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Microsoft Excel LibreOffice Calc

Intuit Inc. (INTU)


Analysis of Goodwill and Intangible Assets

Advanced level


Accounting Policy on Goodwill and Intangible Assets

Goodwill

Intuit records goodwill when the fair value of consideration transferred in a business combination exceeds the fair value of the identifiable assets acquired and liabilities assumed. Goodwill and other intangible assets that have indefinite useful lives are not amortized, but Intuit tests them for impairment annually during the fourth fiscal quarter and whenever an event or change in circumstances indicates that the carrying value of the asset may not be recoverable.

For goodwill, Intuit performs a two-step impairment test. In the first step, Intuit compares the fair value of each reporting unit to its carrying value. In accordance with authoritative guidance, Intuit defines fair value as the price that would be received from the sale of an asset or paid to transfer a liability in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Intuit considers and uses all valuation methods that are appropriate in estimating the fair value of the reporting units and generally uses a weighted combination of income and market approaches. Under the income approach, Intuit estimates the fair value of each reporting unit based on the present value of future cash flows. Intuit uses a number of assumptions in the discounted cash flow model, including market factors specific to the business, the amount and timing of estimated future cash flows to be generated by the business over an extended period of time, long-term growth rates for the business, and a rate of return that considers the relative risk of achieving the cash flows and the time value of money. Under the market approach, Intuit estimates the fair value of each reporting unit based on market multiples of revenue, operating income, and earnings for comparable publicly traded companies engaged in similar businesses. If the estimated fair value of the reporting unit exceeds the carrying value of the net assets assigned to that unit, goodwill is not impaired and no further analysis is required.

If the carrying value of the net assets assigned to a reporting unit exceeds the estimated fair value of the unit, Intuit performs the second step of the impairment test. In this step Intuit allocates the fair value of the reporting unit calculated in step one to all of the assets and liabilities of that unit, as if Intuit had just acquired the reporting unit in a business combination. The excess of the fair value of the reporting unit over the total amount allocated to the assets and liabilities represents the implied fair value of goodwill. If the carrying value of a reporting unit’s goodwill exceeds its implied fair value, Intuit would record an impairment loss equal to the difference. Intuit recorded no goodwill impairment charges for the twelve months ended July 31, 2019, 2018 or 2017.

Acquired Intangible Assets and Other Long-Lived Assets

Intuit generally records acquired intangible assets that have finite useful lives, such as purchased technology, in connection with business combinations. Intuit amortizes the cost of acquired intangible assets on a straight-line basis over their estimated useful lives, which range from three to seven years. Intuit reviews intangible assets that have finite useful lives and other long-lived assets whenever an event or change in circumstances indicates that the carrying value of the asset may not be recoverable. Intuit estimates the recoverability of these assets by comparing the carrying amount of the asset to the future undiscounted cash flows that Intuit expects the asset to generate. Intuit estimates the fair value of assets that have finite useful lives based on the present value of future cash flows for those assets. If the carrying value of an asset with a finite life exceeds its estimated fair value, Intuit would record an impairment loss equal to the difference. Impairment charges for acquired intangible assets were not significant for the twelve months ended July 31, 2019, 2018 or 2017.

Source: 10-K (filing date: 2019-08-30).


Goodwill and Intangible Asset Disclosure

Intuit Inc., balance sheet: goodwill and intangible assets

US$ in millions

Microsoft Excel LibreOffice Calc
Jul 31, 2019 Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
Goodwill
Customer lists
Purchased technology
Trade names and logos
Covenants not to compete or sue
Acquired intangible assets, cost
Accumulated amortization
Acquired intangible assets, net
Goodwill and acquired intangible assets

Based on: 10-K (filing date: 2019-08-30), 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

Item Description The company
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. Intuit Inc.’s goodwill increased from 2017 to 2018 and from 2018 to 2019.
Acquired intangible assets, net Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Intuit Inc.’s acquired intangible assets, net increased from 2017 to 2018 but then slightly decreased from 2018 to 2019.
Goodwill and acquired intangible assets Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Intuit Inc.’s goodwill and acquired intangible assets increased from 2017 to 2018 and from 2018 to 2019.

Adjustments to Financial Statements: Removal of Goodwill

Intuit Inc., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Jul 31, 2019 Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
Adjustment to Total Assets
Total assets (as reported)
Less: Goodwill
Total assets (adjusted)
Adjustment to Stockholders’ Equity
Stockholders’ equity (as reported)
Less: Goodwill
Stockholders’ equity (adjusted)
Adjustment to Net Income
Net income (as reported)
Add: Goodwill impairment charges
Net income (adjusted)

Based on: 10-K (filing date: 2019-08-30), 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).


Intuit Inc., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Goodwill (Summary)

Intuit Inc., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Jul 31, 2019 Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
Net Profit Margin
Reported net profit margin
Adjusted net profit margin
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: 2019-08-30), 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

Financial ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Intuit Inc.’s adjusted net profit margin ratio improved from 2017 to 2018 and from 2018 to 2019.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Intuit Inc.’s adjusted total asset turnover ratio deteriorated from 2017 to 2018 and from 2018 to 2019.
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.
Intuit Inc.’s adjusted financial leverage ratio decreased from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Intuit Inc.’s adjusted ROE deteriorated from 2017 to 2018 and from 2018 to 2019.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Intuit Inc.’s adjusted ROA deteriorated from 2017 to 2018 and from 2018 to 2019.

Intuit Inc., Financial Ratios: Reported vs. Adjusted


Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
Jul 31, 2019 Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income
Net revenue
Profitability Ratio
Net profit margin1
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net income
Net revenue
Profitability Ratio
Adjusted net profit margin2

Based on: 10-K (filing date: 2019-08-30), 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

2019 Calculations

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

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

Profitability ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. Intuit Inc.’s adjusted net profit margin ratio improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Jul 31, 2019 Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net revenue
Total assets
Activity Ratio
Total asset turnover1
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net revenue
Adjusted total assets
Activity Ratio
Adjusted total asset turnover2

Based on: 10-K (filing date: 2019-08-30), 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

2019 Calculations

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

2 Adjusted total asset turnover = Net revenue ÷ Adjusted total assets
= ÷ =

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Intuit Inc.’s adjusted total asset turnover ratio deteriorated from 2017 to 2018 and from 2018 to 2019.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Jul 31, 2019 Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets
Stockholders’ equity
Solvency Ratio
Financial leverage1
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets
Adjusted stockholders’ equity
Solvency Ratio
Adjusted financial leverage2

Based on: 10-K (filing date: 2019-08-30), 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

2019 Calculations

1 Financial leverage = Total assets ÷ Stockholders’ equity
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted 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.
Intuit Inc.’s adjusted financial leverage ratio decreased from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Jul 31, 2019 Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income
Stockholders’ equity
Profitability Ratio
ROE1
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net income
Adjusted stockholders’ equity
Profitability Ratio
Adjusted ROE2

Based on: 10-K (filing date: 2019-08-30), 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

2019 Calculations

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

2 Adjusted ROE = 100 × Adjusted net income ÷ Adjusted stockholders’ equity
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. Intuit Inc.’s adjusted ROE deteriorated from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Jul 31, 2019 Jul 31, 2018 Jul 31, 2017 Jul 31, 2016 Jul 31, 2015 Jul 31, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income
Total assets
Profitability Ratio
ROA1
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted net income
Adjusted total assets
Profitability Ratio
Adjusted ROA2

Based on: 10-K (filing date: 2019-08-30), 10-K (filing date: 2018-08-31), 10-K (filing date: 2017-09-01), 10-K (filing date: 2016-09-01), 10-K (filing date: 2015-09-01), 10-K (filing date: 2014-09-12).

2019 Calculations

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

2 Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. Intuit Inc.’s adjusted ROA deteriorated from 2017 to 2018 and from 2018 to 2019.