Goodwill and Intangible Assets Accounting Policy
Goodwill
Monsanto follows the guidance of the Business Combinations topic of the ASC, in recording the goodwill arising from a business combination as the excess of purchase price and related costs over the fair value of identifiable assets acquired and liabilities assumed.
Under the Intangibles — Goodwill and Other topic of the ASC, goodwill is not amortized and is subject to annual impairment tests. A fair-value-based test is applied at the reporting unit level, which is generally at or one level below the operating segment level. The test compares the fair value of the company's reporting units to the carrying value of those reporting units. This test requires various judgments and estimates. The fair value of goodwill is determined using an estimate of future cash flows of the reporting unit and a risk-adjusted discount rate to compute a net present value of future cash flows. An adjustment to goodwill will be recorded for any goodwill that is determined to be impaired. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair values of recognized and unrecognized assets and liabilities of the reporting unit. Goodwill is tested for impairment at least annually, or more frequently if events or circumstances indicate it might be impaired. Goodwill was last tested for impairment as of March 1, 2011.
Other Intangible Assets
Other intangible assets consist primarily of acquired seed germplasm, acquired intellectual property, trademarks and customer relationships. Seed germplasm is the genetic material used in new seed varieties. Germplasm is amortized on a straight-line basis over useful lives ranging from five years for completed technology germplasm to a maximum of 30 years for certain core technology germplasm. Completed technology germplasm consists of seed hybrids and varieties that are commercially available. Core technology germplasm is the collective germplasm of inbred and hybrid seeds and has a longer useful life as it is used to develop new seed hybrids and varieties. Acquired intellectual property includes intangible assets related to acquisitions and licenses through which Monsanto has acquired the rights to various research and discovery technologies. These encompass intangible assets such as enabling processes and data libraries necessary to support the integrated genomics and biotechnology platforms. These intangible assets have alternative future uses and are amortized over useful lives ranging from three to 10 years. The useful lives of acquired germplasm and acquired intellectual property are determined based on consideration of several factors including the nature of the asset, its expected use, length of licensing agreement or patent and the period over which benefits are expected to be received from the use of the asset.
Monsanto has a broad portfolio of trademarks and patents, including trademarks for Roundup (for herbicide products); Roundup Ready, Bollgard, Bollgard II, YieldGard, YieldGard VT, Roundup Ready 2 Yield and SmartStax (for traits); DEKALB, Asgrow, Deltapine and Vistive (for agricultural seeds); Seminis and De Ruiter (for vegetable seeds); and patents for insect-protection traits, formulations used to make herbicides and various manufacturing processes. The amortization period for trademarks and patents ranges from one to 30 years. Trademarks are amortized on a straight-line basis over their useful lives. The useful life of a trademark is determined based on the estimated market-life of the associated company, brand or product. Patents are amortized on a straight-line basis over the period in which the patent is legally protected, the period over which benefits are expected to be received, or the estimated market-life of the product with which the patent is associated, whichever is shorter.
In conjunction with acquisitions, Monsanto obtains access to the distribution channels and customer relationships of the acquired companies. These relationships are expected to provide economic benefits to Monsanto. The amortization period for customer relationships ranges from three to 20 years, and amortization is recognized on a straight-line basis over these periods. The amortization period of customer relationships represents management's best estimate of the expected usage or consumption of the economic benefits of the acquired assets, which is based on the company's historical experience of customer attrition rates.
In accordance with the Intangibles — Goodwill and Other topic of the ASC, all amortizable intangible assets are assessed for impairment whenever events indicate a possible loss. Such an assessment involves estimating undiscounted cash flows over the remaining useful life of the intangible. If the review indicates that undiscounted cash flows are less than the recorded value of the intangible asset, the carrying amount of the intangible is reduced by the estimated cash-flow shortfall on a discounted basis, and a corresponding loss is charged to the Statement of Consolidated Operations.
Source: Monsanto Co., Annual Report
Goodwill and Intangible Assets Disclosure
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Monsanto Co., Statement of Financial Position, Goodwill and Intangible Assets
Source: Based on data from Monsanto Co. Annual Reports
| Item |
Description |
The company |
| Other intangible assets, net |
Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. |
Monsanto Co.'s other intangible assets, net declined from 2009 to 2010 but then slightly increased from 2010 to 2011.
|
| 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. |
Monsanto Co.'s goodwill declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
|
| Goodwill and other 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. |
Monsanto Co.'s goodwill and other intangible assets declined from 2009 to 2010 but then increased from 2010 to 2011 exceeding 2009 level.
|
Analyst Adjustments: Removal of Goodwill
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Monsanto Co., adjustments to financial data
Adjusted Ratios: Removal of Goodwill (Summary)
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Monsanto Co., adjusted ratios
| Ratio |
Description |
The company |
| Adjusted total asset turnover |
An activity ratio calculated as total revenue divided by adjusted total assets. |
Monsanto Co.'s adjusted total asset turnover deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.
|
| 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. |
Monsanto Co.'s adjusted financial leverage declined from 2009 to 2010 and from 2010 to 2011.
|
| Adjusted ROE |
A profitability ratio calculated as net income divided by adjusted shareholders' equity. |
Monsanto Co.'s adjusted ROE deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.
|
| Adjusted ROA |
A profitability ratio calculated as net income divided by adjusted total assets. |
Monsanto Co.'s adjusted ROA deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.
|
Adjusted Total Asset Turnover
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2011 Calculations
| Ratio |
Description |
The company |
| Adjusted total asset turnover |
An activity ratio calculated as total revenue divided by adjusted total assets. |
Monsanto Co.'s adjusted total asset turnover deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.
|
Adjusted Financial Leverage
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2011 Calculations
| 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. |
Monsanto Co.'s adjusted financial leverage declined from 2009 to 2010 and from 2010 to 2011.
|
Adjusted Return On Equity (ROE)
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2011 Calculations
| Ratio |
Description |
The company |
| Adjusted ROE |
A profitability ratio calculated as net income divided by adjusted shareholders' equity. |
Monsanto Co.'s adjusted ROE deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.
|
Adjusted Return On Assets (ROA)
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2011 Calculations
| Ratio |
Description |
The company |
| Adjusted ROA |
A profitability ratio calculated as net income divided by adjusted total assets. |
Monsanto Co.'s adjusted ROA deteriorated from 2009 to 2010 but then slightly improved from 2010 to 2011.
|
