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Microsoft Excel LibreOffice Calc


Analysis of Goodwill and Intangible Assets

Difficulty: Advanced


Goodwill and Intangible Assets Accounting Policy

Goodwill

Marriott tests goodwill for potential impairment at least annually, or more frequently if an event or other circumstance indicates that Marriott may not be able to recover the carrying amount of the net assets of the reporting unit. In evaluating goodwill for impairment, Marriott may assess qualitative factors to determine whether it is more likely than not (that is, a likelihood of more than 50 percent) that the fair value of a reporting unit is less than its carrying amount. If Marriott bypasses the qualitative assessment, or if Marriott concludes that it is more likely than not that the fair value of a reporting unit is less than its carrying value, then Marriott performs a quantitative impairment test by comparing the fair value of a reporting unit with its carrying amount.

Marriott calculates the estimated fair value of a reporting unit using a weighting of the income and market approaches. For the income approach, Marriott uses internally developed discounted cash flow models that include the following assumptions, among others: projections of revenues, expenses, and related cash flows based on assumed long-term growth rates and demand trends; expected future investments to grow new units; and estimated discount rates. For the market approach, Marriott uses internal analyses based primarily on market comparables. Marriott bases these assumptions on the historical data and experience, third-party appraisals, industry projections, micro and macro general economic condition projections, and the expectations.

In 2017, Marriott elected to change the date for the annual goodwill impairment test from December 31 to October 1 of each year for all reporting units. Marriott made this voluntary change to provide more time to complete the annual goodwill impairment test in advance of the year-end reporting cycle. The change, which Marriott applied prospectively, did not delay, accelerate, or avoid any impairment charge and does not represent a material change in the method of applying ASC 350.

Marriott has had no goodwill impairment charges for the last three fiscal years.

Intangibles and Long-Lived Assets

Marriott assesses indefinite-lived intangible assets for potential impairment and continued indefinite use annually, or more frequently if an event or other circumstance indicates that Marriott may not be able to recover the carrying amount of the asset. Like goodwill, Marriott may first assess qualitative factors to determine whether it is more likely than not that the fair value of the indefinite-lived intangible is less than its carrying amount. If the carrying value of the asset exceeds the fair value, Marriott recognizes an impairment loss in the amount of that excess.

Marriott tests definite-lived intangibles and long-lived asset groups for recoverability when changes in circumstances indicate that Marriott may not be able to recover the carrying value; for example, when there are material adverse changes in projected revenues or expenses, significant underperformance relative to historical or projected operating results, or significant negative industry or economic trends. Marriott also tests recoverability when management has committed to a plan to sell or otherwise dispose of an asset group and Marriott expects to complete the plan within a year. Marriott evaluates recoverability of an asset group by comparing its carrying value to the future net undiscounted cash flows that Marriott expects the asset group will generate. If the comparison indicates that Marriott will not be able to recover the carrying value of an asset group, Marriott recognizes an impairment loss for the amount by which the carrying value exceeds the estimated fair value. When Marriott recognizes an impairment loss for assets to be held and used, Marriott depreciates the adjusted carrying amount of those assets over their remaining useful life.

Marriott calculates the estimated fair value of an intangible asset or asset group using the income approach or the market approach. Marriott utilizes the same assumptions and methodology for the income approach that Marriott describes in the "Goodwill" caption. For the market approach, Marriott uses internal analyses based primarily on market comparables and assumptions about market capitalization rates, growth rates, and inflation.

Source: 10-K (filing date: 2018-02-15).


Goodwill and Intangible Assets Disclosure

Marriott International Inc., Statement of Financial Position, Goodwill and Intangible Assets

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Contract acquisition costs and other hidden hidden hidden hidden hidden
Accumulated amortization hidden hidden hidden hidden hidden
Definite-lived intangible assets hidden hidden hidden hidden hidden
Indefinite-lived intangible brand assets hidden hidden hidden hidden hidden
Intangible assets hidden hidden hidden hidden hidden
Goodwill hidden hidden hidden hidden hidden
Intangible assets and goodwill hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-18), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-20).

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. Marriott International Inc.’s intangible assets increased from 2015 to 2016 but then slightly declined from 2016 to 2017.
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. Marriott International Inc.’s goodwill increased from 2015 to 2016 and from 2016 to 2017.
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. Marriott International Inc.’s intangible assets and goodwill increased from 2015 to 2016 and from 2016 to 2017.

Analyst Adjustments: Removal of Goodwill

Marriott International Inc., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
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 Shareholders’ Equity (deficit)
Shareholders’ equity (deficit) (as reported) hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden
Shareholders’ equity (deficit) (adjusted) hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-18), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-20).


Marriott International Inc., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Goodwill (Summary)

Marriott International Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
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: 2018-02-15), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-18), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-20).

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Marriott International Inc.’s adjusted total asset turnover deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.
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.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Marriott International Inc.’s adjusted ROA deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

Marriott International Inc., Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Revenues 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)
Revenues 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: 2018-02-15), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-18), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-20).

2017 Calculations

1 Total asset turnover = Revenues ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Revenues ÷ 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. Marriott International Inc.’s adjusted total asset turnover deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Total assets hidden hidden hidden hidden hidden
Shareholders’ equity (deficit) 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 shareholders’ equity (deficit) hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-18), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-20).

2017 Calculations

1 Financial leverage = Total assets ÷ Shareholders’ equity (deficit)
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ equity (deficit)
= 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.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Selected Financial Data (USD $ in millions)
Net income hidden hidden hidden hidden hidden
Shareholders’ equity (deficit) 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 shareholders’ equity (deficit) hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-18), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-20).

2017 Calculations

1 ROE = 100 × Net income ÷ Shareholders’ equity (deficit)
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Net income ÷ Adjusted shareholders’ equity (deficit)
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 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 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: 2018-02-15), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-18), 10-K (filing date: 2015-02-19), 10-K (filing date: 2014-02-20).

2017 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. Marriott International Inc.’s adjusted ROA deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.