Held for Sale

6 Months Ended

Sep. 30, 2020

Discontinued Operations and Disposal Groups [Abstract]

Held for Sale Assets and liabilities to be disposed of by sale (“disposal groups”) are reclassified into “held for sale” if their carrying amounts are principally expected to be recovered through a sale transaction rather than through continuing use. The reclassification occurs when the disposal group is available for immediate sale and the sale is highly probable. These criteria are generally met when an agreement to sell exists, or management has committed to a plan to sell the assets within one year. Disposal groups are measured at the lower of carrying amount or fair value less costs to sell and are not depreciated or amortized. The fair value of a disposal group, less any costs to sell, is assessed each reporting period it remains classified as held for sale and any remeasurement to the lower of carrying value or fair value less cost to sell is reported as an adjustment to the carrying value of the disposal group. Assets and liabilities that have met the classification of held for sale were $833 million and $537 million, respectively, at September 30, 2020 and $906 million and $683 million, respectively, at March 31, 2020. These amounts primarily consist of the majority of the Company’s German pharmaceutical wholesale business described below.

German Pharmaceutical Wholesale Joint Venture

On December 12, 2019, the Company announced that it had entered into an agreement (the “Contribution Agreement”) with Walgreens Boots Alliance intending to contribute the majority of its German pharmaceutical wholesale business to create a joint venture in which McKesson will have a noncontrolling interest. This business is within the Company’s International segment. The agreement was subject to regulatory approvals, which were received in the second quarter of 2021, and the contribution was completed on November 1, 2020, as noted below. The transaction does not meet the criteria to be reported as a discontinued operation as it does not constitute a significant strategic business shift. For the three and six months ended September 30, 2020, the Company recorded a charge of $10 million to remeasure the held for sale assets and liabilities to fair value less costs to sell. The Company’s measurement of the fair value of the disposal group was based on the total consideration received by the Company as outlined in the Contribution Agreement. Certain components of the total consideration included fair value measurements that fall within Level 3 of the fair value hierarchy.

The total assets and liabilities of the German pharmaceutical wholesale joint venture that have met the classification of held for sale on the Company’s Condensed Consolidated Balance Sheets are as follows:


(In millions)	September 30, 2020		March 31, 2020
Assets
Current assets
Receivables, net and other current assets	$	519	$	548
Inventories, net	463		478

Long-term assets	95		88
Remeasurement of assets of business held for sale to fair value less costs to sell (1)	(296)		(272)
Total assets held for sale	$	781	$	842

Liabilities
Current liabilities
Drafts and accounts payable	$	292	$	450
Other accrued liabilities	38		40
Long-term liabilities	176		166
Total liabilities held for sale	$	506	$	656

(1)Includes the effect of approximately $11 million unfavorable and $3 million favorable cumulative foreign currency translation adjustments as of September 30, 2020 and March 31, 2020, respectively.

On November 1, 2020, the Company completed the contribution of the disposal group to the joint venture. The Company accounted for this transaction as a sale of the German pharmaceutical wholesale business and a subsequent purchase of a 30% interest in the newly formed joint venture in the third quarter of 2021. As a result of finalization of working capital amounts contributed and other adjustments, the Company may record additional gains or losses in future periods. These adjustments are not expected to have a material impact on the Company’s condensed consolidated financial statements.