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Honeywell International Inc. (HON)
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 and Indefinite-Lived Intangible Assets
Goodwill and indefinite-lived intangible assets are subject to impairment testing annually as of March 31, and whenever events or changes in circumstances indicate that the carrying amount may not be fully recoverable. This testing compares carrying values to fair values and, when appropriate, the carrying value of these assets is reduced to fair value. Honeywell completed the annual goodwill impairment test as of March 31, 2018 and determined that there was no impairment as of that date.
Other Intangible Assets with Determinable Lives
Other intangible assets with determinable lives consist of customer lists, technology, patents and trademarks and other intangibles and are amortized over their estimated useful lives, ranging from 2 to 24 years.
Source: 10-K (filing date: 2019-02-08).
Goodwill and Intangible Assets Disclosure
Honeywell International Inc., balance sheet: goodwill and intangible assets
US$ in millions
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| Other intangible assets, net | |
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| Goodwill | |
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| Goodwill and other intangible assets, net | |
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Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).
| Item | Description | The company |
|---|---|---|
| Other intangible assets, net | Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. | Honeywell International Inc.’s other intangible assets, net declined from 2016 to 2017 and from 2017 to 2018. |
| 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. | Honeywell International Inc.’s goodwill increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
| Goodwill and other intangible assets, net | Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. | Honeywell International Inc.’s goodwill and other intangible assets, net increased from 2016 to 2017 but then declined significantly from 2017 to 2018. |
Analyst Adjustments: Removal of Goodwill
Honeywell International Inc., adjustments to financial data
US$ in millions
Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).
Honeywell International Inc., Financial Data: Reported vs. Adjusted
Adjusted Ratios: Removal of Goodwill (Summary)
Honeywell International Inc., adjusted ratios
Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Honeywell International Inc.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018. |
| 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. |
Honeywell International Inc.’s adjusted financial leverage declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level. |
| Adjusted ROE | A profitability ratio calculated as net income divided by adjusted shareholders’ equity. | Honeywell International Inc.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Honeywell International Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |
Honeywell International Inc., Ratios: Reported vs. Adjusted
Adjusted Total Asset Turnover
Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).
2018 Calculations
1 Total asset turnover = Net sales ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Net sales ÷ Adjusted total assets
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Honeywell International Inc.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then slightly improved from 2017 to 2018. |
Adjusted Financial Leverage
Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).
2018 Calculations
1 Financial leverage = Total assets ÷ Total Honeywell shareowners’ equity
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Honeywell shareowners’ 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. |
Honeywell International Inc.’s adjusted financial leverage declined from 2016 to 2017 but then increased from 2017 to 2018 not reaching 2016 level. |
Adjusted Return on Equity (ROE)
Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).
2018 Calculations
1 ROE = 100 × Net income attributable to Honeywell ÷ Total Honeywell shareowners’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Net income attributable to Honeywell ÷ Adjusted total Honeywell shareowners’ equity
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROE | A profitability ratio calculated as net income divided by adjusted shareholders’ equity. | Honeywell International Inc.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 not reaching 2016 level. |
Adjusted Return on Assets (ROA)
Based on: 10-K (filing date: 2019-02-08), 10-K (filing date: 2018-02-09), 10-K (filing date: 2017-02-10), 10-K (filing date: 2016-02-12), 10-K (filing date: 2015-02-13).
2018 Calculations
1 ROA = 100 × Net income attributable to Honeywell ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Net income attributable to Honeywell ÷ Adjusted total assets
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Honeywell International Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level. |