CVS Health Corp. (CVS)

Goodwill

CVS Health accounts for business combinations using the acquisition method of accounting, which requires the excess cost of an acquisition over the fair value of net assets acquired and identifiable intangible assets to be recorded as goodwill. Goodwill is not amortized, but is subject to impairment reviews annually, or more frequently if necessary. When evaluating goodwill for potential impairment, CVS Health compares the fair value of its reporting units to their respective carrying amounts. CVS Health estimates the fair value of its reporting units using a combination of a discounted cash flow method and a market multiple method. If the carrying amount of a reporting unit exceeds its estimated fair value, an impairment loss is recognized in an amount equal to that excess.

Intangible Assets

CVS Health’s definite-lived intangible assets are amortized over their estimated useful-life based upon the pattern of future cash flows attributable to the asset. Other than value of business acquired (“VOBA”), definite-lived intangible assets are amortized using the straight-line method. VOBA is amortized over the expected life of the acquired contracts in proportion to estimated premiums. CVS Health groups and evaluates definite-lived intangible assets for impairment at the lowest level at which individual cash flows can be identified whenever events or changes in circumstances indicate that the carrying value of an asset may not be recoverable. If indicators of impairment are present, CVS Health first compares the carrying amount of the asset group to the estimated future cash flows associated with the asset group (undiscounted and without interest charges). If the estimated future cash flows used in this analysis are less than the carrying amount of the asset group, an impairment loss calculation is prepared. The impairment loss calculation compares the carrying amount of the asset group to the asset group’s estimated future cash flows (discounted and with interest charges). If required, an impairment loss is recorded for the portion of the asset group’s carrying value that exceeds the asset group’s estimated future cash flows (discounted and with interest charges). There were no material impairment losses recognized on definite-lived intangible assets in any of the three years ended December 31, 2018, 2017 or 2016.

Indefinitely-lived intangible assets are not amortized but are tested for impairment annually, or more frequently if necessary. Indefinitely-lived intangible assets are tested for impairment by comparing the estimated fair value of the asset to its carrying value. CVS Health estimates the fair value of its indefinitely-lived trademarks using the relief from royalty method under the income approach. If the carrying value of the asset exceeds its estimated fair value, an impairment loss is recognized, and the asset is written down to its estimated fair value. There were no impairment losses recognized on indefinitely-lived intangible assets in any of the three years ended December 31, 2018, 2017 or 2016.

Source: 10-K (filing date: 2019-02-28).

CVS Health Corp., balance sheet: goodwill and intangible assets

US$ in millions

		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014
	Customer contracts/relationships and covenants not to compete
	Technology
	Provider networks
	Value of Business Acquired
	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

Based on: 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10).

CVS Health Corp., adjustments to financial statements

US$ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	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 (loss) Attributable To CVS Health
	Net income (loss) attributable to CVS Health (as reported)
	Add: Goodwill impairments
	Net income (loss) attributable to CVS Health (adjusted)

Based on: 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10).

CVS Health Corp., Financial Data: Reported vs. Adjusted

CVS Health Corp., adjusted financial ratios

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	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

Based on: 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10).

CVS Health Corp., Financial Ratios: Reported vs. Adjusted

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income (loss) attributable to CVS Health
	Revenues from customers
	Profitability Ratio
	Net profit margin1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Adjusted net income (loss) attributable to CVS Health
	Revenues from customers
	Profitability Ratio
	Adjusted net profit margin2

Based on: 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10).

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Revenues from customers
	Total assets
	Activity Ratio
	Total asset turnover1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Revenues from customers
	Adjusted total assets
	Activity Ratio
	Adjusted total asset turnover2

Based on: 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10).

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Total assets
	Total CVS Health shareholders’ equity
	Solvency Ratio
	Financial leverage1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted total CVS Health shareholders’ equity
	Solvency Ratio
	Adjusted financial leverage2

Based on: 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10).

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income (loss) attributable to CVS Health
	Total CVS Health shareholders’ equity
	Profitability Ratio
	ROE1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Adjusted net income (loss) attributable to CVS Health
	Adjusted total CVS Health shareholders’ equity
	Profitability Ratio
	Adjusted ROE2

Based on: 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10).

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income (loss) attributable to CVS Health
	Total assets
	Profitability Ratio
	ROA1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Adjusted net income (loss) attributable to CVS Health
	Adjusted total assets
	Profitability Ratio
	Adjusted ROA2

Based on: 10-K (filing date: 2019-02-28), 10-K (filing date: 2018-02-14), 10-K (filing date: 2017-02-09), 10-K (filing date: 2016-02-09), 10-K (filing date: 2015-02-10).