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Microsoft Excel LibreOffice Calc

Gilead Sciences Inc. (GILD)


Analysis of Goodwill and Intangible Assets

Advanced level


Accounting Policy on Goodwill and Intangible Assets

Goodwill represents the excess of the consideration transferred over the estimated fair value of assets acquired and liabilities assumed in a business combination. Intangible assets with indefinite useful lives are related to purchased IPR&D projects and are measured at their respective fair values as of the acquisition date. Gilead does not amortize goodwill and intangible assets with indefinite useful lives. Intangible assets related to IPR&D projects are considered to be indefinite-lived until the completion or abandonment of the associated R&D efforts. If and when development is complete, which generally occurs if and when regulatory approval to market a product is obtained, the associated assets are deemed finite-lived and are amortized based on their respective estimated useful lives at that point in time. Gilead tests goodwill and other indefinite-lived intangible assets for impairment on an annual basis and in between annual tests if Gilead becomes aware of any events or circumstances that would indicate the fair values of the assets are below their carrying amounts.

Intangible assets with finite useful lives are amortized over their estimated useful lives, primarily on a straight-line basis, and are reviewed for impairment when facts or circumstances suggest that the carrying value of these assets may not be recoverable.

Source: 10-K (filing date: 2019-02-26).


Goodwill and Intangible Asset Disclosure

Gilead Sciences Inc., balance sheet: goodwill and intangible assets

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Sofosbuvir
Axicabtagene ciloleucel (DLBCL)
Ranexa
Other
Finite-lived assets, gross carrying amount
Accumulated amortization
Finite-lived assets, net carrying amount
IPR&D
Indefinite-lived assets
Intangible assets
Goodwill
Intangible assets and goodwill

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

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. Gilead Sciences Inc.’s intangible assets increased from 2016 to 2017 but then slightly decreased from 2017 to 2018.
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. Gilead Sciences Inc.’s goodwill increased from 2016 to 2017 but then slightly decreased from 2017 to 2018.
Intangible assets and goodwill Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Gilead Sciences Inc.’s intangible assets and goodwill increased from 2016 to 2017 but then slightly decreased from 2017 to 2018.

Adjustments to Financial Statements: Removal of Goodwill

Gilead Sciences Inc., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Adjustment to Total Assets
Total assets (as reported)
Less: Goodwill
Total assets (adjusted)
Adjustment to Total Gilead Stockholders’ Equity
Total Gilead stockholders’ equity (as reported)
Less: Goodwill
Total Gilead stockholders’ equity (adjusted)

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).


Gilead Sciences Inc., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Goodwill (Summary)

Gilead Sciences Inc., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
Total Asset Turnover
Reported total asset turnover
Adjusted total asset turnover
Financial Leverage
Reported financial leverage
Adjusted financial leverage
Return on Equity (ROE)
Reported ROE
Adjusted ROE
Return on Assets (ROA)
Reported ROA
Adjusted ROA

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

Financial ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Gilead Sciences Inc.’s adjusted total asset turnover ratio deteriorated from 2016 to 2017 and from 2017 to 2018.
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.
Gilead Sciences Inc.’s adjusted financial leverage ratio increased from 2016 to 2017 but then slightly decreased from 2017 to 2018 not reaching 2016 level.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity. Gilead Sciences Inc.’s adjusted ROE deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Gilead Sciences Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.

Gilead Sciences Inc., Financial Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Product sales
Total assets
Activity Ratio
Total asset turnover1
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Product sales
Adjusted total assets
Activity Ratio
Adjusted total asset turnover2

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

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

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

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Gilead Sciences Inc.’s adjusted total asset turnover ratio deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets
Total Gilead stockholders’ equity
Solvency Ratio
Financial leverage1
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets
Adjusted total Gilead stockholders’ equity
Solvency Ratio
Adjusted financial leverage2

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 Financial leverage = Total assets ÷ Total Gilead stockholders’ equity
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Gilead 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.
Gilead Sciences Inc.’s adjusted financial leverage ratio increased from 2016 to 2017 but then slightly decreased from 2017 to 2018 not reaching 2016 level.

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 (US$ in millions)
Net income attributable to Gilead
Total Gilead stockholders’ equity
Profitability Ratio
ROE1
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income attributable to Gilead
Adjusted total Gilead stockholders’ equity
Profitability Ratio
Adjusted ROE2

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 ROE = 100 × Net income attributable to Gilead ÷ Total Gilead stockholders’ equity
= 100 × ÷ =

2 Adjusted ROE = 100 × Net income attributable to Gilead ÷ Adjusted total Gilead stockholders’ equity
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity. Gilead Sciences Inc.’s adjusted ROE deteriorated from 2016 to 2017 but then slightly improved 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 (US$ in millions)
Net income attributable to Gilead
Total assets
Profitability Ratio
ROA1
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income attributable to Gilead
Adjusted total assets
Profitability Ratio
Adjusted ROA2

Based on: 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-27), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).

2018 Calculations

1 ROA = 100 × Net income attributable to Gilead ÷ Total assets
= 100 × ÷ =

2 Adjusted ROA = 100 × Net income attributable to Gilead ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Gilead Sciences Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.