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Goodwill and Intangible Assets Accounting Policy

Goodwill and other indefinitely-lived assets

Goodwill and other indefinitely-lived assets are not amortized, but are subject to impairment reviews annually, or more frequently if necessary.

Intangible assets

Purchased customer contracts and relationships are amortized on a straight-line basis over their estimated useful lives between 9 and 20 years. Purchased customer lists are amortized on a straight-line basis over their estimated useful lives of up to 10 years. Purchased leases are amortized on a straight-line basis over the remaining life of the lease.

Source: CVS Health Corp., Annual Report

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Goodwill and Intangible Assets Disclosure

CVS Health Corp., Statement of Financial Position, Goodwill and Intangible Assets

USD $ in millions

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Customer contracts and relationships and covenants not to compete
Favorable leases and other
Finitely-lived intangible assets, gross carrying amount
Accumulated amortization
Finitely-lived intangible assets, net carrying amount
Trademark
Indefinitely-lived intangible assets
Intangible assets
Goodwill
Goodwill and other intangibles

Source: Based on data from CVS Health Corp. Annual Reports

Item Description The company
Intangible assets Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. CVS Health Corp.'s intangible assets declined from 2015 to 2016 but then slightly increased 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. CVS Health Corp.'s goodwill increased from 2015 to 2016 and from 2016 to 2017.
Goodwill and other intangibles Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. CVS Health Corp.'s goodwill and other intangibles declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level.

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Analyst Adjustments: Removal of Goodwill

CVS Health Corp., adjustments to financial data

USD $ in millions

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Adjustment to Total Assets
Total assets (as reported)
Less: Goodwill
Total assets (adjusted)
Adjustment to Total CVS Health Shareholders' Equity
Total CVS Health shareholders' equity (as reported)
Less: Goodwill
Total CVS Health shareholders' equity (adjusted)
Adjustment to Net Income Attributable To CVS Health
Net income attributable to CVS Health (as reported)
Add: Goodwill impairments
Net income attributable to CVS Health (adjusted)

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Adjusted Ratios: Removal of Goodwill (Summary)

CVS Health Corp., 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 % % % % %
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 % % % % %
Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. CVS Health Corp.'s adjusted net profit margin deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. CVS Health Corp.'s adjusted total asset turnover improved from 2015 to 2016 and 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 adjusted net income divided by adjusted shareholders' equity.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. CVS Health Corp.'s adjusted ROA improved from 2015 to 2016 and from 2016 to 2017.

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Adjusted Net Profit Margin

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net income attributable to CVS Health (USD $ in millions)
Net revenues (USD $ in millions)
Net profit margin1 % % % % %
Adjusted for Goodwill
Adjusted net income attributable to CVS Health (USD $ in millions)
Net revenues (USD $ in millions)
Adjusted net profit margin2 % % % % %

2017 Calculations

1 Net profit margin = 100 × Net income attributable to CVS Health ÷ Net revenues
= 100 × ÷ = %

2 Adjusted net profit margin = 100 × Adjusted net income attributable to CVS Health ÷ Net revenues
= 100 × ÷ = %

Ratio Description The company
Adjusted net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. CVS Health Corp.'s adjusted net profit margin deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.

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Adjusted Total Asset Turnover

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net revenues (USD $ in millions)
Total assets (USD $ in millions)
Total asset turnover1
Adjusted for Goodwill
Net revenues (USD $ in millions)
Adjusted total assets (USD $ in millions)
Adjusted total asset turnover2

2017 Calculations

1 Total asset turnover = Net revenues ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Net revenues ÷ Adjusted total assets
= ÷ =

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. CVS Health Corp.'s adjusted total asset turnover improved from 2015 to 2016 and from 2016 to 2017.

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Adjusted Financial Leverage

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Total assets (USD $ in millions)
Total CVS Health shareholders' equity (USD $ in millions)
Financial leverage1
Adjusted for Goodwill
Adjusted total assets (USD $ in millions)
Adjusted total CVS Health shareholders' equity (USD $ in millions)
Adjusted financial leverage2

2017 Calculations

1 Financial leverage = Total assets ÷ Total CVS Health shareholders' equity
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total CVS Health 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.

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Adjusted Return on Equity (ROE)

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net income attributable to CVS Health (USD $ in millions)
Total CVS Health shareholders' equity (USD $ in millions)
ROE1 % % % % %
Adjusted for Goodwill
Adjusted net income attributable to CVS Health (USD $ in millions)
Adjusted total CVS Health shareholders' equity (USD $ in millions)
Adjusted ROE2 % % % % %

2017 Calculations

1 ROE = 100 × Net income attributable to CVS Health ÷ Total CVS Health shareholders' equity
= 100 × ÷ = %

2 Adjusted ROE = 100 × Adjusted net income attributable to CVS Health ÷ Adjusted total CVS Health shareholders' equity
= 100 × ÷ = %

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

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Adjusted Return on Assets (ROA)

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net income attributable to CVS Health (USD $ in millions)
Total assets (USD $ in millions)
ROA1 % % % % %
Adjusted for Goodwill
Adjusted net income attributable to CVS Health (USD $ in millions)
Adjusted total assets (USD $ in millions)
Adjusted ROA2 % % % % %

2017 Calculations

1 ROA = 100 × Net income attributable to CVS Health ÷ Total assets
= 100 × ÷ = %

2 Adjusted ROA = 100 × Adjusted net income attributable to CVS Health ÷ Adjusted total assets
= 100 × ÷ = %

Ratio Description The company
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. CVS Health Corp.'s adjusted ROA improved from 2015 to 2016 and from 2016 to 2017.

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