.Analysis of Investments
Difficulty: Advanced
Investment Accounting Policy
Cash and Equivalents
Cash and equivalents include money market funds and time deposits with original maturities of three months or less.
Investments
Investments consist primarily of time deposits, marketable debt securities, held-to-maturity debt securities and equity securities. Investments in marketable securities are classified as available-for-sale and are recorded at fair value with any unrealized holding gains or losses, net of tax, included in AOCI on the consolidated balance sheets. Investments in equity securities that are not traded on public stock exchanges and held-to-maturity debt securities are recorded at cost.
AbbVie periodically assesses its investment securities for other-than-temporary impairment losses. This evaluation is based on a number of factors, including the length of time and the extent to which the fair value has been below the cost basis and adverse conditions related specifically to the security, including any changes to the credit rating of the security, intent to sell, or whether AbbVie will more likely than not be required to sell the security before recovery of its amortized cost basis. AbbVie also considers industry factors and general market trends. When AbbVie determines that an other than temporary decline has occurred, a cost basis investment is written down with a charge to other expense (income), net in the consolidated statements of earnings and an available-for-sale investment's unrealized loss is reclassified from AOCI to other expense (income), net in the consolidated statements of earnings. Realized gains and losses on sales of investments are computed using the first-in, first-out method adjusted for any other-than-temporary declines in fair value that were recorded in net earnings.
Source: AbbVie Inc., Annual Report
Adjustment to Net Income (Loss): Mark to Market Available-for-sale Securities
AbbVie Inc., adjustment to Net Earnings
USD $ in millions
Adjusted Ratios: Mark to Market Available-for-sale Securities (Summary)
AbbVie Inc., adjusted ratios
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| Net Profit Margin | ||||||
| | Reported net profit margin | % | % | % | % | % |
| | Adjusted net profit margin | % | % | % | % | % |
| Return on Equity (ROE) | ||||||
| | Reported ROE | % | % | % | % | % |
| | Adjusted ROE | % | % | % | % | % |
| Return on Assets (ROA) | ||||||
| | Reported ROA | % | % | % | % | % |
| | Adjusted ROA | % | % | % | % | % |
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | AbbVie Inc.'s adjusted net profit margin improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by shareholders' equity. | AbbVie Inc.'s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by total assets. | AbbVie Inc.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017. |
Adjusted Net Profit Margin
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Net earnings (USD $ in millions) | |||||
| | Net revenues (USD $ in millions) | |||||
| | Net profit margin1 | % | % | % | % | % |
| Adjusted: Mark to Market Available-for-sale Securities | ||||||
| | Adjusted net earnings (USD $ in millions) | |||||
| | Net revenues (USD $ in millions) | |||||
| | Adjusted net profit margin2 | % | % | % | % | % |
2017 Calculations
1 Net profit margin = 100 × Net earnings ÷ Net revenues
= 100 × ÷ = %
2 Adjusted net profit margin = 100 × Adjusted net earnings ÷ Net revenues
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | AbbVie Inc.'s adjusted net profit margin improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
Adjusted Return on Equity (ROE)
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Net earnings (USD $ in millions) | |||||
| | Stockholders' equity (USD $ in millions) | |||||
| | ROE1 | % | % | % | % | % |
| Adjusted: Mark to Market Available-for-sale Securities | ||||||
| | Adjusted net earnings (USD $ in millions) | |||||
| | Stockholders' equity (USD $ in millions) | |||||
| | Adjusted ROE2 | % | % | % | % | % |
2017 Calculations
1 ROE = 100 × Net earnings ÷ Stockholders' equity
= 100 × ÷ = %
2 Adjusted ROE = 100 × Adjusted net earnings ÷ Stockholders' equity
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by shareholders' equity. | AbbVie Inc.'s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017. |
Adjusted Return on Assets (ROA)
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Net earnings (USD $ in millions) | |||||
| | Total assets (USD $ in millions) | |||||
| | ROA1 | % | % | % | % | % |
| Adjusted: Mark to Market Available-for-sale Securities | ||||||
| | Adjusted net earnings (USD $ in millions) | |||||
| | Total assets (USD $ in millions) | |||||
| | Adjusted ROA2 | % | % | % | % | % |
2017 Calculations
1 ROA = 100 × Net earnings ÷ Total assets
= 100 × ÷ = %
2 Adjusted ROA = 100 × Adjusted net earnings ÷ Total assets
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by total assets. | AbbVie Inc.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017. |
