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Microsoft Excel LibreOffice Calc

Intel Corp. (INTC)


Analysis of Goodwill and Intangible Assets

Difficulty: Advanced


Goodwill and Intangible Assets Accounting Policy

GOODWILL

Intel performs an annual impairment assessment of goodwill at the reporting unit level in the fourth quarter of each year, or more frequently if indicators of potential impairment exist. The analysis may include both qualitative and quantitative factors to assess the likelihood of an impairment. The reporting unit’s carrying value used in an impairment test represents the assignment of various assets and liabilities, excluding certain corporate assets and liabilities, such as cash, investments, and debt.

Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and factors affecting the reporting unit. Additionally, as part of this assessment, Intel may perform a quantitative analysis to support the qualitative factors above by applying sensitivities to assumptions and inputs used in measuring a reporting unit’s fair value.

Intel’s quantitative impairment test considers both the income approach and the market approach to estimate a reporting unit’s fair value. Significant estimates include market segment growth rates, Intel’s assumed market segment share, estimated costs, and discount rates based on a reporting unit’s weighted average cost of capital.

Intel tests the reasonableness of the inputs and outcomes of the discounted cash flow analysis against available market data. In the current year, the fair value for all of Intel’s reporting units substantially exceeds their carrying value, and the annual qualitative assessment did not indicate that a more detailed quantitative analysis was necessary.

IDENTIFIED INTANGIBLE ASSETS

Intel amortizes acquisition-related intangible assets that are subject to amortization over their estimated useful life. Acquisition-related in-process R&D assets represent the fair value of incomplete R&D projects that had not reached technological feasibility as of the date of acquisition; initially, these are classified as in-process R&D and are not subject to amortization. Once these R&D projects are completed, the asset balances are transferred from in-process R&D to acquisition-related developed technology and are subject to amortization from this point forward. The asset balances relating to projects that are abandoned after acquisition are impaired and expensed to R&D.

Intel performs a quarterly review of significant finite-lived identified intangible assets to determine whether facts and circumstances indicate that the carrying amount may not be recoverable. These reviews can be affected by various factors, including external factors such as industry and economic trends, and internal factors such as changes in Intel’s business strategy and the forecasts for specific product lines.

Source: 10-K (filing date: 2019-02-01).


Goodwill and Intangible Assets Disclosure

Intel Corp., Statement of Financial Position, Goodwill and Intangible Assets

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014
Acquisition-related developed technology hidden hidden hidden hidden hidden
Acquisition-related customer relationships and brands hidden hidden hidden hidden hidden
Licensed technology and patents hidden hidden hidden hidden hidden
Identified intangible assets subject to amortization, gross assets hidden hidden hidden hidden hidden
Accumulated amortization hidden hidden hidden hidden hidden
Identified intangible assets subject to amortization, net hidden hidden hidden hidden hidden
Acquisition-related brands hidden hidden hidden hidden hidden
In-process research and development hidden hidden hidden hidden hidden
Other intangible assets hidden hidden hidden hidden hidden
Identified intangible assets not subject to amortization hidden hidden hidden hidden hidden
Identified intangible assets hidden hidden hidden hidden hidden
Goodwill hidden hidden hidden hidden hidden
Identified intangible assets and goodwill hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-01), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

Item Description The company
Identified 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. Intel Corp.’s identified 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. Intel Corp.’s goodwill increased from 2016 to 2017 and from 2017 to 2018.
Identified 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. Intel Corp.’s identified intangible assets and goodwill increased from 2016 to 2017 but then slightly declined from 2017 to 2018.

Analyst Adjustments: Removal of Goodwill

Intel Corp., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014
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: 2019-02-01), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).


Intel Corp., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Goodwill (Summary)

Intel Corp., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014
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: 2019-02-01), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Intel Corp.’s adjusted total asset turnover improved 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.
Intel Corp.’s adjusted financial leverage increased from 2016 to 2017 but then slightly declined from 2017 to 2018.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity. Intel Corp.’s adjusted ROE improved from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Intel Corp.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Intel Corp., Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014
As Reported
Selected Financial Data (USD $ in millions)
Net 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)
Net 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: 2019-02-01), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

2018 Calculations

1 Total asset turnover = Net revenue ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Net 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. Intel Corp.’s adjusted total asset turnover improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014
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: 2019-02-01), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

2018 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.
Intel Corp.’s adjusted financial leverage increased from 2016 to 2017 but then slightly declined from 2017 to 2018.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 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 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: 2019-02-01), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

2018 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. Intel Corp.’s adjusted ROE improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 29, 2018 Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 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 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: 2019-02-01), 10-K (filing date: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).

2018 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. Intel Corp.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.