Home Depot Inc. (HD) | Goodwill and Intangible Assets

Goodwill and Intangible Assets Accounting Policy

Goodwill represents the excess of purchase price over the fair value of net assets acquired. Home Depot does not amortize goodwill but does assess the recoverability of goodwill in the third quarter of each fiscal year, or more often if indicators warrant, by determining whether the fair value of each reporting unit supports its carrying value. The fair values of Home Depot's identified reporting units were estimated using the present value of expected future discounted cash flows.

Home Depot amortizes the cost of other intangible assets over their estimated useful lives, which range up to ten years, unless such lives are deemed indefinite. Intangible assets with indefinite lives are tested in the third quarter of each fiscal year for impairment, or more often if indicators warrant. Impairment charges related to goodwill and other intangible assets were not material for fiscal 2011, 2010 or 2009.

Source: Home Depot Inc., Annual Report

Analyst Adjustments: Removal of Goodwill

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Home Depot Inc., adjustments to financial data

USD $ in millions

		Jan 29, 2012	Jan 30, 2011	Jan 31, 2010	Feb 1, 2009	Feb 3, 2008	Jan 28, 2007
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Goodwill
	Total assets (adjusted)
	Adjustment to Stockholders’ Equity
	Stockholders’ equity (as reported)
	Less: Goodwill
	Stockholders’ equity (adjusted)

Adjusted Ratios: Removal of Goodwill (Summary)

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Home Depot Inc., adjusted ratios

	Jan 29, 2012	Jan 30, 2011	Jan 31, 2010	Feb 1, 2009	Feb 3, 2008	Jan 28, 2007
Total Asset Turnover
Reported total asset turnover
Adjusted total asset turnover
Financial Leverage
Reported financial leverage
Adjusted financial leverage
Return on Equity (ROE)
Reported ROE	%	%	%	%	%	%
Adjusted ROE	%	%	%	%	%	%
Return on Assets (ROA)
Reported ROA	%	%	%	%	%	%
Adjusted ROA	%	%	%	%	%	%

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Home Depot Inc.'s adjusted total asset turnover improved from 2010 to 2011 and from 2011 to 2012.
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Home Depot Inc.'s adjusted financial leverage increased from 2010 to 2011 and from 2011 to 2012.
Adjusted ROE	A profitability ratio calculated as net income divided by adjusted shareholders' equity.	Home Depot Inc.'s adjusted ROE improved from 2010 to 2011 and from 2011 to 2012.
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	Home Depot Inc.'s adjusted ROA improved from 2010 to 2011 and from 2011 to 2012.

Adjusted Total Asset Turnover

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		Jan 29, 2012	Jan 30, 2011	Jan 31, 2010	Feb 1, 2009	Feb 3, 2008	Jan 28, 2007
	As Reported
	Net sales (USD $ in millions)
	Total assets (USD $ in millions)

	Total asset turnover¹
	Adjusted for Goodwill
	Net sales (USD $ in millions)
	Adjusted total assets (USD $ in millions)

	Adjusted total asset turnover²

2012 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= ÷ =

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= ÷ =

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Home Depot Inc.'s adjusted total asset turnover improved from 2010 to 2011 and from 2011 to 2012.

Adjusted Financial Leverage

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		Jan 29, 2012	Jan 30, 2011	Jan 31, 2010	Feb 1, 2009	Feb 3, 2008	Jan 28, 2007
	As Reported
	Total assets (USD $ in millions)
	Stockholders’ equity (USD $ in millions)

	Financial leverage¹
	Adjusted for Goodwill
	Adjusted total assets (USD $ in millions)
	Adjusted stockholders’ equity (USD $ in millions)

	Adjusted financial leverage²

2012 Calculations

¹ Financial leverage = Total assets ÷ Stockholders’ equity
= ÷ =

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ equity
= ÷ =

Ratio	Description	The company
Adjusted financial leverage	A measure of financial leverage calculated as adjusted total assets divided by adjusted total equity. Financial leverage is the extent to which a company can effect, through the use of debt, a proportional change in the return on common equity that is greater than a given proportional change in operating income.	Home Depot Inc.'s adjusted financial leverage increased from 2010 to 2011 and from 2011 to 2012.

Adjusted Return On Equity (ROE)

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	Jan 29, 2012	Jan 30, 2011	Jan 31, 2010	Feb 1, 2009	Feb 3, 2008	Jan 28, 2007
As Reported
Net earnings (USD $ in millions)
Stockholders’ equity (USD $ in millions)

ROE¹	%	%	%	%	%	%
Adjusted for Goodwill
Net earnings (USD $ in millions)
Adjusted stockholders’ equity (USD $ in millions)

Adjusted ROE²	%	%	%	%	%	%

2012 Calculations

¹ ROE = 100 × Net earnings ÷ Stockholders’ equity
= 100 × ÷ = %

² Adjusted ROE = 100 × Net earnings ÷ Adjusted stockholders’ equity
= 100 × ÷ = %

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as net income divided by adjusted shareholders' equity.	Home Depot Inc.'s adjusted ROE improved from 2010 to 2011 and from 2011 to 2012.

Adjusted Return On Assets (ROA)

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	Jan 29, 2012	Jan 30, 2011	Jan 31, 2010	Feb 1, 2009	Feb 3, 2008	Jan 28, 2007
As Reported
Net earnings (USD $ in millions)
Total assets (USD $ in millions)

ROA¹	%	%	%	%	%	%
Adjusted for Goodwill
Net earnings (USD $ in millions)
Adjusted total assets (USD $ in millions)

Adjusted ROA²	%	%	%	%	%	%

2012 Calculations

¹ ROA = 100 × Net earnings ÷ Total assets
= 100 × ÷ = %

² Adjusted ROA = 100 × Net earnings ÷ Adjusted total assets
= 100 × ÷ = %

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	Home Depot Inc.'s adjusted ROA improved from 2010 to 2011 and from 2011 to 2012.

Home Depot Inc. (HD) | Analysis of Goodwill and Intangible Assets

Goodwill and Intangible Assets Accounting Policy

Analyst Adjustments: Removal of Goodwill

Adjusted Ratios: Removal of Goodwill (Summary)

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return On Equity (ROE)

Adjusted Return On Assets (ROA)

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