Item 8. Financial Statements and Supplementary Data

Report of Independent Registered Public Accounting Firm

To the Shareholders and Board of Directors of Medtronic plc

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Medtronic plc and its subsidiaries (the “Company”) as of April 29, 2022 and April 30, 2021, and the related consolidated statements of income, of comprehensive income, of equity and of cash flows for each of the three years in the period ended April 29, 2022, including the related notes and schedule of valuation and qualifying accounts for each of the three years in the period ended April 29, 2022 appearing under Item 15(a)(1) (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of April 29, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of April 29, 2022 and April 30, 2021, and the results of its operations and its cash flows for each of the three years in the period ended April 29, 2022 in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of April 29, 2022, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Change in Accounting Principle

As discussed in Note 1 to the consolidated financial statements, the Company changed the manner in which it accounts for leases in fiscal year 2020.

Basis for Opinions

The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.

Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. Our audit of internal control over financial reporting included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

Definition and Limitations of Internal Control over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the

company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Critical Audit Matters

The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.

Income Tax Reserve for the Uncertain Tax Position Related to Puerto Rico Manufacturing

As described in Notes 13 and 18 to the consolidated financial statements, management records reserves for uncertain tax positions related to unresolved matters with the Internal Revenue Service (IRS) and other taxing authorities. A remaining unresolved issue with the IRS, relates to the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico, which is one of the Company's manufacturing sites. These reserves are subject to a high degree of estimation and management judgment. Total reserves relating to uncertain tax positions as of April 29, 2022 were $1.661 billion, of which the Puerto Rico manufacturing reserve makes up a significant portion.

The principal considerations for our determination that performing procedures relating to the income tax reserve for the uncertain tax position related to Puerto Rico manufacturing is a critical audit matter are the significant judgment by management when determining the reserve, including a high degree of estimation uncertainty relative to the unresolved issue with the IRS involving one of the Company’s manufacturing sites. This in turn led to a high degree of auditor judgment, effort, and subjectivity in performing procedures and evaluating audit evidence to support management’s accurate measurement of the income tax reserve for the uncertain tax position related to Puerto Rico manufacturing, as the nature of the evidence is often highly subjective.

Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included testing the effectiveness of controls relating to the recognition of the income tax reserves for uncertain tax positions, as well as controls over measurement of the reserves. These procedures also included, among others (i) testing management’s process for determining the reserve for the uncertain tax position, (ii) evaluating the status and results of the related U. S. Tax Court case, and (iii) evaluating the consistency of the reserve calculation with the relevant documents related to the tax court case.

/s/ PricewaterhouseCoopers LLP
Minneapolis, Minnesota
June 23, 2022

We have served as the Company’s auditor since 1963.

Medtronic plc

Consolidated Statements of Income

			Fiscal Year
(in millions, except per share data)			2022						2021						2020
Net sales			$	31,686					$	30,117					$	28,913
Costs and expenses:
Cost of products sold, excluding amortization of intangible assets			10,145						10,483						9,424
Research and development expense			2,746						2,493						2,331
Selling, general, and administrative expense			10,292						10,148						10,109
Amortization of intangible assets			1,733						1,783						1,756
Restructuring charges, net			60						293						118
Certain litigation charges			95						118						313
Other operating expense, net			862						315						71
Operating profit			5,752						4,484						4,791
Other non-operating income, net			(318)						(336)						(356)
Interest expense			553						925						1,092
Income before income taxes			5,517						3,895						4,055
Income tax provision (benefit)			456						265						(751)
Net income			5,062						3,630						4,806
Net income attributable to noncontrolling interests			(22)						(24)						(17)
Net income attributable to Medtronic			$	5,039					$	3,606					$	4,789
Basic earnings per share			$	3.75					$	2.68					$	3.57
Diluted earnings per share			$	3.73					$	2.66					$	3.54
Basic weighted average shares outstanding			1,342.4						1,344.9						1,340.7
Diluted weighted average shares outstanding			1,351.4						1,354.0						1,351.1

The accompanying notes are an integral part of these consolidated financial statements.

Medtronic plc

Consolidated Statements of Comprehensive Income

			Fiscal Year
(in millions)			2022						2021						2020
Net income			$	5,062					$	3,630					$	4,806
Other comprehensive income (loss), net of tax:
Unrealized (loss) gain on investment securities			(301)						92						45
Translation adjustment			(2,086)						1,699						(829)
Net investment hedge			2,299						(1,694)						405
Net change in retirement obligations			574						505						(544)
Unrealized (loss) gain on cash flow hedges			727						(519)						72
Other comprehensive income (loss)			1,213						83						(851)
Comprehensive income including noncontrolling interests			6,274						3,713						3,955
Comprehensive income attributable to noncontrolling interests			(16)						(32)						(15)
Comprehensive income attributable to Medtronic			$	6,258					$	3,681					$	3,940

The accompanying notes are an integral part of these consolidated financial statements.

Medtronic plc

Consolidated Balance Sheets

(in millions)						April 29, 2022						April 30, 2021
ASSETS
Current assets:
Cash and cash equivalents						$	3,714					$	3,593
Investments						6,859						7,224
Accounts receivable, less allowances and credit losses of $230 and $241, respectively						5,551						5,462
Inventories, net						4,616						4,313
Other current assets						2,318						1,955
Total current assets						23,059						22,548
Property, plant, and equipment, net						5,413						5,221
Goodwill						40,502						41,961
Other intangible assets, net						15,595						17,740
Tax assets						3,403						3,169
Other assets						3,008						2,443
Total assets						$	90,981					$	93,083
LIABILITIES AND EQUITY
Current liabilities:
Current debt obligations						$	3,742					$	11
Accounts payable						2,276						2,106
Accrued compensation						2,121						2,482
Accrued income taxes						704						435
Other accrued expenses						3,551						3,475
Total current liabilities						12,394						8,509
Long-term debt						20,372						26,378
Accrued compensation and retirement benefits						1,113						1,557
Accrued income taxes						2,087						2,251
Deferred tax liabilities						884						1,028
Other liabilities						1,410						1,756
Total liabilities						38,260						41,481
Commitments and contingencies (Notes 3, 16, and 18)
Shareholders’ equity:
Ordinary shares— par value $0.0001, 2.6 billion shares authorized, 1,330,743,395 and 1,345,400,671 shares issued and outstanding, respectively						—						—
Additional paid-in capital						24,566						26,319
Retained earnings						30,250						28,594
Accumulated other comprehensive loss						(2,265)						(3,485)
Total shareholders’ equity						52,551						51,428
Noncontrolling interests						171						174
Total equity						52,722						51,602
Total liabilities and equity						$	90,981					$	93,083

The accompanying notes are an integral part of these consolidated financial statements.

Medtronic plc

Consolidated Statements of Equity

						Ordinary Shares												Additional Paid-in Capital						Retained Earnings						Accumulated Other Comprehensive Loss						Total Shareholders’ Equity						Noncontrolling Interests						Total Equity
(in millions, except per share data)						Number						Par Value
April 26, 2019						1,341						$	—					$	26,532					$	26,270					$	(2,711)					$	50,091					$	121					$	50,212
Net income						—						—						—						4,789						—						4,789						17						4,806
Other comprehensive loss						—						—						—						—						(849)						(849)						(2)						(851)
Dividends to shareholders ($2.16 per ordinary share)						—						—						—						(2,894)						—						(2,894)						—						(2,894)
Issuance of shares under stock purchase and award plans						12						—						564						—						—						564						—						564
Repurchase of ordinary shares						(12)						—						(1,228)						—						—						(1,228)						—						(1,228)
Stock-based compensation						—						—						297						—						—						297						—						297
Changes to noncontrolling ownership interests						—						—						—						—						—						—						(1)						(1)
Cumulative effect of change in accounting principle(1)						—						—						—						(33)						—						(33)						—						(33)
April 24, 2020						1,341						$	—					$	26,165					$	28,132					$	(3,560)					$	50,737					$	135					$	50,872
Net income						—						—						—						3,606						—						3,606						24						3,630
Other comprehensive income						—						—						—						—						75						75						8						83
Dividends to shareholders ($2.32 per ordinary share)						—						—						—						(3,120)						—						(3,120)						—						(3,120)
Issuance of shares under stock purchase and award plans						8						—						382						—						—						382						—						382
Repurchase of ordinary shares						(4)						—						(559)						—						—						(559)						—						(559)
Stock-based compensation						—						—						344						—						—						344						—						344
Changes to noncontrolling ownership interests						—						—						(13)						—						—						(13)						7						(6)
Cumulative effect of change in accounting principle(1)						—						—						—						(24)						—						(24)						—						(24)
April 30, 2021						1,345						$	—					$	26,319					$	28,594					$	(3,485)					$	51,428					$	174					$	51,602
Net income						—						—						—						5,039						—						5,039						22						5,062
Other comprehensive income						—						—						—						—						1,219						1,219						(6)						1,213
Dividends to shareholders ($2.52 per ordinary share)						—						—						—						(3,383)						—						(3,383)						—						(3,383)
Issuance of shares under stock purchase and award plans						7						—						329						—						—						329						—						329
Repurchase of ordinary shares						(21)						—						(2,442)						—						—						(2,442)						—						(2,442)
Stock-based compensation						—						—						359						—						—						359						—						359
Changes to noncontrolling ownership interests						—						—						1						—						—						1						(19)						(18)
April 29, 2022						1,331						$	—					$	24,566					$	30,250					$	(2,265)					$	52,551					$	171					$	52,722

(1) See Note 1 to the consolidated financial statements for discussion regarding the adoption of accounting standards during fiscal year 2021 and fiscal year 2020.

The accompanying notes are an integral part of these consolidated financial statements.

Medtronic plc

Consolidated Statements of Cash Flows

			Fiscal Year
(in millions)			2022						2021						2020
Operating Activities:
Net income			$	5,062					$	3,630					$	4,806
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization			2,707						2,702						2,663
Provision for credit losses			58						128						99
Deferred income taxes			(604)						(422)						(1,315)
Stock-based compensation			359						344						297
Loss on debt extinguishment			—						308						406
Asset impairment charges			515						—						—
Other, net			138						251						217
Change in operating assets and liabilities, net of acquisitions and divestitures:
Accounts receivable, net			(477)						(761)						1,291
Inventories, net			(560)						78						(577)
Accounts payable and accrued liabilities			213						531						(44)
Other operating assets and liabilities			(65)						(549)						(609)
Net cash provided by operating activities			7,346						6,240						7,234
Investing Activities:
Acquisitions, net of cash acquired			(91)						(994)						(488)
Additions to property, plant, and equipment			(1,368)						(1,355)						(1,213)
Purchases of investments			(9,882)						(11,808)						(11,039)
Sales and maturities of investments			9,692						11,345						9,574
Other investing activities, net			(10)						(54)						(37)
Net cash used in investing activities			(1,659)						(2,866)						(3,203)
Financing Activities:
Change in current debt obligations, net			—						(311)						(17)
Proceeds from short-term borrowings (maturities greater than 90 days)			—						2,789						—
Repayments from short-term borrowings (maturities greater than 90 days)			—						(2,853)						—
Issuance of long-term debt			—						7,172						5,568
Payments on long-term debt			(1)						(7,367)						(6,110)
Dividends to shareholders			(3,383)						(3,120)						(2,894)
Issuance of ordinary shares			429						474						662
Repurchase of ordinary shares			(2,544)						(652)						(1,326)
Other financing activities			163						(268)						(81)
Net cash used in financing activities			(5,336)						(4,136)						(4,198)
Effect of exchange rate changes on cash and cash equivalents			(231)						215						(86)
Net change in cash and cash equivalents			121						(547)						(253)
Cash and cash equivalents at beginning of period			3,593						4,140						4,393
Cash and cash equivalents at end of period			$	3,714					$	3,593					$	4,140
Supplemental Cash Flow Information
Cash paid for:
Income taxes			$	996					$	1,250					$	878
Interest			540						582						643

The accompanying notes are an integral part of these consolidated financial statements.

Medtronic plc

Notes to Consolidated Financial Statements

1. Summary of Significant Accounting Policies

Nature of Operations Medtronic plc (Medtronic or the Company) is the leading global healthcare technology company– alleviating pain, restoring health, and extending life for millions of people around the world. The Company provides innovative products and therapies to serve healthcare systems, physicians, clinicians, and patients. Medtronic was founded in 1949 and is headquartered in Dublin, Ireland.

Principles of Consolidation The consolidated financial statements include the accounts of Medtronic plc, its wholly-owned subsidiaries, entities for which the Company has a controlling financial interest, and variable interest entities for which the Company is the primary beneficiary. Intercompany transactions and balances have been fully eliminated in consolidation. Certain reclassifications have been made to prior year financial statements to conform to classifications used in the current year. Amounts reported in millions within this annual report are computed based on the amounts in thousands, and therefore, the sum of the components may not equal the total amount reported in millions due to rounding. Additionally, certain columns and rows within tables may not sum due to rounding.

Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States (U.S.) (U.S. GAAP) requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Estimates are used when accounting for items such as income taxes, contingencies, intangible asset, and liability valuations. Actual results may or may not differ from those estimates.

COVID-19 has had, and may continue to have, an adverse effect on our business, results of operations, financial condition, and cash flows, and its future impacts remain uncertain and unpredictable. The Company has considered the disruptions caused by COVID-19 and has assessed the potential impact on certain accounting estimates including, but not limited to, the allowance for doubtful accounts, inventory reserves, return reserves, the valuation of goodwill, intangible assets, other long-lived assets, investments and contingent consideration, as of April 29, 2022 and through the date of this report. There was not a material impact to accounting estimates associated with the Company’s consolidated financial statements as of and for each of the three fiscal years ended April 29, 2022, April 30, 2021, and April 24, 2020.

Fiscal Year-End The Company utilizes a 52/53-week fiscal year, ending the last Friday in April, for the presentation of its consolidated financial statements and related notes thereto at April 29, 2022 and April 30, 2021 and for each of the three fiscal years ended April 29, 2022 (fiscal year 2022), April 30, 2021 (fiscal year 2021), and April 24, 2020 (fiscal year 2020). Fiscal year 2021 was a 53-week year, with the extra week having occurred in the first fiscal month of the first quarter.

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 The Company invests in marketable debt and equity securities, investments that do not have readily determinable fair values, and investments accounted for under the equity method.

Marketable debt securities are classified and accounted for as available-for-sale. 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. The Company determines the appropriate classification of its investments in marketable debt securities at the time of purchase and reevaluates such determinations at each balance sheet date. The classification of marketable debt securities as current or long-term is based on the nature of the securities and the availability for use in current operations consistent with the Company's management of its capital structure and liquidity.

Certain of the Company’s investments in marketable equity securities and other securities are long-term, strategic investments in companies that are in various stages of development and are included in other assets on the consolidated balance sheets. Marketable equity securities are recorded at fair value in the consolidated balance sheets. The change in fair value of marketable equity securities is recognized within other non-operating income, net in the consolidated statements of income. At each reporting period, the Company makes a qualitative assessment considering impairment indicators to evaluate whether the investment is impaired. Equity securities accounted for under the equity method are initially recorded at the amount of the Company’s investment and are adjusted each period for the Company’s share of the investee’s income or loss and dividends paid. Securities accounted for under the equity method are reviewed quarterly for changes in circumstance or the occurrence of events that suggest other than temporary impairment has occurred.

Accounts Receivable and Allowance for Doubtful Accounts and Credit Losses The Company grants credit to customers in the normal course of business and maintains an allowance for doubtful accounts for potential credit losses. When evaluating allowances for doubtful accounts, the Company considers various factors, including historical experience and customer-specific information. Uncollectible accounts are written-off against the allowance when it is deemed that a customer account is uncollectible.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Inventories Inventories are stated at the lower of cost or net realizable value, with cost determined on a first-in, first-out basis. The Company reduces the carrying value of inventories for items that are potentially excess, obsolete, or slow-moving based on changes in customer demand, technology developments, or other economic factors.

Property, Plant, and Equipment Property, plant, and equipment is stated at cost and depreciated over the useful lives of the assets using the straight-line method. Additions and improvements that extend the lives of the assets are capitalized, while expenditures for repairs and maintenance are expensed as incurred. The Company assesses property, plant, and equipment for impairment whenever events or changes in circumstances indicate that the carrying amount of property, plant, and equipment asset groupings may not be recoverable. The cost of interest that is incurred in connection with significant ongoing construction projects is capitalized using a weighted average interest rate. These costs are included in property, plant, and equipment and amortized over the useful life of the related asset. Upon retirement or disposal of property, plant, and equipment, the costs and related amounts of accumulated depreciation or amortization are eliminated from the asset and accumulated depreciation accounts. The difference, if any, between the net asset value and the proceeds, is recognized in earnings.

Goodwill and Intangible Assets Goodwill is the excess of the purchase price over the estimated fair value of net assets of acquired businesses. The Company assesses goodwill for impairment annually in the third quarter of the fiscal year and whenever an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is performed at a reporting unit level. The test for impairment of goodwill requires the Company to make several estimates related to projected future cash flows to determine the fair value of the goodwill reporting units. The Company calculates the excess of each reporting unit's fair value over its carrying amount, including goodwill, utilizing a discounted cash flow analysis. Internal operational budgets and long-range strategic plans are used as a basis for the cash flow analysis. The Company also utilizes assumptions for working capital, capital expenditures, and terminal growth rates. The discount rate applied to the cash flow analysis is based on the weighted average cost of capital (“WACC”) for each reporting unit. An impairment is recognized when the carrying amount of the reporting unit’s net assets exceeds the estimated fair value of the reporting unit.

Intangible assets include patents, trademarks, tradenames, customer relationships, purchased technology, and in-process research and development (IPR&D). Intangible assets with a definite life are amortized on a straight-line basis with estimated useful lives typically ranging from three to 20 years. Amortization is recognized within amortization of intangible assets in the consolidated statements of income. Intangible assets with a definite life are tested 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 is recognized based on the amount by which the carrying value exceeds the fair value. The fair value of an intangible asset (asset group) is estimated by utilizing a discounted cash flow analysis.

Acquired IPR&D represents the fair value assigned to those research and development projects that were acquired in a business combination for which the related products have not received regulatory approval and have no alternative future use. IPR&D is capitalized at its fair value as an indefinite-lived intangible asset, and any development costs incurred after the acquisition are expensed as incurred. The fair value of IPR&D is determined by estimating the future cash flows of each project and discounting the net cash flows back to their present values. Upon achieving regulatory approval or commercial viability for the related product, the indefinite-lived intangible asset is accounted for as a definite-lived asset and is amortized on a straight-line basis over the estimated useful life. If the project is not completed or is terminated or abandoned, the Company may have an impairment related to the IPR&D, which is charged to expense. Indefinite-lived intangible assets are tested for impairment annually in the third quarter of the fiscal year and whenever events or changes in circumstances indicate that the carrying amount may be impaired. Impairment is calculated as the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted future cash flow analysis. IPR&D with no alternative future use acquired outside of a business combination is expensed immediately.

Contingent Consideration Certain of the Company’s business combinations involve potential payment of future consideration that is contingent upon the achievement of certain product development milestones and/or contingent on the acquired business reaching certain performance milestones. The Company records contingent consideration at fair value at the date of acquisition based on the consideration expected to be transferred, estimated as the probability-weighted future cash flows, discounted back to present value. The fair value of contingent consideration is measured using projected payment dates, discount rates, probabilities of payment, and projected revenues (for revenue-based considerations). Projected revenues are based on the Company’s most recent internal operational budgets and long-range strategic plans. The discount rate used is determined at the time of measurement in accordance with accepted valuation methodologies. Changes in projected revenues, probabilities of payment, discount rates, and projected payment dates may result in adjustments to the fair value measurements. Contingent consideration is remeasured each reporting period using Level 3 inputs, and the change in fair value, including accretion for the passage of time, is recognized as income or expense within other operating expense, net in the consolidated statements of income. Contingent consideration payments made soon after the acquisition date are classified as investing activities in the

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

consolidated statements of cash flows. Contingent consideration payments not made soon after the acquisition date that are related to the acquisition date fair value are reported as financing activities in the consolidated statements of cash flows, and amounts paid in excess of the original acquisition date fair value are reported as operating activities in the consolidated statements of cash flows.

Self-Insurance The Company self-insures the majority of its insurable risks, including medical and dental costs, disability coverage, physical loss to property, business interruptions, workers’ compensation, comprehensive general, and product liability. Insurance coverage is obtained for risks required to be insured by law or contract. The Company uses claims data and historical experience, as applicable, to estimate liabilities associated with the exposures that the Company has self-insured.

Retirement Benefit Plan Assumptions The Company sponsors various retirement benefit plans, including defined benefit pension plans, post-retirement medical plans, defined contribution savings plans, and termination indemnity plans, covering substantially all U.S. employees and many employees outside the U.S. See Note 15 for assumptions used in determining pension and post-retirement benefit costs and liabilities.

Derivatives The Company recognizes all derivative financial instruments in its consolidated financial statements at fair value in accordance with authoritative guidance on derivatives and hedging, and presents assets and liabilities associated with derivative financial instruments on a gross basis in the consolidated financial statements. For derivative instruments that are designated and qualify as hedging instruments, the hedging instrument must be designated as a fair value hedge or a cash flow hedge, based upon the exposure being hedged. See Note 7 for more information on the Company's derivative instruments and hedging programs.

Fair Value Measurements The Company follows the authoritative guidance on fair value measurements and disclosures with respect to assets and liabilities that are measured at fair value on both a recurring and nonrecurring basis. Fair value is defined as the exit price, or the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants as of the measurement date. The authoritative guidance also establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are inputs market participants would use in valuing the asset or liability, based on market data obtained from sources independent of the Company. Unobservable inputs are inputs that reflect the Company’s assumptions about the factors market participants would use in valuing the asset or liability developed based upon the best information available in the circumstances. The categorization of financial assets and financial liabilities within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The hierarchy is broken down into three levels defined as follows:

• Level 1 - Inputs are quoted prices in active markets for identical assets or liabilities.

• Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, and inputs (other than quoted prices) that are observable for the asset or liability, either directly or indirectly.

• Level 3 - Inputs are unobservable for the asset or liability.

Financial assets that are classified as Level 1 securities include highly liquid government bonds within U.S. government and agency securities and marketable equity securities for which quoted market prices are available. In addition, the Company classifies currency forward contracts as Level 1 since they are valued using quoted market prices in active markets which have identical assets or liabilities.

The valuation for most fixed maturity securities are classified as Level 2. Financial assets that are classified as Level 2 include corporate debt securities, government and agency securities, other asset-backed securities, certificate of deposits, debt funds, and mortgage-backed securities whose value is determined using inputs that are observable in the market or may be derived principally from, or corroborated by, observable market data such as pricing for similar securities, recently executed transactions, cash flow models with yield curves, and benchmark securities. In addition, total return swaps are included in Level 2 as the Company uses inputs other than quoted prices that are observable for the asset. The Level 2 derivative instruments are primarily valued using standard calculations and models that use readily observable market data as their basis.

Financial assets are considered Level 3 when their fair values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable. Financial assets that are classified as Level 3 include certain investment securities for which there is limited market activity such that the determination of fair value requires significant judgment or estimation, and auction rate securities. With the exception of auction rate securities, these securities are valued using third-party pricing sources that incorporate transaction details such as contractual terms, maturity, timing, and amount of expected future cash flows, as well as assumptions about liquidity and credit valuation adjustments by market participants. The fair value of auction rate securities is estimated by the Company using a discounted cash flow model, which incorporates significant unobservable inputs. The significant unobservable inputs used in the fair value measurement of the Company’s auction rate securities are years to principal recovery and the

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

illiquidity premium that is incorporated into the discount rate. For goodwill, other intangible assets, and IPR&D, 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.

Certain investments for which the fair value is measured using the net asset value per share (or its equivalent) practical expedient are excluded from the fair value hierarchy. Financial assets for which the fair value is measured using the net asset value per share practical expedient include certain debt funds, equity and fixed income commingled trusts, and registered investment companies.

Revenue Recognition The Company sells its products through direct sales representatives and independent distributors. Additionally, a portion of the Company's revenue is generated from consignment inventory maintained at hospitals. The Company recognizes revenue when control is transferred to the customer. For products sold through direct sales representatives and independent distributors, control is transferred upon shipment or upon delivery, based on the contract terms and legal requirements. For consignment inventory, control is transferred when the product is used or implanted. Payment terms vary depending on the country of sale, type of customer, and type of product.

If a contract contains more than one performance obligation, the transaction price is allocated to each performance obligation based on relative standalone selling price. Shipping and handling is treated as a fulfillment activity rather than a promised service, and therefore, is not considered a performance obligation. Taxes assessed by a governmental authority that are both imposed on, and concurrent with, a specific revenue producing transaction and collected by the Company from customers (for example, sales, use, value added, and some excise taxes) are not included in revenue. For contracts that have an original duration of one year or less, the Company uses the practical expedient applicable to such contracts and does not adjust the transaction price for the time value of money.

The amount of revenue recognized reflects sales rebates and returns, which are estimated based on sales terms, historical experience, and trend analysis. In estimating rebates, the Company considers the lag time between the point of sale and the payment of the rebate claim, the stated rebate rates, and other relevant information. The Company records adjustments to rebates and returns reserves as increases or decreases of revenue.

The Company records a deferred revenue liability if a customer pays consideration before the Company transfers a good or service to the customer. Deferred revenue primarily represents remote monitoring services and equipment maintenance, for which consideration is received at the same time as consideration for the device or equipment. Revenue related to remote monitoring services and equipment maintenance is recognized over the service period as time elapses.

Shipping and Handling Shipping and handling costs incurred to physically move product from the Company's premises to the customer's premises are recognized in selling, general, and administrative expense in the consolidated statements of income and were $354 million, $308 million, and $347 million in fiscal years 2022, 2021, and 2020, respectively. Other shipping and handling costs incurred to store, move, and prepare products for shipment are recognized in cost of products sold in the consolidated statements of income.

Research and Development Research and development costs are expensed when incurred. Research and development costs include costs of research, engineering, and technical activities to develop a new product or service or make significant improvement to an existing product or manufacturing process. Research and development costs also include pre-approval regulatory and clinical trial expenses.

Contingencies The Company records a liability in the consolidated financial statements for loss contingencies when a loss is known or considered probable, and the amount may be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or range of loss is disclosed.

Income Taxes The Company has deferred taxes that arise as a result of the different treatment of transactions for U.S. GAAP and income tax accounting, known as temporary differences. The Company records the tax effect of these temporary differences as deferred tax assets and deferred tax liabilities. Deferred tax assets generally represent items that may be used as a tax deduction or credit in a tax return in future years for which the Company has already recognized the tax benefit in the consolidated statements of income. The Company establishes valuation allowances for deferred tax assets when the amount of expected future taxable income is not likely to support the use of the deduction or credit. Deferred tax liabilities generally represent tax expense for which payment has been deferred or expense has already been taken as a deduction on the Company’s tax return but has not yet been recognized as an expense in the consolidated statements of income. See Footnote 13 for more information on the Company's uncertain tax positions and tax policies.

Other Operating Expense, Net Other operating expense, net primarily includes royalty income and expense, currency remeasurement and derivative gains and losses, Puerto Rico excise taxes, changes in fair value of contingent consideration, changes in amounts accrued for certain contingent liabilities for a past acquisition, charges related to the June 2021 decision to stop the distribution and sale of Medtronic's HVAD System within the Mechanical Circulatory Support Operating Unit (MCS) (MCS charges), impairment charges, and income from funded research and development arrangements.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Other Non-Operating Income, Net Other non-operating income, net includes the non-service component of net periodic pension and post-retirement benefit cost, investment gains and losses, and interest income.

Currency Translation Assets and liabilities of non-U.S. dollar functional currency entities are translated to U.S. dollars at period-end exchange rates, and the currency impacts arising from the translation of the assets and liabilities are recorded as a cumulative translation adjustment, a component of accumulated other comprehensive loss, on the consolidated balance sheets. Elements of the consolidated statements of income are translated at the average monthly currency exchange rates in effect during the period. Currency transaction gains and losses are included in other operating expense, net in the consolidated statements of income.

Stock-Based Compensation The Company measures stock-based compensation expense at the grant date based on the fair value of the award and recognizes the compensation expense over the requisite service period, which is generally the vesting period. The amount of stock-based compensation expense recognized during a period is based on the portion of the awards that are expected to vest. The Company estimates pre-vesting forfeitures at the time of grant and revises the estimates in subsequent periods.

Recently Adopted Accounting Standards

Current Expected Credit Losses

In June 2016, the Financial Accounting Standards Board (FASB) issued guidance changing the methodology to be used to measure credit losses for certain financial instruments and financial assets, including trade receivables. The new methodology requires the recognition of an allowance that reflects the current estimate of credit losses expected to be incurred over the life of the financial asset. The Company adopted this guidance using the modified retrospective method in the first quarter of fiscal year 2021. The adoption of this guidance did not have a material impact to the Company’s consolidated financial statements.

Leases

In February 2016, the FASB issued guidance which requires lessees to recognize right-of-use assets and lease liabilities on the balance sheet. This guidance also requires additional qualitative and quantitative lease related disclosures in the notes to the consolidated financial statements. The Company adopted this guidance using the modified retrospective method in the first quarter of fiscal year 2020.

During the implementation, the Company elected the package of practical expedients available under the transition guidance that allowed an entity not to reassess whether any expired or existing contracts are or contain leases, the classification for any expired or existing leases or any initial direct costs for existing leases. Further, the Company made accounting policy elections to not apply the recognition requirements to short-term leases and to account for lease and nonlease components as a single lease component.

The adoption of this guidance resulted in the recognition of right-of-use assets and lease liabilities in an amount of approximately $1.0 billion, an immaterial cumulative-effect adjustment to retained earnings as of April 27, 2019, and expansion of lease related disclosures*.* The adoption of this guidance did not have a material impact on the Company's consolidated statements of income or consolidated statements of cash flows.

2. Revenue

The Company's revenues are principally derived from device-based medical therapies and services related to cardiac rhythm disorders, cardiovascular disease, renal disease, neurological disorders and diseases, spinal conditions and musculoskeletal trauma, chronic pain, urological and digestive disorders, ear, nose, and throat conditions, and diabetes conditions as well as advanced and general surgical care products, respiratory and monitoring solutions, and neurological surgery technologies. The Company's primary customers include healthcare systems, clinics, third-party healthcare providers, distributors, and other institutions, including governmental healthcare programs and group purchasing organizations.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The table below illustrates net sales by segment and division for fiscal years 2022, 2021, and 2020:

			Net Sales by Fiscal Year
(in millions)			2022						2021						2020
Cardiac Rhythm & Heart Failure			$	5,908					$	5,584					$	5,141
Structural Heart & Aortic			3,055						2,834						2,842
Coronary & Peripheral Vascular			2,460						2,354						2,486
Cardiovascular			11,423						10,772						10,468
Surgical Innovations			6,060						5,438						5,513
Respiratory, Gastrointestinal, & Renal			3,081						3,298						2,839
Medical Surgical			9,141						8,737						8,352
Cranial & Spinal Technologies			4,456						4,288						4,082
Specialty Therapies			2,592						2,307						2,147
Neuromodulation			1,735						1,601						1,497
Neuroscience			8,784						8,195						7,725
Diabetes			2,338						2,413						2,368
Total			$	31,686					$	30,117					$	28,913

The table below includes net sales by market geography and segment for fiscal years 2022, 2021, and 2020:

			U.S.****(1)																		Non-U.S. Developed Markets**(2)**																		Emerging Markets**(3)**
(in millions)			Fiscal Year 2022						Fiscal Year 2021						Fiscal Year 2020						Fiscal Year 2022						Fiscal Year 2021						Fiscal Year 2020						Fiscal Year 2022						Fiscal Year 2021						Fiscal Year 2020
Cardiovascular			$	5,545					$	5,248					$	5,062					$	3,866					$	3,752					$	3,519					$	2,012					$	1,773					$	1,887
Medical Surgical			3,862						3,650						3,532						3,373						3,320						3,169						1,905						1,766						1,651
Neuroscience			5,753						5,456						5,122						1,801						1,724						1,659						1,229						1,015						945
Diabetes			974						1,171						1,204						1,085						1,019						940						279						222						224
Total			$	16,135					$	15,526					$	14,919					$	10,126					$	9,815					$	9,287					$	5,426					$	4,777					$	4,707

(1)U.S. includes the United States and U.S. territories.

(2)Non-U.S. developed markets include Japan, Australia, New Zealand, Korea, Canada, and the countries of Western Europe.

(3)Emerging markets include the countries of the Middle East, Africa, Latin America, Eastern Europe, and the countries of Asia that are not included in the non-U.S. developed markets, as defined above.

At April 29, 2022, $981 million of rebates were classified as other accrued expenses, and $548 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheet. At April 30, 2021, $906 million of rebates were classified as other accrued expenses, and $485 million of rebates were classified as a reduction of accounts receivable in the consolidated balance sheet. During fiscal year 2022, adjustments to rebate and return reserves recognized in revenue that were included in the rebate and return reserves at the beginning of the period were not material.

Deferred Revenue and Remaining Performance Obligations

Deferred revenue at April 29, 2022 and April 30, 2021 was $399 million and $368 million, respectively. At April 29, 2022 and April 30, 2021, $305 million and $276 million was included in other accrued expenses, respectively, and $94 million and $93 million was included in other liabilities, respectively. During the fiscal year ended April 29, 2022, the Company recognized $243 million of revenue that was included in deferred revenue as of April 30, 2021.

Remaining performance obligations include goods and services that have not yet been delivered or provided under existing, noncancellable contracts with minimum purchase commitments. At April 29, 2022, the estimated revenue expected to be recognized in future periods related to unsatisfied performance obligations for executed contracts with an original duration of one year or more was approximately $925 million. The Company expects to recognize revenue on the majority of these remaining performance obligations over the next three years.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

3. Acquisitions

The Company had acquisitions during fiscal years 2022 and 2021 that were accounted for as business combinations. The assets and liabilities of 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 acquisitions during fiscal years 2022 and 2021 was not significant, either individually or in the aggregate, to the consolidated results of the Company. 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. Purchase price allocation adjustments for fiscal years 2022 and 2021 business combinations were not significant.

Fiscal Year 2022

The acquisition date fair value of net assets acquired during fiscal year 2022 was $125 million, consisting of $154 million of assets acquired and $29 million of liabilities assumed. Based upon preliminary valuations, assets acquired were primarily comprised of $50 million of technology-based intangible assets with estimated useful lives ranging from 15 to 16 years, and $80 million of goodwill. The goodwill is not deductible for tax purposes. The Company recognized $31 million of contingent consideration liabilities in connection with business combinations during fiscal year 2022, which are comprised of revenue and regulatory milestone-based payments.

Fiscal Year 2021

The acquisition date fair value of net assets acquired during fiscal year 2021 was $1.2 billion, consisting of $1.4 billion of assets acquired and $161 million of liabilities assumed. Based upon final valuations, assets acquired were primarily comprised of $417 million of technology-based intangible assets and $13 million of customer-related intangible assets with estimated useful lives ranging from 8 to 15 years, and $816 million of goodwill. The goodwill is not deductible for tax purposes. The Company recognized $253 million of contingent consideration liabilities in connection with business combinations during fiscal year 2021, which are comprised of revenue and regulatory milestone-based payments. Additionally, the Company recognized a gain of $132 million related to a change in amounts accrued for certain contingent liabilities from a past acquisition. The benefit was recognized in other operating expense, net in the consolidated statements of income as the purchase accounting was finalized in fiscal year 2020.

Subsequent Acquisitions

Subsequent to fiscal year 2022, on May 13, 2022, the Company's Neuroscience segment acquired Intersect ENT, a global ear, nose, and throat (ENT) medical technology leader. The acquisition expands Medtronic's portfolio of products used during ENT procedures and, combined with the Company's navigation, powered instruments, and existing tissue health products, will offer a broader suite of solutions to assist surgeons treating patients who suffer from chronic rhinosinusitis (CRS). Total consideration for the transaction, in which the Company acquired all outstanding shares of Intersect ENT for $28.25 per share, was approximately $1.2 billion. The transaction will be accounted for as a business combination using the acquisition method of accounting. This requires, among other things, that assets acquired and liabilities assumed be recognized at their fair values as of the acquisition date.

Due to the limited amount of time since the acquisition date and the significant limitations on access to Intersect ENT information prior to the acquisition date the preliminary acquisition valuation for the business combination is incomplete at this time. As a result, the Company is unable to provide the amounts recognized as of the acquisition date for the major classes of assets acquired and liabilities assumed, including the information required for valuation of intangible assets and goodwill. We will include such disclosures in our Form 10-Q for the quarter ending July 29, 2022.

Acquired In-Process Research & Development (IPR&D)

IPR&D with no alternative future use acquired outside of a business combination is expensed immediately. During fiscal year 2022, the Company acquired $101 million of IPR&D in connection with asset acquisitions of technology not approved by regulators, which was recognized in research and development expense in the consolidated statements of income. During fiscal year 2021, IPR&D acquired in connection with asset acquisitions was not significant.

Contingent Consideration

Certain of the Company’s business combinations involve potential payment of future consideration that is contingent upon the achievement of certain product development milestones and/or contingent on the acquired business reaching certain performance milestones. A liability is recorded for the estimated fair value of the contingent consideration on the acquisition date. The fair value of the contingent consideration is remeasured at each reporting period, and the change in fair value is recognized within other operating expense, net in the consolidated statements of income.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The fair value of contingent consideration at April 29, 2022 and April 30, 2021 was $119 million and $270 million, respectively. At April 29, 2022, $35 million was recorded in other accrued expenses, and $84 million was recorded in other liabilities on the consolidated balance sheets. At April 30, 2021, $78 million was reflected in other accrued expenses, and $192 million was reflected in other liabilities on the consolidated balance sheets.

The following table provides a reconciliation of the beginning and ending balances of contingent consideration:

			Fiscal Year
(in millions)			2022						2021
Beginning Balance			$	270					$	280
Purchase price contingent consideration			31						253
Purchase price allocation adjustments			7						—
Payments			(86)						(299)
Change in fair value			(103)						36
Ending Balance			$	119					$	270

The recurring Level 3 fair value measurements of contingent consideration for which a liability is recorded include the following significant unobservable inputs:

(in millions)						Fair Value at April 29, 2022												Unobservable Input						Range						Weighted Average (1)
																		Discount rate						11.2% - 27.2%						14.6%
Revenue and other performance-based payments						$	104											Probability of payment						100%						100%
																		Projected fiscal year of payment						2023 - 2027						2025
																		Discount rate						5.5%						5.5%
Product development and other milestone-based payments						$	15											Probability of payment						100%						100%
																		Projected fiscal year of payment						2023 - 2024						2024

(1) Unobservable inputs were weighted by the relative fair value of the contingent consideration liability. For projected fiscal year of payment, the amount represents the median of the inputs and is not a weighted average.

4. Restructuring Charges

Enterprise Excellence

In the third quarter of fiscal year 2018, the Company announced its Enterprise Excellence restructuring program, which was designed to leverage the Company's global size and scale, as well as enhance the customer and employee experience, with a focus on three objectives: global operations, functional optimization, and commercial optimization.

Since inception, the Company has incurred pre-tax exit and disposal costs and other costs, across all segments, of $1.6 billion in connection with the Enterprise Excellence program. In total, the Company estimates it will recognize approximately $1.8 billion of exit and disposal costs and other costs related to the program by the end of fiscal year 2023. The remaining charges are costs associated with the restructuring program, such as salaries and benefits for employees supporting the program, including program management and transition teams, and strategic and operational consulting services related to the three objectives of the program. These charges are recognized within restructuring charges, net, cost of products sold, and selling, general, and administrative expense in the consolidated statements of income.

For fiscal years 2022, 2021 and 2020, the Company recognized net charges of $259 million, $349 million, and $441 million, respectively, of which $116 million, $128 million, and $155 million, respectively, were recognized within cost of products sold, and $112 million, $169 million, and $168 million, respectively, were recognized within selling, general, and administrative expense in the consolidated statements of income.

Simplification

In the first quarter of fiscal year 2021, the Company initiated the Simplification restructuring program, designed to make the Company a more nimble and competitive organization focused on accelerating innovation, enhancing the customer experience, driving revenue growth, and winning market share, while also more efficiently and effectively leveraging the enterprise scale.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Since inception, the Company has incurred pre-tax exit and disposal costs and other costs, across all segments, of $349 million in connection with the program. In total, the Company estimates it will recognize approximately $450 million of exit and disposal costs and other costs related to the Simplification program by the end of fiscal year 2023. The remaining charges are costs associated with the restructuring program, such as salaries for employees supporting the program and consulting expenses. These charges are recognized within restructuring charges, net, cost of products sold, and selling, general, and administrative expense in the consolidated statements of income.

For fiscal years 2022 and 2021, the Company recognized net charges of $82 million and $268 million, respectively, of which $45 million and $27 million were recognized within selling, general, and administrative expense in the consolidated statements of income. The net charges for fiscal year 2021 included $97 million of incremental defined benefit pension and post-retirement related expenses for employees that accepted voluntary early retirement packages and are not included in the table below, as they are associated with costs that are accounted for under the pension and post-retirement rules. See Note 15 for further discussion on these charges.

The following table summarizes the activity related to the restructuring programs noted above for fiscal years 2022, 2021, and 2020:

(in millions)			Employee Termination Benefits						Associated Costs**(1)**						Asset Write-downs						Other Costs						Total
April 26, 2019			$	101					$	9					$	—					$	12					$	122
Charges			129						300						24						9						462
Cash payments			(128)						(290)						—						(9)						(427)
Settled non-cash			—						—						(24)						—						(24)
Accrual adjustments(2)			(13)						—						—						(8)						(21)
April 24, 2020			89						19						—						4						112
Charges			213						322						—						4						539
Cash payments			(162)						(319)						—						(5)						(486)
Accrual adjustments(2)			(17)						—						—						(2)						(19)
April 30, 2021			123						22						—						1						146
Charges			80						274						—						—						354
Cash payments			(109)						(269)						—						—						(378)
Accrual adjustments(2)			(13)						—						—						—						(13)
April 29, 2022			$	81					$	27					$	—					$	1					$	110

(1)Associated costs include costs incurred as a direct result of the restructuring program, such as salaries for employees supporting the program and consulting expenses.

(2)Accrual adjustments relate to certain employees identified for termination finding other positions within the Company or contract terminations being settled for less than originally estimated.

Mechanical Circulatory Support (MCS)

On June 3, 2021, the Company announced the decision to stop the distribution and sale of the Medtronic HVAD System in light of a growing body of observational clinical comparisons indicating a lower frequency of neurological adverse events and mortality with another circulatory support device available to patients compared to the HVAD system. In connection with this decision, the Company recorded charges of $726 million (MCS charges) within the Cardiovascular segment during the first quarter of fiscal year 2022, including $58 million recognized in costs of products sold and $668 million recognized within other operating expense, net in the consolidated statement of income*.* The charges included $515 million of non-cash impairments and write-downs primarily related to $409 million of intangible asset impairments and $58 million of inventory write-downs. The Company also recorded charges of $211 million for commitments and obligations associated with the decision, which included charges for patient support obligations, restructuring, and other associated costs. During the fourth quarter of fiscal year 2022, the Company recorded additional charges of $155 million within other operating expense, net primarily related to incremental commitments and obligations associated with the exit of the business. As of April 29, 2022, accruals were recorded in the consolidated balance sheet for these obligations, with $82 million reflected in other accrued expenses and $152 million recorded in other liabilities. Medtronic remains committed to serving the needs of the approximately 3,500 patients currently implanted with the HVAD system.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

5. Financial Instruments

Debt Securities

The Company holds investments in marketable debt securities that are classified and accounted for as available-for-sale and are remeasured on a recurring basis. The following tables summarize the Company's investments in available-for-sale debt securities by significant investment category and the related consolidated balance sheet classification at April 29, 2022 and April 30, 2021:

			April 29, 2022
			Valuation																								Balance Sheet Classification
(in millions)			Cost						Unrealized Gains						Unrealized Losses						Fair Value						Investments						Other Assets
Level 1:
U.S. government and agency securities			$	533					$	1					$	(15)					$	518					$	518					$	—
Level 2:
Corporate debt securities			4,457						4						(140)						4,321						4,321						—
U.S. government and agency securities			910						—						(41)						869						869						—
Mortgage-backed securities			592						—						(35)						558						558						—
Non-U.S. government and agency securities			17						—						—						17						17						—
Certificates of deposit			20						—						—						20						20
Other asset-backed securities			567						—						(11)						556						556						—
Total Level 2			6,563						4						(227)						6,341						6,341						—
Level 3:
Auction rate securities			36						—						(3)						33						—						33
Total available-for-sale debt securities			$	7,131					$	5					$	(245)					$	6,893					$	6,859					$	33

			April 30, 2021
			Valuation																								Balance Sheet Classification
(in millions)			Cost						Unrealized Gains						Unrealized Losses						Fair Value						Investments						Other Assets
Level 1:
U.S. government and agency securities			$	505					$	26					$	(3)					$	528					$	528					$	—
Level 2:
Corporate debt securities			4,557						103						(13)						4,647						4,647						—
U.S. government and agency securities			810						—						(7)						804						804						—
Mortgage-backed securities			645						21						(16)						650						650						—
Non-U.S. government and agency securities			31						1						—						33						33						—
Certificates of deposit			19						—						—						19						19						—
Other asset-backed securities			534						4						(1)						537						537						—
Debt funds			7						—						—						7						7						—
Total Level 2			6,603						129						(36)						6,696						6,696						—
Level 3:
Auction rate securities			36						—						(3)						33						—						33
Total available-for-sale debt securities			$	7,144					$	155					$	(42)					$	7,257					$	7,224					$	33

The amortized cost of debt securities excludes accrued interest, which is reported in other current assets in the consolidated balance sheets.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following tables present the gross unrealized losses and fair values of the Company’s available-for-sale debt securities that have been in a continuous unrealized loss position deemed to be temporary, aggregated by investment category at April 29, 2022 and April 30, 2021:

			April 29, 2022
			Less than 12 months												More than 12 months
(in millions)			Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
U.S. government and agency securities			$	—					$	—					$	945					$	(56)
Corporate debt securities			222						(1)						2,993						(139)
Mortgage-backed securities			—						—						507						(35)
Other asset-backed securities			—						—						526						(11)
Auction rate securities			—						—						33						(3)
Total			$	222					$	(1)					$	5,004					$	(244)

			April 30, 2021
			Less than 12 months												More than 12 months
(in millions)			Fair Value						Unrealized Losses						Fair Value						Unrealized Losses
U.S. government and agency securities			$	946					$	(10)					$	—					$	—
Corporate debt securities			—						—						3,209						(13)
Mortgage-backed securities			—						—						650						(16)
Other asset-backed securities			—						—						531						(1)
Auction rate securities			—						—						33						(3)
Total			$	946					$	(10)					$	4,423					$	(32)

The Company reviews the fair value hierarchy classification on a quarterly basis. Changes in the ability to observe valuation inputs may result in a reclassification of levels for certain securities within the fair value hierarchy. There were no transfers into or out of Level 3 during the fiscal years ended April 29, 2022 and April 30, 2021. When a determination is made to classify an asset or liability within Level 3, the determination is based upon the significance of the unobservable inputs to the overall fair value measurement.

Activity related to the Company’s available-for-sale debt securities portfolio is as follows:

(in millions)			April 29, 2022						April 30, 2021						April 24, 2020
Proceeds from sales and maturities			$	9,611					$	10,420					$	9,559
Gross realized gains			15						15						25
Gross realized losses			(18)						(14)						(22)

During the fiscal year ended April 30, 2021, the Company had proceeds from maturities of investments classified as held to maturity of $911 million.

The April 29, 2022 balance of available-for-sale debt securities by contractual maturity is shown in the following table. Within the table, maturities of mortgage-backed securities have been allocated based upon timing of estimated cash flows assuming no change in the current interest rate environment. Actual maturities may differ from contractual maturities because the issuers of the securities may have the right to prepay obligations without prepayment penalties.

(in millions)			April 29, 2022
Due in one year or less			$	1,501
Due after one year through five years			3,465
Due after five years through ten years			1,271
Due after ten years			656
Total debt securities			$	6,893

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Equity Securities, Equity Method Investments, and Other Investments

The Company holds investments in equity securities with readily determinable fair values, equity investments without readily determinable fair values, investments accounted for under the equity method, and other investments. Equity securities with readily determinable fair values are included in Level 1 of the fair value hierarchy, as they are measured using quoted market prices. Equity method investments and investments without readily determinable fair values are included within Level 3 of the fair value hierarchy due to the use of significant unobservable inputs to determine fair value. To determine the fair value of these investments, the Company uses all pertinent financial information available related to the investees, including financial statements, market participant valuations from recent and proposed equity offerings, and other third-party data.

The following table summarizes the Company's equity and other investments at April 29, 2022 and April 30, 2021, which are classified as other assets in the consolidated balance sheets:

(in millions)						April 29, 2022						April 30, 2021
Investments with readily determinable fair value (marketable equity securities)						$	64					$	74
Investments without readily determinable fair values						732						537
Equity method and other investments						85						76
Total equity and other investments						$	881					$	687

The table below includes activity related to the Company’s portfolio of equity and other investments. Gains and losses on equity and other investments are recognized in other non-operating income, net in the consolidated statements of income.

(in millions)						April 29, 2022						April 30, 2021						April 24, 2020
Proceeds from sales						$	81					$	13					$	15
Gross gains						99						68						17
Gross losses						(52)						(3)						(30)
Impairment losses recognized						(17)						(4)						(4)

During the fiscal year ended April 29, 2022, there were $8 million of net unrealized gains on equity securities and other investments still held at April 29, 2022. During the fiscal year ended April 30, 2021, there were $63 million of net unrealized gains on equity securities and other investments still held at April 30, 2021.

6. Financing Arrangements

Current debt obligations consisted of the following:

(in millions)			April 29, 2022						April 30, 2021
Bank borrowings			$	12					$	2
0.000 percent three-year 2019 senior notes			798						—
0.375 percent four-year 2019 senior notes			1,596						—
0.000 percent two-year 2020 senior notes			1,330						—
Finance lease obligations			6						9
Current debt obligations			$	3,742					$	11

Bank Borrowings Outstanding bank borrowings at April 29, 2022 and April 30, 2021 were not significant.

Commercial Paper On January 26, 2015, Medtronic Global Holdings S.C.A. (Medtronic Luxco), an entity organized under the laws of Luxembourg, entered into various agreements pursuant to which Medtronic Luxco may issue United States Dollar-denominated unsecured commercial paper notes (the 2015 CP Program) on a private placement basis, and on January 31, 2020 Medtronic Luxco entered into various agreements pursuant to which Medtronic Luxco may issue Euro-denominated unsecured commercial paper notes (the 2020 CP Program) on a private placement basis. The Maximum aggregate amount outstanding at any time under the 2015 CP Program and the 2020 CP Program together may not exceed the equivalent of $3.5 billion. The Company and Medtronic, Inc. have guaranteed the obligations of Medtronic Luxco under the 2015 CP Program and the 2020 CP Program.

There was no commercial paper outstanding at April 29, 2022 and April 30, 2021, or during fiscal year 2021. During fiscal year 2022, the weighted average original maturity of the commercial paper outstanding was approximately fifteen days and the weighted average interest

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

rate was 0.70 percent. The issuance of commercial paper reduces the amount of credit available under the Company's existing credit facility, defined below.

Line of Credit On December 12, 2021, Medtronic Luxco, as borrower, entered into an amendment to its amended and restated credit agreement (Credit Facility), by and among Medtronic, Medtronic, Inc., Medtronic Luxco, the lenders from time to time party thereto, and Bank of America, N.A., as administrative agent and issuing bank, extending the maturity date of the Credit Facility to December 2026 and removing the cap on the number of extension options available.

The Credit Facility provides for a $3.5 billion five-year unsecured revolving credit facility (Credit Facility). At each anniversary date of the Credit Facility we can request a one-year extension of the maturity date. The Credit Facility provides the Company with the ability to increase its borrowing capacity by an additional $1.0 billion at any time during the term of the agreement. The Company and Medtronic, Inc. have guaranteed the obligations of the borrowers under the Credit Facility, and Medtronic Luxco will also guarantee the obligations of any designated borrower. The Credit Facility includes a multi-currency borrowing feature for certain specified foreign currencies. At April 29, 2022 and April 30, 2021, no amounts were outstanding under the Credit Facility.

Interest rates on advances on the Credit Facility are determined by a pricing matrix based on the Company’s long-term debt ratings, assigned by Standard & Poor’s Ratings Services and Moody’s Investors Service. Facility fees are payable on the Credit Facility and are determined in the same manner as the interest rates. The Company is in compliance with all covenants related to the Credit Facility.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The Company's long-term debt obligations consisted of the following:

									April 29, 2022												April 30, 2021
(in millions, except interest rates)			Maturity by Fiscal Year						Amount						Effective Interest Rate						Amount						Effective Interest Rate
0.000 percent three-year 2019 senior notes			2023						$	—					—		%				$	907					0.08		%
0.375 percent four-year 2019 senior notes			2023						—						—						1,813						0.55
0.000 percent two-year 2020 senior notes			2023						—						—						1,511						0.12
3.500 percent ten-year 2015 senior notes			2025						1,890						3.74						1,890						3.74
0.250 percent six-year 2019 senior notes			2026						1,064						0.45						1,209						0.43
0.000 percent five-year 2020 senior notes			2026						1,064						0.25						1,209						0.22
1.125 percent eight-year 2019 senior notes			2027						1,596						1.26						1,813						1.24
3.350 percent ten-year 2017 senior notes			2027						368						3.53						368						3.53
0.375 percent eight-year 2020 senior notes			2029						1,064						0.52						1,209						0.51
1.625 percent twelve-year 2019 senior notes			2031						1,064						1.75						1,209						1.74
1.000 percent twelve-year 2019 senior notes			2032						1,064						1.06						1,209						1.05
0.750 percent twelve-year 2020 senior notes			2033						1,064						0.81						1,209						0.81
4.375 percent twenty-year 2015 senior notes			2035						1,932						4.47						1,932						4.47
6.550 percent thirty-year 2007 CIFSA senior notes			2038						253						4.67						253						4.67
2.250 percent twenty-year 2019 senior notes			2039						1,064						2.35						1,209						2.34
6.500 percent thirty-year 2009 senior notes			2039						158						6.56						158						6.56
1.500 percent twenty-year 2019 senior notes			2040						1,064						1.59						1,209						1.58
5.550 percent thirty-year 2010 senior notes			2040						224						5.58						224						5.58
1.375 percent twenty-year 2020 senior notes			2041						1,064						1.47						1,209						1.46
4.500 percent thirty-year 2012 senior notes			2042						105						4.54						105						4.54
4.000 percent thirty-year 2013 senior notes			2043						305						4.09						305						4.09
4.625 percent thirty-year 2014 senior notes			2044						127						4.67						127						4.67
4.625 percent thirty-year 2015 senior notes			2045						1,813						4.69						1,813						4.69
1.750 percent thirty-year 2019 senior notes			2050						1,064						1.88						1,209						1.87
1.625 percent thirty-year 2020 senior notes			2051						1,064						1.76						1,209						1.75
Finance lease obligations			2023-2035						56						9.15						62						9.29
Debt discount, net			2023-2051						(52)						—						(75)						—
Deferred financing costs			2023-2051						(109)						—						(125)						—
Long-term debt									$	20,372											$	26,378

Senior Notes The Company has outstanding unsecured senior obligations, described as senior notes in the tables above (collectively, the Senior Notes). The Senior Notes rank equally with all other unsecured and unsubordinated indebtedness of the Company. The Company is in compliance with all covenants related to the Seniors Notes.

In June 2019, Medtronic Luxco issued six tranches of Euro-denominated Senior Notes with an aggregate principal of €5.0 billion, with maturities ranging from fiscal year 2021 to fiscal year 2050, resulting in cash proceeds of approximately $5.6 billion, net of discounts and issuance costs. The Company used the net proceeds of the offering to fund the cash tender offer and early redemption of $5.2 billion of Medtronic Inc., CIFSA, and Medtronic Luxco Senior Notes for $5.6 billion of total consideration. The Company recognized a loss on debt extinguishment of $413 million in fiscal year 2020, which primarily included cash premiums and accelerated amortization of deferred financing costs and debt discounts and premiums. The loss was recognized in interest expense in the consolidated statement of income.

In September 2020, Medtronic Global Holdings S.C.A. (Medtronic Luxco) issued an additional six tranches of Euro-denominated Senior Notes with an aggregate principal of €6.3 billion, with maturities ranging from fiscal year 2023 to fiscal year 2051, resulting in cash proceeds of approximately $7.2 billion, net of discounts and issuance costs. The Company used the net proceeds of the offering to fund the

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

early redemption of $4.3 billion of Medtronic Inc. and CIFSA Senior Notes and €1.5 billion of Medtronic Luxco Senior Notes for $6.3 billion of total consideration in October 2020. Additionally, the Company used the proceeds to repay its €750 million floating rate senior notes at maturity in March 2021. The Company recognized a loss on debt extinguishment of $308 million in fiscal year 2021, which primarily included cash premiums and accelerated amortization of deferred financing costs and debt discounts and premiums. The loss was recognized in interest expense in the consolidated statement of income.

The Euro-denominated debt issued in June 2019 and September 2020 is designated as a net investment hedge of certain of the Company's European operations. Refer to Note 7 for additional information regarding the net investment hedge.

Term Loan Agreements On May 12, 2020, Medtronic Luxco entered into a term loan agreement (Fiscal 2021 Loan Agreement) by and among Medtronic Luxco, Medtronic plc, Medtronic, Inc., and Mizuho Bank, Ltd. as administrative agent and as lender. The Fiscal 2021 Loan Agreement provided an unsecured term loan in an aggregate principal amount of up to ¥300 billion, with a term of six months and the option to extend for an additional six months at Medtronic Luxco’s option. On May 13, 2020, Medtronic Luxco borrowed the entire amount of the term loan under the Fiscal 2021 Loan Agreement. The Japanese Yen-denominated debt was designated as a net investment hedge for certain of the Company's Japanese operations. Borrowings under the Fiscal 2021 Loan Agreement carried interest at the TIBOR Rate (as defined in the Fiscal 2021 Loan Agreement) plus a margin of 0.50% per annum. Medtronic plc and Medtronic, Inc. guaranteed the obligations of Medtronic Luxco under the Fiscal 2021 Loan Agreement. On November 12, 2020, the Company exercised its option to extend the term loan for an additional six months. During the fourth quarter of fiscal year 2021, the Company de-designated the Yen-denominated debt as a net investment hedge and repaid the term loan in full, including interest.

Subsequent to fiscal year 2022, on May 2, 2022, Medtronic Luxco entered into a term loan agreement (Fiscal 2023 Loan Agreement) by and among Medtronic Luxco, Medtronic plc, Medtronic, Inc., and Mizuho Bank, Ltd. as administrative agent and as lender. The Fiscal 2023 Loan Agreement provides an unsecured term loan in an aggregate principal amount of up to ¥300 billion with a term of 364 days. Borrowings under the Fiscal 2023 Loan Agreement bear interest at the TIBOR Rate (as defined in the Fiscal 2023 Loan Agreement) plus a margin of 0.40% per annum. Medtronic plc and Medtronic, Inc. have guaranteed the obligations of Medtronic Luxco under the Fiscal 2023 Loan Agreement. In May and June 2022, Medtronic Luxco borrowed an aggregate of ¥297 billion, or approximately $2.3 billion, of the term loan, under the Fiscal 2023 Loan Agreement. The Company used the net proceeds of the borrowings to fund the early redemption of $1.9 billion of Medtronic Inc.'s 3.500% Senior Notes due 2025 for $1.9 billion of total consideration, and $368 million of Medtronic Luxco's 3.350% Senior Notes due 2027 for $376 million of total consideration. The Company will recognize a total loss on debt extinguishment of $53 million in the quarter ended July 29, 2022, which primarily includes cash premiums and accelerated amortization of deferred financing costs and debt discounts and premiums. The loss will be recognized in interest expense in the consolidated statements of income.

Contractual maturities of debt for the next five fiscal years and thereafter, excluding deferred financing costs and debt discount, net, are as follows:

(in millions)
2023			$	3,744
2024			6
2025			1,895
2026			2,133
2027			1,969
Thereafter			14,528
Total			$	24,275

Financial Instruments Not Measured at Fair Value

At April 29, 2022, the estimated fair value of the Company’s Senior Notes was $22.9 billion compared to a principal value of $24.2 billion. At April 30, 2021 the estimated fair value was $28.6 billion compared to a principal value of $26.5 billion. The fair value was estimated using quoted market prices for the publicly registered Senior Notes, which are classified as Level 2 within the fair value hierarchy. The fair values and principal values consider the terms of the related debt and exclude the impacts of debt discounts and hedging activity.

7. Derivatives and Currency Exchange Risk Management

The Company uses operational and economic hedges, including currency exchange rate derivative contracts and interest rate derivative instruments, to manage the impact of currency exchange and interest rate changes on earnings and cash flows. In addition, the Company uses cross currency interest rate swaps to manage currency risk related to certain debt. In order to minimize earnings and cash flow volatility resulting from currency exchange rate changes, the Company enters into derivative instruments, principally forward currency exchange rate

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

contracts. These contracts are designed to hedge anticipated foreign currency transactions and changes in the value of specific assets and liabilities. At inception of the contract, the derivative is designated as either a freestanding derivative or a cash flow hedge. Currencies of our derivative instruments include the Euro, Japanese Yen, Chinese Yuan, and others. The Company does not enter into currency exchange rate derivative contracts for speculative purposes. The gross notional amount of all currency exchange rate derivative instruments outstanding was $13.8 billion and $14.7 billion at April 29, 2022 and April 30, 2021, respectively.

The Company also uses derivative and non-derivative instruments to manage the impact of currency exchange rate changes on net investments in foreign currency-denominated operations. The information that follows explains the various types of derivatives and financial instruments used by the Company, reasons the Company uses such instruments, and the impact such instruments have on the Company’s consolidated balance sheets and statements of income.

Freestanding Derivative Contracts

Freestanding derivative contracts are primarily used to offset the Company’s exposure to the change in value of specific foreign-currency-denominated assets and liabilities, and to offset variability of cash flows associated with forecasted transactions denominated in foreign currencies. The gross notional amount of the Company's freestanding currency exchange rate contracts outstanding at April 29, 2022 and April 30, 2021 was $4.9 billion and $5.7 billion, respectively. The Company's freestanding currency exchange rate contracts are not designated as hedges, and therefore, changes in the value of these contracts are recognized in earnings, thereby offsetting the current earnings effect of the related change in value of foreign-currency-denominated assets, liabilities, and cash flows.

The Company also uses total return swaps to hedge the liability of a non-qualified, deferred compensation plan. The gross notional amount of the Company's total return swaps outstanding at April 29, 2022 and April 30, 2021 was $226 million and $243 million, respectively. The Company's total return swaps are not designated as hedges, and therefore, changes in the value of these instruments are recognized in earnings. The cash flows related to the Company's freestanding derivative contracts are reported as operating or financing activities, depending on the nature of the underlying hedged item, in the consolidated statements of cash flows.

Cash Flow Hedges

Forward contracts designated as cash flow hedges are designed to hedge the variability of cash flows associated with forecasted transactions denominated in a foreign currency that will take place in the future. The gross notional amount of these contracts, designated as cash flow hedges, outstanding at April 29, 2022 and April 30, 2021 was $8.8 billion and $9.0 billion, respectively, and will mature within the subsequent three-year period. For derivative instruments that are designated and qualify as a cash flow hedge, the gain or loss on the derivative instrument is reported as a component of accumulated other comprehensive loss. The gain or loss on the derivative instrument is reclassified into earnings and is included in other operating expense, net or cost of products sold in the consolidated statements of income in the same period or periods during which the hedged transaction affects earnings. Amounts excluded from the measurement of hedge effectiveness are recognized in earnings in the current period. The cash flows related to all of the Company's derivative instruments designated as cash flow hedges are reported as operating activities in the consolidated statements of cash flows. No components of the hedge contracts were excluded in the measurement of hedge effectiveness, and no forward contracts designated as cash flow hedges were derecognized or discontinued during fiscal years 2022, 2021, or 2020.

At April 29, 2022 and April 30, 2021, the Company had $474 million in after-tax unrealized gains and $253 million in after-tax unrealized losses, respectively, associated with cash flow hedging instruments recorded in accumulated other comprehensive loss. The Company expects that $368 million of after-tax net unrealized gains at April 29, 2022 will be recognized in the consolidated statements of income over the next 12 months.

Net Investment Hedges

The Company has designated Euro-denominated debt as a net investment hedge of certain of its European operations to manage the exposure to currency and exchange rate movements for foreign currency-denominated net investments in foreign operations. At April 29, 2022, the Company had €16.0 billion, or $17.0 billion, of outstanding Euro-denominated debt designated as a hedge of its net investment in certain of its European operations, which will mature in fiscal year 2023 through fiscal year 2051.

In February 2021, the Company de-designated ¥300 billion of outstanding Yen-denominated debt previously designated as a net investment hedge and concurrently entered into freestanding forward derivative contracts with a total notional value of ¥300 billion, or approximately $2.9 billion. These forward contracts were not designated as hedges. The Company used the proceeds from these forward derivative contracts to repay the ¥300 billion of Yen-denominated debt in conjunction with the maturity of these forward contracts in March and April of 2021.

For instruments that are designated and qualify as net investment hedges, the gains or losses are reported as a component of accumulated other comprehensive loss. The gains or losses are reclassified into earnings upon a liquidation event or deconsolidation of the foreign

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

subsidiary. Amounts excluded from the assessment of effectiveness are recognized in other operating expense, net. The cash flows related to the Company's derivative instruments designated as net investment hedges are reported as investing activities in the consolidated statements of cash flows.

At April 29, 2022 and April 30, 2021, the Company had $841 million in after-tax unrealized gains and $1.5 billion in after-tax unrealized losses associated with net investment hedges recorded in accumulated other comprehensive loss, respectively. The Company does not expect any of the after-tax unrealized gains at April 29, 2022 to be recognized in the consolidated statements of income over the next 12 months.

The Company did not recognize any gains or losses during fiscal years 2022, 2021, or 2020 on instruments that no longer qualify as net investment hedges.

Gains and Losses on Hedging Instruments and Derivatives not Designated as Hedging Instruments

The amount of the gains and losses on our hedging instruments and the classification of those gains and losses within our consolidated financial statements for fiscal years 2022, 2021, and 2020 were as follows:

			(Gain) Loss Recognized in Accumulated Other Comprehensive Income																		(Gain) Loss Reclassified into Income
			Fiscal Year																		Fiscal Year																		Location of (Gain) Loss in Income Statement
(in millions)			2022						2021						2020						2022						2021						2020
Cash flow hedges
Currency exchange rate contracts			$	(953)					$	519					$	(397)					$	(144)					$	(17)					$	(335)					Other operating expense, net
Currency exchange rate contracts			18						108						—						61						15						—						Cost of products sold
Net investment hedges			(2,299)						1,694						(405)						—						—						(9)						Other operating expense, net
Total			$	(3,234)					$	2,321					$	(802)					$	(83)					$	(2)					$	(344)

The amount of the gains and losses on our derivative instruments not designated as hedging instruments and the classification of those gains and losses within our consolidated financial statements for fiscal years 2022, 2021, and 2020 were as follows:

			(Gain) Loss Recognized in Income
			Fiscal Year																		Location of (Gain) Loss in Income Statement
(in millions)			2022						2021						2020
Derivatives not designated as hedging instruments
Currency exchange rate contracts			$	(54)					$	247					$	(133)					Other operating expense, net
Total return swaps			1						(81)						7						Other operating expense, net
Total			$	(53)					$	166					$	(126)

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Balance Sheet Presentation

The following tables summarize the balance sheet classification and fair value of derivative instruments included in the consolidated balance sheets at April 29, 2022 and April 30, 2021. The fair value amounts are presented on a gross basis, and are segregated between derivatives that are designated and qualify as hedging instruments and those that are not designated and do not qualify as hedging instruments, and are further segregated by type of contract within those two categories.

			Fair Value - Assets																		Fair Value - Liabilities
(in millions)			April 29, 2022						April 30, 2021						Balance Sheet Classification						April 29, 2022						April 30, 2021						Balance Sheet Classification
Derivatives designated as hedging instruments
Currency exchange rate contracts			$	481					$	49					Other current assets						$	43					$	190					Other accrued expenses
Currency exchange rate contracts			168						22						Other assets						16						94						Other liabilities
Total derivatives designated as hedging instruments			649						70												60						285
Derivatives not designated as hedging instruments
Currency exchange rate contracts			46						14						Other current assets						49						11						Other accrued expenses
Total return swaps			—						18						Other current assets						20						—						Other accrued expenses
Total derivatives not designated as hedging instruments			46						32												69						11
Total derivatives			$	695					$	102											$	129					$	296

The following table provides information by level for the derivative assets and liabilities that are measured at fair value on a recurring basis:

			April 29, 2022												April 30, 2021
(in millions)			Level 1						Level 2						Level 1						Level 2
Derivative assets			$	695					$	109					$	85					$	18
Derivative liabilities			—						20						296						—

The Company has elected to present the fair value of derivative assets and liabilities within the consolidated balance sheets on a gross basis, even when derivative transactions are subject to master netting arrangements and may otherwise qualify for net presentation. The cash flows related to collateral posted and received are reported gross as investing and financing activities, respectively, in the consolidated statements of cash flows.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following tables provide information as if the Company had elected to offset the asset and liability balances of derivative instruments, netted in accordance with various criteria as stipulated by the terms of the master netting arrangements with each of the counterparties. Derivatives not subject to master netting arrangements are not eligible for net presentation.

						April 29, 2022
												Gross Amount Not Offset on the Balance Sheet
(in millions)						Gross Amount of Recognized Assets (Liabilities)						Financial Instruments						Cash Collateral (Received) Posted						Net Amount
Derivative assets:
Currency exchange rate contracts						$	695					$	(109)					$	(254)					$	332
Derivative liabilities:
Currency exchange rate contracts						(109)						109						—						—
Total return swaps						(20)						—						—						(20)
						(129)						109						—						(20)
Total						$	566					$	—					$	(254)					$	312

						April 30, 2021
												Gross Amount Not Offset on the Balance Sheet
(in millions)						Gross Amount of Recognized Assets (Liabilities)						Financial Instruments						Cash Collateral (Received) Posted						Net Amount
Derivative assets:
Currency exchange rate contracts						$	85					$	(83)					$	—					$	1
Total return swaps						18						—						—						18
						102						(83)						—						19
Derivative liabilities:
Currency exchange rate contracts						(296)						83						46						(167)
Total						$	(194)					$	—					$	46					$	(148)

Concentrations of Credit Risk

Financial instruments, which potentially subject the Company to significant concentrations of credit risk, consist principally of interest-bearing investments, forward exchange derivative contracts, and trade accounts receivable. Global concentrations of credit risk with respect to trade accounts receivable are limited due to the large number of customers and their dispersion across many geographic areas. The Company monitors the creditworthiness of its customers to which it grants credit terms in the normal course of business.

The Company maintains cash and cash equivalents, investments, and certain other financial instruments (including currency exchange rate and interest rate derivative contracts) with various major financial institutions. The Company performs periodic evaluations of the relative credit standings of these financial institutions and limits the amount of credit exposure with any one institution. In addition, the Company has collateral credit agreements with its primary derivatives counterparties. Under these agreements, either party is required to post eligible collateral when the market value of transactions covered by the agreement exceeds specific thresholds, thus limiting credit exposure for both parties. As of April 29, 2022, the Company received net cash collateral of $254 million from its counterparties. As of April 30, 2021, the Company posted net cash collateral of $46 million to its counterparties. Cash collateral posted is recorded as a reduction in cash and cash equivalents, with the offset recorded as an increase in other current assets in the consolidated balance sheets. Cash collateral received is recorded as an increase in cash and cash equivalents with the offset recorded in other accrued expenses in the consolidated balance sheets.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

8. Inventories

Inventory balances, net of reserves, were as follows:

(in millions)			April 29, 2022						April 30, 2021
Finished goods			$	3,070					$	2,906
Work-in-process			682						611
Raw materials			864						796
Total			$	4,616					$	4,313

9. Goodwill and Other Intangible Assets

Goodwill

The following table presents the changes in the carrying amount of goodwill by segment:

(in millions)			Cardiovascular						Medical Surgical						Neuroscience						Diabetes						Total
April 24, 2020			$	6,831					$	20,176					$	10,920					$	1,914					$	39,841
Goodwill as a result of acquisitions			248						12						210						346						816
Purchase accounting adjustments			(2)						(5)						3						(4)						(8)
Currency translation and other			132						1,012						167						1						1,312
April 30, 2021			7,209						21,195						11,300						2,257						41,961
Goodwill as a result of acquisitions			55						—						26						—						80
Purchase accounting adjustments			21						3						3						(2)						25
Currency translation and other			(125)						(1,241)						(196)						(1)						(1,563)
April 29, 2022			$	7,160					$	19,957					$	11,132					$	2,254					$	40,502

The Company did not recognize any goodwill impairments during fiscal years 2022, 2021, or 2020.

Intangible Assets

The following table presents the gross carrying amount and accumulated amortization of intangible assets:

			April 29, 2022												April 30, 2021
(in millions)			Gross Carrying Amount						Accumulated Amortization						Gross Carrying Amount						Accumulated Amortization
Definite-lived:
Customer-related			$	16,953					$	(7,005)					$	17,036					$	(6,058)
Purchased technology and patents			10,802						(5,667)						11,286						(5,156)
Trademarks and tradenames			473						(266)						475						(251)
Other			80						(69)						82						(68)
Total			$	28,308					$	(13,006)					$	28,879					$	(11,533)
Indefinite-lived:
IPR&D			$	293					$	—					$	394					$	—

During fiscal year 2022, the Company recognized $409 million of definite-lived intangible asset impairment charges in connection with MCS within the Cardiovascular Portfolio. The intangible asset impairment charge primarily related to purchased technology and patents. Refer to Note 4 Restructuring Charges for additional information on what led to the impairment. During fiscal year 2021, the Company recognized $30 million of definite-lived intangible asset charges in connection with the abandonment of certain intangible assets within the Neuroscience segment. During fiscal year 2020, the Company recognized $37 million of definite-lived intangible asset charges, including $33 million and $4 million recognized in connection with business exits in the Neuroscience and Cardiovascular segments, respectively. Definite-lived intangible asset charges are recognized in other operating expense, net in the consolidated statements of income.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Indefinite-lived intangible asset impairment charges were not significant for fiscal year 2022. During fiscal year 2021, the Company recognized $45 million of indefinite-lived intangible asset impairment charges related to the abandonment of certain IPR&D projects in the Neuroscience segment. During fiscal year 2020, the Company recognized $35 million of indefinite-lived intangible asset impairment charges, including $25 million relating to a partial impairment of an IPR&D project within the Neuroscience segment and $10 million in connection with the discontinuation of an IPR&D project within the Cardiovascular segment. Indefinite-lived intangible asset impairment charges are recognized in other operating expense, net in the consolidated statements of income. 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, other failures to achieve a commercially viable product, or the discontinuation of certain projects, and as a result, may recognize impairment losses in the future.

Amortization Expense

Intangible asset amortization expense was $1.7 billion for fiscal year 2022 and $1.8 billion for fiscal years 2021 and 2020. Estimated aggregate amortization expense by fiscal year based on the current carrying value and remaining estimated useful lives of definite-lived intangible assets at April 29, 2022, excluding any possible future amortization associated with acquired IPR&D which has not met technological feasibility, is as follows:

(in millions)			Amortization Expense
2023			$	1,659
2024			1,624
2025			1,602
2026			1,588
2027			1,564

10. Property, Plant, and Equipment

Property, plant, and equipment balances and corresponding estimated useful lives were as follows:

(in millions)			April 29, 2022						April 30, 2021						Estimated Useful Lives (in years)
Equipment			$	6,489					$	6,308					Generally 2-7, up to 15
Computer software			2,617						2,346						Up to 5
Land and land improvements			170						178						Up to 20
Buildings and leasehold improvements			2,351						2,370						Up to 40
Construction in progress			1,737						1,498						—
Property, plant, and equipment			13,365						12,700
Less: Accumulated depreciation			(7,952)						(7,479)
Property, plant, and equipment, net			$	5,413					$	5,221

Depreciation expense of $974 million, $919 million, and $907 million was recognized in fiscal years 2022, 2021, and 2020, respectively.

11. Shareholders’ Equity

Share Capital Medtronic plc is authorized to issue 2.6 billion Ordinary Shares, $0.0001 par value; 40 thousand Euro Deferred Shares, €1.00 par value; 127.5 million Preferred Shares, $0.20 par value; and 500 thousand A Preferred Shares, $1.00 par value.

Euro Deferred Shares The authorized share capital of the Company includes 40 thousand Euro Deferred Shares, with a par value of €1.00 per share. At April 29, 2022, no Euro Deferred Shares were issued or outstanding.

Preferred Shares The authorized share capital of the Company includes 127.5 million of Preferred Shares, with a par value of $0.20 per share. At April 29, 2022, no Preferred Shares were issued or outstanding.

A Preferred Shares The authorized share capital of the Company includes 500 thousand A Preferred Shares, with a par value of $1.00 per share. During the third quarter of fiscal year 2022 the Company redeemed the previously outstanding 1,872 A Preferred Shares for $0.075 million. At April 29, 2022, no A Preferred Shares were outstanding.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Dividends The timing, declaration, and payment of future dividends to holders of the Company's ordinary shares falls within the discretion of the Company's Board of Directors and depends upon many factors, including the statutory requirements of Irish law, the Company's earnings and financial condition, the capital requirements of the Company's businesses, industry practice and any other factors the Board of Directors deems relevant.

Ordinary Share Repurchase Program Shares are repurchased on occasion to support the Company’s stock-based compensation programs and to return capital to shareholders. During fiscal years 2022 and 2021, the Company repurchased approximately 22 million and 4 million shares, respectively, at an average price of $113.11 and $126.80, respectively.

In March 2019, the Company's Board of Directors authorized $6.0 billion for repurchase of the Company's ordinary shares. There is no specific time-period associated with these repurchase authorizations. At April 29, 2022, the Company had used $3.0 billion of the $6.0 billion authorized under the repurchase program, leaving approximately $3.0 billion available for future repurchases. The Company accounts for repurchases of ordinary shares using the par value method and shares repurchased are cancelled.

12. Stock Purchase and Award Plans

In fiscal year 2022, the Company granted stock awards under the Medtronic plc 2013 Plan (2013 Plan) and the 2021 Medtronic plc Long Term Incentive Plan (2021 Plan). The 2021 Plan was approved by the Company's shareholders on December 9, 2021, and provides for a maximum of 115 million ordinary shares to be issued, in addition to the 14 million ordinary shares previously approved for issuance under the 2013 Plan. The 2021 Plan provides for the grant of non-qualified and incentive stock options, stock appreciation rights, restricted stock, restricted stock units, performance awards, and other stock and cash-based awards. At April 29, 2022, there were approximately 127 million shares available for future grants under the 2021 Plan.

Stock-Based Compensation Expense The following table presents the components and classification of stock-based compensation expense recognized for stock options, restricted stock, performance share units, and employee stock purchase plan (ESPP) in fiscal years 2022, 2021, and 2020:

			Fiscal Year
(in millions)			2022						2021						2020
Stock options			$	70					$	72					$	61
Restricted stock			184						185						205
Performance share units			66						49						—
Employee stock purchase plan			39						38						31
Total stock-based compensation expense			$	359					$	344					$	297
Cost of products sold			$	36					$	35					$	28
Research and development expense			40						38						36
Selling, general, and administrative expense			283						272						233
Total stock-based compensation expense			359						344						297
Income tax benefits			(62)						(59)						(51)
Total stock-based compensation expense, net of tax			$	297					$	285					$	246

Stock Options Options are granted at the exercise price, which is equal to the closing price of the Company’s ordinary shares on the grant date. The majority of the Company’s options are non-qualified options with a 10-year life and a 4-year ratable vesting term. The Company uses the Black-Scholes option pricing model (Black-Scholes model) to determine the fair value of stock options at the grant date. The fair value of stock options under the Black-Scholes model requires management to make assumptions regarding projected employee stock option exercise behaviors, risk-free interest rates, volatility of the Company’s stock price, and expected dividends.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following table provides the weighted average fair value of options granted to employees and the related assumptions used in the Black-Scholes model:

			Fiscal Year
			2022						2021						2020
Weighted average fair value of options granted			$	22.83					$	16.15					$	15.49
Assumptions used:
Expected life (years)			6.0						6.0						6.1
Risk-free interest rate			0.90		%				0.33		%				1.88		%
Volatility			23.04		%				24.17		%				17.97		%
Dividend yield			1.95		%				2.36		%				2.09		%

The following table summarizes stock option activity during fiscal year 2022:

			Options (in thousands)						Wtd. Avg. Exercise Price						Wtd. Avg. Remaining Contractual Term (in years)						Aggregate Intrinsic Value (in millions)
Outstanding at April 30, 2021			27,972						$	84.38
Granted			4,153						129.03
Exercised			(3,222)						70.52
Expired/Forfeited			(641)						107.42
Outstanding at April 29, 2022			28,263						92.00						5.5						$	450
Expected to vest at April 29, 2022			8,818						110.27						8.4						35
Exercisable at April 29, 2022			18,804						82.62						4.0						414

The following table summarizes the total cash received from the issuance of new shares upon stock option award exercises, the total intrinsic value of options exercised, and the related tax benefit during fiscal years 2022, 2021, and 2020:

			Fiscal Year
(in millions)			2022						2021						2020
Cash proceeds from options exercised			$	209					$	277					$	484
Intrinsic value of options exercised			174						205						349
Tax benefit related to options exercised			40						47						75

Unrecognized compensation expense related to outstanding stock options at April 29, 2022 was $90 million and is expected to be recognized over a weighted average period of 2.5 years.

Restricted Stock Restricted stock units are expensed over the vesting period and are subject to forfeiture if employment terminates prior to the lapse of the restrictions. The expense recognized for restricted stock units is equal to the grant date fair value, which is equal to the closing stock price on the date of grant. Restricted stock units either have a 4-year ratable vesting term or cliff vest after three years. The Company also grants shares of performance-based restricted stock units that typically cliff vest after three years only if the Company has also achieved certain performance objectives. Performance awards are expensed over the performance period based on the probability of achieving the performance objectives. Restricted stock units are not considered issued or outstanding ordinary shares of the Company. Dividend equivalent units are accumulated on restricted stock units during the vesting period.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following table summarizes restricted stock activity during fiscal year 2022:

			Units (in thousands)						Wtd. Avg. Grant Price
Nonvested at April 30, 2021			5,980						$	97.66
Granted			1,935						127.47
Vested			(2,089)						93.05
Forfeited			(456)						107.53
Nonvested at April 29, 2022			5,370						108.92

The following table summarizes the weighted-average grant date fair value of restricted stock granted, total fair value of restricted stock vested and related tax benefit during fiscal years 2022, 2021, and 2020:

			Fiscal Year
(in millions, except per share data)			2022						2021						2020
Weighted-average grant-date fair value per restricted stock			$	127.47					$	99.48					$	103.52
Fair value of restricted stock vested			194						280						242
Tax benefit related to restricted stock vested			52						65						62

Unrecognized compensation expense related to restricted stock as of April 29, 2022 was $316 million and is expected to be recognized over a weighted average period of 2.5 years.

Performance Share Units Beginning in fiscal year 2021, the Company granted performance share units to officers and key employees. Performance share units typically cliff vest after three years. The awards include three metrics: relative total shareholder return (rTSR), revenue growth, and return on investor capital (ROIC). rTSR is considered a market condition metric, and the expense is determined at the grant date and will not be adjusted even if the market condition is not met. Revenue growth and ROIC are considered performance metrics, and the expense is recorded over the performance period, which will be reassessed each reporting period based on the probability of achieving the various performance conditions. The number of shares earned at the end of the three-year period will vary, based on only actual performance, from 0% to 200% of the target number of performance share units granted. Performance share units are subject to forfeiture if employment terminates prior to the lapse of the restrictions. Performance share units are not considered issued or outstanding ordinary shares of the Company. Dividend equivalent units are accumulated on performance share units for each component of the award during the vesting period.

The Company calculates the fair value of the performance share units for each component individually. The fair value of the rTSR metric will be determined using the Monte Carlo valuation model. The fair value of the revenue growth and ROIC metrics are equal to the closing stock price on the grant date.

The following table summarizes performance share unit activity during fiscal year 2022:

			Units (in thousands)						Wtd. Avg. Grant Price
Nonvested at April 30, 2021			828						$	129.05
Granted			831						149.16
Forfeited			(78)						138.31
Nonvested at April 29, 2022			1,581						138.95

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following table summarizes the weighted-average grant date fair value of performance share units granted, total fair value of performance share units vested and related tax benefit during fiscal year 2022 and 2021:

			Fiscal Year
(in millions, except per share data)			2022						2021
Weighted-average grant-date fair value per performance share units			$	149.16					$	129.04
Fair value of performance share units vested			—						—
Tax benefit related to performance share units vested			—						—

Unrecognized compensation expense related to performance share units as of April 29, 2022 was $84 million and is expected to be recognized over a weighted average period of 1.9 years.

Employees Stock Purchase Plan The Medtronic plc Amended and Restated 2014 Employees Stock Purchase Plan allows participating employees to purchase the Company's ordinary shares at a discount through payroll deductions. The expense recognized for shares purchased under the Company’s ESPP is equal to the 15 percent discount the employee receives. Employees purchased 2 million shares at an average price of $98.75 per share in fiscal year 2022. At April 29, 2022, approximately 7 million ordinary shares were available for future purchase under the ESPP.

13. Income Taxes

The income tax provision (benefit) is based on income before income taxes reported for financial statement purposes. The components of income before income taxes, based on tax jurisdiction, are as follows:

			Fiscal Year
(in millions)			2022						2021						2020
U.S.			$	436					$	(358)					$	466
International			5,081						4,253						3,589
Income before income taxes			$	5,517					$	3,895					$	4,055

The income tax provision (benefit) consists of the following:

			Fiscal Year
(in millions)			2022						2021						2020
Current tax expense:
U.S.			$	467					$	287					$	151
International			599						439						375
Total current tax expense			1,066						726						526
Deferred tax (benefit) expense:
U.S.			(402)						(625)						(138)
International			(209)						165						(1,139)
Net deferred tax benefit			(611)						(461)						(1,277)
Income tax provision (benefit)			$	456					$	265					$	(751)

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Tax assets (liabilities), shown before jurisdictional netting of deferred tax assets (liabilities), are comprised of the following:

(in millions)			April 29, 2022						April 30, 2021**(1)**
Deferred tax assets:
Intangible assets			$	2,334					$	1,536
Net operating loss, capital loss, and credit carryforwards			5,982						6,114
Capitalization of research and development			597						408
Other accrued liabilities			483						442
Accrued compensation			332						411
Pension and post-retirement benefits			66						234
Stock-based compensation			146						132
Inventory			146						164
Lease obligations			92						106
Federal and state benefit on uncertain tax positions			60						55
Interest limitation			386						352
Other			374						336
Gross deferred tax assets			10,998						10,290
Valuation allowance			(6,583)						(5,822)
Total deferred tax assets			4,415						4,468
Deferred tax liabilities:
Intangible assets			(1,488)						(1,856)
Realized loss on derivative financial instruments			(66)						(75)
Right of use leases			(89)						(102)
Unrealized gain on available-for-sale securities and derivative financial instruments			—						(16)
Accumulated depreciation			(121)						(151)
Outside basis difference of subsidiaries			(129)						(101)
Other			(70)						(81)
Total deferred tax liabilities			(1,963)						(2,382)
Prepaid income taxes			474						458
Income tax receivables			358						353
Tax assets, net			$	3,284					$	2,897
Reported as (after valuation allowance and jurisdictional netting):
Other current assets			$	765					$	756
Tax assets			3,403						3,169
Deferred tax liabilities			(884)						(1,028)
Tax assets, net			$	3,284					$	2,897

(1)Certain prior year amounts have been reclassified to conform to current year presentation

No deferred taxes have been provided on the approximately $79.3 billion and $74.2 billion of undistributed earnings of the Company’s subsidiaries at April 29, 2022 and April 30, 2021, respectively, since these earnings have been, and under current plans will continue to be, permanently reinvested in these subsidiaries. Due to the number of legal entities and jurisdictions involved, the complexity of the legal entity structure of the Company, and the complexity of the tax laws in the relevant jurisdictions, the Company believes it is not practicable to estimate, within any reasonable range, the amount of additional taxes which may be payable upon distribution of these undistributed earnings.

At April 29, 2022, the Company had approximately $25.4 billion of net operating loss carryforwards in certain non-U.S. jurisdictions, of which $20.0 billion have no expiration, and the remaining $5.4 billion will expire during fiscal years 2023 through 2042. Included in these net operating loss carryforwards are $18.6 billion of net operating losses related to a subsidiary of the Company, substantially all of which

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

were recorded in fiscal year 2008 as a result of the receipt of a favorable tax ruling from certain non-U.S. taxing authorities. The Company has recorded a full valuation allowance against these net operating losses, as management does not believe that it is more likely than not that these net operating losses will be utilized. Certain of the remaining non-U.S. net operating loss carryforwards of $6.8 billion have a valuation allowance recorded against the carryforwards, as management does not believe that it is more likely than not that these net operating losses will be utilized.

At April 29, 2022, the Company had $222 million of U.S. federal net operating loss carryforwards, of which $47 million have no expiration. The remaining loss carryforwards will expire during fiscal years 2023 through 2036. For U.S. state purposes, the Company had $1.4 billion of net operating loss carryforwards at April 29, 2022, $72 million of which have no expiration. The remaining U.S. state loss carryforwards will expire during fiscal years 2023 through 2042.

At April 29, 2022, the Company also had $254 million of tax credits available to reduce future income taxes payable, of which $120 million have no expiration. The remaining credits will expire during fiscal years 2023 through 2042.

The Company has established valuation allowances of $6.6 billion and $5.8 billion at April 29, 2022 and April 30, 2021, respectively, primarily related to the uncertainty of the utilization of certain deferred tax assets which are primarily comprised of tax loss and credit carryforwards in various jurisdictions. The increase in the valuation allowance during fiscal year 2022 is primarily related to the step up in tax basis for Swiss Cantonal purposes, the generation of certain net operating losses and the effects of currency fluctuations. These valuation allowances would result in a reduction to the income tax provision in the consolidated statements of income if they are ultimately not required.

The Company’s effective income tax rate varied from the U.S. federal statutory tax rate as follows:

			Fiscal Year
			2022						2021						2020
U.S. federal statutory tax rate			21.0		%				21.0		%				21.0		%
Increase (decrease) in tax rate resulting from:
U.S. state taxes, net of federal tax benefit			0.2						(1.1)						0.5
Research and development credit			(1.3)						(2.3)						(2.1)
Puerto Rico excise tax			(1.1)						(2.0)						(1.5)
International			(11.2)						(12.6)						(10.0)
Stock based compensation			(0.8)						(0.8)						(1.5)
Interest on uncertain tax positions			0.5						0.9						1.3
Base erosion anti-abuse tax			0.9						0.5						2.6
Foreign derived intangible income benefit			(1.0)						(1.9)						(1.2)
Certain tax adjustments			(0.9)						(1.0)						(30.8)
Legal entity restructuring			—						1.8						—
U.S. tax on foreign earnings			2.2						3.4						2.8
Other, net			(0.2)						0.9						0.4
Effective tax rate			8.3		%				6.8		%				(18.5)		%

During fiscal year 2022, the net benefit from certain tax adjustments of $50 million, recognized in income tax provision (benefit) in the consolidated statement of income, included the following:

• A benefit of $82 million associated with a step up in tax basis for Swiss Cantonal purposes.

• A benefit of $82 million related to a change in tax rates on intangible assets.

• A cost of $47 million associated with the amortization of the previously established deferred tax assets from intercompany intellectual property transactions.

• A cost of $41 million associated with a change in the Company’s permanent reinvestment assertion on certain historical earnings.

• A net cost of $26 million primarily associated with an intercompany sale of assets.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

During fiscal year 2021, the net benefit from certain tax adjustments of $41 million, recognized in income tax provision (benefit) in the consolidated statement of income, included the following:

• A net benefit of $106 million associated with the resolution of an audit at the IRS Appellate level for fiscal years 2012, 2013, and 2014. The issues resolved relate to the utilization of certain net operating losses and the allocation of income between Medtronic, Inc. and its wholly owned subsidiary operating in Puerto Rico for businesses that are not the subject of the U.S. Tax Court Case for fiscal years 2005 and 2006.

• A net cost of $73 million related to a tax basis adjustment of previously established deferred tax assets from intercompany intellectual property transactions. The cumulative amount of deferred tax benefit previously recognized from intercompany intellectual property transactions and recorded as Certain Tax Adjustments is $1.5 billion. The corresponding deferred tax assets will be amortized over a period of approximately 20 years.

• A cost of $50 million associated with the amortization of the previously established deferred tax assets from intercompany intellectual property transactions.

• A net cost of $25 million associated with an internal restructuring and intercompany sale of assets.

• A benefit of $83 million related to the capitalization of certain research and development costs for U.S. income tax purposes and the establishment of a deferred tax asset at the U.S. federal statutory tax rate.

During fiscal year 2020, the net benefit from certain tax adjustments of $1.2 billion, recognized in income tax provision (benefit) in the consolidated statement of income, included the following:

• A net benefit of $63 million related to the finalization of certain state tax impacts from U.S. Tax Reform, and the issuance of certain final U.S. Treasury Regulations associated with U.S. Tax Reform. The primary impact of these regulations resulted in the Company re-establishing its permanently reinvested assertion on certain foreign earnings and reversing the previously accrued tax liability. This benefit was partially offset by additional tax associated with a previously executed internal reorganization of certain foreign subsidiaries.

• A benefit of $252 million related to tax legislative changes in Switzerland, which abolished certain preferential tax regimes the Company benefited from and replaced them with a new set of internationally accepted measures. The legislation provided for higher effective tax rates but allowed for a transitional period whereby an amortizable asset was created for Swiss federal income tax purposes that will be amortized and deducted over a 10-year period.

• A benefit of $658 million related to the release of a valuation allowance previously recorded against certain net operating losses. Luxembourg enacted tax legislation during the year requiring the Company to reassess the realizability of certain net operating losses. The Company evaluated both the positive and negative evidence and released valuation allowance equal to the expected benefit from the utilization of certain net operating losses in connection with a planned intercompany sale of intellectual property.

• A benefit of $269 million associated with the intercompany sale of intellectual property and the establishment of a deferred tax asset.

Currently, the Company’s operations in Puerto Rico, Singapore, Dominican Republic, Costa Rica, and China have various tax holidays and tax incentive grants. The tax reductions as compared to the local statutory rate favorably impacted earnings by $248 million, $301 million, and $231 million in fiscal years 2022, 2021, and 2020, respectively, and diluted earnings per share by $0.18, $0.22, and $0.17, in fiscal years 2022, 2021, and 2020, respectively. The tax holidays are conditional upon the Company meeting certain thresholds required under statutory law. The tax incentive grants, unless extended, will expire between fiscal years 2023 and 2034. The Company’s historical practice has been to renew, extend, or obtain new tax incentive grants upon expiration of existing tax incentive grants. If the Company is not able to renew, extend, or obtain new tax incentive grants, the expiration of existing tax incentive grants could have a material impact on the Company’s financial results in future periods. The tax incentive grants which expired during fiscal year 2022 did not have a material impact on the Company's consolidated financial statements.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The Company had $1.7 billion, $1.7 billion, and $1.9 billion of gross unrecognized tax benefits at April 29, 2022, April 30, 2021, and April 24, 2020, respectively. A reconciliation of the beginning and ending amount of unrecognized tax benefits for fiscal years 2022, 2021, and 2020 is as follows:

			Fiscal Year
(in millions)			2022						2021						2020
Gross unrecognized tax benefits at beginning of fiscal year			$	1,668					$	1,862					$	1,836
Gross increases:
Prior year tax positions			1						88						12
Current year tax positions			40						62						55
Gross decreases:
Prior year tax positions			(29)						(106)						(9)
Settlements			(8)						(216)						(5)
Statute of limitation lapses			(11)						(21)						(27)
Gross unrecognized tax benefits at end of fiscal year			1,661						1,668						1,862
Cash advance paid to taxing authorities			(859)						(859)						(859)
Gross unrecognized tax benefits at end of fiscal year, net of cash advance			$	802					$	809					$	1,003

If all of the Company’s unrecognized tax benefits at April 29, 2022, April 30, 2021, and April 24, 2020 were recognized, $1.6 billion, $1.6 billion, and $1.8 billion would impact the Company’s effective tax rate, respectively. Although the Company believes that it has adequately provided for liabilities resulting from tax assessments by taxing authorities, positions taken by these tax authorities could have a material impact on the Company’s effective tax rate in future periods. The Company has recorded gross unrecognized tax benefits, net of cash advance, of $787 million as a noncurrent liability. The Company estimates that within the next 12 months it is reasonably possible that its uncertain tax positions excluding interest, could decrease by as much as $15 million, net as a result of statute of limitation lapses.

The Company recognizes interest and penalties related to income tax matters in income tax provision (benefit) in the consolidated statements of income and records the liability in the current or noncurrent accrued income taxes in the consolidated balance sheets, as appropriate. The Company had $117 million, $99 million, and $225 million of accrued gross interest and penalties at April 29, 2022, April 30, 2021, and April 24, 2020, respectively. During fiscal years 2022, 2021, and 2020, the Company recognized gross interest expense of $17 million, income of $44 million, and expense of $53 million, respectively, in income tax provision (benefit) in the consolidated statements of income.

The Company reserves for uncertain tax positions related to unresolved matters with the IRS and other taxing authorities. These reserves are subject to a high degree of estimation and management judgment. Resolution of these significant unresolved matters, or positions taken by the IRS or other tax authorities during future tax audits, could have a material impact on the Company’s financial results in future periods. The Company continues to believe that its reserves for uncertain tax positions are appropriate and that it has meritorious defenses for its tax filings and will vigorously defend them during the audit process, appellate process, and through litigation in courts, as necessary.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The major tax jurisdictions where the Company conducts business which remain subject to examination are as follows:

Jurisdiction						Earliest Year Open
United States - federal and state						2005
Australia						2018
Brazil						2017
Canada						2013
China						2015
Costa Rica						2018
Dominican Republic						2019
France						2019
Germany						2014
India						2002
Ireland						2012
Israel						2010
Italy						2005
Japan						2018
Korea						2017
Luxembourg						2017
Mexico						2017
Puerto Rico						2011
Singapore						2016
Switzerland						2010
United Kingdom						2017

See Note 18 for additional information regarding the status of current tax audits and proceedings.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

14. Earnings Per Share

Basic earnings per share is computed based on the weighted average number of ordinary shares outstanding. Diluted earnings per share is computed based on the weighted number of ordinary shares outstanding, increased by the number of additional shares that would have been outstanding had the potentially dilutive ordinary shares been issued, and reduced by the number of shares the Company could have repurchased with the proceeds from issuance of the potentially dilutive shares. Potentially dilutive ordinary shares include stock-based awards granted under stock-based compensation plans and shares committed to be purchased under the employee stock purchase plan.

The table below sets forth the computation of basic and diluted earnings per share:

			Fiscal Year
(in millions, except per share data)			2022						2021						2020
Numerator:
Net income attributable to ordinary shareholders			$	5,039					$	3,606					$	4,789
Denominator:
Basic – weighted average shares outstanding			1,342.4						1,344.9						1,340.7
Effect of dilutive securities:
Employee stock options			6.6						6.6						7.2
Employee restricted stock units			1.6						2.1						2.8
Other			0.8						0.5						0.4
Diluted – weighted average shares outstanding			1,351.4						1,354.0						1,351.1
Basic earnings per share			$	3.75					$	2.68					$	3.57
Diluted earnings per share			$	3.73					$	2.66					$	3.54

The calculation of weighted average diluted shares outstanding excludes options to purchase approximately 5 million ordinary shares in fiscal year 2022 and 4 million ordinary shares in fiscal years 2021 and 2020 because their effect would have been anti-dilutive on the Company’s earnings per share.

15. Retirement Benefit Plans

The Company sponsors various retirement benefit plans, including defined benefit pension plans, post-retirement medical plans, defined contribution savings plans, and termination indemnity plans, covering substantially all U.S. employees and many employees outside the U.S. The net expense related to these plans was $459 million, $668 million, and $467 million in fiscal years 2022, 2021, and 2020, respectively.

In the U.S., the Company maintains qualified pension plans designed to provide guaranteed minimum retirement benefits to all eligible U.S. participants. Pension coverage for non-U.S. employees is provided, to the extent deemed appropriate, through separate plans. In addition to the benefits provided under the qualified pension plan, retirement benefits associated with wages in excess of the IRS allowable limits are provided to certain employees under a non-qualified plan. U.S. and Puerto Rico employees are also eligible to receive a medical benefit component, in addition to normal retirement benefits, through the Company’s post-retirement benefits.

At April 29, 2022 and April 30, 2021, the funded status of the Company’s benefit plans was $74 million overfunded and $705 million underfunded, respectively.

During fiscal year 2021, as part of the Simplification restructuring program, the Company offered certain eligible U.S. employees voluntary early retirement packages, resulting in incremental expense of $97 million recognized. Of this amount, $73 million related to U.S. pension benefits, $11 million related to defined contribution plans, $11 million related to U.S. post-retirement benefits, and $2 million related to cash payments and administrative fees. See Note 4 for additional information on the Simplification restructuring program.

As of April 24, 2020, the Company announced the freezing of U.S. pension benefits beginning in 2027. Employees will continue to earn benefits as required by the plan until April 30, 2027, after which date benefits will no longer be earned and employees will earn benefits under a new defined contribution structure. The Company recognized curtailment benefits of $94 million in fiscal year 2020 as a result of this change.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Defined Benefit Pension Plans The change in benefit obligation and funded status of the Company’s U.S. and Non-U.S. pension benefits are as follows:

			U.S. Pension Benefits												Non-U.S. Pension Benefits
			Fiscal Year												Fiscal Year
(in millions)			2022						2021						2022						2021
Accumulated benefit obligation at end of year:			$	3,396					$	3,786					$	1,638					$	2,035
Change in projected benefit obligation:
Projected benefit obligation at beginning of year			$	3,979					$	3,723					$	2,294					$	2,024
Service cost			98						106						64						70
Interest cost			102						109						26						28
Employee contributions			—						—						12						12
Plan curtailments and settlements			—						—						(11)						(4)
Actuarial (gain) loss(1)			(513)						99						(394)						6
Benefits paid			(141)						(129)						(48)						(41)
Special termination benefits			—						73						—						—
Currency exchange rate changes and other			—						—						(203)						200
Projected benefit obligation at end of year			$	3,526					$	3,979					$	1,740					$	2,294
Change in plan assets:
Fair value of plan assets at beginning of year			$	3,660					$	2,982					$	1,900					$	1,404
Actual return on plan assets			15						715						(12)						232
Employer contributions			24						95						70						149
Employee contributions			—						—						12						12
Plan settlements			—						—						(1)						(4)
Benefits paid			(141)						(129)						(48)						(41)
Currency exchange rate changes and other			—						—						(188)						149
Fair value of plan assets at end of year			$	3,559					$	3,660					$	1,732					$	1,900
Funded status at end of year:
Fair value of plan assets			$	3,559					$	3,660					$	1,732					$	1,900
Benefit obligations			3,526						3,979						1,740						2,294
Over (under) funded status of the plans			33						(319)						(8)						(394)
Recognized asset (liability)			$	33					$	(319)					$	(8)					$	(394)
Amounts recognized on the consolidated balance sheets consist of:
Non-current assets			$	313					$	110					$	240					$	48
Current liabilities			(21)						(20)						(6)						(6)
Non-current liabilities			(259)						(408)						(242)						(436)
Recognized asset (liability)			$	33					$	(319)					$	(8)					$	(394)
Amounts recognized in accumulated other comprehensive loss:
Prior service cost (credit)			$	—					$	—					$	(4)					$	(6)
Net actuarial loss			854						1,220						161						530
Ending balance			$	854					$	1,220					$	157					$	524

(1)Actuarial gains and losses result from changes in actuarial assumptions (such as changes in the discount rate and revised mortality rates). The actuarial gain in fiscal year 2022 was primarily related to increases in discount rates. The actuarial loss in fiscal year 2021 was primarily related to decreases in discount rates.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

In certain countries outside the U.S., fully funding pension plans is not a common practice, as funding provides no income tax benefit. Consequently, certain pension plans were partially funded at April 29, 2022 and April 30, 2021. U.S. and non-U.S. pension plans with accumulated benefit obligations in excess of plan assets consist of the following:

			Fiscal Year
(in millions)			2022						2021
Accumulated benefit obligation			$	830					$	5,089
Projected benefit obligation			880						5,198
Plan assets at fair value			356						4,561

U.S. and non-U.S. pension plans with projected benefit obligations in excess of plan assets consist of the following:

			Fiscal Year
(in millions)			2022						2021
Projected benefit obligation			$	907					$	5,921
Plan assets at fair value			379						5,159

The net periodic benefit cost of the plans includes the following components:

			U.S. Pension Benefits																		Non-U.S. Pension Benefits
			Fiscal Year																		Fiscal Year
(in millions)			2022						2021						2020						2022						2021						2020
Service cost			$	98					$	106					$	106					$	64					$	70					$	59
Interest cost			102						109						126						26						28						28
Expected return on plan assets			(226)						(242)						(225)						(64)						(59)						(58)
Amortization of prior service cost			—						1						1						(1)						(1)						(1)
Amortization of net actuarial loss			64						69						56						22						25						14
Settlement and curtailment (gain) loss			—						—						—						(10)						1						—
Special termination benefits			—						73						—						—						—						—
Net periodic benefit cost			$	39					$	116					$	64					$	37					$	64					$	42

The other changes in plan assets and projected benefit obligations recognized in other comprehensive income for fiscal year 2022 are as follows:

(in millions)			U.S. Pension Benefits						Non-U.S. Pension Benefits
Net actuarial gain			$	(303)					$	(317)
Amortization of prior service credit			—						1
Amortization and settlement recognition of actuarial loss			(64)						(22)
Effect of exchange rates			—						(29)
Total recognized in other comprehensive income			(367)						(367)
Total recognized in net periodic benefit cost and other comprehensive income			$	(328)					$	(331)

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The actuarial assumptions are as follows:

			U.S. Pension Benefits																		Non-U.S. Pension Benefits
			Fiscal Year																		Fiscal Year
			2022						2021						2020						2022						2021						2020
Critical assumptions – projected benefit obligation:
Discount rate			4.23% - 4.48%						2.80% - 3.50%						3.10% - 3.70%						0.60% - 25.40%						0.30% - 13.30%						0.30% - 13.30%
Rate of compensation increase			4.83		%				4.83		%				3.90		%				2.70		%				2.90		%				2.91		%
Critical assumptions – net periodic benefit cost:
Discount rate – benefit obligation			2.80% - 3.46%						3.10% - 3.70%						3.90% - 4.30%						0.25% - 12.80%						0.30% - 13.90%						0.40% - 13.90%
Discount rate – service cost			2.50% - 3.51%						2.60% - 3.90%						3.70% - 4.00%						0.24% - 12.80%						0.30% - 13.90%						0.40% - 13.90%
Discount rate – interest cost			2.08% - 2.87%						2.80% - 3.20%						3.50% - 4.30%						0.08% - 12.80%						0.30% - 13.90%						0.40% - 13.90%
Expected return on plan assets			5.60% - 7.40%						7.50		%				7.90		%				3.67		%				3.78		%				4.19		%
Rate of compensation increase			3.90% - 4.83%						3.90		%				3.90		%				2.90		%				2.91		%				2.87		%

The Company utilizes a full yield curve approach methodology to estimate the service and interest cost components of net periodic pension cost and net periodic post-retirement benefit cost for the Company’s pension and other post-retirement benefits. The full yield curve approach applies specific spot rates along the yield curve to their underlying projected cash flows in estimation of the cost components. The current yield curves represent high quality, long-term fixed income instruments.

The expected long-term rate of return on plan assets assumptions are determined using a building block approach, considering historical averages and real returns of each asset class. In certain countries, where historical returns are not meaningful, consideration is given to local market expectations of long-term returns.

Retirement Benefit Plan Investment Strategy The Company sponsors trusts that hold the assets for U.S. pension plans and other U.S. post-retirement benefit plans, primarily retiree medical benefits. For investment purposes, the Medtronic U.S. pension and other U.S. post-retirement benefit plans employ similar investment strategies with different asset allocation targets.

The Company has a Qualified Plan Committee (the Plan Committee) that sets investment guidelines for U.S. pension plans and other U.S. post-retirement benefit plans with the assistance of external consultants. These guidelines are established based on market conditions, risk tolerance, funding requirements, and expected benefit payments. The Plan Committee also oversees the investment allocation process, selects the investment managers, and monitors asset performance. As pension liabilities are long-term in nature, the Company employs a long-term total return approach to maximize the long-term rate of return on plan assets for a prudent level of risk. An annual analysis on the risk versus the return of the investment portfolio is conducted to justify the expected long-term rate of return assumption.

The investment portfolios contain a diversified allocation of investment categories, including equities, fixed income securities, hedge funds, and private equity. Securities are also diversified in terms of domestic and international, short- and long-term, growth and value styles, large cap and small cap stocks, and active and passive management.

Outside the U.S., pension plan assets are typically managed by decentralized fiduciary committees. There is significant variation in policy asset allocation from country to country. Local regulations, funding rules, and financial and tax considerations are part of the funding and investment allocation process in each country. The weighted average target asset allocations at April 29, 2022 for the plans are 41% equity securities, 33% debt securities, and 26% other.

The plans did not hold any investments in the Company’s ordinary shares at April 29, 2022 or April 30, 2021.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The Company’s U.S. plans target asset allocations at April 29, 2022, compared to the U.S. plans actual asset allocations at April 29, 2022 and April 30, 2021 by asset category, are as follows:

U.S. Plans			Target Allocation						Actual Allocation
			April 29, 2022						April 29, 2022						April 30, 2021
Asset Category:
Equity securities			34		%				36		%				39		%
Debt securities			51						45						32
Other			15						19						29
Total			100		%				100		%				100		%

Strong performance on equity securities during the fiscal year resulted in asset allocations different than targets. Management expects to move the allocations closer to target over the intermediate term.

Retirement Benefit Plan Asset Fair Values The following is a description of the valuation methodologies used for retirement benefit plan assets measured at fair value:

Short-term investments: Valued at the closing price reported in the active markets in which the individual security is traded.

Mutual funds: Comprised of investments in equity and fixed income securities held in pooled investment vehicles. The valuations of mutual funds are based on the respective net asset values which are determined by the fund daily at market close. The net asset values are calculated based on the valuation of the underlying assets which are determined using observable inputs. The net asset values are publicly reported.

Equity commingled trusts: Comprised of investments in equity securities held in pooled investment vehicles. The valuations of equity commingled trusts are based on the respective net asset values which are determined by the fund daily at market close. The net asset values are calculated based on the valuation of the underlying assets which are determined using observable inputs. The net asset values are not publicly reported, and funds are valued at the net asset value practical expedient.

Fixed income commingled trusts: Comprised of investments in fixed income securities held in pooled investment vehicles. The valuations of fixed income commingled trusts are based on the respective net asset values which are determined by the fund daily at market close. The net asset values are calculated based on the valuation of the underlying assets which are determined using observable inputs. The net asset values are not publicly reported, and funds are valued at the net asset value practical expedient.

Partnership units: Valued based on the year-end net asset values of the underlying partnerships. The net asset values of the partnerships are based on the fair values of the underlying investments of the partnerships. Quoted market prices are used to value the underlying investments of the partnerships, where the partnerships consist of the investment pools which invest primarily in common stocks. Partnership units include partnerships, private equity investments, and real asset investments. Partnerships primarily include long/short equity and absolute return strategies. These investments may be redeemed monthly with notice periods ranging from 45 to 95 days. At April 29, 2022, there are no funds in the process of liquidation. Private equity investments consist of common stock and debt instruments of private companies. For private equity funds, the sum of the unfunded commitments at April 29, 2022 is $204 million, and the estimated liquidation period of these funds is expected to be one to 15 years. Real asset investments consist of commodities, derivatives, Real Estate Investment Trusts, and illiquid real estate holdings. These investments have redemption and liquidation periods ranging from 30 days to 10 years. At April 29, 2022, there are no real estate investments in the process of liquidation. Valuation procedures are utilized to arrive at fair value if a quoted market price is not available for a partnership investment.

Registered investment companies: Valued at net asset values which are not publicly reported. The net asset values are calculated based on the valuation of the underlying assets. The underlying assets are valued at the quoted market prices of shares held by the plan at year-end in the active market on which the individual securities are traded.

Insurance contracts: Comprised of investments in collective (group) insurance contracts, consisting of individual insurance policies. The policyholder is the employer, and each member is the owner/beneficiary of their individual insurance policy. These policies are a part of the insurance company’s general portfolio and participate in the insurer’s profit-sharing policy on an excess yield basis.

The methods described above may produce fair values that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Company believes its valuation methodologies are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following tables provide information by level for the retirement benefit plan assets that are measured at fair value, as defined by U.S. GAAP. Certain investments for which the fair value is measured using the net asset value per share (or its equivalent) practical expedient are not presented within the fair value hierarchy. The fair value amounts presented for these investments are intended to permit reconciliation to the total fair value of plan assets at April 29, 2022 and April 30, 2021.

U.S. Pension Benefits

			Fair Value at
			Fair Value Measurements Using Inputs Considered as																		Investments Measured at Net Asset Value
(in millions)			April 29, 2022			Level 1						Level 2						Level 3
Short-term investments			$	73					$	73					$	—					$	—					$	—
Mutual funds			125						125						—						—						—
Equity commingled trusts			1,281						—						—						—						1,281
Fixed income commingled trusts			1,069						—						—						—						1,069
Partnership units			1,011						—						—						1,011						—
			$	3,559					$	197					$	—					$	1,011					$	2,350

			Fair Value at						Fair Value Measurements Using Inputs Considered as																		Investments Measured at Net Asset Value
(in millions)			April 30, 2021			Level 1						Level 2						Level 3
Short-term investments			$	232					$	232					$	—					$	—					$	—
Mutual funds			99						99						—						—						—
Equity commingled trusts			1,420						—						—						—						1,420
Fixed income commingled trusts			1,050						—						—						—						1,050
Partnership units			860						—						—						860						—
			$	3,660					$	331					$	—					$	860					$	2,470

The following tables provide a reconciliation of the beginning and ending balances of U.S. pension benefit assets measured at fair value that used significant unobservable inputs (Level 3):

(in millions)			Partnership Units
April 24, 2020			$	625
Total realized gains, net			8
Total unrealized gains, net			89
Purchases and sales, net			139
April 30, 2021			860
Total realized gains, net			28
Total unrealized gains, net			72
Purchases and sales, net			51
April 29, 2022			$	1,011

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Non-U.S. Pension Benefits

			Fair Value at						Fair Value Measurements Using Inputs Considered as																		Investments Measured at Net Asset Value
(in millions)			April 29, 2022			Level 1						Level 2						Level 3
Registered investment companies			$	1,689					$	—					$	—					$	—					$	1,689
Insurance contracts			43						—						—						43						—
			$	1,732					$	—					$	—					$	43					$	1,689

			Fair Value at						Fair Value Measurements Using Inputs Considered as																		Investments Measured at Net Asset Value
(in millions)			April 30, 2021			Level 1						Level 2						Level 3
Registered investment companies			$	1,850					$	—					$	—					$	—					$	1,850
Insurance contracts			49						—						—						49						—
			$	1,900					$	—					$	—					$	49					$	1,850

Non-U.S. pension benefit assets that are valued using significant unobservable inputs (Level 3) was $43 million and $49 million as of April 29, 2022 and April 30, 2021, respectively. The decrease in the fair value of the assets was due to insurance contracts being sold.

There were no transfers into or out of Level 3 for both the U.S. and non-U.S. pension plans during the fiscal years ended April 29, 2022 and April 30, 2021.

Retirement Benefit Plan Funding It is the Company’s policy to fund retirement costs within the limits of allowable tax deductions. During fiscal year 2022, the Company made discretionary contributions of approximately $24 million to the U.S. pension plan. Internationally, the Company contributed approximately $70 million for pension benefits during fiscal year 2022. The Company anticipates that it will make contributions of $21 million and $52 million to its U.S. pension benefit plans and non-U.S. pension benefit plans, respectively, in fiscal year 2023. Based on the guidelines under the U.S. Employee Retirement Income Security Act of 1974 and the various guidelines which govern the plans outside the U.S., the majority of anticipated fiscal year 2023 contributions will be discretionary. The Company believes that pension assets, returns on invested pension assets, and Company contributions will be able to meet its pension and other post-retirement obligations in the future.

Retiree benefit payments, which reflect expected future service, are anticipated to be paid as follows:

(in millions)			Gross Payments
Fiscal Year			U.S. Pension Benefits						Non-U.S. Pension Benefits
2023			$	150					$	61
2024			160						55
2025			172						59
2026			182						59
2027			193						65
2028 – 2032			1,110						367
Total			$	1,966					$	666

Post-retirement Benefit Plans The net periodic benefit cost associated with the Company’s post-retirement benefit plans was income of $20 million, $6 million, and $15 million in fiscal years 2022, 2021, and 2020, respectively. The Company’s projected benefit obligation for all post-retirement benefit plans was $276 million and $337 million at April 29, 2022 and April 30, 2021, respectively. The Company’s fair value of plan assets for all post-retirement benefit plans was $325 million and $345 million at April 29, 2022 and April 30, 2021, respectively. The post-retirement benefit plan assets at both April 29, 2022 and April 30, 2021 primarily comprised of equity and fixed commingled trusts, consistent with the U.S. retirement benefit plan assets outlined in the fair value leveling tables above.

Defined Contribution Savings Plans The Company has defined contribution savings plans that cover substantially all U.S. employees and certain non-U.S. employees. The general purpose of these plans is to provide additional financial security during retirement by providing employees with an incentive to make regular savings. Company contributions to the plans are based on employee contributions

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

and Company performance. Expense recognized under these plans was $403 million, $495 million, and $376 million in fiscal years 2022, 2021, and 2020, respectively.

Effective May 1, 2005, the Company froze participation in the original defined benefit pension plan in the U.S. and implemented two new plans: an additional defined benefit pension plan, the Personal Pension Account (PPA), and a new defined contribution plan, the Personal Investment Account (PIA). Employees in the U.S. hired on or after May 1, 2005 but before January 1, 2016 had the option to participate in either the PPA or the PIA. Participants in the PPA receive an annual allocation of their salary and bonus on which they will receive an annual guaranteed rate of return, which is based on the ten-year Treasury bond rate. Participants in the PIA also receive an annual allocation of their salary and bonus; however, they are allowed to determine how to invest their funds among identified fund alternatives. The cost associated with the PPA is included in U.S. Pension Benefits in the tables presented earlier. The defined contribution cost associated with the PIA was approximately $48 million, $50 million, and $52 million in fiscal years 2022, 2021, and 2020, respectively.

Effective January 1, 2016, the Company froze participation in the existing defined benefit (PPA) and contribution (PIA) pension plans in the U.S. and implemented a new form of benefit under the existing defined contribution plan for legacy Covidien employees and employees in the U.S. hired on or after January 1, 2016 or rehired after July 1, 2020. Participants in the Medtronic Core Contribution (MCC) also receive an annual allocation of their salary and bonus and are allowed to determine how to invest their funds among identified fund alternatives. The defined contribution cost associated with the MCC was approximately $83 million, $73 million, and $66 million and in fiscal years 2022, 2021, and 2020, respectively.

16. Leases

The Company leases office, manufacturing, and research facilities and warehouses, as well as transportation, data processing, and other equipment. The Company determines whether a contract is a lease or contains a lease at inception date. Upon commencement, the Company recognizes a right-of-use asset and lease liability. Right-of-use assets represent the Company's right to use the underlying asset for the lease term. Lease liabilities are the Company's obligation to make the lease payments arising from a lease. As the Company’s leases typically do not provide an implicit rate, the Company’s lease liabilities are measured on a discounted basis using the Company's incremental borrowing rate. Lease terms used in the recognition of right-of-use assets and lease liabilities include only options to extend the lease that are reasonably certain to be exercised. Additionally, lease terms underlying the right-of-use assets and lease liabilities consider terminations that are reasonably certain to be executed.

The Company's lease agreements include leases that have both lease and associated nonlease components. The Company has elected to account for lease components and the associated nonlease components as a single lease component. The consolidated balance sheets do not include recognized assets or liabilities for leases that, at the commencement date, have a term of twelve months or less and do not include an option to purchase the underlying asset that is reasonably certain to be exercised. The Company recognizes such leases in the consolidated statements of income on a straight-line basis over the lease term. Additionally, the Company recognizes variable lease payments not included in its lease liabilities in the period in which the obligation for those payments is incurred. Variable lease payments for fiscal year 2022, 2021, and 2020 were not material.

The Company's lease agreements include leases accounted for as operating leases and those accounted for as finance leases. The right-of-use assets, lease liabilities, lease costs, cash flows, and lease maturities associated with the Company's finance leases were not material to the consolidated financial statements at April 29, 2022 or April 30, 2021 or for fiscal year 2022, 2021 and 2020. Finance lease right-of-use assets are included in property, plant, and equipment, net, and finance lease liabilities are included in current debt obligations and long-term debt on the consolidated balance sheets.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following table summarizes the balance sheet classification of the Company's operating leases and amounts of the right-of-use assets and lease liabilities at April 29, 2022 and April 30, 2021:

(in millions)			Balance Sheet Classification						April 29, 2022						April 30, 2021
Right-of-use assets			Other assets						$	854					$	998
Current liability			Other accrued expenses						167						186
Non-current liability			Other liabilities						703						829

The following table summarizes the weighted-average remaining lease term and weighted-average discount rate for the Company's operating leases at April 29, 2022, April 30, 2021, and April 24, 2020:

						April 29, 2022						April 30, 2021						April 24, 2020
Weighted-average remaining lease term						7.3 Years						7.5 years						7.2 years
Weighted-average discount rate						2.0%						2.3%						3.0%

The following table summarizes the components of total operating lease cost for fiscal year 2022, 2021, and 2020:

						Fiscal Year
(in millions)						2022						2021						2020
Operating lease cost						$	195					$	216					$	223
Short-term lease cost						65						35						46
Total operating lease cost						$	260					$	251					$	269

The following table summarizes the cash paid for amounts included in the measurement of operating lease liabilities and right-of-use assets obtained in exchange for operating lease liabilities for fiscal year 2022, 2021, and 2020:

						Fiscal Year
(in millions)						2022						2021						2020
Cash paid for amounts included in the measurement of operating lease liabilities						$	174					$	216					$	221
Right-of-use assets obtained in exchange for operating lease liabilities						78						230						174

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The following table summarizes the maturities of the Company's operating leases at April 29, 2022:

(in millions) Fiscal Year						Operating Leases
2023						$	213
2024						164
2025						130
2026						103
2027						82
Thereafter						284
Total expected lease payments						976
Less: Imputed interest						(105)
Total lease liability						$	871

The Company makes certain products available to customers under lease arrangements, including arrangements whereby equipment is placed with customers who then purchase consumable products to accompany the use of the equipment. Income arising from arrangements where the Company is the lessor is recognized within net sales in the consolidated statements of income and the Company's net investments in sales-type leases are included in other current assets and other assets in the consolidated balance sheets. Lessor income and the related assets and lease maturities were not material to the consolidated financial statements at or for the fiscal year ended April 29, 2022 and April 30, 2021.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

17. Accumulated Other Comprehensive Loss

The following table provides changes in AOCI, net of tax and by component:

(in millions)			Unrealized (Loss) Gain on Investment Securities						Cumulative Translation Adjustments						Net Investment Hedges						Net Change in Retirement Obligations						Unrealized (Loss) Gain on Cash Flow Hedges						Total Accumulated Other Comprehensive (Loss) Income
April 26, 2019			$	(45)					$	(1,383)					$	(169)					$	(1,308)					$	194					$	(2,711)
Other comprehensive income (loss) before reclassifications			43						(827)						405						(596)						309						(666)
Reclassifications			2						—						—						52						(237)						(183)
Other comprehensive income (loss)			45						(827)						405						(544)						72						(849)
April 24, 2020			—						(2,210)						236						(1,852)						266						(3,560)
Other comprehensive income (loss) before reclassifications			92						1,691						(1,694)						432						(541)						(20)
Reclassifications			—						—						—						73						22						95
Other comprehensive income (loss)			92						1,691						(1,694)						505						(519)						75
April 30, 2021			92						(519)						(1,458)						(1,347)						(253)						(3,485)
Other comprehensive income (loss) before reclassifications			(304)						(2,080)						2,299						514						781						1,210
Reclassifications			3						—						—						60						(54)						9
Other comprehensive income (loss)			(301)						(2,080)						2,299						574						727						1,219
April 29, 2022			$	(209)					$	(2,599)					$	841					$	(773)					$	474					$	(2,265)

The income tax on gains and losses on investment securities in other comprehensive income before reclassifications during fiscal years 2022, 2021, and 2020 was a benefit of $51 million, an expense of $31 million and a benefit of $13 million, respectively. During fiscal years 2022, 2021, and 2020, realized gains and losses on investment securities reclassified from AOCI were reduced by income taxes of $1 million, $2 million and $3 million, respectively. When realized, gains and losses on investment securities reclassified from AOCI are recognized within other non-operating income, net. Refer to Note 5 for additional information.

During fiscal years 2022, 2021, and 2020, the income tax on cumulative translation adjustment was a benefit of $8 million, an expense of $7 million, and a benefit of $9 million, respectively.

During fiscal years 2022, 2021, and 2020, there were no tax impacts on net investment hedges. Refer to Note 7 for additional information.

The net change in retirement obligations in other comprehensive income includes amortization of net actuarial losses included in net periodic benefit cost. The income tax on the net change in retirement obligations in other comprehensive income before reclassifications during fiscal years 2022, 2021, and 2020 resulted in an expense of $134 million and $115 million, and a benefit of $159 million, respectively. During fiscal years 2022, 2021, and 2020, the gains and losses on defined benefit and pension items reclassified from AOCI were reduced by income taxes of $20 million, $16 million, and $12 million, respectively. When realized, net gains and losses on defined benefit and pension items reclassified from AOCI are recognized within other non-operating income, net. Refer to Note 15 for additional information.

The income tax on unrealized gains and losses on cash flow hedges in other comprehensive income before reclassifications during fiscal years 2022, 2021, and 2020 was an expense of $152 million, a benefit of $87 million, and an expense of $88 million, respectively. Amounts reclassified from AOCI related to cash flow hedges included income taxes of $26 million, $14 million, and $80 million for fiscal years 2022, 2021, and 2020, respectively. When realized, gains and losses on currency exchange rate contracts reclassified from AOCI are recognized within other operating expense, net or cost of products sold. Refer to Note 7 for additional information.

18. Commitments and Contingencies

Legal Matters

The Company and its affiliates are involved in a number of legal actions from time to time involving product liability, employment, intellectual property and commercial disputes, shareholder related matters, environmental proceedings, tax disputes, and governmental proceedings and investigations, including those described below. With respect to governmental proceedings and investigations, like other companies in our industry, the Company is subject to extensive regulation by national, state, and local governmental agencies in the United

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

States and in other jurisdictions in which the Company and its affiliates operate. As a result, interaction with governmental agencies is ongoing. The Company’s standard practice is to cooperate with regulators and investigators in responding to inquiries. The outcomes of legal actions are not within the Company’s complete control and may not be known for prolonged periods of time. In some actions, the enforcement agencies or private claimants seek damages, as well as other civil or criminal remedies (including injunctions barring the sale of products that are the subject of the proceeding), that could require significant expenditures, result in lost revenues, or limit the Company's ability to conduct business in the applicable jurisdictions.

The Company records a liability in the consolidated financial statements on an undiscounted basis for loss contingencies related to legal actions when a loss is known or considered probable and the amount may be reasonably estimated. If the reasonable estimate of a known or probable loss is a range, and no amount within the range is a better estimate than any other, the minimum amount of the range is accrued. If a loss is reasonably possible but not known or probable, and may be reasonably estimated, the estimated loss or range of loss is disclosed. When determining the estimated loss or range of loss, significant judgment is required. Estimates of probable losses resulting from litigation and governmental proceedings involving the Company are inherently difficult to predict, particularly when the matters are in early procedural stages with incomplete scientific facts or legal discovery, involve unsubstantiated or indeterminate claims for damages, potentially involve penalties, fines or punitive damages, or could result in a change in business practice. The Company classifies certain specified litigation charges and gains related to significant legal matters as certain litigation charges in the consolidated statements of income. During fiscal years 2022, 2021, and 2020, the Company recognized $95 million, $118 million, and $313 million, respectively, of additional certain litigation charges. At April 29, 2022 and April 30, 2021, total accrued litigation charges were approximately $0.3 billion and $0.4 billion, respectively. The ultimate cost to the Company with respect to accrued litigation could be materially different than the amount of the current estimates and accruals and could have a material adverse impact on the Company’s consolidated earnings, financial position, and/or cash flows. The Company includes accrued litigation in other accrued expenses and other liabilities on the consolidated balance sheets. While it is not possible to predict the outcome for most of the legal matters discussed below, the Company believes it is possible that the costs associated with these matters could have a material adverse impact on the Company’s consolidated earnings, financial position, and/or cash flows.

Product Liability Matters

Pelvic Mesh Litigation

The Company is currently involved in litigation in various state and federal courts against manufacturers of pelvic mesh products alleging personal injuries resulting from the implantation of those products. Two subsidiaries of Covidien supplied pelvic mesh products to one of the manufacturers, C.R. Bard (Bard), named in the litigation. The litigation includes a federal multi-district litigation in the U.S. District Court for the Northern District of West Virginia and cases in various state courts and jurisdictions outside the U.S. Generally, complaints allege design and manufacturing claims, failure to warn, breach of warranty, fraud, violations of state consumer protection laws and loss of consortium claims. In fiscal year 2016, Bard paid the Company $121 million towards the settlement of 11,000 of these claims. In May 2017, the agreement with Bard was amended to extend the terms to apply to up to an additional 5,000 claims. That agreement does not resolve the dispute between the Company and Bard with respect to claims that do not settle, if any. As part of the agreement, the Company and Bard agreed to dismiss without prejudice their pending litigation with respect to Bard’s obligation to defend and indemnify the Company. The Company estimates law firms representing approximately 16,200 claimants have asserted or may assert claims involving products manufactured by Covidien’s subsidiaries. As of June 1, 2022, the Company had reached agreements to settle approximately 15,900 of these claims. The Company's accrued expenses for this matter are included within accrued litigation as discussed above.

Hernia Mesh Litigation

Starting in fiscal year 2020, plaintiffs began filing lawsuits against certain subsidiaries of the Company in U.S. state and federal courts alleging personal injury from hernia mesh products sold by those subsidiaries. The majority of the pending cases are in Massachusetts state court, where they have been consolidated before a single judge. As of June 6, 2022, subsidiaries of the Company have been named as defendants in lawsuits filed on behalf of approximately 5,900 individual plaintiffs, and certain plaintiffs’ law firms have advised the Company that they may file additional cases in the future. On June 6, 2022, the Judicial Panel on Multidistrict Litigation transferred 83 actions involving the Company’s hernia mesh to a federal Multidistrict Litigation in the U.S. District Court for the District of Massachusetts for pretrial proceedings. The pending lawsuits relate almost entirely to hernia mesh products that have not been subject to recalls, withdrawals, or other adverse regulatory action. The Company has not recorded an expense related to damages in connection with these matters because any potential loss is not currently probable and reasonably estimable. Additionally, the Company is unable to reasonably estimate the range of loss, if any, that may result from these matters.

Environmental Proceedings

The Company is involved in various stages of investigation and cleanup related to environmental remediation matters at a number of sites. These projects relate to a variety of activities, including removal of solvents, metals and other hazardous substances from soil and

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

groundwater. The ultimate cost of site cleanup and timing of future cash flows is difficult to predict given uncertainties regarding the extent of the required cleanup, the interpretation of applicable laws and regulations, and alternative cleanup methods.

The Company is a successor to a company which owned and operated a chemical manufacturing facility in Orrington, Maine from 1967 until 1982, and is responsible for the costs of completing an environmental site investigation as required by the Maine Department of Environmental Protection (MDEP). MDEP served a compliance order on Mallinckrodt LLC and U.S. Surgical Corporation, subsidiaries of Covidien, in December 2008, which included a directive to remove a significant volume of soils at the site. After a hearing on the compliance order before the Maine Board of Environmental Protection (Maine Board) to challenge the terms of the compliance order, the Maine Board modified the MDEP order and issued a final order requiring removal of two landfills, capping of the remaining three landfills, installation of a groundwater extraction system and long-term monitoring of the site and the three remaining landfills. The Company has proceeded with remediation in accordance with the MDEP order as modified by the Maine Board order.

Since the early 2000s, the Company or its predecessors have also been involved in a lawsuit filed in the U.S. District Court for the District of Maine by the Natural Resources Defense Council and the Maine People’s Alliance. Plaintiffs sought an injunction requiring the Company's predecessor to conduct extensive studies of mercury contamination of the Penobscot River and Bay and options for remediating such contamination, and to perform appropriate remedial activities, if necessary.

Following a trial in March 2002, the court held that conditions in the Penobscot River and Bay may pose an imminent and substantial endangerment and that the Company’s predecessor was liable for the cost of performing a study of the River and Bay. Following a second trial in June 2014, the court ordered that further engineering study and engineering design work was needed to determine the nature and extent of remediation in the Penobscot River and Bay. The court also appointed an engineering firm to conduct such studies and issue a report on potential remediation alternatives. In connection with these proceedings, reports have been produced including a variety of cost estimates for a variety of potential remedial options. In March 2021, the parties notified the court that they had agreed on a settlement in principle of all issues in this matter. Finalization of the proposed settlement remains subject to court approval.

The Company's accrued expenses for environmental proceedings are included within accrued litigation as discussed above.

Income Taxes

In March 2009, the IRS issued its audit report on Medtronic, Inc. for fiscal years 2005 and 2006. Medtronic, Inc. reached agreement with the IRS on some, but not all matters related to these fiscal years. The remaining unresolved issue for fiscal years 2005 and 2006 relates to the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico, which is one of the Company's key manufacturing sites. The U.S. Tax Court reviewed this dispute, and in June 2016, issued an opinion with respect to the allocation of income between the parties for fiscal years 2005 and 2006. The Tax Court generally rejected the IRS’s position, but also made certain modifications to the Medtronic, Inc. tax returns as filed. In April 2017, the IRS filed a Notice of Appeal to the U.S. Court of Appeals for the Eighth Circuit regarding the Tax Court opinion. Oral argument for the Appeal occurred in March 2018. The Court of Appeals issued its opinion in August 2018 and remanded the case back to the Tax Court for additional factual findings. The Tax Court trial relating to the issues remanded by the Court of Appeals concluded during June 2021. The parties are awaiting the Tax Court decision, which will remain subject to appeal by either party upon its issuance.

The IRS has issued its audit reports on Medtronic, Inc. for fiscal years 2007 through 2016. Medtronic, Inc. and the IRS have reached agreement on all significant issues except for the allocation of income between Medtronic, Inc. and its wholly-owned subsidiary operating in Puerto Rico for the businesses that are the subject of the U.S. Tax Court matter for fiscal years 2005 and 2006.

Medtronic, Inc.’s fiscal years 2017, 2018, and 2019 U.S. federal income tax returns are currently being audited by the IRS.

Covidien LP (a wholly owned subsidiary of Medtronic plc) has either reached agreement with the IRS or the statute of limitations has lapsed on its U.S. federal income tax returns through fiscal year 2018.

Although it is not possible to predict the outcome for most of the income tax matters discussed above, the Company believes it is possible that charges associated with these matters could have a material adverse impact on the Company’s consolidated earnings, financial position, and/or cash flows.

Refer to Note 13 for additional discussion of income taxes.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Guarantees

In the normal course of business, the Company and/or its affiliates periodically enter into agreements that require one or more of the Company and/or its affiliates to indemnify customers or suppliers for specific risks, such as claims for injury or property damage arising as a result of the Company or its affiliates’ products, the negligence of the Company's personnel, or claims alleging that the Company's products infringe on third-party patents or other intellectual property. The Company also offers warranties on various products. The Company’s maximum exposure under these guarantees is unable to be estimated. Historically, the Company has not experienced significant losses on these types of guarantees.

The Company believes the ultimate resolution of the above guarantees is not expected to have a material effect on the Company’s consolidated earnings, financial position, and/or cash flows.

19. Segment and Geographic Information

There were no changes to the reportable segments during the fiscal year ended April 29, 2022. The Company's four principal operating and reportable segments are as follows: Cardiovascular Portfolio, Neuroscience Portfolio, Medical Surgical Portfolio, and Diabetes Operating Unit.

The Company's management has chosen to organize the entity based upon therapy solutions provided by each segment. The four principal segments are strategic businesses that are managed separately, as each one develops and manufactures products and provides services oriented toward targeted therapy solutions.

The primary products and services from which the Cardiovascular Portfolio segment derives its revenues include products for the diagnosis, treatment, and management of cardiac rhythm disorders and cardiovascular disease, as well as services to diagnose, treat, and manage heart and vascular-related disorders and diseases.

The primary products and services from which the Medical Surgical Portfolio segment derives its revenues include those focused on diseases of the respiratory system, gastrointestinal tract, renal system, lungs, pelvic region, kidneys, obesity, and other preventable complications.

The primary products and services from which the Neuroscience Portfolio segment derives its revenues include those focused on neurostimulation therapies and drug delivery systems for the treatment of chronic pain, as well as various areas of the spine and brain, along with pelvic health and conditions of the ear, nose, and throat.

The primary products from which the Diabetes Operating Unit segment derives its revenues include those focused on diabetes management, including insulin pumps, continuous glucose monitoring systems, smart insulin pens, and insulin pump consumables.

Segment disclosures are on a performance basis, consistent with internal management reporting. Net sales of the Company's segments include end-customer revenues from the sale of products the segment develops, manufactures, and distributes. Refer to Note 2 for discussion on net sales by segment. There are certain corporate and centralized expenses that are not allocated to the segments. The Company's management evaluates the performance of the segments and allocates resources based on net sales and segment operating profit. Segment operating profit represents income before income taxes, excluding interest expense, amortization of intangible assets, centralized distribution costs, non-operating income or expense items, certain corporate charges, and other items not allocated to the segments.

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

The accounting policies of the segments are the same as those described in Note 1. Certain depreciable assets may be recorded by one segment, while the depreciation expense is allocated to another segment. The allocation of depreciation expense is based on the proportion of the assets used by each segment.

Segment Operating Profit

			Fiscal Year
(in millions)			2022						2021						2020
Cardiovascular			$	4,512					$	3,850					$	3,719
Medical Surgical			3,572						3,021						3,044
Neuroscience			3,765						3,162						2,915
Diabetes			583						598						546
Segment operating profit			12,432						10,632						10,224
Interest expense			(553)						(925)						(1,092)
Other non-operating income, net			318						336						356
Amortization of intangible assets			(1,733)						(1,783)						(1,756)
Corporate			(1,724)						(1,577)						(1,239)
Centralized distribution costs			(1,752)						(1,877)						(1,420)
Restructuring and associated costs			(335)						(617)						(441)
Acquisition-related items			43						15						(66)
Certain litigation charges			(95)						(118)						(313)
Impairment charges			—						(76)						—
MCS impairment / costs			(881)						—						—
IPR&D charges			(101)						(31)						(25)
Exit of businesses			—						—						(52)
Debt tender premium and other charges			—						—						7
Medical device regulations			(102)						(83)						(48)
Contribution to Medtronic Foundation			—						—						(80)
Income before income taxes			$	5,517					$	3,895					$	4,055

Total Assets and Depreciation Expense

			Total Assets												Depreciation Expense
(in millions)			April 29, 2022						April 30, 2021						2022						2021						2020
Cardiovascular			$	14,490					$	15,027					$	214					$	212					$	210
Medical Surgical			36,940						39,319						200						195						194
Neuroscience			16,917						17,151						265						236						233
Diabetes			3,797						3,671						67						53						38
Segments			72,144						75,168						746						696						675
Corporate			18,837						17,915						228						223						232
Total			$	90,981					$	93,083					$	974					$	919					$	907

Medtronic plc

Notes to Consolidated Financial Statements (Continued)

Geographic Information

Net sales are attributed to the country based on the location of the customer taking possession of the products or in which the services are rendered. Geographic property, plant, and equipment are attributed to the country based on the physical location of the assets.

The following table presents net sales for fiscal years 2022, 2021, and 2020, and property, plant, and equipment, net at April 29, 2022 and April 30, 2021 for the Company's country of domicile, countries with significant concentrations, and all other countries:

			Net sales																		Property, plant, and equipment, net
(in millions)			2022						2021						2020						April 29, 2022						April 30, 2021
Ireland			$	101					$	100					$	85					$	177					$	170
United States			16,135						15,526						14,919						3,821						3,688
Rest of world			15,450						14,491						13,909						1,415						1,363
Total other countries, excluding Ireland			31,585						30,017						28,828						5,236						5,051
Total			$	31,686					$	30,117					$	28,913					$	5,413					$	5,221

No single customer represented over 10 percent of the Company’s consolidated net sales in fiscal years 2022, 2021, or 2020.

20. Subsequent Events

On May 25, 2022, the Company and DaVita Inc. (“DaVita”) entered into a definitive agreement with the intent to form a new, independent kidney care-focused medical device company (“NewCo”) with equal equity ownership. The transaction is expected to close in calendar year 2023, subject to customary regulatory approvals and closing conditions. Medtronic is contributing its entire Renal Care Solutions business (“RCS”) to NewCo. RCS is part of the Respiratory, Gastrointestinal, and Renal division in the Company’s Medical Surgical portfolio, and had revenue of $325 million in fiscal year 2022.