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FedEx Corp. (FDX)
Analysis of Goodwill and Intangible Assets
Advanced level
- 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 Net Profit Margin
- 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
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 benefits 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 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: 10-K (filing date: 2019-07-16).
Goodwill and Intangible Assets Disclosure
FedEx Corp., balance sheet: goodwill and intangible assets
US$ in millions
Based on: 10-K (filing date: 2019-07-16), 10-K (filing date: 2018-07-16), 10-K (filing date: 2017-07-17), 10-K (filing date: 2016-07-18), 10-K (filing date: 2015-07-14), 10-K (filing date: 2014-07-14).
| Item | Description | The company |
|---|---|---|
| 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. | FedEx Corp.’s goodwill decreased from 2017 to 2018 and from 2018 to 2019. |
| 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 decreased from 2017 to 2018 and from 2018 to 2019. |
| 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 decreased from 2017 to 2018 and from 2018 to 2019. |
Adjustments to Financial Statements: Removal of Goodwill
FedEx Corp., adjustments to financial statements
US$ in millions
Based on: 10-K (filing date: 2019-07-16), 10-K (filing date: 2018-07-16), 10-K (filing date: 2017-07-17), 10-K (filing date: 2016-07-18), 10-K (filing date: 2015-07-14), 10-K (filing date: 2014-07-14).
FedEx Corp., Financial Data: Reported vs. Adjusted
Adjusted Financial Ratios: Removal of Goodwill (Summary)
FedEx Corp., adjusted financial ratios
Based on: 10-K (filing date: 2019-07-16), 10-K (filing date: 2018-07-16), 10-K (filing date: 2017-07-17), 10-K (filing date: 2016-07-18), 10-K (filing date: 2015-07-14), 10-K (filing date: 2014-07-14).
| Financial ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | FedEx Corp.’s adjusted net profit margin ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. |
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | FedEx Corp.’s adjusted total asset turnover ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 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 ratio decreased from 2017 to 2018 but then increased from 2018 to 2019 not reaching 2017 level. |
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. | FedEx Corp.’s adjusted ROE improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. |
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | FedEx Corp.’s adjusted ROA improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. |
FedEx Corp., Financial Ratios: Reported vs. Adjusted
Adjusted Net Profit Margin
Based on: 10-K (filing date: 2019-07-16), 10-K (filing date: 2018-07-16), 10-K (filing date: 2017-07-17), 10-K (filing date: 2016-07-18), 10-K (filing date: 2015-07-14), 10-K (filing date: 2014-07-14).
2019 Calculations
1 Net profit margin = 100 × Net income ÷ Revenues
= 100 × ÷ =
2 Adjusted net profit margin = 100 × Adjusted net income ÷ Revenues
= 100 × ÷ =
| Profitability ratio | Description | The company |
|---|---|---|
| Adjusted net profit margin | An indicator of profitability, calculated as adjusted net income divided by revenue. | FedEx Corp.’s adjusted net profit margin ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. |
Adjusted Total Asset Turnover
Based on: 10-K (filing date: 2019-07-16), 10-K (filing date: 2018-07-16), 10-K (filing date: 2017-07-17), 10-K (filing date: 2016-07-18), 10-K (filing date: 2015-07-14), 10-K (filing date: 2014-07-14).
2019 Calculations
1 Total asset turnover = Revenues ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= ÷ =
| Activity 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 ratio deteriorated from 2017 to 2018 but then improved from 2018 to 2019 exceeding 2017 level. |
Adjusted Financial Leverage
Based on: 10-K (filing date: 2019-07-16), 10-K (filing date: 2018-07-16), 10-K (filing date: 2017-07-17), 10-K (filing date: 2016-07-18), 10-K (filing date: 2015-07-14), 10-K (filing date: 2014-07-14).
2019 Calculations
1 Financial leverage = Total assets ÷ Common stockholders’ investment
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted common stockholders’ investment
= ÷ =
| 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. |
FedEx Corp.’s adjusted financial leverage ratio decreased from 2017 to 2018 but then increased from 2018 to 2019 not reaching 2017 level. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2019-07-16), 10-K (filing date: 2018-07-16), 10-K (filing date: 2017-07-17), 10-K (filing date: 2016-07-18), 10-K (filing date: 2015-07-14), 10-K (filing date: 2014-07-14).
2019 Calculations
1 ROE = 100 × Net income ÷ Common stockholders’ investment
= 100 × ÷ =
2 Adjusted ROE = 100 × Adjusted net income ÷ Adjusted common stockholders’ investment
= 100 × ÷ =
| Profitability ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity. | FedEx Corp.’s adjusted ROE improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2019-07-16), 10-K (filing date: 2018-07-16), 10-K (filing date: 2017-07-17), 10-K (filing date: 2016-07-18), 10-K (filing date: 2015-07-14), 10-K (filing date: 2014-07-14).
2019 Calculations
1 ROA = 100 × Net income ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × ÷ =
| Profitability ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as adjusted net income divided by adjusted total assets. | FedEx Corp.’s adjusted ROA improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019. |