Monsanto Co. (MON)

Goodwill

Monsanto follows the guidance of the Business Combinations topic of the ASC in recording the goodwill arising from a business combination as the excess of purchase price and related costs over the fair value of identifiable assets acquired and liabilities assumed.

Under the Intangibles – Goodwill and Other topic of the ASC, goodwill is not amortized and is subject to annual impairment tests. A fair-value-based test is applied at the reporting unit level, which is generally at or one level below the operating segment level. The test compares the fair value of Monsanto’s reporting units to the carrying value of those reporting units. This test requires various judgments and estimates. The fair value of goodwill is determined using an estimate of future cash flows of the reporting unit and a risk-adjusted discount rate to compute a net present value of future cash flows. An adjustment to goodwill will be recorded for any goodwill that is determined to be impaired. Impairment of goodwill is measured as the excess of the carrying amount of goodwill over the fair values of recognized assets and liabilities of the reporting unit. Goodwill is tested for impairment at least annually, or more frequently if events or circumstances indicate it might be impaired.

Other Intangible Assets

Other intangible assets consist primarily of acquired seed germplasm, intellectual property, trademarks and customer relationships. Seed germplasm is the genetic material used in new seed varieties. Germplasm is amortized on a straight-line basis over useful lives ranging from five years for completed technology germplasm to a maximum of 30 years for certain core technology germplasm. Completed technology germplasm consists of seed hybrids and varieties that are commercially available. Core technology germplasm is the collective germplasm of parental seeds and has a longer useful life as it is used to develop new seed hybrids and varieties. Acquired intellectual property includes intangible assets related to acquisitions and licenses through which Monsanto has acquired the rights to various research and discovery technologies. These encompass intangible assets such as enabling processes and data libraries necessary to support the integrated genomics and biotechnology platforms. These intangible assets have alternative future uses and are amortized over useful lives ranging from two years to 19 years. The useful lives of acquired germplasm and acquired intellectual property are determined based on consideration of several factors including the nature of the asset, its expected use, length of licensing agreement or patent and the period over which benefits are expected to be received from the use of the asset.

Monsanto has a broad portfolio of trademarks for herbicide products, traits, agricultural seeds and vegetable seeds, and patents for its traits, formulations used to make its herbicides and various manufacturing processes. The amortization period for acquired trademarks and patents ranges from three years to 30 years. Trademarks are amortized on a straight-line basis over their useful lives. The useful life of a trademark is determined based on the estimated market-life of the associated company, brand or product. Patents are amortized on a straight-line basis over the period in which the patent is legally protected, the period over which benefits are expected to be received, or the estimated market-life of the product with which the patent is associated, whichever is shorter.

In conjunction with acquisitions, Monsanto obtains access to the distribution channels and customer relationships of the acquired companies. These relationships are expected to provide economic benefits to Monsanto. The amortization period for customer relationships ranges from five years to 20 years, and amortization is recognized on a straight-line basis over these periods. The amortization period of customer relationships represents management’s best estimate of the expected usage or consumption of the economic benefits of the acquired assets, which is based on Monsanto’s historical experience of customer attrition rates.

In accordance with the Property, Plant and Equipment topic of the ASC, all amortizable intangible assets are assessed for impairment whenever events indicate a possible loss. At a minimum, Monsanto assesses all amortizable intangible assets annually. Such an assessment involves estimating undiscounted cash flows over the remaining useful life of the intangible. If the review indicates that undiscounted cash flows are less than the recorded value of the intangible asset, the carrying amount of the intangible is reduced by the estimated cash-flow shortfall on a discounted basis, and a corresponding loss is charged to the Statement of Consolidated Operations.

Source: 10-K (filing date: 2017-10-27).

Monsanto Co., Statement of Financial Position, Goodwill and Intangible Assets

USD $ in millions

		Aug 31, 2017		Aug 31, 2016		Aug 31, 2015		Aug 31, 2014		Aug 31, 2013		Aug 31, 2012
	Acquired Germplasm
	Acquired intellectual property
	Trademarks
	Customer relationships
	Other
	Other intangible assets, finite lives, carrying amount
	Accumulated amortization
	Other intangible assets, finite lives, net
	In process research & development
	Other intangible assets, indefinite lives
	Other intangible assets, net
	Goodwill
	Goodwill and other intangible assets

Based on: 10-K (filing date: 2017-10-27), 10-K (filing date: 2016-10-19), 10-K (filing date: 2015-10-29), 10-K (filing date: 2014-10-29), 10-K (filing date: 2013-10-23), 10-K (filing date: 2012-10-19).

Monsanto Co., adjustments to financial data

USD $ in millions

		Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Goodwill
	Total assets (adjusted)
	Adjustment to Total Monsanto Company Shareowners’ Equity
	Total Monsanto Company shareowners’ equity (as reported)
	Less: Goodwill
	Total Monsanto Company shareowners’ equity (adjusted)

Based on: 10-K (filing date: 2017-10-27), 10-K (filing date: 2016-10-19), 10-K (filing date: 2015-10-29), 10-K (filing date: 2014-10-29), 10-K (filing date: 2013-10-23), 10-K (filing date: 2012-10-19).

Monsanto Co., Financial Data: Reported vs. Adjusted

Monsanto Co., adjusted ratios

		Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 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

Based on: 10-K (filing date: 2017-10-27), 10-K (filing date: 2016-10-19), 10-K (filing date: 2015-10-29), 10-K (filing date: 2014-10-29), 10-K (filing date: 2013-10-23), 10-K (filing date: 2012-10-19).

Monsanto Co., Ratios: Reported vs. Adjusted

		Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
	As Reported
	Selected Financial Data (USD $ in millions)
	Net sales
	Total assets
	Ratio
	Total asset turnover1
	Adjusted for Goodwill
	Selected Financial Data (USD $ in millions)
	Net sales
	Adjusted total assets
	Ratio
	Adjusted total asset turnover2

Based on: 10-K (filing date: 2017-10-27), 10-K (filing date: 2016-10-19), 10-K (filing date: 2015-10-29), 10-K (filing date: 2014-10-29), 10-K (filing date: 2013-10-23), 10-K (filing date: 2012-10-19).

2017 Calculations

		Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
	As Reported
	Selected Financial Data (USD $ in millions)
	Total assets
	Total Monsanto Company shareowners’ equity
	Ratio
	Financial leverage1
	Adjusted for Goodwill
	Selected Financial Data (USD $ in millions)
	Adjusted total assets
	Adjusted total Monsanto Company shareowners’ equity
	Ratio
	Adjusted financial leverage2

Based on: 10-K (filing date: 2017-10-27), 10-K (filing date: 2016-10-19), 10-K (filing date: 2015-10-29), 10-K (filing date: 2014-10-29), 10-K (filing date: 2013-10-23), 10-K (filing date: 2012-10-19).

2017 Calculations

		Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
	As Reported
	Selected Financial Data (USD $ in millions)
	Net income attributable to Monsanto Company
	Total Monsanto Company shareowners’ equity
	Ratio
	ROE1
	Adjusted for Goodwill
	Selected Financial Data (USD $ in millions)
	Net income attributable to Monsanto Company
	Adjusted total Monsanto Company shareowners’ equity
	Ratio
	Adjusted ROE2

Based on: 10-K (filing date: 2017-10-27), 10-K (filing date: 2016-10-19), 10-K (filing date: 2015-10-29), 10-K (filing date: 2014-10-29), 10-K (filing date: 2013-10-23), 10-K (filing date: 2012-10-19).

2017 Calculations

		Aug 31, 2017	Aug 31, 2016	Aug 31, 2015	Aug 31, 2014	Aug 31, 2013	Aug 31, 2012
	As Reported
	Selected Financial Data (USD $ in millions)
	Net income attributable to Monsanto Company
	Total assets
	Ratio
	ROA1
	Adjusted for Goodwill
	Selected Financial Data (USD $ in millions)
	Net income attributable to Monsanto Company
	Adjusted total assets
	Ratio
	Adjusted ROA2

Based on: 10-K (filing date: 2017-10-27), 10-K (filing date: 2016-10-19), 10-K (filing date: 2015-10-29), 10-K (filing date: 2014-10-29), 10-K (filing date: 2013-10-23), 10-K (filing date: 2012-10-19).

2017 Calculations