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NVIDIA Corp. (NVDA)
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
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
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| Amortizable intangible assets, net carrying amount | |
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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
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
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
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
= ÷ =
2 Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= ÷ =
| 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
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
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ 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. |
NVIDIA Corp.’s adjusted financial leverage declined from 2017 to 2018 and from 2018 to 2019. |
Adjusted Return on Equity (ROE)
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 × ÷ =
2 Adjusted ROE = 100 × Net income ÷ Adjusted shareholders’ equity
= 100 × ÷ =
| 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)
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 × ÷ =
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. | NVIDIA Corp.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019. |