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Microsoft Excel LibreOffice Calc


Analysis of Goodwill and Intangible Assets

Difficulty: Advanced


Goodwill and Intangible Assets Accounting Policy

Finite-lived intangible assets are recorded at cost, net of accumulated amortization and, if applicable, impairment charges. Amortization of finite-lived intangible assets is provided over their estimated useful lives on a straight-line basis or the pattern in which economic benefits are consumed, if reliably determinable. Amgen reviews the finite-lived intangible assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable.

The fair values of IPR&D projects acquired in a business combination which are not complete are capitalized and accounted for as indefinite-lived intangible assets until completion or abandonment of the related R&D efforts. Upon successful completion of the project, the capitalized amount is amortized over its estimated useful life. If a project is abandoned, all remaining capitalized amounts are written-off immediately. There are often major risks and uncertainties associated with IPR&D projects as Amgen is required to obtain regulatory approvals in order to be able to market the resulting products. Such approvals require completing clinical trials that demonstrate a product candidate is safe and effective. Consequently, the eventual realized value of the acquired IPR&D project may vary from its fair value at the date of acquisition, and IPR&D impairment charges may occur in future periods.

Capitalized IPR&D projects are tested for impairment annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. Amgen considers various factors for potential impairment, including the current legal and regulatory environment and the competitive landscape. Adverse clinical trial results, significant delays in obtaining marketing approval, the inability to bring a product to market and the introduction or advancement of competitors' products could result in partial or full impairment of the related intangible assets.

Amgen performs an impairment test of goodwill annually and whenever events or changes in circumstances indicate that the carrying amount may not be recoverable. To date, an impairment of goodwill has not been recorded.

Source: Amgen Inc., Annual Report


Goodwill and Intangible Assets Disclosure

Amgen Inc., Statement of Financial Position, Goodwill and Intangible Assets

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Developed product technology rights hidden hidden hidden hidden hidden
Licensing rights hidden hidden hidden hidden hidden
Marketing-related rights hidden hidden hidden hidden hidden
R&D technology rights hidden hidden hidden hidden hidden
Finite-lived intangible assets, gross carrying amount hidden hidden hidden hidden hidden
Accumulated amortization hidden hidden hidden hidden hidden
Finite-lived intangible assets, net hidden hidden hidden hidden hidden
IPR&D hidden hidden hidden hidden hidden
Indefinite-lived intangible assets hidden hidden hidden hidden hidden
Other intangible assets hidden hidden hidden hidden hidden
Goodwill hidden hidden hidden hidden hidden
Goodwill and other intangible assets hidden hidden hidden hidden hidden

Source: Based on data from Amgen Inc. 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. Amgen Inc.'s other intangible assets declined from 2015 to 2016 and from 2016 to 2017.
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. Amgen Inc.'s goodwill declined from 2015 to 2016 but then slightly increased from 2016 to 2017.
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. Amgen Inc.'s goodwill and other intangible assets declined from 2015 to 2016 and from 2016 to 2017.

Analyst Adjustments: Removal of Goodwill

Amgen Inc., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden
Adjustment to Stockholders' Equity
Stockholders' equity (as reported) hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden
Stockholders' equity (adjusted) hidden hidden hidden hidden hidden

Adjusted Ratios: Removal of Goodwill (Summary)

Amgen Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Total Asset Turnover
Reported total asset turnover hidden hidden hidden hidden hidden
Adjusted total asset turnover hidden hidden hidden hidden hidden
Financial Leverage
Reported financial leverage hidden hidden hidden hidden hidden
Adjusted financial leverage hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden% hidden% hidden% hidden% hidden%
Adjusted ROE hidden% hidden% hidden% hidden% hidden%
Return on Assets (ROA)
Reported ROA hidden% hidden% hidden% hidden% hidden%
Adjusted ROA hidden% hidden% hidden% hidden% hidden%
Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Amgen Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.
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.
Amgen Inc.'s adjusted financial leverage declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders' equity. Amgen Inc.'s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Amgen Inc.'s adjusted ROA improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Product sales (USD $ in millions) hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
Total asset turnover1 hidden hidden hidden hidden hidden
Adjusted for Goodwill
Product sales (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total asset turnover2 hidden hidden hidden hidden hidden

2017 Calculations

1 Total asset turnover = Product sales ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Product sales ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Amgen Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
Stockholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
Financial leverage1 hidden hidden hidden hidden hidden
Adjusted for Goodwill
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted stockholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted financial leverage2 hidden hidden hidden hidden hidden

2017 Calculations

1 Financial leverage = Total assets ÷ Stockholders' equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders' equity
= hidden ÷ hidden = hidden

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.
Amgen Inc.'s adjusted financial leverage declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net income (USD $ in millions) hidden hidden hidden hidden hidden
Stockholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
ROE1 hidden% hidden% hidden% hidden% hidden%
Adjusted for Goodwill
Net income (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted stockholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted ROE2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

1 ROE = 100 × Net income ÷ Stockholders' equity
= 100 × hidden ÷ hidden = hidden%

2 Adjusted ROE = 100 × Net income ÷ Adjusted stockholders' equity
= 100 × hidden ÷ hidden = hidden%

Ratio Description The company
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders' equity. Amgen Inc.'s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net income (USD $ in millions) hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
ROA1 hidden% hidden% hidden% hidden% hidden%
Adjusted for Goodwill
Net income (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted ROA2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

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

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

Ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Amgen Inc.'s adjusted ROA improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017.