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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

Facebook evaluates the recoverability of property and equipment and finite-lived intangible assets for possible impairment whenever events or circumstances indicate that the carrying amount of such assets may not be recoverable. The evaluation is performed at the lowest level for which identifiable cash flows are largely independent of the cash flows of other assets and liabilities. Recoverability of these assets is measured by a comparison of the carrying amounts to the future undiscounted cash flows the assets are expected to generate. If such review indicates that the carrying amount of property and equipment and intangible assets is not recoverable, the carrying amount of such assets is reduced to fair value. Facebook has not recorded any significant impairment charges during the years presented.

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, 2017, 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 reduces 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: 2018-02-01).


Goodwill and Intangible Assets Disclosure

Facebook 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
Acquired users hidden hidden hidden hidden hidden
Acquired technology hidden hidden hidden hidden hidden
Acquired patents hidden hidden hidden hidden hidden
Trade names hidden hidden hidden hidden hidden
Other 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 carrying amount hidden hidden hidden hidden hidden
In-process research and development (IPR&D) hidden hidden hidden hidden hidden
Indefinite-lived intangible assets hidden hidden hidden hidden hidden
Intangible assets hidden hidden hidden hidden hidden
Goodwill hidden hidden hidden hidden hidden
Goodwill and intangible assets hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-01-31).

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 declined from 2015 to 2016 and from 2016 to 2017.
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 2015 to 2016 and from 2016 to 2017.
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 declined from 2015 to 2016 and from 2016 to 2017.

Analyst Adjustments: Removal of Goodwill

Facebook 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

Based on: 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-01-31).


Facebook Inc., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Goodwill (Summary)

Facebook 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

Based on: 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-01-31).

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 improved 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.
Facebook Inc.'s adjusted financial leverage declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 2015 level.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders' equity. Facebook Inc.'s adjusted ROE improved from 2015 to 2016 and from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Facebook Inc.'s adjusted ROA improved from 2015 to 2016 and from 2016 to 2017.

Facebook Inc., Ratios: Reported vs. Adjusted


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
Selected Financial Data (USD $ in millions)
Revenue hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
Total asset turnover1 hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Revenue hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden
Ratio
Adjusted total asset turnover2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-01-31).

2017 Calculations

1 Total asset turnover = Revenue ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Revenue ÷ 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. Facebook Inc.'s adjusted total asset turnover improved 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
Selected Financial Data (USD $ in millions)
Total assets hidden hidden hidden hidden hidden
Stockholders' equity hidden hidden hidden hidden hidden
Ratio
Financial leverage1 hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (USD $ in millions)
Adjusted total assets hidden hidden hidden hidden hidden
Adjusted stockholders' equity hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-01-31).

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.
Facebook Inc.'s adjusted financial leverage declined from 2015 to 2016 but then increased from 2016 to 2017 not reaching 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
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 for Goodwill
Selected Financial Data (USD $ in millions)
Net income hidden hidden hidden hidden hidden
Adjusted stockholders' equity hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-01-31).

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. Facebook Inc.'s adjusted ROE improved 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
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 for Goodwill
Selected Financial Data (USD $ in millions)
Net income hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-01), 10-K (filing date: 2017-02-03), 10-K (filing date: 2016-01-28), 10-K (filing date: 2015-01-29), 10-K (filing date: 2014-01-31).

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. Facebook Inc.'s adjusted ROA improved from 2015 to 2016 and from 2016 to 2017.