United Parcel Service Inc. (UPS)

Costs of purchased businesses in excess of net identifiable assets acquired (goodwill), and indefinite-lived intangible assets are tested for impairment at least annually, unless changes in circumstances indicate an impairment may have occurred sooner. UPS is required to test goodwill on a “reporting unit” basis. A reporting unit is the operating segment unless, for businesses within that operating segment, discrete financial information is prepared and regularly reviewed by management, in which case such a component business is the reporting unit.

In assessing goodwill for impairment, UPS initially evaluates qualitative factors to determine if it is more likely than not that the fair value of a reporting unit is less than its carrying amount. UPS considers several factors, including macroeconomic conditions, industry and market conditions, overall financial performance of the reporting unit, changes in management, strategy or customers and relevant reporting unit-specific events such as a change in the carrying amount of net assets, a more likely than not expectation of selling or disposing all, or a portion, of a reporting unit, and the testing for recoverability of a significant asset group within a reporting unit. If this qualitative assessment results in a conclusion that it is more likely than not that the fair value of a reporting unit exceeds the carrying value, then no further testing is performed for that reporting unit.

If the qualitative assessment is not conclusive and it is necessary to calculate the fair value of a reporting unit, then UPS utilizes a two-step process to test goodwill for impairment. First, a comparison of the fair value of the applicable reporting unit with the aggregate carrying value, including goodwill, is performed. If the carrying amount of a reporting unit exceeds its calculated fair value, then the second step is performed, and an impairment charge is recognized for the amount, if any, by which the carrying amount of goodwill exceeds its implied fair value. UPS primarily determines the fair value of the reporting units using a discounted cash flow model and supplement this with observable valuation multiples for comparable companies, as appropriate.

A trade name with a carrying value of $200 million and licenses with a carrying value of $5 million as of December 31, 2018 are considered to be indefinite-lived intangibles, and therefore are not amortized. Indefinite-lived intangible assets are reviewed for impairment at least annually. UPS determined that the income approach, specifically the relief from royalty method, is the most appropriate valuation method to estimate the fair value of the trade name. The estimated fair value of the trade name is compared to the carrying value of the asset. If the carrying value of the trade name exceeds its estimated fair value, an impairment charge is recognized for the amount by which the carrying amount of the asset exceeds its fair value.

Finite-lived intangible assets, including trademarks, licenses, patents, customer lists, non-compete agreements and franchise rights are amortized on a straight-line basis over the estimated useful lives of the assets, which range from 2 to 22 years. Capitalized software is generally amortized over 7 years.

Source: 10-K (filing date: 2019-02-21).

United Parcel Service Inc., balance sheet: goodwill and intangible assets

US$ in millions

		Dec 31, 2018		Dec 31, 2017		Dec 31, 2016		Dec 31, 2015		Dec 31, 2014
	Capitalized software
	Licenses
	Franchise rights
	Customer relationships
	Trade name
	Trademarks, patents, and other
	Intangible assets, gross carrying amount
	Accumulated amortization
	Intangible assets, net carrying value
	Goodwill
	Goodwill and intangible assets

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-27).

United Parcel Service Inc., adjustments to financial statements

US$ in millions

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	Adjustment to Total Assets
	Total assets (as reported)
	Less: Goodwill
	Total assets (adjusted)
	Adjustment to Equity For Controlling Interests
	Equity for controlling interests (as reported)
	Less: Goodwill
	Equity for controlling interests (adjusted)

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-27).

United Parcel Service Inc., Financial Data: Reported vs. Adjusted

United Parcel Service Inc., adjusted financial ratios

		Dec 31, 2018	Dec 31, 2017	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014
	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: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-27).

United Parcel Service Inc., Financial 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)
	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: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-27).

		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
	Equity for controlling interests
	Solvency Ratio
	Financial leverage1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Adjusted total assets
	Adjusted equity for controlling interests
	Solvency Ratio
	Adjusted financial leverage2

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-27).

		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
	Equity for controlling interests
	Profitability Ratio
	ROE1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Net income
	Adjusted equity for controlling interests
	Profitability Ratio
	Adjusted ROE2

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-27).

		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
	Profitability Ratio
	ROA1
	Adjusted for Goodwill
	Selected Financial Data (US$ in millions)
	Net income
	Adjusted total assets
	Profitability Ratio
	Adjusted ROA2

Based on: 10-K (filing date: 2019-02-21), 10-K (filing date: 2018-02-21), 10-K (filing date: 2017-02-21), 10-K (filing date: 2016-02-25), 10-K (filing date: 2015-02-27).