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Goodwill and Intangible Assets Accounting Policy

GOODWILL

Goodwill is recognized for the excess of the purchase price over the fair value of tangible and identifiable intangible net assets of businesses acquired. Several factors give rise to goodwill in FedEx's acquisitions, such as the expected benefit from synergies of the combination and the existing workforce of the acquired business. Goodwill is reviewed at least annually for impairment. In the evaluation of goodwill impairment, FedEx performs a qualitative assessment to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. If the qualitative assessment is not conclusive, FedEx proceeds to a two-step process to test goodwill for impairment, including comparing the fair value of the reporting unit to its carrying value (including attributable goodwill). Fair value for FedEx's reporting units is determined using an income or market approach incorporating market participant considerations and management's assumptions on revenue growth rates, operating margins, discount rates and expected capital expenditures. Fair value determinations may include both internal and third-party valuations. Unless circumstances otherwise dictate, FedEx performs the annual impairment testing in the fourth quarter.

INTANGIBLE ASSETS

Intangible assets primarily include customer relationships, technology assets and trademarks acquired in business combinations. Intangible assets are amortized over periods ranging from 3 to 15 years, either on a straight-line basis or on a basis consistent with the pattern in which the economic benefits are realized.

Source: FedEx Corp., Annual Report

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Goodwill and Intangible Assets Disclosure

FedEx Corp., Statement of Financial Position, Goodwill and Intangible Assets

USD $ in millions

 
May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014 May 31, 2013 May 31, 2012
Goodwill
Customer relationships
Technology
Trademarks and other
Other intangible assets, gross carrying amount
Accumulated amortization
Other intangible assets, net book value
Goodwill and other intangible assets

Source: Based on data from FedEx Corp. Annual Reports

Item Description The company
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. FedEx Corp.'s goodwill increased from 2015 to 2016 and from 2016 to 2017.
Other intangible assets, net book value Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. FedEx Corp.'s other intangible assets, net book value increased from 2015 to 2016 but then slightly declined from 2016 to 2017 not reaching 2015 level.
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. FedEx Corp.'s goodwill and other intangible assets increased from 2015 to 2016 but then slightly declined from 2016 to 2017.

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Analyst Adjustments: Removal of Goodwill

FedEx Corp., adjustments to financial data

USD $ in millions

 
May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014 May 31, 2013 May 31, 2012
Adjustment to Total Assets
Total assets (as reported)
Less: Goodwill
Total assets (adjusted)
Adjustment to Common Stockholders' Investment
Common stockholders' investment (as reported)
Less: Goodwill
Common stockholders' investment (adjusted)

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Adjusted Ratios: Removal of Goodwill (Summary)

FedEx Corp., adjusted ratios

 
May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014 May 31, 2013 May 31, 2012
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. FedEx 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.
FedEx Corp.'s adjusted financial leverage increased from 2015 to 2016 but then slightly declined from 2016 to 2017.
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders' equity. FedEx Corp.'s adjusted ROE improved from 2015 to 2016 and from 2016 to 2017.
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. FedEx Corp.'s adjusted ROA improved from 2015 to 2016 and from 2016 to 2017.

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Adjusted Total Asset Turnover

 
May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014 May 31, 2013 May 31, 2012
As Reported
Revenues (USD $ in millions)
Total assets (USD $ in millions)
Total asset turnover1
Adjusted for Goodwill
Revenues (USD $ in millions)
Adjusted total assets (USD $ in millions)
Adjusted total asset turnover2

2017 Calculations

1 Total asset turnover = Revenues ÷ Total assets
= ÷ =

2 Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= ÷ =

Ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. FedEx Corp.'s adjusted total asset turnover deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level.

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Adjusted Financial Leverage

 
May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014 May 31, 2013 May 31, 2012
As Reported
Total assets (USD $ in millions)
Common stockholders' investment (USD $ in millions)
Financial leverage1
Adjusted for Goodwill
Adjusted total assets (USD $ in millions)
Adjusted common stockholders' investment (USD $ in millions)
Adjusted financial leverage2

2017 Calculations

1 Financial leverage = Total assets ÷ Common stockholders' investment
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted common stockholders' investment
= ÷ =

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.
FedEx Corp.'s adjusted financial leverage increased from 2015 to 2016 but then slightly declined from 2016 to 2017.

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Adjusted Return on Equity (ROE)

 
May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014 May 31, 2013 May 31, 2012
As Reported
Net income (USD $ in millions)
Common stockholders' investment (USD $ in millions)
ROE1 % % % % % %
Adjusted for Goodwill
Net income (USD $ in millions)
Adjusted common stockholders' investment (USD $ in millions)
Adjusted ROE2 % % % % % %

2017 Calculations

1 ROE = 100 × Net income ÷ Common stockholders' investment
= 100 × ÷ = %

2 Adjusted ROE = 100 × Net income ÷ Adjusted common stockholders' investment
= 100 × ÷ = %

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

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Adjusted Return on Assets (ROA)

 
May 31, 2017 May 31, 2016 May 31, 2015 May 31, 2014 May 31, 2013 May 31, 2012
As Reported
Net income (USD $ in millions)
Total assets (USD $ in millions)
ROA1 % % % % % %
Adjusted for Goodwill
Net income (USD $ in millions)
Adjusted total assets (USD $ in millions)
Adjusted ROA2 % % % % % %

2017 Calculations

1 ROA = 100 × Net income ÷ Total assets
= 100 × ÷ = %

2 Adjusted ROA = 100 × Net income ÷ Adjusted total assets
= 100 × ÷ = %

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

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