Microsoft Excel LibreOffice Calc

International Business Machines Corp. (NYSE:IBM)

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Analysis of Goodwill and Intangible Assets

Advanced level


Goodwill and Intangible Asset Disclosure

International Business Machines Corp., balance sheet: goodwill and intangible assets

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Capitalized software
Client relationships
Completed technology
Patents/trademarks
Other
Intangible assets, gross carrying amount
Accumulated amortization
Intangible assets, net carrying amount
Goodwill
Intangible assets including goodwill

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

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. International Business Machines Corp.’s intangible assets, net carrying amount decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
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. International Business Machines Corp.’s goodwill decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.
Intangible assets including 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. International Business Machines Corp.’s intangible assets including goodwill decreased from 2017 to 2018 but then increased from 2018 to 2019 exceeding 2017 level.

Adjustments to Financial Statements: Removal of Goodwill

International Business Machines Corp., adjustments to financial statements

US$ in millions

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
Adjustment to Total Assets
Total assets (as reported)
Less: Goodwill
Total assets (adjusted)
Adjustment to Total IBM Stockholders’ Equity
Total IBM stockholders’ equity (as reported)
Less: Goodwill
Total IBM stockholders’ equity (adjusted)

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).


International Business Machines Corp., Financial Data: Reported vs. Adjusted


Adjusted Financial Ratios: Removal of Goodwill (Summary)

International Business Machines Corp., adjusted financial ratios

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
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

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

Financial ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. International Business Machines Corp.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.
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 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. International Business Machines Corp.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.

International Business Machines Corp., Financial Ratios: Reported vs. Adjusted


Adjusted Total Asset Turnover

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Revenue
Total assets
Activity Ratio
Total asset turnover1
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Revenue
Adjusted total assets
Activity Ratio
Adjusted total asset turnover2

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

2019 Calculations

1 Total asset turnover = Revenue ÷ Total assets
= ÷ =

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

Activity ratio Description The company
Adjusted total asset turnover An activity ratio calculated as total revenue divided by adjusted total assets. International Business Machines Corp.’s adjusted total asset turnover ratio improved from 2017 to 2018 but then deteriorated significantly from 2018 to 2019.

Adjusted Financial Leverage

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Total assets
Total IBM stockholders’ equity
Solvency Ratio
Financial leverage1
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets
Adjusted total IBM stockholders’ equity
Solvency Ratio
Adjusted financial leverage2

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

2019 Calculations

1 Financial leverage = Total assets ÷ Total IBM stockholders’ equity
= ÷ =

2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total IBM stockholders’ equity
= ÷ =

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.

Adjusted Return on Equity (ROE)

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to IBM
Total IBM stockholders’ equity
Profitability Ratio
ROE1
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income attributable to IBM
Adjusted total IBM stockholders’ equity
Profitability Ratio
Adjusted ROE2

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

2019 Calculations

1 ROE = 100 × Net income attributable to IBM ÷ Total IBM stockholders’ equity
= 100 × ÷ =

2 Adjusted ROE = 100 × Net income attributable to IBM ÷ Adjusted total IBM stockholders’ equity
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROE A profitability ratio calculated as net income divided by adjusted shareholders’ equity.

Adjusted Return on Assets (ROA)

Microsoft Excel LibreOffice Calc
Dec 31, 2019 Dec 31, 2018 Dec 31, 2017 Dec 31, 2016 Dec 31, 2015
As Reported
Selected Financial Data (US$ in millions)
Net income attributable to IBM
Total assets
Profitability Ratio
ROA1
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income attributable to IBM
Adjusted total assets
Profitability Ratio
Adjusted ROA2

Based on: 10-K (filing date: 2020-02-25), 10-K (filing date: 2019-02-26), 10-K (filing date: 2018-02-27), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-23).

2019 Calculations

1 ROA = 100 × Net income attributable to IBM ÷ Total assets
= 100 × ÷ =

2 Adjusted ROA = 100 × Net income attributable to IBM ÷ Adjusted total assets
= 100 × ÷ =

Profitability ratio Description The company
Adjusted ROA A profitability ratio calculated as net income divided by adjusted total assets. International Business Machines Corp.’s adjusted ROA improved from 2017 to 2018 and from 2018 to 2019.