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Analysis of Goodwill and Intangible Assets
- Accounting Policy on Goodwill and Intangible Assets
- 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)
Accounting Policy on Goodwill and Intangible Assets
Facebook reviews goodwill for impairment at least annually or more frequently if events or changes in circumstances would more likely than not reduce the fair value of the single reporting unit below its carrying value. As of December 31, 2019, no impairment of goodwill has been identified.
Acquired finite-lived intangible assets are amortized on a straight-line basis over the estimated useful lives of the assets. Facebook routinely reviews the remaining estimated useful lives of property and equipment and finite-lived intangible assets. If Facebook changes the estimated useful life assumption for any asset, the remaining unamortized balance is amortized or depreciated over the revised estimated useful life.
Source: 10-K (filing date: 2020-01-30).
Goodwill and Intangible Asset Disclosure
Facebook Inc., balance sheet: goodwill and intangible assets
US$ in millions
Based on: 10-K (filing date: 2020-01-30), 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28).
Item | Description | The company |
---|---|---|
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. | Facebook Inc.’s intangible assets decreased from 2017 to 2018 and from 2018 to 2019. |
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. | Facebook Inc.’s goodwill increased from 2017 to 2018 and from 2018 to 2019. |
Goodwill and 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. | Facebook Inc.’s goodwill and intangible assets decreased from 2017 to 2018 but then slightly increased from 2018 to 2019. |
Adjustments to Financial Statements: Removal of Goodwill
Facebook Inc., adjustments to financial statements
US$ in millions
Based on: 10-K (filing date: 2020-01-30), 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28).
Facebook Inc., Financial Data: Reported vs. Adjusted
Adjusted Financial Ratios: Removal of Goodwill (Summary)
Facebook Inc., adjusted financial ratios
Based on: 10-K (filing date: 2020-01-30), 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28).
Financial ratio | Description | The company |
---|---|---|
Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Facebook Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level. |
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. |
Facebook Inc.’s adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019. |
Adjusted ROE | A profitability ratio calculated as net income divided by adjusted shareholders’ equity. | Facebook Inc.’s adjusted ROE improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. |
Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Facebook Inc.’s adjusted ROA improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. |
Facebook Inc., Financial Ratios: Reported vs. Adjusted
Adjusted Total Asset Turnover
Based on: 10-K (filing date: 2020-01-30), 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28).
2019 Calculations
1 Total asset turnover = Revenue ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= ÷ =
Activity ratio | Description | The company |
---|---|---|
Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Facebook Inc.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then slightly deteriorated from 2018 to 2019 not reaching 2017 level. |
Adjusted Financial Leverage
Based on: 10-K (filing date: 2020-01-30), 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28).
2019 Calculations
1 Financial leverage = Total assets ÷ Stockholders’ equity
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted stockholders’ 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. |
Facebook Inc.’s adjusted financial leverage ratio increased from 2017 to 2018 and from 2018 to 2019. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2020-01-30), 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28).
2019 Calculations
1 ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Net income ÷ Adjusted stockholders’ equity
= 100 × ÷ =
Profitability ratio | Description | The company |
---|---|---|
Adjusted ROE | A profitability ratio calculated as net income divided by adjusted shareholders’ equity. | Facebook Inc.’s adjusted ROE improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2020-01-30), 10-K (filing date: 2019-01-31), 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28).
2019 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. | Facebook Inc.’s adjusted ROA improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. |