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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
BD's unamortized intangible assets include goodwill and in-process research and development assets which arise from acquisitions. BD currently reviews all indefinite-lived assets, including goodwill, for impairment generally using quantitative models. Goodwill is reviewed at least annually for impairment at the reporting unit level, which is defined as an operating segment or one level below an operating segment, referred to as a component. BD's reporting units generally represent one level below reporting segments. Potential impairment of goodwill is generally identified by comparing the fair value of a reporting unit, estimated using an income approach, with its carrying value. The annual impairment review performed on July 1, 2018 indicated that all identified reporting units' fair values exceeded their respective carrying values. The review for impairment of in-process research and development assets is performed by comparing the fair value of the technology or project assets, estimated using an income approach, with their carrying value. In-process research and development assets are considered indefinite-lived assets and are reviewed at least annually for impairment until projects are completed or abandoned.
Amortized intangible assets include developed technology assets which arise from acquisitions. These assets represent acquired intellectual property that is already technologically feasible upon the acquisition date or acquired in-process research and development assets that are completed subsequent to acquisition. Developed technology assets are generally amortized over periods ranging from 15 to 20 years, using the straight-line method. Customer relationship assets are generally amortized over periods ranging from 10 to 15 years, using the straight-line method. Other intangibles with finite useful lives, which include patents, are amortized over periods principally ranging from one to 40 years, using the straight-line method. Finite-lived intangible assets, including developed technology assets, are periodically reviewed when impairment indicators are present to assess recoverability from future operations using undiscounted cash flows. The carrying values of these finite-lived assets are compared to the undiscounted cash flows they are expected to generate and an impairment loss is recognized in operating results to the extent any finite-lived intangible asset's carrying value exceeds its calculated fair value.
Source: 10-K (filing date: 2018-11-21).
Goodwill and Intangible Assets Disclosure
Becton, Dickinson & Co., Statement of Financial Position, Goodwill and Intangible Assets
USD $ in millions
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| Unamortized intangible assets | |
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| Intangible assets, net | |
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| Goodwill | |
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| Intangible assets and goodwill | |
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Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-26), 10-K (filing date: 2013-11-27).
| 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. | Becton, Dickinson & Co.'s intangible assets, net declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level. |
| 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. | Becton, Dickinson & Co.'s goodwill increased from 2016 to 2017 and from 2017 to 2018. |
| Intangible assets and goodwill | Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. | Becton, Dickinson & Co.'s intangible assets and goodwill declined from 2016 to 2017 but then increased from 2017 to 2018 exceeding 2016 level. |
Analyst Adjustments: Removal of Goodwill
Becton, Dickinson & Co., adjustments to financial data
USD $ in millions
Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-26), 10-K (filing date: 2013-11-27).
Becton, Dickinson & Co., Financial Data: Reported vs. Adjusted
Adjusted Ratios: Removal of Goodwill (Summary)
Becton, Dickinson & Co., adjusted ratios
Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-26), 10-K (filing date: 2013-11-27).
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Becton, Dickinson & Co.'s adjusted total asset turnover deteriorated from 2016 to 2017 but then slightly improved 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. |
Becton, Dickinson & Co.'s adjusted financial leverage declined from 2016 to 2017 and from 2017 to 2018. |
| Adjusted ROE | A profitability ratio calculated as net income divided by adjusted shareholders' equity. | Becton, Dickinson & Co.'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. | Becton, Dickinson & Co.'s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018. |
Becton, Dickinson & Co., Ratios: Reported vs. Adjusted
Adjusted Total Asset Turnover
Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-26), 10-K (filing date: 2013-11-27).
2018 Calculations
1 Total asset turnover = Revenues ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Becton, Dickinson & Co.'s adjusted total asset turnover deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018. |
Adjusted Financial Leverage
Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-26), 10-K (filing date: 2013-11-27).
2018 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. |
Becton, Dickinson & Co.'s adjusted financial leverage declined from 2016 to 2017 and from 2017 to 2018. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-26), 10-K (filing date: 2013-11-27).
2018 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. | Becton, Dickinson & Co.'s adjusted ROE deteriorated from 2016 to 2017 and from 2017 to 2018. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2018-11-21), 10-K (filing date: 2017-11-22), 10-K (filing date: 2016-11-23), 10-K (filing date: 2015-11-25), 10-K (filing date: 2014-11-26), 10-K (filing date: 2013-11-27).
2018 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. | Becton, Dickinson & Co.'s adjusted ROA deteriorated from 2016 to 2017 and from 2017 to 2018. |
