Kimberly-Clark Corp. (KMB) | Goodwill and Intangible Assets

Goodwill and Intangible Assets Accounting Policy

Goodwill represents costs in excess of fair values assigned to the underlying net assets of acquired businesses. Goodwill is not amortized, but rather is tested for impairment annually and whenever events and circumstances indicate that impairment may have occurred. Impairment testing compares the reporting unit carrying amount of the goodwill with its fair value. Fair value is estimated based on discounted cash flows. If the reporting unit carrying amount of goodwill exceeds its fair value, an impairment charge would be recorded. Kimberly-Clark has completed the required annual testing of goodwill for impairment for all reporting units and has determined that goodwill is not impaired.

Intangible assets with finite lives are amortized over their estimated useful lives and are reviewed for impairment whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. Estimated useful lives range from 2 to 30 years for trademarks, 5 to 17 years for patents and developed technologies, and 5 to 16 years for other intangible assets. An impairment loss would be indicated when estimated undiscounted future cash flows from the use of the asset are less than its carrying amount. An impairment loss would be measured as the difference between the fair value (based on discounted future cash flows) and the carrying amount of the asset.

Source: Kimberly-Clark Corp., Annual Report

Goodwill and Intangible Assets Disclosure

Kimberly-Clark Corp., Statement of Financial Position, Goodwill and Intangible Assets

USD $ in millions

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Trademarks	253	252	257	266	219
Patents and developed technologies	158	157	157	153	52
Other	105	96	93	86	36
Intangible assets subject to amortization, gross carrying amount	516	505	507	505	307
Accumulated amortization	(281)	(251)	(231)	(208)	(186)
Intangible assets subject to amortization, net	235	254	276	297	121
Acquired in-process research and development	11	11	11	13	–
Intangible assets with indefinite useful lives	11	11	11	13	–
Other intangible assets	246	265	287	310	121
Goodwill	3,337	3,340	3,403	3,275	2,743
Intangible assets	3,583	3,605	3,690	3,585	2,864

Source: Based on data from Kimberly-Clark Corp. Annual Reports

Item	Description	The company
Other intangible assets	Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.	Kimberly-Clark Corp.'s other intangible assets declined from 2010 to 2011 and from 2011 to 2012.
Goodwill	Carrying amount as of the balance sheet date, which is the cumulative amount paid and (if applicable) the fair value of any noncontrolling interest in the acquiree, adjusted for any amortization recognized prior to the adoption of any changes in generally accepted accounting principles (as applicable) and for any impairment charges, in excess of the fair value of net assets acquired in one or more business combination transactions.	Kimberly-Clark Corp.'s goodwill declined from 2010 to 2011 and from 2011 to 2012.
Intangible assets	Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.	Kimberly-Clark Corp.'s intangible assets declined from 2010 to 2011 and from 2011 to 2012.

Analyst Adjustments: Removal of Goodwill

Kimberly-Clark Corp., adjustments to financial data

USD $ in millions

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Adjustment to Total Assets
Total assets (as reported)	19,873	19,373	19,864	19,209	18,089
Less: Goodwill	3,337	3,340	3,403	3,275	2,743
Total assets (adjusted)	16,536	16,033	16,461	15,934	15,346
Adjustment to Total Kimberly-Clark Corporation Stockholders' Equity
Total Kimberly-Clark Corporation stockholders' equity (as reported)	4,985	5,249	5,917	5,406	3,878
Less: Goodwill	3,337	3,340	3,403	3,275	2,743
Total Kimberly-Clark Corporation stockholders' equity (adjusted)	1,648	1,909	2,514	2,131	1,135

Adjusted Ratios: Removal of Goodwill (Summary)

Kimberly-Clark Corp., adjusted ratios

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
Total Asset Turnover
Reported total asset turnover	1.06	1.08	0.99	1.00	1.07
Adjusted total asset turnover	1.27	1.30	1.20	1.20	1.27
Financial Leverage
Reported financial leverage	3.99	3.69	3.36	3.55	4.66
Adjusted financial leverage	10.03	8.40	6.55	7.48	13.52
Return on Equity (ROE)
Reported ROE	35.11%	30.31%	31.15%	34.85%	43.58%
Adjusted ROE	106.19%	83.34%	73.31%	88.41%	148.90%
Return on Assets (ROA)
Reported ROA	8.81%	8.21%	9.28%	9.81%	9.34%
Adjusted ROA	10.58%	9.92%	11.20%	11.82%	11.01%

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Kimberly-Clark Corp.'s adjusted total asset turnover improved from 2010 to 2011 but then slightly deteriorated 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.	Kimberly-Clark Corp.'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.	Kimberly-Clark Corp.'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.	Kimberly-Clark Corp.'s adjusted ROA deteriorated from 2010 to 2011 but then improved from 2011 to 2012 not reaching 2010 level.

Adjusted Total Asset Turnover

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Net sales (USD $ in millions)	21,063	20,846	19,746	19,115	19,415
Total assets (USD $ in millions)	19,873	19,373	19,864	19,209	18,089

Total asset turnover¹	1.06	1.08	0.99	1.00	1.07
Adjusted for Goodwill
Net sales (USD $ in millions)	21,063	20,846	19,746	19,115	19,415
Adjusted total assets (USD $ in millions)	16,536	16,033	16,461	15,934	15,346

Adjusted total asset turnover²	1.27	1.30	1.20	1.20	1.27

2012 Calculations

¹ Total asset turnover = Net sales ÷ Total assets
= 21,063 ÷ 19,873 = 1.06

² Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= 21,063 ÷ 16,536 = 1.27

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Kimberly-Clark Corp.'s adjusted total asset turnover improved from 2010 to 2011 but then slightly deteriorated from 2011 to 2012.

Adjusted Financial Leverage

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Total assets (USD $ in millions)	19,873	19,373	19,864	19,209	18,089
Total Kimberly-Clark Corporation stockholders' equity (USD $ in millions)	4,985	5,249	5,917	5,406	3,878

Financial leverage¹	3.99	3.69	3.36	3.55	4.66
Adjusted for Goodwill
Adjusted total assets (USD $ in millions)	16,536	16,033	16,461	15,934	15,346
Adjusted total Kimberly-Clark Corporation stockholders' equity (USD $ in millions)	1,648	1,909	2,514	2,131	1,135

Adjusted financial leverage²	10.03	8.40	6.55	7.48	13.52

2012 Calculations

¹ Financial leverage = Total assets ÷ Total Kimberly-Clark Corporation stockholders' equity
= 19,873 ÷ 4,985 = 3.99

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Kimberly-Clark Corporation stockholders' equity
= 16,536 ÷ 1,648 = 10.03

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.	Kimberly-Clark Corp.'s adjusted financial leverage increased from 2010 to 2011 and from 2011 to 2012.

Adjusted Return On Equity (ROE)

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Net income attributable to Kimberly-Clark Corporation (USD $ in millions)	1,750	1,591	1,843	1,884	1,690
Total Kimberly-Clark Corporation stockholders' equity (USD $ in millions)	4,985	5,249	5,917	5,406	3,878

ROE¹	35.11%	30.31%	31.15%	34.85%	43.58%
Adjusted for Goodwill
Net income attributable to Kimberly-Clark Corporation (USD $ in millions)	1,750	1,591	1,843	1,884	1,690
Adjusted total Kimberly-Clark Corporation stockholders' equity (USD $ in millions)	1,648	1,909	2,514	2,131	1,135

Adjusted ROE²	106.19%	83.34%	73.31%	88.41%	148.90%

2012 Calculations

¹ ROE = 100 × Net income attributable to Kimberly-Clark Corporation ÷ Total Kimberly-Clark Corporation stockholders' equity
= 100 × 1,750 ÷ 4,985 = 35.11%

² Adjusted ROE = 100 × Net income attributable to Kimberly-Clark Corporation ÷ Adjusted total Kimberly-Clark Corporation stockholders' equity
= 100 × 1,750 ÷ 1,648 = 106.19%

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

Adjusted Return On Assets (ROA)

	Dec 31, 2012	Dec 31, 2011	Dec 31, 2010	Dec 31, 2009	Dec 31, 2008
As Reported
Net income attributable to Kimberly-Clark Corporation (USD $ in millions)	1,750	1,591	1,843	1,884	1,690
Total assets (USD $ in millions)	19,873	19,373	19,864	19,209	18,089

ROA¹	8.81%	8.21%	9.28%	9.81%	9.34%
Adjusted for Goodwill
Net income attributable to Kimberly-Clark Corporation (USD $ in millions)	1,750	1,591	1,843	1,884	1,690
Adjusted total assets (USD $ in millions)	16,536	16,033	16,461	15,934	15,346

Adjusted ROA²	10.58%	9.92%	11.20%	11.82%	11.01%

2012 Calculations

¹ ROA = 100 × Net income attributable to Kimberly-Clark Corporation ÷ Total assets
= 100 × 1,750 ÷ 19,873 = 8.81%

² Adjusted ROA = 100 × Net income attributable to Kimberly-Clark Corporation ÷ Adjusted total assets
= 100 × 1,750 ÷ 16,536 = 10.58%

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	Kimberly-Clark Corp.'s adjusted ROA deteriorated from 2010 to 2011 but then improved from 2011 to 2012 not reaching 2010 level.