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Chevron Corp. (CVX)

Analysis of Goodwill and Intangible Assets

Difficulty: Advanced

Goodwill and Intangible Assets Accounting Policy
Analyst Adjustments: Removal of Goodwill
Adjusted Ratios: Removal of Goodwill (Summary)
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

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
= hidden ÷ hidden = hidden

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

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
= hidden ÷ hidden = hidden

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Chevron Corporation stockholders' equity
= hidden ÷ hidden = hidden

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 × hidden ÷ hidden = hidden %

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

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 × hidden ÷ hidden = hidden %

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

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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Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality

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Financial Statements
Common-Size Financial Statements
Ratios
Relative Valuation
Discounted Cash Flow (DCF) Valuation
Economic Value Added (EVA)
Long-term Trends
Analysis
Financial Reporting Quality