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Analysis of Goodwill and Intangible Assets

Advanced level

Goodwill and Intangible Asset Disclosure
Adjustments to Financial Statements: Removal of Goodwill
Adjusted Financial Ratios: Removal of Goodwill (Summary)
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Goodwill and Intangible Asset Disclosure

Activision Blizzard Inc., balance sheet: goodwill and intangible assets

US$ in millions

		Dec 31, 2020		Dec 31, 2019		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016
	Internally-developed franchises
	Developed software
	Customer base
	Trade names
	Other
	Acquired definite-lived intangible assets, gross carrying amount
	Accumulated amortization
	Acquired definite-lived intangible assets, net carrying amount
	Activision trademark
	Acquired trade names
	Acquired indefinite-lived intangible assets
	Intangible assets, net
	Goodwill
	Intangible assets, net and goodwill

Based on: 10-K (filing date: 2021-02-23), 10-K (filing date: 2020-02-27), 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28).

Item	Description	The company
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.	Activision Blizzard Inc.’s intangible assets, net decreased from 2018 to 2019 and from 2019 to 2020.
Goodwill	Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized.	Activision Blizzard Inc.’s goodwill increased from 2018 to 2019 and from 2019 to 2020.
Intangible assets, net and goodwill	Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges.	Activision Blizzard Inc.’s intangible assets, net and goodwill decreased from 2018 to 2019 and from 2019 to 2020.

Adjustments to Financial Statements: Removal of Goodwill

Activision Blizzard Inc., adjustments to financial statements

US$ in millions

		Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Goodwill
	Total assets (adjusted)
	Adjustment to Shareholders’ Equity
	Shareholders’ equity (as reported)
	Less: Goodwill
	Shareholders’ equity (adjusted)

Based on: 10-K (filing date: 2021-02-23), 10-K (filing date: 2020-02-27), 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28).

Activision Blizzard Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Goodwill (Summary)

Activision Blizzard Inc., adjusted financial ratios

		Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016
	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

Based on: 10-K (filing date: 2021-02-23), 10-K (filing date: 2020-02-27), 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28).

Financial ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Activision Blizzard Inc.’s adjusted total asset turnover ratio deteriorated from 2018 to 2019 and from 2019 to 2020.
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.	Activision Blizzard Inc.’s adjusted financial leverage ratio decreased from 2018 to 2019 and from 2019 to 2020.
Adjusted ROE	A profitability ratio calculated as net income divided by adjusted shareholders’ equity.	Activision Blizzard Inc.’s adjusted ROE deteriorated from 2018 to 2019 and from 2019 to 2020.
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	Activision Blizzard Inc.’s adjusted ROA deteriorated from 2018 to 2019 but then slightly improved from 2019 to 2020.

Activision Blizzard Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Total Asset Turnover

		Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016
	As Reported
	Selected Financial Data (US$ in millions)
	Net revenues
	Total assets
	Activity Ratio
	Total asset turnover¹
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Net revenues
	Adjusted total assets
	Activity Ratio
	Adjusted total asset turnover²

Based on: 10-K (filing date: 2021-02-23), 10-K (filing date: 2020-02-27), 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28).

2020 Calculations

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

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

Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Activision Blizzard Inc.’s adjusted total asset turnover ratio deteriorated from 2018 to 2019 and from 2019 to 2020.

Adjusted Financial Leverage

		Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016
	As Reported
	Selected Financial Data (US$ in millions)
	Total assets
	Shareholders’ equity
	Solvency Ratio
	Financial leverage¹
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted shareholders’ equity
	Solvency Ratio
	Adjusted financial leverage²

Based on: 10-K (filing date: 2021-02-23), 10-K (filing date: 2020-02-27), 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28).

2020 Calculations

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

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

Solvency 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.	Activision Blizzard Inc.’s adjusted financial leverage ratio decreased from 2018 to 2019 and from 2019 to 2020.

Adjusted Return on Equity (ROE)

		Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016
	As Reported
	Selected Financial Data (US$ in millions)
	Net income
	Shareholders’ equity
	Profitability Ratio
	ROE¹
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Net income
	Adjusted shareholders’ equity
	Profitability Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2021-02-23), 10-K (filing date: 2020-02-27), 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28).

2020 Calculations

¹ ROE = 100 × Net income ÷ Shareholders’ equity
= 100 × ÷ =

² Adjusted ROE = 100 × Net income ÷ Adjusted shareholders’ equity
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as net income divided by adjusted shareholders’ equity.	Activision Blizzard Inc.’s adjusted ROE deteriorated from 2018 to 2019 and from 2019 to 2020.

Adjusted Return on Assets (ROA)

		Dec 31, 2020	Dec 31, 2019	Dec 31, 2018	Dec 31, 2017	Dec 31, 2016
	As Reported
	Selected Financial Data (US$ in millions)
	Net income
	Total assets
	Profitability Ratio
	ROA¹
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Net income
	Adjusted total assets
	Profitability Ratio
	Adjusted ROA²

Based on: 10-K (filing date: 2021-02-23), 10-K (filing date: 2020-02-27), 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28).

2020 Calculations

¹ ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =

² Adjusted ROA = 100 × Net income ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	Activision Blizzard Inc.’s adjusted ROA deteriorated from 2018 to 2019 but then slightly improved from 2019 to 2020.

	Activision Blizzard Inc.	Other companies (not purchased previously)
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

	All companies
Financial Statements
Common-Size Financial Statements
Analysis of Financial Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis of Components of Financial Statements
Financial Reporting Quality

Activision Blizzard Inc. (NASDAQ:ATVI)

Analysis of Goodwill and Intangible Assets

Goodwill and Intangible Asset Disclosure

Adjustments to Financial Statements: Removal of Goodwill

Activision Blizzard Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Goodwill (Summary)

Activision Blizzard Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)