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Analysis of Goodwill and Intangible Assets
Difficulty: Advanced
- Goodwill and Intangible Assets Accounting Policy
- Goodwill and Intangible Assets Disclosure
- Analyst Adjustments: Removal of Goodwill
- Adjusted Ratios: Removal of Goodwill (Summary)
- Adjusted Total Asset Turnover
- Adjusted Financial Leverage
- Adjusted Return on Equity (ROE)
- Adjusted Return on Assets (ROA)
Goodwill and Intangible Assets Accounting Policy
Goodwill
General Dynamics reviews goodwill for impairment annually or when circumstances indicate that an impairment is more likely than not. Goodwill represents the purchase price paid in excess of the fair value of net tangible and intangible assets acquired. The test for goodwill impairment is a two-step process to first identify potential goodwill impairment for each reporting unit and then, if necessary, measure the amount of the impairment loss. General Dynamics completed the required annual goodwill impairment test as of December 31, 2017. The first step of the goodwill impairment test compares the fair value of each of General Dynamics' reporting units to its carrying value. General Dynamics estimates the fair value of the reporting units based primarily on the discounted projected cash flows of the underlying operations. The estimated fair value of each of General Dynamics' reporting units was well in excess of its respective carrying value as of December 31, 2017.
Source: 10-K (filing date: 2018-02-12).
Goodwill and Intangible Assets Disclosure
General Dynamics Corp., Statement of Financial Position, Goodwill and Intangible Assets
USD $ in millions
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| Intangible assets, net carrying amount | |
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| Goodwill | |
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| Intangible assets and goodwill | |
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Based on: 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09), 10-K (filing date: 2014-02-07).
| Item | Description | The company |
|---|---|---|
| Intangible assets, net carrying amount | Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. | General Dynamics Corp.'s intangible assets, net carrying amount declined from 2015 to 2016 but then slightly increased from 2016 to 2017. |
| 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. | General Dynamics Corp.'s goodwill increased from 2015 to 2016 and from 2016 to 2017. |
| Intangible assets and goodwill | Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. | General Dynamics Corp.'s intangible assets and goodwill declined from 2015 to 2016 but then increased from 2016 to 2017 exceeding 2015 level. |
Analyst Adjustments: Removal of Goodwill
General Dynamics Corp., adjustments to financial data
USD $ in millions
Based on: 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09), 10-K (filing date: 2014-02-07).
General Dynamics Corp., Financial Data: Reported vs. Adjusted
Adjusted Ratios: Removal of Goodwill (Summary)
General Dynamics Corp., adjusted ratios
Based on: 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09), 10-K (filing date: 2014-02-07).
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | General Dynamics Corp.'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. |
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| Adjusted ROE | A profitability ratio calculated as net income divided by adjusted shareholders' equity. | |
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | General Dynamics Corp.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017. |
General Dynamics Corp., Ratios: Reported vs. Adjusted
Adjusted Total Asset Turnover
Based on: 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09), 10-K (filing date: 2014-02-07).
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. | General Dynamics Corp.'s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017. |
Adjusted Financial Leverage
Based on: 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09), 10-K (filing date: 2014-02-07).
2017 Calculations
1 Financial leverage = Total assets ÷ Shareholders' equity
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted 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. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09), 10-K (filing date: 2014-02-07).
2017 Calculations
1 ROE = 100 × Net earnings ÷ Shareholders' equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Net earnings ÷ Adjusted shareholders' equity
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as net income divided by adjusted shareholders' equity. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2018-02-12), 10-K (filing date: 2017-02-06), 10-K (filing date: 2016-02-08), 10-K (filing date: 2015-02-09), 10-K (filing date: 2014-02-07).
2017 Calculations
1 ROA = 100 × Net earnings ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Net earnings ÷ Adjusted total assets
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | General Dynamics Corp.'s adjusted ROA deteriorated from 2015 to 2016 and from 2016 to 2017. |
