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
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) |
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. |
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. |
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. |
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. |
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. |