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Analysis of Goodwill and Intangible Assets

Difficulty: Advanced


Goodwill and Intangible Assets Accounting Policy

Goodwill

Goodwill represents the excess of the purchase price of an acquired entity over the fair value of net assets acquired. Accenture reviews the recoverability of goodwill by reportable operating segment annually, or more frequently when indicators of impairment exist. Based on the results of the annual impairment analysis, Accenture determined that no impairment existed as of August 31, 2018 or 2017, as each reportable operating segment's estimated fair value substantially exceeded its carrying value.

Source: 10-K (filing date: 2018-10-24).


Goodwill and Intangible Assets Disclosure

Accenture PLC, Statement of Financial Position, Goodwill and Intangible Assets

USD $ in thousands

Microsoft Excel LibreOffice Calc
Aug 31, 2018 Aug 31, 2017 Aug 31, 2016 Aug 31, 2015 Aug 31, 2014 Aug 31, 2013
Customer-related hidden hidden hidden hidden hidden hidden
Technology hidden hidden hidden hidden hidden hidden
Patents hidden hidden hidden hidden hidden hidden
Other hidden hidden hidden hidden hidden hidden
Definite-lived intangible assets, gross carrying amount hidden hidden hidden hidden hidden hidden
Accumulated amortization hidden hidden hidden hidden hidden hidden
Definite-lived intangible assets, net carrying amount hidden hidden hidden hidden hidden hidden
Goodwill hidden hidden hidden hidden hidden hidden
Goodwill and intangible assets hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30), 10-K (filing date: 2014-10-24), 10-K (filing date: 2013-10-29).

Item Description The company
Definite-lived intangible assets, net carrying amount Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. Accenture PLC's definite-lived intangible assets, net carrying amount increased from 2016 to 2017 but then slightly declined from 2017 to 2018.
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. Accenture PLC's goodwill increased from 2016 to 2017 and from 2017 to 2018.
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. Accenture PLC's goodwill and intangible assets increased from 2016 to 2017 and from 2017 to 2018.

Analyst Adjustments: Removal of Goodwill

Accenture PLC, adjustments to financial data

USD $ in thousands

Microsoft Excel LibreOffice Calc
Aug 31, 2018 Aug 31, 2017 Aug 31, 2016 Aug 31, 2015 Aug 31, 2014 Aug 31, 2013
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 Total Accenture Plc Shareholders' Equity
Total Accenture plc shareholders' equity (as reported) hidden hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden hidden
Total Accenture plc shareholders' equity (adjusted) hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30), 10-K (filing date: 2014-10-24), 10-K (filing date: 2013-10-29).


Adjusted Ratios: Removal of Goodwill (Summary)

Accenture PLC, adjusted ratios

Microsoft Excel LibreOffice Calc
Aug 31, 2018 Aug 31, 2017 Aug 31, 2016 Aug 31, 2015 Aug 31, 2014 Aug 31, 2013
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: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30), 10-K (filing date: 2014-10-24), 10-K (filing date: 2013-10-29).

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Accenture PLC's adjusted total asset turnover improved from 2016 to 2017 and from 2017 to 2018.
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.
Accenture PLC's adjusted financial leverage increased from 2016 to 2017 but then declined significantly from 2017 to 2018.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders' equity. Accenture PLC's adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Accenture PLC's adjusted ROA deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.

Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Aug 31, 2018 Aug 31, 2017 Aug 31, 2016 Aug 31, 2015 Aug 31, 2014 Aug 31, 2013
As Reported
Revenues before reimbursements (Net revenues) (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Total assets (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Total asset turnover1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Revenues before reimbursements (Net revenues) (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Adjusted total asset turnover2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30), 10-K (filing date: 2014-10-24), 10-K (filing date: 2013-10-29).

2018 Calculations

1 Total asset turnover = Revenues before reimbursements (Net revenues) ÷ Total assets
= hidden ÷ hidden = hidden

2 Adjusted total asset turnover = Revenues before reimbursements (Net revenues) ÷ 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. Accenture PLC's adjusted total asset turnover improved from 2016 to 2017 and from 2017 to 2018.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Aug 31, 2018 Aug 31, 2017 Aug 31, 2016 Aug 31, 2015 Aug 31, 2014 Aug 31, 2013
As Reported
Total assets (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Total Accenture plc shareholders' equity (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Financial leverage1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Adjusted total assets (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Adjusted total Accenture plc shareholders' equity (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Adjusted financial leverage2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30), 10-K (filing date: 2014-10-24), 10-K (filing date: 2013-10-29).

2018 Calculations

1 Financial leverage = Total assets ÷ Total Accenture plc shareholders' equity
= hidden ÷ hidden = hidden

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Accenture plc 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.
Accenture PLC's adjusted financial leverage increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Aug 31, 2018 Aug 31, 2017 Aug 31, 2016 Aug 31, 2015 Aug 31, 2014 Aug 31, 2013
As Reported
Net income attributable to Accenture plc (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Total Accenture plc shareholders' equity (USD $ in thousands) hidden hidden hidden hidden hidden hidden
ROE1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Net income attributable to Accenture plc (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Adjusted total Accenture plc shareholders' equity (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Adjusted ROE2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30), 10-K (filing date: 2014-10-24), 10-K (filing date: 2013-10-29).

2018 Calculations

1 ROE = 100 × Net income attributable to Accenture plc ÷ Total Accenture plc shareholders' equity
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROE = 100 × Net income attributable to Accenture plc ÷ Adjusted total Accenture plc shareholders' equity
= 100 × hidden ÷ hidden = hidden

Ratio Description The company
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders' equity. Accenture PLC's adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Aug 31, 2018 Aug 31, 2017 Aug 31, 2016 Aug 31, 2015 Aug 31, 2014 Aug 31, 2013
As Reported
Net income attributable to Accenture plc (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Total assets (USD $ in thousands) hidden hidden hidden hidden hidden hidden
ROA1 hidden hidden hidden hidden hidden hidden
Adjusted for Goodwill
Net income attributable to Accenture plc (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in thousands) hidden hidden hidden hidden hidden hidden
Adjusted ROA2 hidden hidden hidden hidden hidden hidden

Based on: 10-K (filing date: 2018-10-24), 10-K (filing date: 2017-10-26), 10-K (filing date: 2016-10-28), 10-K (filing date: 2015-10-30), 10-K (filing date: 2014-10-24), 10-K (filing date: 2013-10-29).

2018 Calculations

1 ROA = 100 × Net income attributable to Accenture plc ÷ Total assets
= 100 × hidden ÷ hidden = hidden

2 Adjusted ROA = 100 × Net income attributable to Accenture plc ÷ 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. Accenture PLC's adjusted ROA deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018.