Caterpillar Inc. (CAT)

Amortization

Amortization of purchased finite-lived intangibles is computed principally using the straight-line method, generally not to exceed a period of 20 years.

Goodwill

For acquisitions accounted for as a business combination, goodwill represents the excess of the cost over the fair value of the net assets acquired. Caterpillar is required to test goodwill for impairment, at the reporting unit level, annually and when events or circumstances make it more likely than not that an impairment may have occurred. A reporting unit is an operating segment or one level below an operating segment (referred to as a component) to which goodwill is assigned when initially recorded. Caterpillar assigns goodwill to reporting units based on the integration plans and the expected synergies resulting from the acquisition. Because Caterpillar is a highly integrated company, the businesses Caterpillar acquires are sometimes combined with or integrated into existing reporting units. When changes occur in the composition of Caterpillar's operating segments or reporting units, goodwill is reassigned to the affected reporting units based on their relative fair values.

Caterpillar performs the annual goodwill impairment test as of October 1 and monitor for interim triggering events on an ongoing basis. Goodwill is reviewed for impairment utilizing either a qualitative assessment or a quantitative goodwill impairment test. If Caterpillar chooses to perform a qualitative assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. For reporting units where Caterpillar performs the quantitative goodwill impairment test, Caterpillar compares the fair value of each reporting unit, which Caterpillar primarily determines using an income approach based on the present value of discounted cash flows, to the respective carrying value, which includes goodwill. If the fair value of the reporting unit exceeds its carrying value, the goodwill is not considered impaired. Beginning in 2017, if the carrying value is higher than the fair value, the difference would be recognized as an impairment loss. Prior to 2017, a two-step process was used. For reporting units where Caterpillar performed the two-step process, the first step required Caterpillar to compare the fair value of each reporting unit, which Caterpillar primarily determined using an income approach based on the present value of discounted cash flows, to the respective carrying value, which includes goodwill. If the fair value of the reporting unit exceeded its carrying value, the goodwill was not considered impaired. If the carrying value was higher than the fair value, there was an indication that an impairment may have existed and the second step was required. In step two, the implied fair value of goodwill was calculated as the excess of the fair value of a reporting unit over the fair values assigned to its assets and liabilities. If the implied fair value of goodwill was less than the carrying value of the reporting unit's goodwill, the difference was recognized as an impairment loss.

Source: 10-K (filing date: 2018-02-15).

Caterpillar Inc., Statement of Financial Position, Goodwill and Intangible Assets

USD $ in millions

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17), 10-K (filing date: 2014-02-18).

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.	Caterpillar Inc.'s intangible assets declined from 2015 to 2016 and 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.	Caterpillar Inc.'s goodwill declined from 2015 to 2016 but then slightly increased from 2016 to 2017.
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.	Caterpillar Inc.'s intangible assets and goodwill declined from 2015 to 2016 and from 2016 to 2017.

Caterpillar Inc., adjustments to financial data

USD $ in millions

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17), 10-K (filing date: 2014-02-18).

Caterpillar Inc., adjusted ratios

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17), 10-K (filing date: 2014-02-18).

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Caterpillar Inc.'s adjusted net profit margin deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Caterpillar Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then improved from 2016 to 2017 not reaching 2015 level.
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.	Caterpillar Inc.'s adjusted financial leverage increased from 2015 to 2016 but then slightly declined from 2016 to 2017.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity.	Caterpillar Inc.'s adjusted ROE deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Caterpillar Inc.'s adjusted ROA deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17), 10-K (filing date: 2014-02-18).

2017 Calculations

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

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17), 10-K (filing date: 2014-02-18).

2017 Calculations

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Caterpillar Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then improved from 2016 to 2017 not reaching 2015 level.

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17), 10-K (filing date: 2014-02-18).

2017 Calculations

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.	Caterpillar Inc.'s adjusted financial leverage increased from 2015 to 2016 but then slightly declined from 2016 to 2017.

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17), 10-K (filing date: 2014-02-18).

2017 Calculations

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity.	Caterpillar Inc.'s adjusted ROE deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.

Based on: 10-K (filing date: 2018-02-15), 10-K (filing date: 2017-02-15), 10-K (filing date: 2016-02-16), 10-K (filing date: 2015-02-17), 10-K (filing date: 2014-02-18).

2017 Calculations

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Caterpillar Inc.'s adjusted ROA deteriorated from 2015 to 2016 but then slightly improved from 2016 to 2017.