Noncontrolling Interests

6 Months Ended

Sep. 30, 2016

Noncontrolling Interests

Under a domination and profit and loss transfer agreement (the “Domination Agreement”) entered into between McKesson and Celesio AG (“Celesio”) in 2014, McKesson is obligated to pay an annual recurring compensation amount of €0.83 per Celesio share (“Compensation Amount”) to the noncontrolling shareholders of Celesio. Additionally, the noncontrolling interests in Celesio are redeemable at the option of the holder as a result of a right to put their Celesio shares at €22.99 per share (“Put Right”) under the Domination Agreement. Accordingly, the noncontrolling interests in Celesio are presented as “Redeemable Noncontrolling Interests” on the accompanying condensed consolidated balance sheets. The Put Right amount is increased annually for interest in the amount of five percentage points above a base rate published by the German Bundesbank semiannually, less any Compensation Amount or the guaranteed dividend already paid in respect of the relevant time period (“Put Amount”). The Domination Agreement became effective when it was registered in the commercial register of Celesio at the local court of Stuttgart on December 2, 2014.

Subsequent to the Domination Agreement’s registration, certain noncontrolling shareholders of Celesio initiated appraisal proceedings (“Appraisal Proceedings”) with the Stuttgart Regional Court to challenge the Compensation Amount, the guaranteed dividend and/or the Put Amount. If any such Appraisal Proceedings result in an adjustment to the Compensation Amount, the guaranteed dividend and/or the Put Amount, Celesio Holdings Deutschland GmbH & Co. KGaA (formerly known as McKesson Deutschland GmbH & Co. KGaA or Dragonfly GmbH & Co. KGaA) would be required to make certain additional payments for any shortfall to all Celesio noncontrolling shareholders who previously received the guaranteed dividend, Compensation Amount and/or the Put Amount.

The balance of redeemable noncontrolling interests is reported at the greater of its carrying value or its maximum redemption value at each reporting date. The redemption value is the Put Amount adjusted for exchange rate fluctuations each period. There were no material exercises of the Put Right during the second quarter and first six months of 2017. At September 30, 2016 and March 31, 2016, the carrying value of redeemable noncontrolling interests of $1.34 billion and $1.41 billion exceeded the maximum redemption value of $1.26 billion and $1.28 billion. At September 30, 2016 and March 31, 2016, we owned approximately 76.0% of Celesio’s outstanding common shares.

Changes in redeemable noncontrolling interests were as follows:



(In millions)	Redeemable Noncontrolling Interests
Balance, March 31, 2016	$	1,406
Net income attributable to noncontrolling interests	23
Other comprehensive loss	(65		)
Reclassification of recurring compensation to other accrued liabilities	(23		)
Balance, September 30, 2016	$	1,341

There were no material changes in our ownership interests of noncontrolling interests during the first six months of 2017 and 2016.