SEC Filings

10-Q
MEDTRONIC PLC filed this Form 10-Q on 09/01/2017
Entire Document
 
Medtronic plc
Notes to Consolidated Financial Statements
(Unaudited)


The Company assesses definite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an intangible asset (asset group) may not be recoverable. When events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable, the Company calculates the excess of an intangible asset's carrying value over its undiscounted future cash flows. If the carrying value is not recoverable, an impairment loss is recognized based on the amount by which the carrying value exceeds the fair value. The inputs used in the fair value analysis fall within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value. The Company did not recognize any definite-lived intangible asset impairments during the three months ended July 28, 2017 or July 29, 2016.
The Company assesses indefinite-lived intangibles for impairment annually in the third quarter of the fiscal year and whenever an event occurs or circumstances change that would indicate that the carrying amount may be impaired. The Company did not recognize any significant indefinite-lived intangibles impairments during the three months ended July 28, 2017 and July 29, 2016. Due to the nature of IPR&D projects, the Company may experience future delays or failures to obtain regulatory approvals to conduct clinical trials, failures of such clinical trials, delays or failures to obtain required market clearances or other failures to achieve a commercially viable product, and as a result, may recognize impairment losses in the future.
Amortization Expense
Intangible asset amortization expense for the three months ended July 28, 2017 and July 29, 2016 was $454 million and $487 million, respectively. Estimated aggregate amortization expense by fiscal year based on the current carrying value of definite-lived intangible assets at July 28, 2017, excluding any possible future amortization associated with acquired IPR&D which has not yet met technological feasibility and amortization associated with definite-lived intangible assets classified as held for sale at July 28, 2017, is as follows:
(in millions)
Amortization Expense
Remaining 2018
$
1,365

2019
1,741

2020
1,693

2021
1,674

2022
1,631

2023
1,564

11. Income Taxes
The Company’s effective tax rate for the three months ended July 28, 2017 was 15.6 percent, as compared to 6.0 percent for the three months ended July 29, 2016. The increase in the effective tax rate for the three months ended July 28, 2017 was primarily due to certain tax adjustments, changes in the amount and jurisdiction of restructuring charges, net and certain litigation charges, the finalization of certain tax audits, the lapse of a statute of limitations for federal purposes, excess tax benefits related to stock-based compensation due to the adoption of revised guidance, and year over year changes in operational results by jurisdiction.
During the three months ended July 28, 2017, the Company recognized charges of $60 million primarily related to the tax effect from certain restructuring steps taken during the quarter in anticipation of the divestiture of a portion of the Patient Monitoring & Recovery division to Cardinal Health. These charges were recorded within provision for income taxes in the consolidated statement of income for the three months ended July 28, 2017.
During the three months ended July 29, 2016, the Company recognized a $31 million net benefit from certain tax adjustments. A $431 million tax benefit was recognized as the result of the resolution of Covidien's previously disclosed Tyco International plc intercompany debt issues with the U.S. Tax Court and the Appeals Division of the U.S. Internal Revenue Service (IRS). This benefit was partially offset by a $371 million charge associated with the expected resolution with the IRS for the Ardian, CoreValve, Inc. and Ablation Frontiers, Inc. acquisition-related issues and the allocation of income between Medtronic, Inc. and its wholly owned subsidiary operating in Puerto Rico for certain businesses. This resolution does not include the businesses that are the subject of the Medtronic, Inc. U.S. Tax Court case for fiscal years 2005 and 2006. In addition, the Company recognized a $29 million charge in connection with the redemption of an intercompany minority interest.

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