Inventory Accounting Policy
Inventory Disclosure
Adjustment to Inventory: from LIFO to FIFO
Adjusted Ratios: LIFO vs. FIFO (Summary)
Adjusted Current Ratio
Adjusted Net Profit Margin
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Inventories are valued at the lower of cost or net realizable value, cost being determined principally by the first-in, first-out (FIFO) method with certain of Thermo Fisher’s businesses utilizing the last-in, first-out (LIFO) method. Thermo Fisher periodically reviews quantities of inventories on hand and compares these amounts to the expected use of each product or product line. In addition, Thermo Fisher has certain inventory that is subject to fluctuating market pricing. Thermo Fisher assesses the carrying value of this inventory based on a lower of cost or net realizable value analysis. Thermo Fisher records a charge to cost of sales for the amount required to reduce the carrying value of inventory to net realizable value. Costs associated with the procurement of inventories, such as inbound freight charges, purchasing and receiving costs, and internal transfer costs, are included in cost of revenues in the accompanying statement of income.

The value of inventories maintained using the LIFO method was $244 million and $219 million at December 31, 2018 and 2017, respectively, which was below estimated replacement cost by $34 million and $31 million, respectively. Reductions to cost of revenues as a result of the liquidation of LIFO inventories were nominal during the three years ended December 31, 2018.

Source: 10-K (filing date: 2019-02-27).

Thermo Fisher Scientific Inc., balance sheet: inventory

US$ in millions

		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014
	Raw materials
	Work in process
	Finished goods
	Inventories

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).

Item	Description	The company
Inventories	Amount after valuation and LIFO reserves of inventory expected to be sold, or consumed within one year or operating cycle, if longer.	Thermo Fisher Scientific Inc.’s inventories increased from 2016 to 2017 and from 2017 to 2018.

Adjusting LIFO Inventory to FIFO (Current) Cost

US$ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Adjustment to Inventories
	Inventories at LIFO (as reported)
	Add: Inventory LIFO reserve
	Inventories at FIFO (adjusted)
	Adjustment to Current Assets
	Current assets (as reported)
	Add: Inventory LIFO reserve
	Current assets (adjusted)
	Adjustment to Total Assets
	Total assets (as reported)
	Add: Inventory LIFO reserve
	Total assets (adjusted)
	Adjustment to Shareholders’ Equity
	Shareholders’ equity (as reported)
	Add: Inventory LIFO reserve
	Shareholders’ equity (adjusted)
	Adjustment to Net Income
	Net income (as reported)
	Add: Increase (decrease) in inventory LIFO reserve
	Net income (adjusted)

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).

Thermo Fisher Scientific Inc.’s inventory value on Dec 31, 2018 would be $3,039 (in millions) if the FIFO inventory method was used instead of LIFO. Thermo Fisher Scientific Inc.’s inventories, valued on a LIFO basis, on Dec 31, 2018 were $3,005 . Thermo Fisher Scientific Inc.’s inventories would have been $34 higher than reported on Dec 31, 2018 if the FIFO method had been used instead.

Thermo Fisher Scientific Inc., Financial Data: Reported vs. Adjusted

Thermo Fisher Scientific Inc., adjusted ratios

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Current Ratio
	Reported current ratio (LIFO)
	Adjusted current ratio (FIFO)
	Net Profit Margin
	Reported net profit margin (LIFO)
	Adjusted net profit margin (FIFO)
	Total Asset Turnover
	Reported total asset turnover (LIFO)
	Adjusted total asset turnover (FIFO)
	Financial Leverage
	Reported financial leverage (LIFO)
	Adjusted financial leverage (FIFO)
	Return on Equity (ROE)
	Reported ROE (LIFO)
	Adjusted ROE (FIFO)
	Return on Assets (ROA)
	Reported ROA (LIFO)
	Adjusted ROA (FIFO)

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by current liabilities.	Thermo Fisher Scientific Inc.’s adjusted current ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Thermo Fisher Scientific Inc.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Thermo Fisher Scientific Inc.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 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.	Thermo Fisher Scientific Inc.’s adjusted financial leverage increased from 2016 to 2017 but then declined significantly from 2017 to 2018.
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Thermo Fisher Scientific Inc.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Thermo Fisher Scientific Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

Thermo Fisher Scientific Inc., Ratios: Reported vs. Adjusted

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Current assets
	Current liabilities
	Ratio
	Current ratio¹
	Adjusted: from LIFO to FIFO
	Selected Financial Data (US$ in millions)
	Adjusted current assets
	Current liabilities
	Ratio
	Adjusted current ratio²

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).

2018 Calculations

¹ Current ratio = Current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

² Adjusted current ratio = Adjusted current assets ÷ Current liabilities
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted current ratio	A liquidity ratio calculated as adjusted current assets divided by current liabilities.	Thermo Fisher Scientific Inc.’s adjusted current ratio deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income
	Revenues
	Ratio
	Net profit margin¹
	Adjusted: from LIFO to FIFO
	Selected Financial Data (US$ in millions)
	Adjusted net income
	Revenues
	Ratio
	Adjusted net profit margin²

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).

2018 Calculations

¹ Net profit margin = 100 × Net income ÷ Revenues
= 100 × hidden ÷ hidden = hidden

² Adjusted net profit margin = 100 × Adjusted net income ÷ Revenues
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted net profit margin	An indicator of profitability, calculated as adjusted net income divided by revenue.	Thermo Fisher Scientific Inc.’s adjusted net profit margin deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Revenues
	Total assets
	Ratio
	Total asset turnover¹
	Adjusted: from LIFO to FIFO
	Selected Financial Data (US$ in millions)
	Revenues
	Adjusted total assets
	Ratio
	Adjusted total asset turnover²

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).

2018 Calculations

¹ Total asset turnover = Revenues ÷ Total assets
= hidden ÷ hidden = hidden

² Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Thermo Fisher Scientific Inc.’s adjusted total asset turnover deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Total assets
	Shareholders’ equity
	Ratio
	Financial leverage¹
	Adjusted: from LIFO to FIFO
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted shareholders’ equity
	Ratio
	Adjusted financial leverage²

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).

2018 Calculations

¹ Financial leverage = Total assets ÷ Shareholders’ equity
= hidden ÷ hidden = hidden

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ equity
= hidden ÷ hidden = hidden

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.	Thermo Fisher Scientific Inc.’s adjusted financial leverage increased from 2016 to 2017 but then declined significantly from 2017 to 2018.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income
	Shareholders’ equity
	Ratio
	ROE¹
	Adjusted: from LIFO to FIFO
	Selected Financial Data (US$ in millions)
	Adjusted net income
	Adjusted shareholders’ equity
	Ratio
	Adjusted ROE²

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).

2018 Calculations

¹ ROE = 100 × Net income ÷ Shareholders’ equity
= 100 × hidden ÷ hidden = hidden

² Adjusted ROE = 100 × Adjusted net income ÷ Adjusted shareholders’ equity
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted ROE	A profitability ratio calculated as adjusted net income divided by adjusted shareholders’ equity.	Thermo Fisher Scientific Inc.’s adjusted ROE deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	As Reported
	Selected Financial Data (US$ in millions)
	Net income
	Total assets
	Ratio
	ROA¹
	Adjusted: from LIFO to FIFO
	Selected Financial Data (US$ in millions)
	Adjusted net income
	Adjusted total assets
	Ratio
	Adjusted ROA²

Based on: 10-K (filing date: 2019-02-27), 10-K (filing date: 2018-02-28), 10-K (filing date: 2017-02-28), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26).

2018 Calculations

¹ ROA = 100 × Net income ÷ Total assets
= 100 × hidden ÷ hidden = hidden

² Adjusted ROA = 100 × Adjusted net income ÷ Adjusted total assets
= 100 × hidden ÷ hidden = hidden

Ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as adjusted net income divided by adjusted total assets.	Thermo Fisher Scientific Inc.’s adjusted ROA deteriorated from 2016 to 2017 but then improved from 2017 to 2018 exceeding 2016 level.

	Thermo Fisher Scientific Inc.	Other companies (not purchased previously)
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Common-Size Financial Statements
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Relative Valuation
Discounted Cash Flow (DCF) Valuation
Long-term Trends
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Common-Size Financial Statements
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Analysis
Financial Reporting Quality

Thermo Fisher Scientific Inc. (TMO)

Analysis of Inventory

Inventory Accounting Policy

Inventory Disclosure

Adjustment to Inventory: from LIFO to FIFO

Thermo Fisher Scientific Inc., Financial Data: Reported vs. Adjusted

Adjusted Ratios: LIFO vs. FIFO (Summary)

Thermo Fisher Scientific Inc., Ratios: Reported vs. Adjusted

Adjusted Current Ratio

Adjusted Net Profit Margin

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)