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Microsoft Excel LibreOffice Calc

NVIDIA Corp. (NVDA)


Analysis of Goodwill and Intangible Assets

Difficulty: Advanced


Goodwill and Intangible Assets Accounting Policy

Goodwill

Goodwill is subject to NVIDIA’s annual impairment test during the fourth quarter of the fiscal year, or earlier if indicators of potential impairment exist. For the purposes of completing the impairment test, NVIDIA performs either a qualitative or a quantitative analysis on a reporting unit basis.

Qualitative factors include industry and market considerations, overall financial performance, and other relevant events and factors affecting the reporting units.

NVIDIA’s quantitative impairment test considers both the income approach and the market approach to estimate a reporting unit’s fair value. The income and market valuation approaches consider a number of factors that include, but are not limited to, prospective financial information, growth rates, residual values, discount rates and comparable multiples from publicly traded companies in NVIDIA’s industry and require NVIDIA to make certain assumptions and estimates regarding industry economic factors and the future profitability of the business.

Intangible Assets and Other Long-Lived Assets

Intangible assets primarily represent rights acquired under technology licenses, patents, acquired intellectual property, trademarks and customer relationships. NVIDIA currently amortizes the intangible assets with definitive lives over periods ranging from three to ten years using a method that reflects the pattern in which the economic benefits of the intangible asset are consumed or otherwise used up or, if that pattern cannot be reliably determined, using a straight-line amortization method.

Long-lived assets, such as property and equipment and intangible assets subject to amortization are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset or asset group may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset or asset group to estimated undiscounted future cash flows expected to be generated by the asset, or asset group. If the carrying amount of an asset or asset group exceeds its estimated future cash flows, an impairment charge is recognized for the amount by which the carrying amount of the asset or asset group exceeds the estimated fair value of the asset or asset group. Fair value is determined based on the estimated discounted future cash flows expected to be generated by the asset or asset group. Assets and liabilities to be disposed of would be separately presented in the Consolidated Balance Sheet and the assets would be reported at the lower of the carrying amount or fair value less costs to sell, and would no longer be depreciated.

Source: 10-K (filing date: 2019-02-21).


Goodwill and Intangible Assets Disclosure

NVIDIA Corp., balance sheet: goodwill and intangible assets

US$ in millions

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
Goodwill hidden hidden hidden hidden hidden hidden
Acquisition-related intangible assets hidden hidden hidden hidden hidden hidden
Patents and licensed technology hidden hidden hidden hidden hidden hidden
Amortizable intangible assets, gross carrying amount hidden hidden hidden hidden hidden hidden
Accumulated amortization hidden hidden hidden hidden hidden hidden
Amortizable intangible assets, net carrying amount hidden hidden hidden hidden hidden hidden
Goodwill and amortizable intangible assets hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

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.
Goodwill and amortizable 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. NVIDIA Corp.’s goodwill and amortizable intangible assets declined from 2017 to 2018 and from 2018 to 2019.

Analyst Adjustments: Removal of Goodwill

NVIDIA Corp., adjustments to financial data

US$ in millions

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden hidden
Adjustment to Shareholders’ Equity
Shareholders’ equity (as reported) hidden hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden hidden
Shareholders’ equity (adjusted) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).


NVIDIA Corp., Financial Data: Reported vs. Adjusted


Adjusted Ratios: Removal of Goodwill (Summary)

NVIDIA Corp., adjusted ratios

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
Total Asset Turnover
Reported total asset turnover hidden hidden hidden hidden hidden hidden
Adjusted total asset turnover hidden hidden hidden hidden hidden hidden
Financial Leverage
Reported financial leverage hidden hidden hidden hidden hidden hidden
Adjusted financial leverage hidden hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden hidden hidden hidden hidden hidden
Adjusted ROE hidden hidden hidden hidden hidden hidden
Return on Assets (ROA)
Reported ROA hidden hidden hidden hidden hidden hidden
Adjusted ROA hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. NVIDIA Corp.’s adjusted total asset turnover improved 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.
NVIDIA Corp.’s adjusted financial leverage declined from 2017 to 2018 and from 2018 to 2019.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity. NVIDIA Corp.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. NVIDIA Corp.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.

NVIDIA Corp., Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
As Reported
Selected Financial Data (US$ in millions)
Revenue hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
Total asset turnover1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Revenue hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted total asset turnover2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

2019 Calculations

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

2 Adjusted total asset turnover = 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. NVIDIA Corp.’s adjusted total asset turnover improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
As Reported
Selected Financial Data (US$ in millions)
Total assets hidden hidden hidden hidden hidden hidden
Shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Financial leverage1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets hidden hidden hidden hidden hidden hidden
Adjusted shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted financial leverage2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

2019 Calculations

1 Financial leverage = Total assets ÷ Shareholders’ equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ 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.
NVIDIA Corp.’s adjusted financial leverage declined from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income hidden hidden hidden hidden hidden hidden
Shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
ROE1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income hidden hidden hidden hidden hidden hidden
Adjusted shareholders’ equity hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROE2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

2019 Calculations

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

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

Ratio Description The company
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity. NVIDIA Corp.’s adjusted ROE improved from 2017 to 2018 and from 2018 to 2019.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Jan 27, 2019 Jan 28, 2018 Jan 29, 2017 Jan 31, 2016 Jan 25, 2015 Jan 26, 2014
As Reported
Selected Financial Data (US$ in millions)
Net income hidden hidden hidden hidden hidden hidden
Total assets hidden hidden hidden hidden hidden hidden
Ratio
ROA1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income hidden hidden hidden hidden hidden hidden
Adjusted total assets hidden hidden hidden hidden hidden hidden
Ratio
Adjusted ROA2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-03-01), 10-K (filing date: 2016-03-17), 10-K (filing date: 2015-03-12), 10-K (filing date: 2014-03-13).

2019 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. NVIDIA Corp.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.