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Danaher Corp. (DHR)
Analysis of Goodwill and Intangible Assets
High level of difficulty
- Accounting Policy on Goodwill and Intangible Assets
- Goodwill and Intangible Assets Disclosure
- Adjustments to Financial Statements: Removal of Goodwill
- Adjusted Financial Ratios: Removal of Goodwill (Summary)
- Adjusted Total Asset Turnover
- Adjusted Financial Leverage
- Adjusted Return on Equity (ROE)
- Adjusted Return on Assets (ROA)
Accounting Policy on Goodwill and Intangible Assets
Goodwill and other intangible assets result from Danaher’s acquisition of existing businesses. In accordance with accounting standards related to business combinations, goodwill is not amortized; however, certain finite-lived identifiable intangible assets, primarily customer relationships and acquired technology, are amortized over their estimated useful lives. Intangible assets with indefinite lives are not amortized. In-process research and development (“IPR&D”) is initially capitalized at fair value and when the IPR&D project is complete, the asset is considered a finite-lived intangible asset and amortized over its estimated useful life. If an IPR&D project is abandoned, an impairment loss equal to the value of the intangible asset is recorded in the period of abandonment. Danaher reviews identified intangible assets and goodwill for impairment whenever events or changes in circumstances indicate that the related carrying amounts may not be recoverable. Danaher also tests intangible assets with indefinite lives and goodwill at least annually for impairment.
Source: 10-K (filing date: 2019-02-21).
Goodwill and Intangible Assets Disclosure
Danaher Corp., balance sheet: goodwill and intangible assets
US$ in thousands
Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).
| Item | Description | The company |
|---|---|---|
| Intangibles | Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. | Danaher Corp.’s intangibles declined from 2016 to 2017 but then slightly increased from 2017 to 2018. |
| Goodwill | Amount after accumulated impairment loss of an asset representing future economic benefits arising from other assets acquired in a business combination that are not individually identified and separately recognized. | Danaher Corp.’s goodwill increased from 2016 to 2017 and from 2017 to 2018. |
| Goodwill and other intangible assets | Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. | Danaher Corp.’s goodwill and other intangible assets increased from 2016 to 2017 and from 2017 to 2018. |
Adjustments to Financial Statements: Removal of Goodwill
Danaher Corp., adjustments to financial statements
US$ in thousands
Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).
Danaher Corp., Financial Data: Reported vs. Adjusted
Adjusted Financial Ratios: Removal of Goodwill (Summary)
Danaher Corp., adjusted financial ratios
Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).
| Financial ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Danaher Corp.’s adjusted total asset turnover ratio improved from 2016 to 2017 and from 2017 to 2018. |
| 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. |
Danaher Corp.’s adjusted financial leverage ratio increased from 2016 to 2017 but then slightly declined from 2017 to 2018. |
| Adjusted ROE | A profitability ratio calculated as net income divided by adjusted shareholders’ equity. | Danaher Corp.’s adjusted ROE improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018. |
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Danaher Corp.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
Danaher Corp., Financial Ratios: Reported vs. Adjusted
Adjusted Total Asset Turnover
Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).
2018 Calculations
1 Total asset turnover = Sales ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Sales ÷ Adjusted total assets
= ÷ =
| Activity ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Danaher Corp.’s adjusted total asset turnover ratio improved from 2016 to 2017 and from 2017 to 2018. |
Adjusted Financial Leverage
Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).
2018 Calculations
1 Financial leverage = Total assets ÷ Total Danaher stockholders’ equity
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Danaher stockholders’ equity
= ÷ =
| Solvency 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. |
Danaher Corp.’s adjusted financial leverage ratio increased from 2016 to 2017 but then slightly declined from 2017 to 2018. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).
2018 Calculations
1 ROE = 100 × Net earnings ÷ Total Danaher stockholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Net earnings ÷ Adjusted total Danaher stockholders’ equity
= 100 × ÷ =
| Profitability ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as net income divided by adjusted shareholders’ equity. | Danaher Corp.’s adjusted ROE improved from 2016 to 2017 but then slightly deteriorated from 2017 to 2018. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-22), 10-K (filing date: 2016-02-24), 10-K (filing date: 2015-02-25).
2018 Calculations
1 ROA = 100 × Net earnings ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Net earnings ÷ Adjusted total assets
= 100 × ÷ =
| Profitability ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Danaher Corp.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |