AbbVie Inc. (ABBV)

Intangible assets acquired in a business combination are recorded at fair value using a discounted cash flow model. The discounted cash flow model requires assumptions about the timing and amount of future net cash flows, risk, the cost of capital and terminal values of market participants. Definite-lived intangibles are amortized over their estimated useful lives using the estimated pattern of economic benefit. AbbVie reviews the recoverability of definite-lived intangible assets whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. AbbVie first compares the projected undiscounted cash flows to be generated by the asset to its carrying value. If the undiscounted cash flows of an intangible asset are less than the carrying value, the intangible asset is written down to its fair value. Where cash flows cannot be identified for an individual asset, the review is applied at the lowest level for which cash flows are largely independent of the cash flows of other assets and liabilities.

Goodwill and indefinite-lived assets are not amortized, but are subject to an impairment review annually and more frequently when indicators of impairment exist. An impairment of goodwill could occur if the carrying amount of a reporting unit exceeded the fair value of that reporting unit. An impairment of indefinite-lived intangible assets would occur if the fair value of the intangible asset is less than the carrying value.

AbbVie tests its goodwill for impairment by first assessing qualitative factors to determine whether it is more likely than not that the fair value is less than its carrying amount. If AbbVie concludes it is more likely than not that the fair value of the reporting unit is less than its carrying amount, a quantitative impairment test is performed. AbbVie tests indefinite-lived intangible assets using a quantitative impairment test. For its quantitative impairment tests, AbbVie uses an estimated future cash flow approach that requires significant judgment with respect to future volume, revenue and expense growth rates, changes in working capital use, future foreign currency exchange rates, the selection of an appropriate discount rate, asset groupings and other assumptions and estimates. The estimates and assumptions used are consistent with AbbVie's business plans and a market participant's views of a company and similar companies. The use of alternative estimates and assumptions could increase or decrease the estimated fair value of the assets and potentially result in different impacts to AbbVie's results of operations. Actual results may differ from AbbVie's estimates.

Source: AbbVie Inc., Annual Report

AbbVie Inc., Statement of Financial Position, Goodwill and Intangible Assets

USD $ in millions

Source: Based on data from AbbVie Inc. Annual Reports

Item	Description	The company
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.	AbbVie Inc.'s intangible assets, net increased from 2015 to 2016 but then slightly declined from 2016 to 2017.
Goodwill	Carrying amount as of the balance sheet date, which is the cumulative amount paid and (if applicable) the fair value of any noncontrolling interest in the acquiree, adjusted for any amortization recognized prior to the adoption of any changes in generally accepted accounting principles (as applicable) and for any impairment charges, in excess of the fair value of net assets acquired in one or more business combination transactions.	AbbVie Inc.'s goodwill increased from 2015 to 2016 and from 2016 to 2017.
Goodwill and 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.	AbbVie Inc.'s goodwill and intangible assets increased from 2015 to 2016 but then slightly declined from 2016 to 2017.

AbbVie Inc., adjustments to financial data

USD $ in millions

AbbVie Inc., adjusted ratios

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	AbbVie 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.	AbbVie Inc.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.

2017 Calculations

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	AbbVie Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

2017 Calculations

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.

2017 Calculations

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

2017 Calculations

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	AbbVie Inc.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.