Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2018


	September 30,		December 31,
In millions	2018		2017
Trade receivables	$	7,258	$	7,873
Vendor and manufacturer receivables		6,991		5,109
Other receivables		588		199
Total accounts receivable, net	$	14,837	$	13,181

Schedule of revenue disaggregation


	Pharmacy				Intersegment		Consolidated
In millions	Services		Retail/LTC		Eliminations		Totals
Three Months Ended September 30, 2018
Major goods/services lines:
Pharmacy	$	32,995	$	16,123	$	(7,350)	$	41,768
Front Store		—		4,557		—		4,557
Other		768		176		—		944
Total	$	33,763	$	20,856	$	(7,350)	$	47,269

Pharmacy Services distribution channel:
Mail choice (1)	$	11,812
Pharmacy network (2)		21,183
Other		768
Total	$	33,763

Nine Months Ended September 30, 2018
Major goods/services lines:
Pharmacy	$	96,110	$	47,428	$	(21,518)	$	122,020
Front Store		—		13,990		—		13,990
Other		3,118		542		—		3,660
Total	$	99,228	$	61,960	$	(21,518)	$	139,670

Pharmacy Services distribution channel:
Mail choice (1)	$	34,807
Pharmacy network (2)		61,303
Other		3,118
Total	$	99,228

(1)

Pharmacy Services mail choice is defined as claims filled at a Pharmacy Services mail facility, which includes specialty mail claims inclusive of Specialty Connect® claims picked up at retail, as well as prescriptions filled at our retail pharmacies under the Maintenance Choice® program.

(2)

Pharmacy Services pharmacy network is defined as claims filled at retail and specialty retail pharmacies, including our retail pharmacies and long-term care pharmacies, but excluding Maintenance Choice activity, which is included within the mail choice category.

Schedule of contract balances and activity

Contract Balances

Contract liabilities primarily represent the Company’s obligation to transfer additional goods or services to a customer for which the Company has received consideration, for example ExtraBucks® Rewards and unredeemed Company gift cards. The consideration received remains a contract liability until goods or services have been provided to the retail customer. In addition, the Company recognizes breakage on Company gift cards based on historical redemption patterns.

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


	September 30,		December 31,
In millions	2018		2017
Trade receivables (included in accounts receivable, net)	$	7,258	$	7,873
Contract liabilities (included in accrued expenses)		63		53

During the nine months ended September 30, 2018, 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. Below is a summary of the changes:


In millions
Balance, December 31, 2017	$	53
Adoption of ASU 2014-09		17
Loyalty program earnings and gift card issuances		236
Redemption and breakage		(243)
Balance, September 30, 2018	$	63

Schedule of new accounting pronouncements and changes in accounting principles


	September 30,		December 31,
In millions	2018		2017
Cash and cash equivalents	$	41,587	$	1,696
Restricted cash (included in other current assets)		11		14
Restricted cash (included in other assets)		229		190
Total cash, cash equivalents and restricted cash in the statement of cash flows	$	41,827	$	1,900

Reconciliation of condensed consolidated statement of cash flows


	As Previously
In millions	Reported		Adjustments		As Revised
Nine Months Ended September 30, 2017
Acquisitions (net of cash acquired) and other investments	$	(502)	$	41	$	(461)
Net cash used in investing activities		(1,608)		41		(1,567)
Net decrease in cash, cash equivalents and restricted cash (1)		(886)		41		(845)
Cash, cash equivalents, and restricted cash at the beginning of the period (1)		3,371		149		3,520
Cash, cash equivalents, and restricted cash at the end of the period (1)		2,485		190		2,675

(1)

Prior to the adoption of ASU 2016-18, these financial statement captions excluded restricted cash. The financial statement captions have been renamed to reflect the inclusion of restricted cash subsequent to the adoption of ASU 2016-18 on January 1, 2018.

ASU 2014-09

Schedule of new accounting pronouncements and changes in accounting principles


	Impact of Change in Accounting Policy
	As Reported				Adjusted
In millions	December 31, 2017		Adjustments		January 1, 2018
Condensed Consolidated Balance Sheet:
Accrued expenses	$	6,609	$	17	$	6,626
Deferred income taxes		2,996		(4)		2,992
Total liabilities		57,436		13		57,449
Retained earnings		43,556		(13)		43,543
Total CVS Health shareholders' equity		37,691		(13)		37,678
Total shareholders' equity		37,695		(13)		37,682

The following tables compare the reported condensed consolidated balance sheet, statements of operations, and statement of cash flows to the pro forma amounts had the previous revenue accounting guidance remained in effect:


	Impact of Change in Accounting Policy
	As Reported				Balances
	For the				Without
	Three Months Ended				Adoption of
In millions	September 30, 2018		Adjustments		Topic 606
Condensed Consolidated Statement of Operations:
Net revenues	$	47,269	$	(6)	$	47,263
Cost of revenues		39,941		(3)		39,938
Gross profit		7,328		(3)		7,325
Operating profit		2,353		(3)		2,350
Income before income tax provision		1,899		(3)		1,896
Income tax provision		509		(1)		508
Income from continuing operations		1,390		(2)		1,388
Net income		1,390		(2)		1,388
Net income attributable to CVS Health		1,390		(2)		1,388


	Impact of Change in Accounting Policy
	As Reported				Balances
	As of/For the				Without
	Nine Months Ended				Adoption of
In millions	September 30, 2018		Adjustments		Topic 606
Condensed Consolidated Statement of Operations:
Net revenues	$	139,670	$	4	$	139,674
Cost of revenues		118,282		3		118,285
Gross profit		21,388		1		21,389
Operating profit		2,712		1		2,713
Income before income tax provision		1,304		1		1,305
Income tax provision		1,478		—		1,478
Loss from continuing operations		(174)		1		(173)
Net loss		(175)		1		(174)
Net loss attributable to CVS Health		(175)		1		(174)

Condensed Consolidated Balance Sheet:
Accrued expenses		6,160		(18)		6,142
Deferred income taxes		3,052		4		3,056
Total liabilities		94,884		(14)		94,870
Retained earnings		41,843		14		41,857
Total CVS Health shareholders' equity		36,618		14		36,632
Total shareholders' equity		36,622		14		36,636

Condensed Consolidated Statement of Cash Flow:
Reconciliation of net loss to net cash provided by operating activities:
Net loss		(175)		1		(174)
Accrued expenses		(341)		(1)		(342)