|MEDTRONIC PLC filed this Form 10-Q on 12/04/2017|
Notes to Consolidated Financial Statements
on the Company's evaluation performed of the amended revenue recognition guidance to date, the Company does not expect the adoption of the amended guidance to have a material impact on the Company's consolidated financial statements. The Company is continuing to evaluate the impact of the amended guidance in the areas of performance obligations, presentation, and new disclosure requirements. Additionally, the Company will continue to monitor any modifications, clarifications, and interpretations communicated by the FASB that may impact its conclusions.
In January 2016, the FASB issued guidance which requires equity investments (except those accounted for under the equity method of accounting or those that result in consolidation of the investee) to be measured at fair value with changes in fair value recognized in net income. The guidance also includes a simplified impairment assessment of equity investments without readily determinable fair values and presentation and disclosure changes. This accounting guidance is effective for the Company beginning in the first quarter of fiscal year 2019. The Company is unable to estimate the impact of the future adoption of this guidance on its financial statements as it will depend on the equity investments at the adoption date.
In February 2016, the FASB issued guidance which requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet. The guidance is to be applied using a modified retrospective approach at the beginning of the earliest comparative period in the financial statements and is effective for the Company beginning in the first quarter of fiscal year 2020. Early adoption is permitted. The Company is evaluating the impact of the lease guidance on the Company's consolidated financial statements and anticipates recording additional assets and corresponding liabilities on its consolidated balance sheets related to operating leases within its lease portfolio upon adoption of the guidance.
In January 2017, the FASB issued guidance which simplifies the accounting for goodwill impairment. The guidance requires a goodwill impairment to be measured as the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. The Company is required to adopt this guidance beginning in the first quarter of fiscal year 2021. Early adoption is permitted, and the guidance must be applied prospectively. The Company is unable to estimate the impact of the future adoption of this guidance on its financial statements, as it is dependent on the specific facts and circumstances of future impairments, if any.
3. Acquisitions and Acquisition-Related Items
The Company had acquisitions and other acquisition-related activity during the six months ended October 27, 2017. The Company accounted for the acquisitions as business combinations using the acquisition method of accounting. The assets and liabilities of the businesses acquired were recorded and consolidated on the acquisition date at their respective fair values. Goodwill resulting from business combinations is largely attributable to future yet to be defined technologies, new customer relationships, existing workforce of the acquired businesses, and synergies expected to arise after the Company's acquisition of these businesses. The pro forma impact of these acquisitions was not significant, either individually or in the aggregate, to the results of the Company for the three and six months ended October 27, 2017. The results of operations of acquired businesses have been included in the Company's consolidated statements of income since the date each business was acquired.
HeartWare International, Inc.
On August 23, 2016, the Company's Cardiac and Vascular Group acquired HeartWare International, Inc. (HeartWare), a medical device company that develops and manufactures miniaturized implantable heart pumps, or ventricular assist devices, to treat patients around the world suffering from advanced heart failure. Total consideration for the transaction was approximately $1.1 billion. The Company acquired $602 million of technology-based and customer-related intangible assets and $23 million of tradenames, with estimated useful lives of 15 and 5 years, respectively, and $481 million of goodwill. The acquired goodwill is not deductible for tax purposes. In addition, the Company acquired $245 million of debt through the acquisition, of which the Company redeemed $203 million as part of a cash tender offer in August 2016 and the remaining $42 million of debt acquired is due December 2017. During the measurement period, which ended on August 22, 2017, adjustments were made to finalize the allocation of purchase price related to other assets, goodwill, and contingent liabilities.