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Microsoft Excel LibreOffice Calc


Analysis of Investments

Difficulty: Advanced


Investment Accounting Policy

CASH EQUIVALENTS

Intel considers all highly liquid debt investments with original maturities from the date of purchase of three months or less as cash equivalents. Cash equivalents can include investments such as corporate debt, financial institution instruments, government debt, and reverse repurchase agreements.

TRADING ASSETS

Marketable debt instruments are generally designated as trading assets when a market risk is economically hedged at inception with a related derivative instrument, or when the marketable debt instrument itself is used to economically hedge currency exchange rate risk from remeasurement. Investments designated as trading assets are reported at fair value. The gains or losses on these investments arising from changes in fair value due to interest rate and currency market fluctuations and credit market volatility, largely offset by losses or gains on the related derivative instruments and balance sheet remeasurement, are recorded in interest and other, net.

AVAILABLE-FOR-SALE INVESTMENTS

Available-for-sale investments are classified within cash and cash equivalents, short-term investments, marketable equity securities, or long-term investments based on the remaining maturity of the investment.

Investments designated as available-for-sale are reported at fair value, with unrealized gains or losses, net of tax, recorded in accumulated other comprehensive income (loss), except as noted in Intel’s other-than-temporary impairment policy. Intel determines the cost of the investment sold based on an average cost basis at the individual security level. Intel’s available-for-sale investments include:

  • Marketable debt instruments when the interest rate and foreign currency risks are not hedged at the inception of the investment or when Intel’s criteria for designation as trading assets are not met. Intel records the interest income and realized gains or losses on the sale of these instruments in interest and other, net.
  • Marketable equity securities when there is no plan to sell or hedge the investment at the time of original classification. Intel acquires these equity securities to promote business and strategic objectives. Intel records the realized gains or losses on the sale or exchange of marketable equity securities in gains (losses) on equity investments, net.

NON-MARKETABLE AND EQUITY METHOD INVESTMENTS

Intel regularly invests in non-marketable equity instruments of private companies. Intel accounts for marketable and non-marketable equity securities as equity method investments when Intel has the ability to exercise significant influence but does not have control over the investee. Intel’s proportionate share of the income or loss from equity method investments is recognized on a one-quarter lag and is recorded in gains (losses) on equity investments, net. Non-marketable equity investments over which Intel cannot exercise significant influence are accounted for as cost method investments.

The carrying value of Intel’s non-marketable equity investment portfolio totaled $4.5 billion as of December 30, 2017 ($4.4 billion as of December 31, 2016), and is included in other long-term assets.

Intel’s quarterly impairment analysis considers both qualitative and quantitative factors that may have a significant impact on the investee’s fair value. Qualitative factors considered include industry and market conditions, the financial performance and near-term prospects of the investee, and other relevant events and factors affecting the investee. Intel prepares quarterly quantitative assessments of the fair value of the non-marketable equity investments using both the market and income approaches, which require judgment and the use of estimates, including discount rates, investee revenues and costs, and comparable market data of private and public companies, among others.

Source: 10-K (filing date: 2018-02-16).


Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities

Intel Corp., adjustment to Net Income

USD $ in millions

Microsoft Excel LibreOffice Calc
12 months ended Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014 Dec 28, 2013
Net income (as reported) hidden hidden hidden hidden hidden
Add: Net unrealized holding gains (losses) on available-for-sale investments hidden hidden hidden hidden hidden
Net income (adjusted) hidden hidden hidden hidden hidden

Based on: 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), 10-K (filing date: 2014-02-14).


Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)

Intel Corp., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014 Dec 28, 2013
Net Profit Margin
Reported net profit margin hidden hidden hidden hidden hidden
Adjusted net profit margin 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: 2018-02-16), 10-K (filing date: 2017-02-17), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13), 10-K (filing date: 2014-02-14).

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Intel Corp.’s adjusted net profit margin deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity. Intel Corp.’s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Intel Corp.’s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.

Intel Corp., Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014 Dec 28, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income hidden hidden hidden hidden hidden
Net revenue hidden hidden hidden hidden hidden
Ratio
Net profit margin1 hidden hidden hidden hidden hidden
Adjusted: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income hidden hidden hidden hidden hidden
Net revenue hidden hidden hidden hidden hidden
Ratio
Adjusted net profit margin2 hidden hidden hidden hidden hidden

Based on: 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), 10-K (filing date: 2014-02-14).

2017 Calculations

1 Net profit margin = 100 × Net income ÷ Net revenue
= 100 × hidden ÷ hidden = hidden

2 Adjusted net profit margin = 100 × Adjusted net income ÷ Net revenue
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Intel Corp.’s adjusted net profit margin deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014 Dec 28, 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: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income hidden hidden hidden hidden hidden
Stockholders’ equity hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden

Based on: 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), 10-K (filing date: 2014-02-14).

2017 Calculations

1 ROE = 100 × Net income ÷ Stockholders’ equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Adjusted net income ÷ Stockholders’ equity
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by shareholders’ equity. Intel Corp.’s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 30, 2017 Dec 31, 2016 Dec 26, 2015 Dec 27, 2014 Dec 28, 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: Mark to Market Available-for-sale Securities
Selected Financial Data (USD $ in millions)
Adjusted net income hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden

Based on: 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), 10-K (filing date: 2014-02-14).

2017 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Adjusted net income ÷ Total assets
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by total assets. Intel Corp.’s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.