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Goodwill and Intangible Assets Accounting Policy

DowDuPont records goodwill when the purchase price of a business combination exceeds the estimated fair value of net identified tangible and intangible assets acquired. Goodwill is tested for impairment at the reporting unit level annually during the fourth quarter, or more frequently when events or changes in circumstances indicate that the fair value of a reporting unit has more likely than not declined below its carrying value. When testing goodwill for impairment, DowDuPont may first assess qualitative factors. If an initial qualitative assessment identifies that it is more likely than not that the fair value of a reporting unit is less than its carrying value, additional quantitative testing is performed. DowDuPont may also elect to skip the qualitative testing and proceed directly to the quantitative testing. If the quantitative testing indicates that goodwill is impaired, an impairment charge is recognized based on the difference between the reporting unit's carrying value and its fair value. DowDuPont primarily utilizes a discounted cash flow methodology to calculate the fair value of its reporting units.

Finite-lived intangible assets such as purchased customer lists, developed technology, patents, trademarks and software, are amortized over their estimated useful lives, generally on a straight-line basis for periods ranging primarily from three to twenty years, or amortized based on units of production. Indefinite-lived intangible assets are reviewed for impairment or obsolescence annually, or more frequently when events or changes in circumstances indicate that the carrying amount of an intangible asset may not be recoverable. If impaired, intangible assets are written down to fair value based on discounted cash flows.

Source: DowDuPont Inc., Annual Report

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Goodwill and Intangible Assets Disclosure

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

USD $ in millions

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Developed technology
Software
Trademarks/tradenames
Customer-related
Microbial cell factories
Favorable supply contracts
Other
Intangible assets with finite lives, gross carrying amount
Accumulated amortization
Intangible assets with finite lives, net
In-process research and development (IPR&D)
Germplasm
Trademarks/tradenames
Intangible assets with indefinite lives
Other intangible assets
Goodwill
Goodwill and other intangible assets

Source: Based on data from DowDuPont Inc. Annual Reports

Item Description The company
Other 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. DowDuPont Inc.'s other intangible assets increased 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. DowDuPont Inc.'s goodwill increased from 2015 to 2016 and from 2016 to 2017.
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. DowDuPont Inc.'s goodwill and other intangible assets increased from 2015 to 2016 and from 2016 to 2017.

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Analyst Adjustments: Removal of Goodwill

DowDuPont Inc., 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 DowDuPont's Stockholders' Equity
DowDuPont's stockholders' equity (as reported)
Less: Goodwill
DowDuPont's stockholders' equity (adjusted)
Adjustment to Net Income Attributable To DowDuPont Inc.
Net income attributable to DowDuPont Inc. (as reported)
Add: Goodwill impairment charge
Net income attributable to DowDuPont Inc. (adjusted)

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Adjusted Ratios: Removal of Goodwill (Summary)

DowDuPont Inc., adjusted ratios

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net Profit Margin
Reported net profit margin % % % % %
Adjusted net profit margin % % % % %
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 net profit margin An indicator of profitability, calculated as adjusted net income divided by revenue. DowDuPont Inc.'s adjusted net profit margin deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. DowDuPont Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.
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.
DowDuPont Inc.'s adjusted financial leverage increased from 2015 to 2016 but then declined significantly from 2016 to 2017.
Adjusted ROE A profitability ratio calculated as adjusted net income divided by adjusted shareholders' equity. DowDuPont Inc.'s adjusted ROE deteriorated from 2015 to 2016 and from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as adjusted net income divided by adjusted total assets. DowDuPont Inc.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017.

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Adjusted Net Profit Margin

 
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net income attributable to DowDuPont Inc. (USD $ in millions)
Net sales (USD $ in millions)
Net profit margin1 % % % % %
Adjusted for Goodwill
Adjusted net income attributable to DowDuPont Inc. (USD $ in millions)
Net sales (USD $ in millions)
Adjusted net profit margin2 % % % % %

2017 Calculations

1 Net profit margin = 100 × Net income attributable to DowDuPont Inc. ÷ Net sales
= 100 × ÷ = %

2 Adjusted net profit margin = 100 × Adjusted net income attributable to DowDuPont Inc. ÷ Net sales
= 100 × ÷ = %

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

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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
Net sales (USD $ in millions)
Total assets (USD $ in millions)
Total asset turnover1
Adjusted for Goodwill
Net sales (USD $ in millions)
Adjusted total assets (USD $ in millions)
Adjusted total asset turnover2

2017 Calculations

1 Total asset turnover = Net sales ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= ÷ =

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. DowDuPont Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.

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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)
DowDuPont's stockholders' equity (USD $ in millions)
Financial leverage1
Adjusted for Goodwill
Adjusted total assets (USD $ in millions)
Adjusted dowDuPont's stockholders' equity (USD $ in millions)
Adjusted financial leverage2

2017 Calculations

1 Financial leverage = Total assets ÷ DowDuPont's stockholders' equity
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted dowDuPont's 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.
DowDuPont Inc.'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 attributable to DowDuPont Inc. (USD $ in millions)
DowDuPont's stockholders' equity (USD $ in millions)
ROE1 % % % % %
Adjusted for Goodwill
Adjusted net income attributable to DowDuPont Inc. (USD $ in millions)
Adjusted dowDuPont's stockholders' equity (USD $ in millions)
Adjusted ROE2 % % % % %

2017 Calculations

1 ROE = 100 × Net income attributable to DowDuPont Inc. ÷ DowDuPont's stockholders' equity
= 100 × ÷ = %

2 Adjusted ROE = 100 × Adjusted net income attributable to DowDuPont Inc. ÷ Adjusted dowDuPont's stockholders' equity
= 100 × ÷ = %

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

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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 attributable to DowDuPont Inc. (USD $ in millions)
Total assets (USD $ in millions)
ROA1 % % % % %
Adjusted for Goodwill
Adjusted net income attributable to DowDuPont Inc. (USD $ in millions)
Adjusted total assets (USD $ in millions)
Adjusted ROA2 % % % % %

2017 Calculations

1 ROA = 100 × Net income attributable to DowDuPont Inc. ÷ Total assets
= 100 × ÷ = %

2 Adjusted ROA = 100 × Adjusted net income attributable to DowDuPont Inc. ÷ Adjusted total assets
= 100 × ÷ = %

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

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