Medtronic 2013 Annual Report Download - page 78

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Table of Contents
Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
1. Summary of Significant Accounting Policies
Nature of Operations Medtronic, Inc. (Medtronic or the Company) is the global leader in medical technology – alleviating pain,
restoring health, and extending life for millions of people around the world. The Company provides innovative products and
therapies for use by medical professionals to meet the health care needs of their patients. Primary products include those for cardiac
rhythm disorders, cardiovascular disease, neurological disorders, spinal conditions and musculoskeletal trauma, urological and
digestive disorders, diabetes, and ear, nose, and throat conditions.
The Company is headquartered in Minneapolis, Minnesota, and markets its products primarily through a direct sales force in the
United States (U.S.) and a combination of direct sales representatives and independent distributors in international markets. The
primary markets for products are the U.S., Western Europe, Japan, and emerging markets.
Principles of Consolidation The consolidated financial statements include the accounts of Medtronic, Inc., and all of its
subsidiaries. All significant intercompany transactions and accounts have been eliminated. U.S. generally accepted accounting
principles (U.S. GAAP) are applied when determining whether an entity is subject to consolidation.
Beginning in the third quarter of fiscal year 2012, the results of operations, assets, and liabilities of the Physio-Control business,
which were previously presented as a component of the Cardiac and Vascular Group operating segment, are classified as
discontinued operations. All information in the following notes to the consolidated financial statements includes only results from
continuing operations (excluding Physio-Control) for all periods presented, unless otherwise noted. For further information
regarding discontinued operations, see Note 16.
Fiscal Year-End The Company utilizes a 52/53-week fiscal year, ending the last Friday in April. The Company’s fiscal years
2013, 2012, and 2011 ended on April 26, 2013, April 27, 2012, and April 29, 2011, respectively, all of which were 52-week years.
Reclassifications Certain prior period amounts have been reclassified to conform to the current year presentation.
Use of Estimates The preparation of the financial statements in conformity with U.S. GAAP requires management to make
estimates and assumptions that affect the reported amounts in the financial statements and accompanying notes. Actual results
could differ materially from those estimates.
Cash Equivalents The Company considers highly liquid investments with maturities of three months or less from the date of
purchase to be cash equivalents. These investments are carried at cost, which approximates fair value.
Investments Investments in marketable equity securities and debt securities are classified and accounted for as available-for-
sale at April 26, 2013 and April 27, 2012. Debt securities include corporate debt securities, U.S. and foreign government and
agency securities, certificates of deposit, mortgage-backed securities, other asset-backed securities, and auction rate securities.
These investments are recorded at fair value in the consolidated balance sheets. The change in fair value for available-for-sale
securities is recorded, net of taxes, as a component of accumulated other comprehensive loss on the consolidated balance sheets.
Investments in securities that are classified and accounted for as trading securities at April 26, 2013 and April 27, 2012 include
exchange-traded funds and are recorded at fair value on the consolidated balance sheets. The Company’s trading securities seek
to offset changes in liabilities related to equity and other market risks of certain deferred compensation arrangements. The change
in fair value for trading securities is recorded as a component of interest expense, net on the consolidated statements of earnings.
Management determines the appropriate classification of its investments in debt and equity securities at the time of purchase and
reevaluates such determinations at each balance sheet date.
Effective April 26, 2013, the Company changed the method of classification of certain investments previously classified as long-
term investments to current. The prior period balances have been reclassified to conform to the current year presentation. This
new method classifies these securities as current or long-term based on the nature of the securities and availability for use in current
operations while the prior classification was based on the maturities of the investments. The Company believes this method is
preferable because it is consistent with how the Company manages its capital structure and liquidity. In conjunction with this
change in classification of investments, the Company changed the classification of deferred taxes related to the unrealized gains
and losses on investments previously classified as long-term from non-current assets to current assets.
Certain of the Company’s investments in equity and other securities are long-term, strategic investments in companies that are in
varied stages of development. The Company accounts for these investments under the cost or the equity method of accounting,
as appropriate. These investments are included in other assets on the consolidated balance sheets. The valuation of equity and
other securities accounted for under the cost method considers all available financial information related to the investee, including
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