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Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 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	June 30, 2023		December 31, 2022
Cash and cash equivalents	$	13,807	$	12,945
Restricted cash (included in other current assets)	87		144
Restricted cash (included in other assets)	233		216
Total cash, cash equivalents and restricted cash in the statements of cash flows	$	14,127	$	13,305

Schedule of accounts receivable, net

Accounts receivable, net at June 30, 2023 and December 31, 2022 was composed of the following:


In millions	June 30, 2023		December 31, 2022
Trade receivables	$	9,949	$	8,983
Vendor and manufacturer receivables	14,911		12,395
Premium receivables	2,296		2,676
Other receivables	2,607		3,449
Total accounts receivable, net (1)	$	29,763	$	27,503

_____________________________________________

(1)Includes accounts receivable of $217 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 June 30, 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 six months ended June 30, 2023 and 2022:


	Six Months Ended June 30,
In millions		2023		2022
Deferred acquisition costs, beginning of the period		$	1,219	$	879
Capitalizations		274		279
Amortization expense		(128)		(103)

Deferred acquisition costs, end of the period		$	1,365	$	1,055

Schedule of disaggregation of revenue

The following tables disaggregate the Company’s revenue by major source in each segment for the three and six months ended June 30, 2023 and 2022:


In millions	Health Care Benefits		Health Services		Pharmacy & Consumer Wellness		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Three Months Ended June 30, 2023
Major goods/services lines:
Pharmacy	$	—	$	44,706	$	22,614	$	—	$	(12,258)	$	55,062
Front Store	—		—		5,629		—		—		5,629
Premiums	25,095		—		—		13		—		25,108
Net investment income	205		—		1		68		—		274
Other	1,447		1,509		540		2		(650)		2,848
Total	$	26,747	$	46,215	$	28,784	$	83	$	(12,908)	$	88,921

Health Services distribution channel:
Pharmacy network (1)			$	27,477
Mail & specialty (2)			17,229
Other			1,509
Total			$	46,215

Three Months Ended June 30, 2022
Major goods/services lines:
Pharmacy	$	—	$	42,179	$	20,442	$	—	$	(11,295)	$	51,326
Front Store	—		—		5,736		—		—		5,736
Premiums	21,245		—		—		15		—		21,260
Net investment income (loss)	88		—		(18)		76		—		146
Other	1,408		759		586		19		(604)		2,168
Total	$	22,741	$	42,938	$	26,746	$	110	$	(11,899)	$	80,636

Health Services distribution channel:
Pharmacy network (1)			$	25,896
Mail & specialty (2)			16,283
Other			759
Total			$	42,938


In millions	Health Care Benefits		Health Services		Pharmacy & Consumer Wellness		Corporate/ Other		Intersegment Eliminations		Consolidated Totals
Six Months Ended June 30, 2023
Major goods/services lines:
Pharmacy	$	—	$	88,443	$	44,394	$	—	$	(24,990)	$	107,847
Front Store	—		—		11,226		—		—		11,226
Premiums	49,434		—		—		26		—		49,460
Net investment income (loss)	369		—		(2)		241		—		608
Other	2,821		2,363		1,088		4		(1,218)		5,058
Total	$	52,624	$	90,806	$	56,706	$	271	$	(26,208)	$	174,199

Health Services distribution channel:
Pharmacy network (1)			$	55,069
Mail & specialty (2)			33,374
Other			2,363
Total			$	90,806

Six Months Ended June 30, 2022
Major goods/services lines:
Pharmacy	$	—	$	80,975	$	40,412	$	—	$	(22,571)	$	98,816
Front Store	—		—		11,049		—		—		11,049
Premiums	42,859		—		—		32		—		42,891
Net investment income (loss)	177		—		(34)		171		—		314
Other	2,799		1,578		1,217		33		(1,235)		4,392
Total	$	45,835	$	82,553	$	52,644	$	236	$	(23,806)	$	157,462

Health Services distribution channel:
Pharmacy network (1)			$	50,024
Mail & specialty (2)			30,951
Other			1,578
Total			$	82,553

_____________________________________________

(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	June 30, 2023		December 31, 2022
Trade receivables (included in accounts receivable, net)	$	9,949	$	8,983
Contract liabilities (included in accrued expenses)	161		71

Below is a summary of such changes:


	Six Months Ended June 30,
In millions	2023		2022
Contract liabilities, beginning of the period	$	71	$	87
Rewards earnings and gift card issuances	165		175
Redemption and breakage	(180)		(182)
Acquired contract liabilities	104		—
Other	1		—
Contract liabilities, end of the period	$	161	$	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 and six months ended June 30, 2022:


	Impact of Change in Accounting Policy
In millions	As Reported June 30, 2022		Adjustments		Adjusted June 30, 2022
Three Months Ended
Condensed Consolidated Statement of Operations:
Operating costs:
Health care costs	$	17,606	$	(116)	$	17,490
Operating expenses	9,171		16		9,187
Total operating costs	76,067		(100)		75,967
Operating income	4,569		100		4,669
Income before income tax provision	4,029		100		4,129
Income tax provision	1,068		22		1,090
Net income	2,961		78		3,039
Net income attributable to CVS Health	2,951		78		3,029
Net income per share attributable to CVS Health:
Basic	$	2.25	$	0.06	$	2.31
Diluted	$	2.23	$	0.06	$	2.29

Six Months Ended
Condensed Consolidated Statement of Operations:
Operating costs:
Health care costs	$	35,557	$	(144)	$	35,413
Operating expenses	18,522		(11)		18,511
Total operating costs	149,403		(155)		149,248
Operating income	8,059		155		8,214
Income before income tax provision	6,975		155		7,130
Income tax provision	1,701		35		1,736
Net income	5,274		120		5,394
Net income attributable to CVS Health	5,263		120		5,383
Net income per share attributable to CVS Health:
Basic	$	4.01	$	0.09	$	4.10
Diluted	$	3.97	$	0.09	$	4.06


	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


	Impact of Change in Accounting Policy
In millions	As Reported June 30, 2022		Adjustments		Adjusted June 30, 2022
Condensed Consolidated Statement of Cash Flows:
Reconciliation of net income to net cash provided by operating activities:
Net income	$	5,274	$	120	$	5,394
Adjustments required to reconcile net income to net cash provided by operating activities:
Depreciation and amortization	2,142		(11)		2,131
Deferred income taxes and other noncash items	(281)		35		(246)
Change in operating assets and liabilities, net of effects from acquisitions:
Other assets	(325)		39		(286)
Health care costs payable and other insurance liabilities	1,467		(181)		1,286
Other liabilities	903		(2)		901