Held for Sale

9 Months Ended

Dec. 31, 2021

Discontinued Operations and Disposal Groups [Abstract]

In July 2021, the Company announced its intention to exit its businesses in Europe. Assets and liabilities of certain European businesses to be disposed of by sale (“disposal groups”) are classified as “held for sale” if their carrying amounts are principally expected to be recovered through a sale transaction rather than through continuing use. The classification occurs when the disposal group is available for immediate sale and the sale is 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 long-lived assets included within the disposal group 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 costs 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 $5.5 billion and $4.8 billion, respectively, at December 31, 2021 and $12 million and $9 million, respectively, at March 31, 2021. The amounts at December 31, 2021 primarily consisted of disposal groups related to the Company’s European divestiture activities, as discussed below. During the three and nine months ended December 31, 2021, the Company recorded charges totaling $879 million and $1.4 billion, respectively, primarily to remeasure the assets and liabilities of the disposal groups related to European divestiture activities discussed below to the lower of their carrying value or fair value less costs to sell. These charges were largely driven by declines in the British pound sterling and the Euro. During the three and nine months ended December 31, 2020, the Company recorded losses of $47 million and $57 million, respectively, related to the contribution of its German pharmaceutical wholesale business to the joint venture with Walgreens Boots Alliance which was completed on November 1, 2020. 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.

European Divestiture Activities

On July 5, 2021, the Company entered into an agreement to sell certain of its businesses in the European Union (“E.U.”) located in France, Italy, Ireland, Portugal, Belgium, and Slovenia, along with its German headquarters and wound-care business, part of a shared services center in Lithuania, and its ownership stake in a joint venture in the Netherlands (“E.U. disposal group”) to the PHOENIX Group for a purchase price of €1.2 billion (or, approximately $1.4 billion) adjusted for certain items, including cash, net debt and working capital adjustments, and reduced by the value of the noncontrolling interest held by minority shareholders of McKesson Europe AG (“McKesson Europe”) at the transaction closing date. The transaction is anticipated to close within the first half of fiscal year 2023, pursuant to the satisfaction of customary closing conditions, including receipt of regulatory approvals, as applicable. As of December 31, 2021, the E.U. disposal group, consisting of $3.1 billion of assets and $2.3 billion of liabilities primarily within the Company’s International segment, was classified as “Assets held for sale” and “Liabilities held for sale,” respectively, in the Condensed Consolidated Balance Sheet.

During the three and nine months ended December 31, 2021, the Company recorded charges totaling $26 million and $517 million, respectively, to remeasure the E.U. disposal group to the lower of its carrying value or fair value less costs to sell. These charges also included impairments of individual assets, such as certain internal-use software that will not be utilized in the future, prior to adjusting the E.U. disposal group as a whole. The remeasurement adjustment includes net losses of $230 million related to the accumulated other comprehensive income balances associated with the E.U. disposal group, driven by declines in the Euro. The charges were recorded within “Selling, distribution, general, and administrative expenses” in the Condensed Consolidated Statements of Operations. The Company’s measurement of the fair value of the E.U. disposal group was based on the total consideration expected to be received by the Company as outlined in the transaction agreement. Certain components of the total consideration included fair value measurements that fall within Level 3 of the fair value hierarchy.

The total assets and liabilities of the E.U. disposal group that have met the classification of held for sale in the Company’s Condensed Consolidated Balance Sheet are as follows:


(In millions)	December 31, 2021
Assets
Current assets
Receivables, net	$	1,346
Inventories, net	913
Prepaid expenses and other	75
Property, plant, and equipment, net	296
Operating lease right-of-use assets	221
Intangible assets, net	274
Other non-current assets	348
Remeasurement of assets of businesses held for sale to fair value less costs to sell (1)	(387)
Total assets held for sale	$	3,086

Liabilities
Current liabilities
Drafts and accounts payable	$	1,433
Current portion of long-term debt	5
Current portion of operating lease liabilities	32
Other accrued liabilities	440
Long-term debt	12
Long-term deferred tax liabilities	47
Long-term operating lease liabilities	187
Other non-current liabilities	165
Total liabilities held for sale	$	2,321

(1)Excludes charges related to the impairment of individual assets, which are primarily comprised of a $113 million impairment of internally developed software recorded directly against the gross value of the assets impacted.

On November 1, 2021, the Company announced an agreement to sell its retail and distribution businesses in the United Kingdom (“U.K. disposal group”) to Aurelius Elephant Limited for a purchase price of £325 million (or, approximately $440 million), subject to certain adjustments. As of December 31, 2021, the U.K. disposal group, consisting of $1.9 billion of assets and $2.3 billion of liabilities primarily within the Company’s International segment, was classified as “Assets held for sale” and “Liabilities held for sale,” respectively, in the Condensed Consolidated Balance Sheet. The transaction is expected to close in the fourth quarter of 2022.

During the three and nine months ended December 31, 2021, the Company recorded charges totaling $823 million to remeasure the U.K. disposal group to the lower of its carrying value or fair value less costs to sell. The remeasurement adjustment includes a $731 million loss related to the accumulated other comprehensive income balances associated with the U.K. disposal group, driven by declines in the British pound sterling. The charges were recorded within “Selling, distribution, general, and administrative expenses” in the Condensed Consolidated Statements of Operations. The Company’s measurement of the fair value of the U.K. disposal group was based on the total consideration expected to be received by the Company as outlined in the transaction agreement. Certain components of the total consideration included fair value measurements that fall within Level 3 of the fair value hierarchy.

The total assets and liabilities of the U.K. disposal group that have met the classification of held for sale in the Company’s Condensed Consolidated Balance Sheet are as follows:


(In millions)	December 31, 2021
Assets
Current assets
Cash and cash equivalents	$	206
Receivables, net	1,212
Inventories, net	698
Prepaid expenses and other	76
Property, plant, and equipment, net	91
Operating lease right-of-use assets	259
Intangible assets, net	120
Other non-current assets	78
Remeasurement of assets of businesses held for sale to fair value less costs to sell	(822)
Total assets held for sale	$	1,918

Liabilities
Current liabilities
Drafts and accounts payable	$	1,756

Current portion of operating lease liabilities	51
Other accrued liabilities	141


Long-term operating lease liabilities	269
Other non-current liabilities	57
Total liabilities held for sale	$	2,274

On December 20, 2021, the Company announced an agreement with Quadrifolia Management GmbH for a management-led buyout of its Austrian business for a purchase price of €226 million (or, approximately $257 million), subject to certain adjustments. At December 31, 2021, the net assets of the Austrian business of $290 million, primarily within the Company’s International segment, were classified as “Assets held for sale” and “Liabilities held for sale” in the Condensed Consolidated Balance Sheet. The transaction closed on January 31, 2022. In the three and nine months ended December 31, 2021, the Company recognized a loss of $30 million to remeasure the assets and liabilities of the business to the lower of its carrying value or fair value less costs to sell. The charge was recorded within “Selling, distribution, general, and administrative expenses” in the Condensed Consolidated Statements of Operations.