ohio office space. The transaction is subject to certain contingencies. At June 30, 2024, we met the criteria for the related assets to be classified as held for sale. No loss was recognized during fiscal 2024 due to the expected net proceeds exceeding the carrying value of the related assets.
On June 5, 2023, we signed a definitive agreement to contribute our Outcomes™ business to Transaction Data Systems ("TDS"), a portfolio company of BlackRock Long Term Private Capital and GTCR, in exchange for a 16 percent equity interest in the combined entity. Upon signing the agreement, we met the criteria for the related assets and liabilities of the Outcomes™ business to be classified as held for sale. The transaction closed on July 10, 2023. See Note 3 for additional information.
Investments
Investments in non-marketable equity securities are accounted for under the fair value, equity or net asset value method of accounting and are included in other assets in the consolidated balance sheets. For equity securities without a readily determinable fair value, we use the fair value measurement alternative and measure the securities at cost less impairment, if any, including adjustments for observable price changes in orderly transactions for an identical or similar investment of the same issuer. For investments in which we can exercise significant influence but do not control, we use the equity method of accounting. Our share of the earnings and losses are recorded in other (income)/expense, net in the consolidated statements of earnings/(loss). We monitor our investments for impairment by considering factors such as the operating performance of the investment and current economic and market conditions.
Leases
Our leases are primarily for corporate offices, distribution facilities, vehicles and equipment. We determine if an arrangement is a lease at its inception by evaluating whether the arrangement conveys the right to use an identified asset and whether we obtain substantially all of the economic benefits from and have the ability to direct the use of the asset. Our lease agreements generally do not contain any material residual value guarantees or material restrictive covenants.
Operating lease right-of-use assets and corresponding operating lease liabilities are recognized in our consolidated balance sheets at lease commencement date based on the present value of lease payments over the lease term. Operating lease expense for
operating lease assets is recognized on a straight-line basis over the lease term. As most of our leases do not provide an implicit rate, we use our collateralized incremental borrowing rate based on the information available at the lease commencement date in determining the present value of lease payments. We use the implicit rate if it is readily determinable.
Our lease agreements contain lease components and non-lease components. For all asset classes, we have elected to account for both of these components as a single lease component. We also, from time to time, sublease portions of our real estate property, resulting in sublease income. Sublease income and the related assets and cash flows are not material to the consolidated financial statements at or for the fiscal years ended June 30, 2024, 2023 and 2022.
We apply a practical expedient for short-term leases whereby we do not recognize a lease liability and right-of-use asset for leases with a term of less than 12 months. Short-term lease expense recognized in fiscal 2024, 2023 and 2022 was immaterial.
Our leases have remaining lease terms from less than 1 year up to approximately 18 years. Our lease terms may include options to extend or terminate the lease when it is reasonably certain and there is a significant economic incentive to exercise that option.
See Note 6 for additional information regarding leases.
Vendor Reserves
In the ordinary course of business, our vendors may dispute deductions taken against payments otherwise due to them or assert other disputes. These disputes are researched and resolved based upon the findings of the research performed. At any given time, there are outstanding items in various stages of research and resolution. In determining appropriate reserves for areas of exposure with our vendors, we assess historical experience and current outstanding claims. We have established various levels of reserves based on the type of claim and status of review. Though the claim types are relatively consistent, we periodically update our reserve estimates to reflect actual historical experience. The ultimate outcome of certain claims may be different than our original estimate and may require an adjustment. Adjustments to vendor reserves are included in cost of products sold. In addition, the reserve balance will fluctuate due to variations of outstanding claims from period-to-period, timing of settlements and specific vendor issues. Vendor reserves were $112 million and $117 million at June 30, 2024 and 2023 respectively, excluding third-party returns. See "Third-Party Returns" section within this Note for a description of third-party returns.
Distribution Services Agreement and Other Vendor Fees
Our Pharmaceutical and Specialty Solutions segment recognizes fees received from distribution services agreements and other fees received from vendors related to the purchase or distribution of the vendors’ inventory when those fees have been earned and we are entitled to payment. Since the benefit provided to a vendor is related to the purchase and distribution of the vendor’s inventory, we recognize the fees as a reduction in the carrying value of the inventory that generated the fees, and as such, a reduction of cost of products sold in our consolidated statements of earnings/(loss) when the inventory is sold.
Loss Contingencies and Self-Insurance
Loss Contingencies
We accrue for contingencies related to disputes, litigation and regulatory matters if it is probable that a liability has been incurred and the amount of the loss can be reasonably estimated.
In connection with the opioid litigation as described further in Note 8, we recorded pre-tax charges of $5.63 billion during fiscal 2021, which were retained at Corporate. In February 2022, we and two other national distributors announced that each company had determined that a sufficient number of political subdivisions had agreed to participate in the previously disclosed settlement agreement (the "National Opioid Settlement Agreement") to settle the vast majority of the opioid lawsuits filed by states and local governmental entities. This National Opioid Settlement Agreement became effective on April 2, 2022.
We have reached agreements in principle with counsel representing classes of third-party payors and acute care hospitals, and we are engaged in resolution discussions with the City of Baltimore. In connection with these matters, as of June 30, 2024, we have accrued $363 million, which reflects our current estimate of probable loss for these matters. The agreements in principle remain subject to contingencies.
We develop and periodically update reserve estimates for all litigation matters, including the Cordis OptEase and TrapEase inferior vena cava ("IVC") claims received to date and expected to be received in the future and related costs. To project future IVC claim costs, we use a methodology based largely on recent experience, including claim filing rates, blended average payout influenced by claim severity, historical sales data, implant and injury to report lag patterns and estimated defense costs.
The amount of ultimate loss may differ materially from these estimates. We recognize these estimated loss contingencies, income from favorable resolution of litigation and certain defense costs in litigation (recoveries)/charges, net in our consolidated statements of earnings/(loss). See Note 8 for additional information regarding loss contingencies and product liability lawsuits.
Self-Insurance
We self-insure for employee healthcare, general liability, certain product liability matters, auto liability, property and workers' compensation. Self-insurance accruals include an estimate for expected settlements or pending claims, defense costs,
administrative fees, claim adjustment costs and an estimate for claims incurred but not reported.
Because these matters are inherently unpredictable and unfavorable developments or resolutions can occur, assessing contingencies and other liabilities is highly subjective and requires judgments about future events. We regularly review contingencies and our self-insurance accruals to determine whether our accruals and related disclosures are adequate. Any adjustments for changes in reserves are recorded in the period in which the change in estimate occurs.
Guarantees
In the ordinary course of business, we agree to indemnify certain other parties under acquisition and disposition agreements, customer agreements, intellectual property licensing agreements and other agreements. Such indemnification obligations vary in scope and, when defined, in duration. In many cases, a maximum obligation is not explicitly stated, and therefore the overall maximum amount of the liability under such indemnification obligations cannot be reasonably estimated. Where appropriate, such indemnification obligations are recorded as a liability. Historically, we have not, individually or in the aggregate, made payments under these indemnification obligations in any material amounts. In certain circumstances, we believe that existing insurance arrangements, subject to the general deduction and exclusion provisions, would cover portions of the liability that may arise from these indemnification obligations. In addition, we believe that the likelihood of a material liability being triggered under these indemnification obligations is not probable.
From time to time we enter into agreements that obligate us to make fixed payments upon the occurrence of certain events. Such obligations primarily relate to obligations arising under acquisition transactions, where we have agreed to make payments based upon the achievement of certain financial performance measures by the acquired business. Generally, the obligation is capped at an explicit amount. There were no material obligations at June 30, 2024.
Income Taxes
We account for income taxes using the asset and liability method. Deferred tax assets and liabilities are measured using enacted tax rates in the respective jurisdictions in which we operate. We assess the realizability of deferred tax assets on a quarterly basis and provide a valuation allowance for deferred tax assets when it is more likely than not that at least a portion of the deferred tax assets will not be realized. The realizability of deferred tax assets depends on our ability to generate sufficient taxable income within the carryback or carryforward periods provided for in the tax law for each applicable tax jurisdiction and also considers all available positive and negative evidence.
Deferred taxes for non-U.S. liabilities are not provided on the unremitted earnings of subsidiaries outside of the United States when it is expected that these earnings are indefinitely reinvested.
We operate in a complex multinational tax environment and are subject to tax treaty arrangements and transfer pricing guidelines for intercompany transactions that are subject to interpretation. Uncertainty in a tax position may arise as tax laws are subject to interpretation.
Tax benefits from uncertain tax positions are recognized when it is more likely than not that the position will be sustained upon examination of the technical merits of the position, including resolutions of any related appeals or litigation processes. The amount recognized is measured as the largest amount of tax benefit that is greater than 50 percent likely of being realized upon settlement. For tax benefits that do not qualify for recognition, we recognize a liability for unrecognized tax benefits.
See Note 9 for additional information regarding income taxes.
Other Accrued Liabilities
Other accrued liabilities represent various current obligations, including certain accrued operating expenses, accrued rebates and taxes payable.
Noncontrolling Interests
Noncontrolling interests represent the portion of net earnings, comprehensive income and net assets that is not attributable to Cardinal Health, Inc.
Share-Based Compensation
Share-based compensation provided to employees is recognized in the consolidated statements of earnings/(loss) based on the grant date fair value of the awards. The fair value of restricted share units ("RSUs") is determined by the grant date market price of our common shares. The fair value of performance share units ("PSUs"), which include a market-based condition, is determined using a Monte Carlo valuation model. The key assumptions for the Monte Carlo valuation model are as follows:
Award Year
Risk-Free Interest Rate (2)
Expected Volatility (3)
20225.28%22.77 %
20233.12%32.41 %
2023 Modified (1)
5.13%26.58 %
20244.66%23.99 %
(1)    There was a modification of prior year awards in fiscal 2024 that required a new Monte Carlo Simulation valuation model.
(2)    Based on the U.S. Treasury yields over a term comparable to the remaining performance period.
(3)    Based on historical volatility and implied volatility indications.
The compensation expense associated with nonvested PSUs is dependent on our periodic assessment of the probability of the performance goals being achieved. Based on the extent to which the performance goals are achieved and the Company's total shareholder return ("TSR") relative to the S&P 500 Health Care Index, vested shares may range from zero to 240 percent of the target award amount. Compensation expense is recognized regardless of the extent to which the market-based condition, the Company's relative TSR, is satisfied.
The compensation expense recognized for share-based awards is net of estimated forfeitures and is recognized ratably over the service period of the awards. All income tax effects of share-based awards are recognized in the consolidated statements of earnings/(loss) as awards vest or are settled. We classify share-based compensation expense in distribution, selling, general and administrative ("SG&A") expenses to correspond with the same line item as the majority of the cash compensation paid to employees. If awards are modified in connection with a restructuring activity, the incremental share-based compensation expense is classified in restructuring and employee severance. See Note 15 for additional information regarding share-based compensation.
Dividends
We paid cash dividends per common share of $2.00, $1.98 and $1.96 in fiscal 2024, 2023 and 2022, respectively.
Revenue Recognition
We recognize revenue in an amount that reflects the consideration to which we expect to be entitled in exchange for the transfer of goods or services to customers.
Revenue in Pharmaceutical and Specialty Solutions, GMPD, Nuclear and Precision Health Solutions and at-Home Solutions operating segments is primarily related to the distribution of pharmaceutical and medical products, which include both manufactured and sourced products, and we recognize at a point in time when title transfers to customers and we have no further obligation to provide services related to such merchandise. OptiFreight® Logistics revenue is related to shipping, freight management and logistics management services. Service revenues are recognized over the period that services are provided to the customer. Revenues derived from services from all segments are immaterial for all periods presented.
We are generally the principal in a transaction, therefore our revenue is primarily recorded on a gross basis. When we are a principal in a transaction, we have determined that we control the ability to direct the use of the product or service prior to transfer to a customer, are primarily responsible for fulfilling the promise to provide the product or service to our customer, have discretion in establishing prices and ultimately control the transfer of the product or services provided to the customer.
In connection with the preparation of our Consolidated Financial Statements for fiscal 2024, we identified an accounting error related to revenue recognition from third party payors within the at-Home Solutions operating segment. We have revised our prior period financial statements to correct this error, as well as other unrelated immaterial errors, including an adjustment to an uncertain tax position. These revisions impacted each quarter of fiscal 2022, 2023 and 2024.
Sales Returns and Allowances
Revenue is recorded net of sales returns and allowances. Revenues are measured based on the amount of consideration that we expect to receive, reduced by estimates for return allowances, discounts, rebates and other variable consideration.
Sales returns are recorded based on estimates using historical data. Our customer return policies generally require that the product be physically returned, subject to restocking fees. We only allow customers to return products for credit in a condition suitable to be added back to inventory and resold at full value (“merchantable product”) or returned to vendors for credit. Product returns are generally consistent throughout the year and typically are not specific to any particular product or customer.
We accrue for estimated sales returns and allowances at the time of sale based upon historical customer return trends, margin rates and processing costs. Our accrual for sales returns is reflected as a reduction of revenue and cost of products sold for the sales price and cost, respectively. At June 30, 2024 and 2023, the accrual for estimated sales returns and allowances was $441 million and $474 million, respectively, which is reflected in trade receivables, net and inventories, net in the consolidated balance sheets. Sales returns and allowances were $2.2 billion, $2.2 billion and $2.4 billion, for fiscal 2024, 2023 and 2022, respectively, and the net impact on net earnings/(loss) in the consolidated statements of earnings/(loss) was immaterial in fiscal 2024, 2023 and 2022.
Third-Party Returns
We generally do not accept non-merchantable pharmaceutical product returns from our customers, so many of our customers return non-merchantable pharmaceutical products to the manufacturer through third parties. Since our customers generally do not have a direct relationship with manufacturers, our vendors pass the value of such returns to us (usually in the form of an accounts payable deduction). We, in turn, pass the value received to our customer. In certain instances, we pass the estimated value of the return to our customer prior to our receipt of the value from the vendor. Although we believe we have satisfactory protections, from time to time, we become subject to claims from customers or vendors that our administration of this overall process is deficient in some respect or our contractual terms with vendors are in conflict with our contractual terms with our customers. We maintain reserves for some of these situations based on their nature and our historical experience with their resolution.
Shipping and Handling
Shipping and handling costs are primarily included in SG&A expenses in our consolidated statements of earnings/(loss) and include all delivery expenses as well as all costs to prepare the product for shipment to the end customer. Shipping and handling costs were $866 million, $835 million and $756 million, for fiscal 2024, 2023 and 2022, respectively.
Restructuring and Employee Severance
Restructuring activities are programs that are not part of the ongoing operations of our underlying business, such as divestitures, closing and consolidating facilities, changing the way we manufacture or distribute our products, moving manufacturing of a product to another location, changes in production or business process outsourcing or insourcing, employee severance (including rationalizing headcount or other significant changes in personnel) and realigning operations (including realignment of the management structure in response to changing market conditions).
Also included within restructuring and employee severance are employee severance costs that are not incurred in connection with a restructuring activity. See Note 4 for additional information regarding our restructuring activities.
Amortization and Other Acquisition-Related Costs
We classify certain costs incurred in connection with acquisitions as amortization and other acquisition-related costs in our consolidated statements of earnings/(loss). These costs consist of amortization of acquisition-related intangible assets, transaction costs, integration costs and changes in the fair value of contingent consideration obligations. Transaction costs are incurred during the initial evaluation of a potential acquisition and primarily relate to costs to analyze, negotiate and consummate the transaction as well as due diligence activities. Integration costs relate to activities required to combine the operations of an acquired enterprise into our operations and, in the case of the significant acquisitions with international operations, to stand-up the systems and processes needed to support an expanded geographic footprint. We record changes in the fair value of contingent consideration obligations relating to acquisitions as income or expense in amortization and other acquisition-related costs. See Note 5 for additional information regarding amortization of acquisition-related intangible assets.
Translation of Foreign Currencies
Financial statements of our subsidiaries outside the United States are generally measured using the local currency as the functional currency. Adjustments to translate the assets and liabilities of these foreign subsidiaries into U.S. dollars are accumulated in shareholders’ equity through accumulated and other comprehensive loss ("AOCI") utilizing period-end exchange rates. Revenues and expenses of these foreign subsidiaries are translated using average exchange rates during the year.
The foreign currency translation gains/(losses) included in AOCI at June 30, 2024 and 2023 are presented in Note 12. Foreign currency transaction gains and losses for the period are included in the consolidated statements of earnings/(loss) in the respective financial statement line item.
Interest Rate, Currency and Commodity Risk
All derivative instruments are recognized at fair value on the consolidated balance sheets and all changes in fair value are recognized in net earnings or shareholders’ equity through AOCI, net of tax.
For contracts that qualify for hedge accounting treatment, the hedge contracts must be effective at reducing the risk associated with the exposure being hedged and must be designated as a hedge at the inception of the contract. Hedge effectiveness is assessed periodically. Any contract not designated as a hedge, or so designated but ineffective, is adjusted to fair value and recognized immediately in net earnings. If a fair value or cash flow hedge ceases to qualify for hedge accounting treatment, the contract continues to be carried on the balance sheet at fair value until settled and future adjustments to the contract’s fair value are recognized immediately in net earnings. If a forecasted transaction
is probable not to occur, amounts previously deferred in AOCI are recognized immediately in net earnings. Interest payments received from the cross-currency swap are excluded from the net investment hedge effectiveness assessment and are recorded in interest expense, net in the consolidated statements of earnings/(loss).
See Note 11 for additional information regarding our derivative instruments, including the accounting treatment for instruments designated as fair value, cash flow, net investment and economic hedges.
Fair Value Measurements
Fair value is defined as the price that would be received upon selling an asset or the price paid to transfer a liability on the measurement date. It focuses on the exit price in the principal or most advantageous market for the asset or liability in an orderly transaction between willing market participants. A three-tier fair value hierarchy is established as a basis for considering such assumptions and for inputs used in the valuation methodologies in measuring fair value. This hierarchy requires entities to maximize the use of observable inputs and minimize the use of unobservable inputs. The three levels of inputs used to measure fair values are:
Level 1 -    Observable prices in active markets for identical assets and liabilities.
Level 2 -    Observable inputs other than quoted prices in active markets for identical assets and liabilities.
Level 3 -    Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets and liabilities.
See Note 10 for additional information regarding fair value measurements.
Recently Adopted Financial Accounting Standards
There were no accounting standards adopted in fiscal 2024 that had a material impact on our consolidated financial statements.
Recently Issued Financial Accounting Standards and Disclosure Rules Not Yet Adopted
We assess the adoption impacts of recently issued accounting standards by the FASB on our consolidated financial statements as well as material updates to previous assessments, if any, from our fiscal 2023 Form 10-K.
Segment Reporting
In November 2023, the FASB issued Accounting Standards Update ("ASU") 2023-07 Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which enhances reportable segment disclosure requirements, primarily through disclosures of significant segment expenses. This guidance will be effective for us in our fiscal 2025 Form 10-K and the guidance must be applied retrospectively to all prior periods presented. We are currently evaluating the impact of adoption of this guidance on our disclosures.
Income Tax Disclosure
In December 2023, the FASB issued ASU 2023-09 Income Taxes (Topic 740): Improvements to Income Tax Disclosures, which enhances income tax disclosures primarily related to the rate reconciliation and income taxes paid information. This guidance also includes certain other amendments to improve the effectiveness of income tax disclosures. This guidance will be effective for us in our fiscal 2026 Form 10-K and should be applied on a prospective basis, with retrospective application permitted. We are currently evaluating the impact of adoption of this guidance on our disclosures.
Climate-Related Disclosures
In March 2024, the SEC issued final rules on climate-related disclosures that will require annual disclosure of material climate-related risks and material direct greenhouse gas emissions from operations owned or controlled (Scope 1) and material indirect greenhouse gas emissions from purchased energy consumed in owned or controlled operations (Scope 2). Additionally, the rules require disclosure in the notes to the financial statements of the effects of severe weather events and other natural conditions, subject to certain financial thresholds, as well as amounts related to carbon offsets and renewable energy credits or certificates. These rules also require disclosure of climate risk oversight practices of the Board of Directors and management, and the disclosure of governance, risk management and strategy related to material climate-related risks. In April 2024, the SEC voluntarily stayed the new rules pending the completion of judicial review. We are currently evaluating the impact of adoption of these final rules on our disclosures.