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Microsoft Excel LibreOffice Calc


Analysis of Goodwill and Intangible Assets

Difficulty: Advanced


Goodwill and Intangible Assets Accounting Policy

Long-Lived Assets Including Goodwill and Other Acquired Intangible Assets

Apple reviews property, plant and equipment, inventory component prepayments and identifiable intangibles, excluding goodwill and intangible assets with indefinite useful lives, for impairment. Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of these assets is measured by comparison of their carrying amounts to future undiscounted cash flows the assets are expected to generate. If property, plant and equipment, inventory component prepayments and certain identifiable intangibles are considered to be impaired, the impairment to be recognized equals the amount by which the carrying value of the asset exceeds its fair value.

Apple does not amortize goodwill and intangible assets with indefinite useful lives; rather, such assets are required to be tested for impairment at least annually or sooner if events or changes in circumstances indicate that the assets may be impaired. Apple performs its goodwill and intangible asset impairment tests in the fourth quarter of each year. Apple did not recognize any impairment charges related to goodwill or indefinite lived intangible assets during 2017, 2016 and 2015. For purposes of testing goodwill for impairment, Apple established reporting units based on its current reporting structure. Goodwill has been allocated to these reporting units to the extent it relates to each reporting unit. In 2017 and 2016, Apple's goodwill was primarily allocated to the Americas and Europe reporting units.

Apple amortizes its intangible assets with definite useful lives over their estimated useful lives and reviews these assets for impairment. Apple typically amortizes its acquired intangible assets with definite useful lives over periods from three to seven years.

Source: Apple Inc., Annual Report


Goodwill and Intangible Assets Disclosure

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

USD $ in millions

Microsoft Excel LibreOffice Calc

Source: Based on data from Apple Inc. Annual Reports

Item Description The company
Acquired 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. Apple Inc.'s acquired 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. Apple Inc.'s goodwill increased from 2015 to 2016 and 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. Apple Inc.'s goodwill and other intangible assets declined from 2015 to 2016 and from 2016 to 2017.

Analyst Adjustments: Removal of Goodwill

Apple Inc., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Sep 30, 2017 Sep 24, 2016 Sep 26, 2015 Sep 27, 2014 Sep 28, 2013 Sep 29, 2012
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Shareholders' Equity
Shareholders' equity (as reported) hidden hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden hidden
Shareholders' equity (adjusted) hidden hidden hidden hidden hidden hidden

Adjusted Ratios: Removal of Goodwill (Summary)

Apple Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Sep 30, 2017 Sep 24, 2016 Sep 26, 2015 Sep 27, 2014 Sep 28, 2013 Sep 29, 2012
Total Asset Turnover
Reported total asset turnover hidden hidden hidden hidden hidden hidden
Adjusted total asset turnover hidden hidden hidden hidden hidden hidden
Financial Leverage
Reported financial leverage hidden hidden hidden hidden hidden hidden
Adjusted financial leverage hidden hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted ROE hidden% hidden% hidden% hidden% hidden% hidden%
Return on Assets (ROA)
Reported ROA hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted ROA hidden% 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. Apple 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.
Apple Inc.'s adjusted financial leverage increased from 2015 to 2016 and from 2016 to 2017.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders' equity. Apple Inc.'s adjusted ROE deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Apple Inc.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Sep 30, 2017 Sep 24, 2016 Sep 26, 2015 Sep 27, 2014 Sep 28, 2013 Sep 29, 2012
As Reported
Net sales (USD $ in millions) hidden hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden hidden
Total asset turnover1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Net sales (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted total asset turnover2 hidden hidden hidden hidden hidden hidden

2017 Calculations

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

2 Adjusted total asset turnover = Net 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. Apple Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Sep 30, 2017 Sep 24, 2016 Sep 26, 2015 Sep 27, 2014 Sep 28, 2013 Sep 29, 2012
As Reported
Total assets (USD $ in millions) hidden hidden hidden hidden hidden hidden
Shareholders' equity (USD $ in millions) hidden hidden hidden hidden hidden hidden
Financial leverage1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted shareholders' equity (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted financial leverage2 hidden hidden hidden hidden hidden hidden

2017 Calculations

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

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders' 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.
Apple Inc.'s adjusted financial leverage increased from 2015 to 2016 and from 2016 to 2017.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Sep 30, 2017 Sep 24, 2016 Sep 26, 2015 Sep 27, 2014 Sep 28, 2013 Sep 29, 2012
As Reported
Net income (USD $ in millions) hidden hidden hidden hidden hidden hidden
Shareholders' equity (USD $ in millions) hidden hidden hidden hidden hidden hidden
ROE1 hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted for Goodwill
Net income (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted shareholders' equity (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted ROE2 hidden% hidden% hidden% hidden% hidden% hidden%

2017 Calculations

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

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

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

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Sep 30, 2017 Sep 24, 2016 Sep 26, 2015 Sep 27, 2014 Sep 28, 2013 Sep 29, 2012
As Reported
Net income (USD $ in millions) hidden hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden hidden
ROA1 hidden% hidden% hidden% hidden% hidden% hidden%
Adjusted for Goodwill
Net income (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden hidden
Adjusted ROA2 hidden% 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. Apple Inc.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.