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Microsoft Excel LibreOffice Calc

Booking Holdings Inc. (BKNG)


Analysis of Investments

Difficulty: Advanced


Investment Accounting Policy

Investments held by Booking Holdings include debt and equity securities. Preferred stock that is either mandatorily redeemable or redeemable at the option of the investor is considered a debt security. Investments in debt or equity securities that include embedded features, such as conversion or redemption features, are analyzed by Booking Holdings to determine if these features are embedded derivatives that require separate accounting treatment.

Debt Securities

Booking Holdings has classified its investments in debt securities as available-for-sale securities. These securities are reported at estimated fair value with the aggregate unrealized gains and losses, net of taxes, reflected as a part of "Accumulated other comprehensive income (loss)" in the Consolidated Balance Sheets. Investments in debt securities are considered to be impaired when a decline in fair value is judged to be other than temporary because Booking Holdings either intends to sell or it is more-likely-than not that it will have to sell the impaired security before recovery. Once a decline in fair value is determined to be other than temporary, an impairment charge is recorded and a new cost basis in the investment is established. If Booking Holdings does not intend to sell the debt security, but it is probable that Booking Holdings will not collect all amounts due, then only the impairment due to the credit risk would be recognized in earnings and the remaining amount of the impairment would be recognized in accumulated other comprehensive income within stockholders’ equity. The fair value of these investments is based on the specific quoted market price of the securities or comparable securities at the balance sheet dates. Unobservable inputs are also used when little or no market data is available.

Booking Holdings’ investments in marketable debt securities are recognized based on trade date and reported as "Short-term investments in marketable securities" or "Long-term investments" in the Consolidated Balance Sheets based on the maturity date of the debt security. Investments of a strategic nature that have been made for the purpose of affiliation or potential business advantage are included in "Long-term investments" in the Consolidated Balance Sheets.

Equity Securities

Equity securities are reported as "Long-term investments" in the Consolidated Balance Sheets and include marketable equity securities and equity investments without readily determinable fair values.

For periods beginning after December 31, 2017, marketable equity securities are reported at estimated fair value with changes in fair value recognized in net income rather than accumulated other comprehensive income within stockholders’ equity, pursuant to the adoption of the accounting update on financial instruments in 2018. As a result, Booking Holdings recognized $367 million, before tax, in "Net unrealized losses on marketable equity securities" in the Consolidated Statement of Operations for the year ended December 31, 2018.

Booking Holdings holds investments in equity securities of private companies, over which Booking Holdings does not have the ability to exercise significant influence or control. Pursuant to the adoption of the accounting update on financial instruments in 2018, for periods beginning after December 31, 2017, Booking Holdings elected to measure these investments at cost less impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. Previously, these investments were carried at cost and adjusted to fair value only for other-than-temporary declines in fair value.

Source: 10-K (filing date: 2019-02-27).


Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Booking Holdings Inc., adjustment to Net Income

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net income (as reported) hidden hidden hidden hidden hidden
Add: Net unrealized gains (losses) on marketable securities, net of tax hidden hidden hidden hidden hidden
Net income (adjusted) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-17), 10-K (filing date: 2015-02-19).


Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Booking Holdings Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Net Profit Margin
Reported net profit margin hidden hidden hidden hidden hidden
Adjusted net profit margin 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

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-17), 10-K (filing date: 2015-02-19).

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Booking Holdings Inc.’s adjusted net profit margin improved from 2016 to 2017 and from 2017 to 2018.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity. Booking Holdings Inc.’s adjusted ROE improved from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Booking Holdings Inc.’s adjusted ROA improved from 2016 to 2017 and from 2017 to 2018.

Booking Holdings Inc., Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net income hidden hidden hidden hidden hidden
Revenues hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income hidden hidden hidden hidden hidden
Revenues hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-17), 10-K (filing date: 2015-02-19).

2018 Calculations

1 Net profit margin = 100 × Net income ÷ Revenues
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income ÷ Revenues
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Booking Holdings Inc.’s adjusted net profit margin improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net income hidden hidden hidden hidden hidden
Stockholders’ equity hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income hidden hidden hidden hidden hidden
Stockholders’ equity hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-17), 10-K (filing date: 2015-02-19).

2018 Calculations

1 ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income ÷ Stockholders’ equity
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity. Booking Holdings Inc.’s adjusted ROE improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net income hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-17), 10-K (filing date: 2015-02-19).

2018 Calculations

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

2 Adjusted ROA = 100 × Adjusted net income ÷ Total assets
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Booking Holdings Inc.’s adjusted ROA improved from 2016 to 2017 and from 2017 to 2018.