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Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2023

Schedule of reconciliation of cash and cash equivalents

The following is a reconciliation of cash and cash equivalents on the unaudited condensed consolidated balance sheets to total cash, cash equivalents and restricted cash on the unaudited condensed consolidated statements of cash flows:


In millions	March 31, 2023		December 31, 2022
Cash and cash equivalents	$	14,618	$	12,945
Restricted cash (included in other current assets)	107		144
Restricted cash (included in other assets)	230		216
Total cash, cash equivalents and restricted cash in the statements of cash flows	$	14,955	$	13,305

Schedule of accounts receivable, net

Accounts receivable, net at March 31, 2023 and December 31, 2022 was composed of the following:


In millions	March 31, 2023		December 31, 2022
Trade receivables	$	9,229	$	8,983
Vendor and manufacturer receivables	13,357		12,395
Premium receivables	3,636		2,676
Other receivables	2,320		3,449
Total accounts receivable, net (1)	$	28,542	$	27,503

_____________________________________________

(1)Includes accounts receivable of $211 million and $227 million which have been accounted for as assets held for sale and are included in assets held for sale on the unaudited condensed consolidated balance sheets at March 31, 2023 and December 31, 2022, respectively. See Note 2 ‘‘Acquisitions and Assets Held for Sale’’ for additional information.

Rollforward of deferred acquisition costs

The following is a roll forward of deferred acquisition costs for the three months ended March 31, 2023 and 2022:


	Three Months Ended March 31,
In millions	2023		2022
Deferred acquisition costs, beginning of the period	$	1,219	$	879
Capitalizations	135		139
Amortization expense	(64)		(47)

Deferred acquisition costs, end of the period	$	1,290	$	971

Schedule of disaggregation of revenue

The following table disaggregates the Company’s revenue by major source in each segment for the three months ended March 31, 2023 and 2022:


In millions	Health Care Benefits		Health Services		Pharmacy & Consumer Wellness		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Three Months Ended March 31, 2023
Major goods/services lines:
Pharmacy	$	—	$	43,737	$	21,495	$	—	$	(12,732)	$	52,500
Front Store	—		—		5,597		—		—		5,597
Premiums	24,339		—		—		13		—		24,352
Net investment income (loss)	164		—		(3)		173		—		334
Other	1,374		854		833		2		(568)		2,495
Total	$	25,877	$	44,591	$	27,922	$	188	$	(13,300)	$	85,278

Health Services distribution channel:
Pharmacy network (1)			$	27,592
Mail & specialty (2)			16,145
Other			854
Total			$	44,591

Three Months Ended March 31, 2022
Major goods/services lines:
Pharmacy	$	—	$	38,796	$	19,532	$	—	$	(11,276)	$	47,052
Front Store	—		—		5,313		—		—		5,313
Premiums	21,614		—		—		17		—		21,631
Net investment income (loss)	89		—		(16)		95		—		168
Other	1,391		819		1,069		14		(631)		2,662
Total	$	23,094	$	39,615	$	25,898	$	126	$	(11,907)	$	76,826

Health Services distribution channel:
Pharmacy network (1)			$	24,128
Mail & specialty (2)			14,668
Other			819
Total			$	39,615

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(1)Health Services pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including the Company’s retail pharmacies and LTC pharmacies. Effective January 1, 2023, pharmacy network also includes activity associated with Maintenance Choice, which permits eligible client plan members to fill their maintenance prescriptions through mail order delivery or at a CVS pharmacy retail store for the same price as mail order. Maintenance Choice activity was previously reflected in mail & specialty. Prior period financial information has been revised to conform with current period presentation.

(2)Health Services mail & specialty is defined as specialty mail claims inclusive of Specialty Connect® claims picked up at a retail pharmacy, as well as mail order and specialty claims fulfilled by the Pharmacy & Consumer Wellness segment. Effective January 1, 2023, mail & specialty excludes Maintenance Choice activity, which is now reflected within pharmacy network. Prior period financial information has been revised to conform with current period presentation.

Schedule of receivables and contract liabilities from contracts with customers

The following table provides information about receivables and contract liabilities from contracts with customers:


In millions	March 31, 2023		December 31, 2022
Trade receivables (included in accounts receivable, net)	$	9,229	$	8,983
Contract liabilities (included in accrued expenses)	136		71

During the three months ended March 31, 2023 and 2022, the contract liabilities balance includes increases related to customers’ earnings in ExtraBucks Rewards or issuances of Company gift cards and decreases for revenues recognized during the period as a result of the redemption of ExtraBucks Rewards or Company gift cards and breakage of Company gift cards. During the three months ended March 31, 2023, the contract liabilities balance also reflects the addition of contract liabilities acquired in connection with the Company’s acquisition of Signify Health, Inc. (“Signify Health”) on March 29, 2023. Below is a summary of such changes:


	Three Months Ended March 31,
In millions	2023		2022
Contract liabilities, beginning of the period	$	71	$	87
Rewards earnings and gift card issuances	82		80
Redemption and breakage	(85)		(87)
Acquired contract liabilities	68		—
Contract liabilities, end of the period	$	136	$	80

Schedule of adjustments resulting from applying new accounting standard

The following summarizes changes in the balances of long-duration insurance liabilities as a result of the adoption of the long-duration insurance standard effective January 1, 2021:


In millions	Large Case Pensions		Long-Term Care		Other
Balance at December 31, 2020, net of reinsurance	$	3,224	$	1,142	$	480
Add: Reinsurance recoverable	—		—		274
Balance at December 31, 2020	3,224		1,142		754
Change in discount rate assumptions	604		553		44
Removal of shadow adjustments in accumulated other comprehensive income	(181)		—		—
Adjusted balance at January 1, 2021	3,647		1,695		798
Less: Reinsurance recoverable	—		—		308
Adjusted balance at January 1, 2021, net of reinsurance	$	3,647	$	1,695	$	490

Impact of Long-Duration Insurance Standard Adoption on Financial Statement Line Items

As a result of applying the long-duration insurance standard using a modified retrospective method, the following adjustments were made to amounts reported in the unaudited condensed consolidated statement of operations for the three months ended March 31, 2022:


	Impact of Change in Accounting Policy
In millions	As Reported March 31, 2022		Adjustments		Adjusted March 31, 2022
Condensed Consolidated Statement of Operations:
Operating costs:
Benefit costs	$	17,951	$	(28)	$	17,923
Operating expenses	9,351		(27)		9,324
Total operating costs	73,336		(55)		73,281
Operating income	3,490		55		3,545
Income before income tax provision	2,946		55		3,001
Income tax provision	633		13		646
Net income	2,313		42		2,355
Net income attributable to CVS Health	2,312		42		2,354
Net income per share attributable to CVS Health:
Basic	$	1.76	$	0.03	$	1.79
Diluted	$	1.74	$	0.03	$	1.77


	Impact of Change in Accounting Policy
In millions	As Reported December 31, 2022		Adjustments		Adjusted December 31, 2022
Condensed Consolidated Balance Sheet:
Other current assets	$	2,685	$	(49)	$	2,636
Total current assets	65,682		(49)		65,633
Intangible assets, net	24,754		49		24,803
Total assets	228,275		—		228,275
Health care costs payable	10,406		(264)		10,142
Other insurance liabilities	1,140		(51)		1,089
Total current liabilities	69,736		(315)		69,421
Deferred income taxes	3,880		136		4,016
Other long-term insurance liabilities	6,108		(273)		5,835
Other long-term liabilities	6,732		(2)		6,730
Total liabilities	156,960		(454)		156,506
Retained earnings	56,145		253		56,398
Accumulated other comprehensive loss	(1,465)		201		(1,264)
Total CVS Health shareholders’ equity	71,015		454		71,469
Total shareholders’ equity	71,315		454		71,769
Total liabilities and shareholders’ equity	228,275		—		228,275

As a result of applying the long-duration insurance standard using a modified retrospective method, the following adjustments were made to amounts reported in the unaudited condensed consolidated statement of cash flows for the three months ended March 31, 2022:


	Impact of Change in Accounting Policy
In millions	As Reported March 31, 2022		Adjustments		Adjusted March 31, 2022
Condensed Consolidated Statement of Cash Flows:
Reconciliation of net income to net cash provided by operating activities:
Net income	$	2,313	$	42	$	2,355
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	1,055		(6)		1,049
Deferred income taxes and other noncash items	(187)		12		(175)
Change in operating assets and liabilities, net of effects from acquisitions:
Other assets	(352)		4		(348)
Health care costs payable and other insurance liabilities	1,478		(48)		1,430
Other liabilities	(440)		(4)		(444)