.Analysis of Goodwill and Intangible Assets
Difficulty: Advanced
Goodwill and Intangible Assets Disclosure
Eli Lilly & Co., Statement of Financial Position, Goodwill and Intangible Assets
USD $ in thousands
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| | Marketed products | |||||
| | Other | |||||
| | Finite-lived intangible assets, gross | |||||
| | Accumulated amortization | |||||
| | Finite-lived intangible assets, net | |||||
| | Acquired in-process research and development | |||||
| | Indefinite-lived intangible assets | |||||
| | Other intangibles | |||||
| | Goodwill | |||||
| | Goodwill and other intangibles |
Source: Based on data from Eli Lilly & Co. Annual Reports
| Item | Description | The company |
|---|---|---|
| Other 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. | Eli Lilly & Co.'s other intangibles declined 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. | Eli Lilly & Co.'s goodwill declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
| Goodwill and other intangibles | Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. | Eli Lilly & Co.'s goodwill and other intangibles declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
Analyst Adjustments: Removal of Goodwill
Eli Lilly & Co., adjustments to financial data
USD $ in thousands
| 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 Eli Lilly And Company Shareholders' Equity | ||||||
| | Total Eli Lilly and Company shareholders' equity (as reported) | |||||
| | Less: Goodwill | |||||
| | Total Eli Lilly and Company shareholders' equity (adjusted) | |||||
Adjusted Ratios: Removal of Goodwill (Summary)
Eli Lilly & Co., 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. | Eli Lilly & Co.'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. |
Eli Lilly & Co.'s adjusted financial leverage increased from 2015 to 2016 and from 2016 to 2017. |
| Adjusted ROE | A profitability ratio calculated as net income divided by adjusted shareholders' equity. | Eli Lilly & Co.'s adjusted ROE improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Eli Lilly & Co.'s adjusted ROA improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
Adjusted Total Asset Turnover
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Revenue (USD $ in thousands) | |||||
| | Total assets (USD $ in thousands) | |||||
| | Total asset turnover1 | |||||
| Adjusted for Goodwill | ||||||
| | Revenue (USD $ in thousands) | |||||
| | Adjusted total assets (USD $ in thousands) | |||||
| | Adjusted total asset turnover2 | |||||
2017 Calculations
1 Total asset turnover = Revenue ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Revenue ÷ Adjusted total assets
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Eli Lilly & Co.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017. |
Adjusted Financial Leverage
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | ||
|---|---|---|---|---|---|---|
| As Reported | ||||||
| | Total assets (USD $ in thousands) | |||||
| | Total Eli Lilly and Company shareholders' equity (USD $ in thousands) | |||||
| | Financial leverage1 | |||||
| Adjusted for Goodwill | ||||||
| | Adjusted total assets (USD $ in thousands) | |||||
| | Adjusted total Eli Lilly and Company shareholders' equity (USD $ in thousands) | |||||
| | Adjusted financial leverage2 | |||||
2017 Calculations
1 Financial leverage = Total assets ÷ Total Eli Lilly and Company shareholders' equity
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Eli Lilly and Company shareholders' 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. |
Eli Lilly & Co.'s adjusted financial leverage increased from 2015 to 2016 and 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) (USD $ in thousands) | |||||
| | Total Eli Lilly and Company shareholders' equity (USD $ in thousands) | |||||
| | ROE1 | % | % | % | % | % |
| Adjusted for Goodwill | ||||||
| | Net income (loss) (USD $ in thousands) | |||||
| | Adjusted total Eli Lilly and Company shareholders' equity (USD $ in thousands) | |||||
| | Adjusted ROE2 | % | % | % | % | % |
2017 Calculations
1 ROE = 100 × Net income (loss) ÷ Total Eli Lilly and Company shareholders' equity
= 100 × ÷ = %
2 Adjusted ROE = 100 × Net income (loss) ÷ Adjusted total Eli Lilly and Company shareholders' equity
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as net income divided by adjusted shareholders' equity. | Eli Lilly & Co.'s adjusted ROE improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
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) (USD $ in thousands) | |||||
| | Total assets (USD $ in thousands) | |||||
| | ROA1 | % | % | % | % | % |
| Adjusted for Goodwill | ||||||
| | Net income (loss) (USD $ in thousands) | |||||
| | Adjusted total assets (USD $ in thousands) | |||||
| | Adjusted ROA2 | % | % | % | % | % |
2017 Calculations
1 ROA = 100 × Net income (loss) ÷ Total assets
= 100 × ÷ = %
2 Adjusted ROA = 100 × Net income (loss) ÷ Adjusted total assets
= 100 × ÷ = %
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Eli Lilly & Co.'s adjusted ROA improved from 2015 to 2016 but then deteriorated significantly from 2016 to 2017. |
