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Gilead Sciences Inc. (GILD)
Analysis of Goodwill and Intangible Assets
Difficulty: Advanced
- Goodwill and Intangible Assets Accounting Policy
- Goodwill and Intangible Assets Disclosure
- Analyst Adjustments: Removal of Goodwill
- Adjusted Ratios: Removal of Goodwill (Summary)
- Adjusted Total Asset Turnover
- Adjusted Financial Leverage
- Adjusted Return on Equity (ROE)
- Adjusted Return on Assets (ROA)
Goodwill and Intangible Assets Accounting Policy
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 Assets Disclosure
Gilead Sciences Inc., balance sheet: goodwill and intangible assets
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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 declined 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 declined 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 declined from 2017 to 2018. |
Analyst Adjustments: Removal of Goodwill
Gilead Sciences Inc., adjustments to financial data
US$ in millions
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 Ratios: Removal of Goodwill (Summary)
Gilead Sciences Inc., adjusted ratios
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).
| 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 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 increased from 2016 to 2017 but then slightly declined 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., Ratios: Reported vs. Adjusted
Adjusted Total Asset Turnover
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
= ÷ =
| 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 deteriorated from 2016 to 2017 and from 2017 to 2018. |
Adjusted Financial Leverage
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
= ÷ =
| 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 increased from 2016 to 2017 but then slightly declined from 2017 to 2018 not reaching 2016 level. |
Adjusted Return on Equity (ROE)
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 × ÷ =
| 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)
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 × ÷ =
| 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. |