Held for Sale

3 Months Ended

Jun. 30, 2022

Discontinued Operations and Disposal Groups [Abstract]

In July 2021, the Company announced its intention to exit its businesses in Europe resulting in classification of certain assets and liabilities as held for sale. Assets and liabilities of $3.2 billion and $2.3 billion, respectively, at June 30, 2022, and $4.5 billion and $4.7 billion, respectively, at March 31, 2022, met the criteria for classification as held for sale, primarily consisting of disposal groups related to the Company’s European divestiture activities discussed below. The decrease in assets and liabilities held for sale during the first quarter of fiscal 2023 was primarily due to the divestiture of the Company’s U.K. disposal group in April 2022, as discussed in more detail below.

Assets and liabilities 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. When the net realizable value of a disposal group increases during a period, a gain can be recognized to the extent that it does not increase the value of the disposal group beyond its original carrying value when the disposal group was reclassified as held for sale. The Company determined that the disposal groups classified as held for sale do not meet the criteria for classification as discontinued operations.

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 $1.3 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 second half of fiscal 2023, pursuant to the satisfaction of customary closing conditions, including receipt of regulatory approvals, as applicable. As of June 30, 2022 and March 31, 2022, the E.U. disposal group 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 months ended June 30, 2022, the Company recorded a gain of $12 million to remeasure the E.U. disposal group to fair value less costs to sell. This amount was recorded within “Selling, distribution, general, and administrative expenses” in the Condensed Consolidated Statement 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)	June 30, 2022		March 31, 2022
Assets
Current assets
Receivables, net	$	1,277	$	1,322
Inventories, net	819		809
Prepaid expenses and other	92		72
Property, plant, and equipment, net	291		304
Operating lease right-of-use assets	217		224
Intangible assets, net	253		267
Other non-current assets	312		328
Remeasurement of assets of businesses held for sale to fair value less costs to sell (1)	(279)		(302)
Total assets held for sale	$	2,982	$	3,024

Liabilities
Current liabilities
Drafts and accounts payable	$	1,406	$	1,826
Current portion of long-term debt	4		4
Current portion of operating lease liabilities	30		33
Other accrued liabilities	403		473
Long-term debt	11		11
Long-term deferred tax liabilities	60		55
Long-term operating lease liabilities	168		180
Other non-current liabilities	122		138
Total liabilities held for sale	$	2,204	$	2,720

(1)Excludes charges in fiscal 2022 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 April 6, 2022, the Company completed the previously announced sale of its retail and distribution businesses in the United Kingdom (“U.K. disposal group”) to Aurelius Elephant Limited for a purchase price of £110 million (or, approximately $144 million), including certain adjustments. As part of the transaction, the Company divested net assets of $615 million and released $731 million of accumulated other comprehensive loss, within the International segment, and the buyer assumed and repaid a note payable to the Company of approximately $118 million.

Following the completion of the transaction on April 6, 2022, there were no assets or liabilities of the U.K. disposal group classified as held for sale in the Company’s Condensed Consolidated Balance Sheet. The total assets and liabilities of the U.K. disposal group that met the classification of held for sale in the Company’s Condensed Consolidated Balance Sheet at March 31, 2022 were as follows:


(In millions)	March 31, 2022
Assets
Current assets
Cash and cash equivalents	$	531
Receivables, net	931
Inventories, net	563
Prepaid expenses and other	50
Property, plant, and equipment, net	91
Operating lease right-of-use assets	270
Intangible assets, net	117
Other non-current assets	88
Remeasurement of assets of businesses held for sale to fair value less costs to sell	(1,159)
Total assets held for sale	$	1,482

Liabilities
Current liabilities
Drafts and accounts payable	$	1,593

Current portion of operating lease liabilities	50
Other accrued liabilities	59

Long-term deferred tax liabilities	16
Long-term operating lease liabilities	262
Other non-current liabilities	38
Total liabilities held for sale	$	2,018