3M Co. (MMM)

Goodwill

Goodwill is the excess of cost of an acquired entity over the amounts assigned to assets acquired and liabilities assumed in a business combination. Goodwill is not amortized. Goodwill is tested for impairment annually in the fourth quarter of each year, and is tested for impairment between annual tests if an event occurs or circumstances change that would indicate the carrying amount may be impaired. Impairment testing for goodwill is done at a reporting unit level, with all goodwill assigned to a reporting unit. Reporting units are one level below the business segment level, but are required to be combined when reporting units within the same segment have similar economic characteristics. 3M did not combine any of its reporting units for impairment testing. The impairment loss is measured as the amount by which the carrying value of the reporting unit’s net assets exceeds its estimated fair value, not to exceed the carrying value of the reporting unit’s goodwill. The estimated fair value of a reporting unit is determined using earnings for the reporting unit multiplied by a price/earnings ratio for comparable industry groups or by using a discounted cash flow analysis. Companies have the option to first assess qualitative factors to determine whether the fair value of a reporting unit is not “more likely than not” less than its carrying amount, which is commonly referred to as “Step 0”. 3M has chosen not to apply Step 0 for its annual goodwill assessments.

Intangible assets

Intangible asset types include customer related, patents, other technology-based, tradenames and other intangible assets acquired from an independent party. Intangible assets with a definite life are amortized over a period ranging from three to twenty years on a systematic and rational basis (generally straight line) that is representative of the asset’s use. The estimated useful lives vary by category, with customer-related largely between ten to seventeen years, patents largely between four to thirteen years, other technology-based largely between five to fifteen years, definite lived tradenames largely between three and twenty years, and other intangibles largely between five to thirteen years. Intangible assets are removed from their respective gross asset and accumulated amortization accounts when they are no longer in use. Costs related to internally developed intangible assets, such as patents, are expensed as incurred, within “Research, development and related expenses.”

Intangible assets with a definite life are tested for impairment whenever events or circumstances indicate that the carrying amount of an asset (asset group) may not be recoverable. An impairment loss is recognized when the carrying amount exceeds the estimated undiscounted cash flows from the asset’s or asset group’s ongoing use and eventual disposition. If an impairment is identified, the amount of the impairment loss recorded is calculated by the excess of the asset’s carrying value over its fair value. Fair value is generally determined using a discounted cash flow analysis.

Intangible assets with an indefinite life, namely certain tradenames, are not amortized. Indefinite-lived intangible assets are tested for impairment annually, and are tested for impairment between annual tests if an event occurs or circumstances change that would indicate that the carrying amount may be impaired. An impairment loss would be recognized when the fair value is less than the carrying value of the indefinite-lived intangible asset.

Source: 10-K (filing date: 2019-02-07).

3M Co., balance sheet: goodwill and intangible assets

US$ in millions

		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014
	Customer related intangible assets
	Patents
	Other technology-based intangible assets
	Definite-lived tradenames
	Other amortizable intangible assets
	Finite-lived intangible assets, gross carrying amount
	Accumulated amortization
	Finite-lived intangible assets, net
	Non-amortizable intangible assets (primarily tradenames)
	Acquired intangible assets
	Goodwill
	Goodwill and intangible assets

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

3M Co., adjustments to financial data

US$ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Goodwill
	Total assets (adjusted)
	Adjustment to Total 3M Company Shareholders’ Equity
	Total 3M Company shareholders’ equity (as reported)
	Less: Goodwill
	Total 3M Company shareholders’ equity (adjusted)

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

3M Co., Financial Data: Reported vs. Adjusted

3M Co., adjusted ratios

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	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: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

3M Co., Ratios: Reported vs. Adjusted

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net sales
	Total assets
	Ratio
	Total asset turnover1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Net sales
	Adjusted total assets
	Ratio
	Adjusted total asset turnover2

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Total assets
	Total 3M Company shareholders’ equity
	Ratio
	Financial leverage1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted total 3M Company shareholders’ equity
	Ratio
	Adjusted financial leverage2

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income attributable to 3M
	Total 3M Company shareholders’ equity
	Ratio
	ROE1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Net income attributable to 3M
	Adjusted total 3M Company shareholders’ equity
	Ratio
	Adjusted ROE2

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income attributable to 3M
	Total assets
	Ratio
	ROA1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Net income attributable to 3M
	Adjusted total assets
	Ratio
	Adjusted ROA2

Based on: 10-K (filing date: 2019-02-07), 10-K (filing date: 2018-02-08), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-11), 10-K (filing date: 2015-02-12).

2018 Calculations