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Microsoft Excel LibreOffice Calc


Analysis of Goodwill and Intangible Assets

Difficulty: Advanced


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


Goodwill and Intangible Assets Disclosure

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

USD $ in millions

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

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.

Analyst Adjustments: Removal of Goodwill

DowDuPont Inc., adjustments to financial data

USD $ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Adjustment to Total Assets
Total assets (as reported) hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden
Total assets (adjusted) hidden hidden hidden hidden hidden
Adjustment to DowDuPont's Stockholders' Equity
DowDuPont's stockholders' equity (as reported) hidden hidden hidden hidden hidden
Less: Goodwill hidden hidden hidden hidden hidden
DowDuPont's stockholders' equity (adjusted) hidden hidden hidden hidden hidden
Adjustment to Net Income Attributable To DowDuPont Inc.
Net income attributable to DowDuPont Inc. (as reported) hidden hidden hidden hidden hidden
Add: Goodwill impairment charge hidden hidden hidden hidden hidden
Net income attributable to DowDuPont Inc. (adjusted) hidden hidden hidden hidden hidden

Adjusted Ratios: Removal of Goodwill (Summary)

DowDuPont Inc., adjusted ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
Net Profit Margin
Reported net profit margin hidden% hidden% hidden% hidden% hidden%
Adjusted net profit margin hidden% hidden% hidden% hidden% hidden%
Total Asset Turnover
Reported total asset turnover hidden hidden hidden hidden hidden
Adjusted total asset turnover hidden hidden hidden hidden hidden
Financial Leverage
Reported financial leverage hidden hidden hidden hidden hidden
Adjusted financial leverage hidden hidden hidden hidden hidden
Return on Equity (ROE)
Reported ROE hidden% hidden% hidden% hidden% hidden%
Adjusted ROE hidden% hidden% hidden% hidden% hidden%
Return on Assets (ROA)
Reported ROA hidden% hidden% hidden% hidden% hidden%
Adjusted ROA hidden% hidden% hidden% hidden% hidden%
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.

Adjusted Net Profit Margin

Microsoft Excel LibreOffice Calc
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) hidden hidden hidden hidden hidden
Net sales (USD $ in millions) hidden hidden hidden hidden hidden
Net profit margin1 hidden% hidden% hidden% hidden% hidden%
Adjusted for Goodwill
Adjusted net income attributable to DowDuPont Inc. (USD $ in millions) hidden hidden hidden hidden hidden
Net sales (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted net profit margin2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

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

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

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

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Net sales (USD $ in millions) hidden hidden hidden hidden hidden
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
Total asset turnover1 hidden hidden hidden hidden hidden
Adjusted for Goodwill
Net sales (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted total asset turnover2 hidden hidden hidden hidden hidden

2017 Calculations

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

2 Adjusted total asset turnover = Net sales ÷ 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. DowDuPont Inc.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2017 Dec 31, 2016 Dec 31, 2015 Dec 31, 2014 Dec 31, 2013
As Reported
Total assets (USD $ in millions) hidden hidden hidden hidden hidden
DowDuPont's stockholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
Financial leverage1 hidden hidden hidden hidden hidden
Adjusted for Goodwill
Adjusted total assets (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted dowDuPont's stockholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted financial leverage2 hidden hidden hidden hidden hidden

2017 Calculations

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

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted dowDuPont's 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.
DowDuPont Inc.'s adjusted financial leverage increased from 2015 to 2016 but then declined significantly from 2016 to 2017.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
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) hidden hidden hidden hidden hidden
DowDuPont's stockholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
ROE1 hidden% hidden% hidden% hidden% hidden%
Adjusted for Goodwill
Adjusted net income attributable to DowDuPont Inc. (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted dowDuPont's stockholders' equity (USD $ in millions) hidden hidden hidden hidden hidden
Adjusted ROE2 hidden% hidden% hidden% hidden% hidden%

2017 Calculations

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

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

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.

Adjusted Return on Assets (ROA)

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

2017 Calculations

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

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

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.