Medtronic 2014 Annual Report Download - page 92

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Medtronic, Inc.
Notes to Consolidated Financial Statements (Continued)
The recurring Level 3 fair value measurements of contingent consideration include the following significant unobservable
inputs:
($ in millions)
Fair Value at
April 25, 2014
Valuation
Technique Unobservable Input Range
Discount rate 13.5% - 24%
Revenue-based payments $ 43 Discounted cash flow Probability of payment 100%
Projected fiscal year of payment 2015 - 2019
Discount rate 5.5%
Product development-
based payments
$ 25 Discounted cash flow Probability of payment 75% - 100%
Projected fiscal year of payment 2015 - 2018
At April 25, 2014, the estimated maximum potential amount of undiscounted future contingent consideration that the Company
is expected to make associated with all completed business combinations or purchases of intellectual property prior to April 24,
2009 was approximately $199 million. The Company estimates the milestones or other conditions associated with the
contingent consideration will be reached in fiscal year 2015 and thereafter.
The fair value of contingent consideration associated with acquisitions subsequent to April 24, 2009, as of April 25, 2014 and
April 26, 2013, was $68 million and $142 million, respectively. As of April 25, 2014, $51 million was reflected in other long-
term liabilities and $17 million was reflected in other accrued expenses in the consolidated balance sheets. As of April 26,
2013, $120 million was reflected in other long-term liabilities and $22 million was reflected in other accrued expenses in the
consolidated balance sheets. The portion of the contingent consideration related to the acquisition date fair value is reported as
financing activities in the consolidated statements of cash flows. Amounts paid in excess of the original acquisition date fair
value are reported as operating activities in the consolidated statements of cash flows. The following table provides a
reconciliation of the beginning and ending balances of contingent consideration associated with acquisitions subsequent to
April 24, 2009:
Fiscal Year
(in millions) 2014 2013
Beginning Balance $ 142 $ 231
Purchase price contingent consideration 65 3
Contingent consideration payments (1) (30)
Change in fair value of contingent consideration (138) (62)
Ending Balance $ 68 $ 142
5. Investments
The Company holds investments consisting primarily of marketable debt and equity securities.
84