Revenue Recognition Accounting Policy
Walgreen recognizes revenue at the time the customer takes possession of the merchandise. Customer returns are immaterial. Sales taxes are not included in revenue.
The services Walgreen provided to its pharmacy benefit management (PBM) clients included: plan set-up, claims adjudication with network pharmacies, formulary management, and reimbursement services. Through its PBM, Walgreen acted as an agent in administering pharmacy reimbursement contracts and did not assume credit risk. Therefore, revenue was recognized as only the differential between the amount receivable from the client and the amount owed to the network pharmacy. Walgreen acted as an agent to its clients with respect to administrative fees for claims adjudication. Those service fees were recognized as revenue.
Source: Walgreen Co., Annual Report
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