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Goodwill Impairment Charges
9 Months Ended
Dec. 31, 2018
Goodwill and Intangible Assets Disclosure [Abstract]  
Goodwill Impairment Charges
Goodwill Impairment Charges
We evaluate goodwill for impairment on an annual basis as of January 1 each year and at an interim date, if indicators of potential impairment exist. Goodwill impairment testing is conducted at the reporting unit level, which is generally defined as an operating segment or one level below an operating segment (also known as a component), for which discrete financial information is available and segment management regularly reviews the operating results of that reporting unit.
As the results of interim goodwill impairment tests, we recorded non-cash goodwill impairment charges of $570 million (pre-tax and after-tax) during the first quarter of 2019 within our two reporting units within the European Pharmaceutical Solutions segment, and $350 million (pre-tax and after-tax) during the second quarter of 2018 within our former (prior to the 2019 first quarter realignment in our operating segment structure) Distribution Solutions segment. During the third quarter of 2019, we also recorded a non-cash goodwill impairment charge of $21 million (pre-tax and after-tax) for our Rexall Health reporting unit, included in Other. These charges were recorded under the caption, “Goodwill Impairment Charges” within operating expenses in the accompanying condensed consolidated statements of operations.  
2019 First Quarter
Prior to implementing the new segment reporting structure in the first quarter of 2019, our European operations were considered a single reporting unit. Following the change in reportable segments, our European Pharmaceutical Solutions segment was split into two distinct reporting units - retail pharmacy operations (“Consumer Solutions”) and wholesale operations (“Pharmacy Solutions”) for purposes of goodwill impairment testing. As a result, we were required to perform a goodwill impairment test for these two new reporting units upon the change in reportable segment. We recorded a non-cash goodwill impairment charge of $238 million (pre-tax and after-tax) in the first quarter of 2019 primarily because the estimated fair value of the Pharmacy Solutions reporting unit was determined to be lower than its reassigned carrying value.
During the first quarter of 2019, our Consumer Solutions and Pharmacy Solutions reporting units had a decline in the estimated future cash flows primarily triggered by additional U.K. government reimbursement reductions which were announced on June 29, 2018. Accordingly, we performed an interim goodwill impairment test for these reporting units. As a result, the estimated fair value of these reporting units was determined to be lower than the carrying value and we recorded non-cash goodwill impairment charges of $332 million (pre-tax and after-tax) primarily for our Consumer Solutions reporting unit within the European Pharmaceutical Solutions segment.
The discount rate and terminal growth rate used for the Consumer Solutions reporting unit in the first quarter 2019 impairment test were 8.5% and 1.25%. The discount rate and terminal growth rate used for the Pharmacy Solutions reporting unit in the first quarter 2019 impairment test were 8.0% and 1.25%.

At December 31, 2018, our Consumer Solutions and Pharmacy Solutions reporting units’ remaining goodwill balances were $461 million and $732 million.

Other risks, expenses and future developments, such as additional government reimbursement reductions, increased regulatory uncertainty including the impact of the U.K.’s potential exit from the European Union (commonly referred to as “Brexit”) and material changes in key market assumptions that we were unable to anticipate as of the testing date may require us to further revise the projected cash flows, which could adversely affect the fair value of our reporting units in future periods. As a result, we may be required to record additional impairment charges in future reporting periods.
2018 Second Quarter
During the second quarter of 2018, our McKesson Europe reporting unit within our former Distribution Solutions segment, had a decline in its estimated future cash flows primarily triggered by government reimbursement reductions in their retail business in the U.K. Accordingly, we performed an interim one-step goodwill impairment test in accordance with the amended goodwill guidance for this reporting unit prior to our annual impairment test.

As a result of the test, the estimated fair value of this reporting unit was determined to be lower than the carrying value and we recorded a non-cash charge of $350 million (pre-tax and after-tax) to impair the carrying value of this reporting unit’s goodwill. There were no tax benefits associated with the goodwill impairment charge.

The fair value of the reporting unit was determined using a combination of an income approach based on a DCF model and a market approach based on guideline public companies’ revenues and earnings before interest, tax, depreciation and amortization multiples. Fair value estimates result from a complex series of judgments about future events and uncertainties and rely heavily on estimates and assumptions that have been deemed reasonable by management as of the measurement date. Any changes in key assumptions, including failure to improve operations of certain retail pharmacy stores, additional government reimbursement reductions, deterioration in the financial market, an increase in interest rates or an increase in the cost of equity financing by market participants within the industry, or other unanticipated events and circumstances, may affect such estimates. Fair value assessments of the reporting unit are considered a Level 3 measurement due to the significance of unobservable inputs developed using company specific information.
 Refer to Financial Note 14, “Fair Value Measurements,” for more information on nonrecurring fair value measurements.