Held for Sale

9 Months Ended

Dec. 31, 2020

Discontinued Operations and Disposal Groups [Abstract]

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 $15 million and $14 million, respectively, at December 31, 2020 and $906 million and $683 million, respectively, at March 31, 2020. These amounts at March 31, 2020 primarily consisted of the majority of the Company’s German pharmaceutical wholesale business described below. This disposal group had been recorded as assets and liabilities held for sale since the third quarter of 2020 through its contribution to a joint venture in the third quarter of 2021. Based on its analysis, the Company determined that the disposal groups classified as held for sale do not meet the criteria for classification as discontinued operations and are not considered to be significant disposals based on its quantitative and qualitative evaluation.

German Pharmaceutical Wholesale Joint Venture

On November 1, 2020, the Company completed its previously announced transaction with Walgreens Boots Alliance (“WBA”) whereby the majority of its German pharmaceutical wholesale business was contributed to a newly formed joint venture in which McKesson has a 30% noncontrolling interest.

Consideration received included a receivable amount of $43 million, primarily related to working capital and net debt adjustments from WBA, and the 30% interest in the newly formed joint venture. At the transaction date, the carrying value of the equity investment in the joint venture was recorded at its fair value, which was measured using inputs that fell within Level 3 of the fair value hierarchy. The carrying value of the investment in the joint venture was nil as of December 31, 2020. The joint venture also assumed a note payable to the Company in the amount of approximately $291 million as of the transaction date, which was paid to the Company in the third quarter of 2021.

In conjunction with the contribution, the Company recorded a loss of $47 million (pre-tax and after-tax) in operating expenses in the three months ended December 31, 2020. In addition to this amount, the Company recorded charges of $10 million (pre-tax and after-tax) in the three and six months ended September 30, 2020 and $282 million (pre-tax and after-tax) in the three and nine months ended December 31, 2019 to remeasure the assets and liabilities held for sale to fair value less costs to sell. These charges were included within operating expenses in the condensed consolidated statements of operations. The Company’s measurement of the fair value of the disposal group was based on estimates of total consideration to be received by the Company as outlined in the contribution agreement between the Company and WBA. As a result of finalization of working capital amounts contributed and other adjustments, the Company may record additional gains or losses in future periods; however, these adjustments are not expected to have a material impact on the Company’s consolidated financial statements.

The Company accounts for its interest in the joint venture as an equity method investment within the International segment. The Company does not provide for losses on the investment as the Company has no guaranteed obligations for the joint venture to fund losses and is not otherwise committed to providing further financial support for the investee. If the joint venture subsequently generates income, the Company will only recognize its share of such income to the extent it exceeds its share of the previously unrecognized losses. As such, the Company has not recognized its proportionate share of earnings for the intervening period from the transaction date to December 31, 2020.

Following the completion of the transaction on November 1, 2020, there were no assets or liabilities of the German pharmaceutical wholesale joint venture classified as held for sale on the Company’s consolidated balance sheet. Total assets and liabilities of the German pharmaceutical wholesale joint venture that were classified as held for sale on the Company’s consolidated balance sheet as of March 31, 2020, were as follows:


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

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

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

(1)Includes the effect of approximately $3 million of favorable cumulative foreign currency translation adjustment as of March 31, 2020.