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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
Intangible Assets
Time Warner has a significant number of intangible assets, including acquired film and television libraries and other copyrighted products and tradenames. Time Warner does not recognize the fair value of internally generated intangible assets. Intangible assets acquired in business combinations are recorded at the acquisition date fair value in the Consolidated Balance Sheet. Acquired film libraries are amortized using the film forecast computation model.
Source: 10-K (filing date: 2018-02-22).
Goodwill and Intangible Assets Disclosure
Time Warner Inc., Statement of Financial Position, Goodwill and Intangible Assets
USD $ in millions
| Dec 31, 2017 | Dec 31, 2016 | Dec 31, 2015 | Dec 31, 2014 | Dec 31, 2013 | |||||||
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| Intangible assets subject to amortization, gross | |
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| Intangible assets not subject to amortization | |
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| Intangible assets | |
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| Goodwill | |
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Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).
| Item | Description | The company |
|---|---|---|
| Intangible assets | Sum of the carrying amounts of all intangible assets, excluding goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. | Time Warner Inc.’s intangible assets declined from 2015 to 2016 and 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. | Time Warner Inc.’s goodwill increased from 2015 to 2016 and from 2016 to 2017. |
| Goodwill and intangible assets | Sum of the carrying amounts of all intangible assets, including goodwill, as of the balance sheet date, net of accumulated amortization and impairment charges. | Time Warner Inc.’s goodwill and intangible assets declined from 2015 to 2016 and from 2016 to 2017. |
Analyst Adjustments: Removal of Goodwill
Time Warner Inc., adjustments to financial data
USD $ in millions
Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).
Time Warner Inc., Financial Data: Reported vs. Adjusted
Adjusted Ratios: Removal of Goodwill (Summary)
Time Warner Inc., adjusted ratios
Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Time Warner Inc.’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. | Time Warner Inc.’s adjusted ROA deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |
Time Warner Inc., Ratios: Reported vs. Adjusted
Adjusted Total Asset Turnover
Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).
2017 Calculations
1 Total asset turnover = Revenues ÷ Total assets
= ÷ =
2 Adjusted total asset turnover = Revenues ÷ Adjusted total assets
= ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted total asset turnover | An activity ratio calculated as total revenue divided by adjusted total assets. | Time Warner Inc.’s adjusted total asset turnover deteriorated from 2015 to 2016 and from 2016 to 2017. |
Adjusted Financial Leverage
Based on: 10-K (filing date: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).
2017 Calculations
1 Financial leverage = Total assets ÷ Total Time Warner Inc. shareholders’ equity
= ÷ =
2 Adjusted financial leverage = Adjusted total assets ÷ Adjusted total Time Warner Inc. 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: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).
2017 Calculations
1 ROE = 100 × Net income attributable to Time Warner Inc. shareholders ÷ Total Time Warner Inc. shareholders’ equity
= 100 × ÷ =
2 Adjusted ROE = 100 × Net income attributable to Time Warner Inc. shareholders ÷ Adjusted total Time Warner Inc. 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: 2018-02-22), 10-K (filing date: 2017-02-23), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-26), 10-K (filing date: 2014-02-26).
2017 Calculations
1 ROA = 100 × Net income attributable to Time Warner Inc. shareholders ÷ Total assets
= 100 × ÷ =
2 Adjusted ROA = 100 × Net income attributable to Time Warner Inc. shareholders ÷ Adjusted total assets
= 100 × ÷ =
| Ratio | Description | The company |
|---|---|---|
| Adjusted ROA | A profitability ratio calculated as net income divided by adjusted total assets. | Time Warner Inc.’s adjusted ROA deteriorated from 2015 to 2016 but then improved from 2016 to 2017 exceeding 2015 level. |