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Intel Corp. (INTC)
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
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
| Dec 29, 2018 | Dec 30, 2017 | Dec 31, 2016 | Dec 26, 2015 | Dec 27, 2014 | |||||||
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| Acquisition-related developed technology | |
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| Acquisition-related customer relationships and brands | |
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| Licensed technology and patents | |
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| Identified intangible assets subject to amortization, gross assets | |
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| Accumulated amortization | |
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| Identified intangible assets subject to amortization, net | |
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| Acquisition-related brands | |
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| In-process research and development | |
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| Other intangible assets | |
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| Identified intangible assets not subject to amortization | |
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| Identified intangible assets | |
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| Goodwill | |
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| Identified intangible assets and goodwill | |
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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
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
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
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
= ÷ =
2 Adjusted total asset turnover = Net revenue ÷ Adjusted total assets
= ÷ =
| 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
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
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted 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. |
Intel Corp.’s adjusted financial leverage increased from 2016 to 2017 but then slightly declined from 2017 to 2018. |
Adjusted Return on Equity (ROE)
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 × ÷ =
2 Adjusted ROE = 100 × Net income ÷ Adjusted stockholders’ equity
= 100 × ÷ =
| 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)
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 × ÷ =
2 Adjusted ROA = 100 × Net income ÷ Adjusted total assets
= 100 × ÷ =
| 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. |