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  2. Chevron Corp.
  3. Analysis of Goodwill and Intangible Assets
 

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Chevron Corp. (CVX)

Analysis of Goodwill and Intangible Assets

Difficulty: Advanced

Goodwill and Intangible Assets Accounting Policy

Goodwill

Goodwill resulting from a business combination is not subject to amortization. Chevron tests such goodwill at the reporting unit level for impairment annually at December 31, or more frequently if an event occurs or circumstances change that would more likely than not reduce the fair value of the reporting unit below its carrying amount.

Source: Chevron Corp., Annual Report

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Analyst Adjustments: Removal of Goodwill

Chevron 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 Chevron Corporation Stockholders' Equity
Total Chevron Corporation stockholders' equity (as reported)
Less: Goodwill
Total Chevron Corporation stockholders' equity (adjusted)

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Adjusted Ratios: Removal of Goodwill (Summary)

Chevron Corp., adjusted ratios

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
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 total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Chevron Corp.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 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.		 Chevron Corp.'s adjusted financial leverage increased from 2015 to 2016 but then declined significantly from 2016 to 2017.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders' equity. Chevron Corp.'s adjusted ROE deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. Chevron Corp.'s adjusted ROA 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
Sales and other operating revenues (USD $ in millions)
Total assets (USD $ in millions)
Total asset turnover1
Adjusted for Goodwill
Sales and other operating revenues (USD $ in millions)
Adjusted total assets (USD $ in millions)
Adjusted total asset turnover2

2017 Calculations

1 Total asset turnover = Sales and other operating revenues ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Sales and other operating revenues ÷ Adjusted total assets
= ÷ =

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. Chevron Corp.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.

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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 Chevron Corporation stockholders' equity (USD $ in millions)
Financial leverage1
Adjusted for Goodwill
Adjusted total assets (USD $ in millions)
Adjusted total Chevron Corporation stockholders' equity (USD $ in millions)
Adjusted financial leverage2

2017 Calculations

1 Financial leverage = Total assets ÷ Total Chevron Corporation stockholders' equity
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Chevron Corporation stockholders' 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.		 Chevron Corp.'s adjusted financial leverage increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

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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 (loss) attributable to Chevron Corporation (USD $ in millions)
Total Chevron Corporation stockholders' equity (USD $ in millions)
ROE1 % % % % %
Adjusted for Goodwill
Net income (loss) attributable to Chevron Corporation (USD $ in millions)
Adjusted total Chevron Corporation stockholders' equity (USD $ in millions)
Adjusted ROE2 % % % % %

2017 Calculations

1 ROE = 100 × Net income (loss) attributable to Chevron Corporation ÷ Total Chevron Corporation stockholders' equity
= 100 × ÷ = %

2 Adjusted ROE = 100 × Net income (loss) attributable to Chevron Corporation ÷ Adjusted total Chevron Corporation stockholders' equity
= 100 × ÷ = %

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

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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 (loss) attributable to Chevron Corporation (USD $ in millions)
Total assets (USD $ in millions)
ROA1 % % % % %
Adjusted for Goodwill
Net income (loss) attributable to Chevron Corporation (USD $ in millions)
Adjusted total assets (USD $ in millions)
Adjusted ROA2 % % % % %

2017 Calculations

1 ROA = 100 × Net income (loss) attributable to Chevron Corporation ÷ Total assets
= 100 × ÷ = %

2 Adjusted ROA = 100 × Net income (loss) attributable to Chevron Corporation ÷ Adjusted total assets
= 100 × ÷ = %

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

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Stock Analysis on Net