Goodwill and Intangible Asset Disclosure
Adjustments to Financial Statements: Removal of Goodwill
Adjusted Financial Ratios: Removal of Goodwill (Summary)
Adjusted Total Asset Turnover
Adjusted Financial Leverage
Adjusted Return on Equity (ROE)
Adjusted Return on Assets (ROA)

Reynolds American Inc., balance sheet: goodwill and intangible assets

US$ in millions

	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
Customer lists	240)	240)	—)	—)	—)
Contract manufacturing agreements	151)	151)	151)	151)	151)
Trademarks	124)	124)	114)	114)	96)
Other intangibles	15)	15)	15)	—)	—)
Finite-lived intangible assets, gross	530)	530)	280)	265)	247)
Accumulated amortization	(271)	(248)	(230)	(219)	(214)
Finite-lived intangible assets, net	259)	282)	50)	46)	33)
Trademarks	29,098)	29,098)	2,268)	2,268)	2,318)
Other	87)	87)	103)	103)	104)
Indefinite-lived intangible assets	29,185)	29,185)	2,371)	2,371)	2,422)
Intangible assets	29,444)	29,467)	2,421)	2,417)	2,455)
Goodwill	15,992)	15,993)	8,016)	8,011)	8,011)
Intangible assets and goodwill	45,436)	45,460)	10,437)	10,428)	10,466)

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

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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.	Reynolds American Inc. intangible assets increased from 2014 to 2015 but then slightly decreased from 2015 to 2016.
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.	Reynolds American Inc. goodwill increased from 2014 to 2015 but then slightly decreased from 2015 to 2016.
Intangible assets and 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.	Reynolds American Inc. intangible assets and goodwill increased from 2014 to 2015 but then slightly decreased from 2015 to 2016.

Reynolds American Inc., adjustments to financial statements

US$ in millions

	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
Adjustment to Total Assets
Total assets (as reported)	51,095)	53,224)	15,196)	15,402)	16,557)
Less: Goodwill	15,992)	15,993)	8,016)	8,011)	8,011)
Total assets (adjusted)	35,103)	37,231)	7,180)	7,391)	8,546)
Adjustment to Shareholders’ Equity
Shareholders’ equity (as reported)	21,711)	18,252)	4,522)	5,167)	5,257)
Less: Goodwill	15,992)	15,993)	8,016)	8,011)	8,011)
Shareholders’ equity (adjusted)	5,719)	2,259)	(3,494)	(2,844)	(2,754)

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

Reynolds American Inc., Financial Data: Reported vs. Adjusted

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Reynolds American Inc., adjusted financial ratios

	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
Total Asset Turnover
Reported total asset turnover	0.33	0.28	0.80	0.78	0.74
Adjusted total asset turnover	0.48	0.40	1.68	1.62	1.43
Financial Leverage
Reported financial leverage	2.35	2.92	3.36	2.98	3.15
Adjusted financial leverage	6.14	16.48	—	—	—
Return on Equity (ROE)
Reported ROE	27.97%	17.82%	32.51%	33.25%	24.20%
Adjusted ROE	106.19%	144.00%	—	—	—
Return on Assets (ROA)
Reported ROA	11.89%	6.11%	9.67%	11.15%	7.68%
Adjusted ROA	17.30%	8.74%	20.47%	23.24%	14.88%

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

Financial ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Reynolds American Inc. adjusted total asset turnover ratio deteriorated from 2014 to 2015 but then slightly improved from 2015 to 2016.
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	Reynolds American Inc. adjusted ROA deteriorated from 2014 to 2015 but then improved from 2015 to 2016 not reaching 2014 level.

Reynolds American Inc., Financial Ratios: Reported vs. Adjusted

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	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Net sales, includes excise taxes	16,846)	14,884)	12,096)	11,966)	12,227)
Total assets	51,095)	53,224)	15,196)	15,402)	16,557)
Activity Ratio
Total asset turnover¹	0.33	0.28	0.80	0.78	0.74
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net sales, includes excise taxes	16,846)	14,884)	12,096)	11,966)	12,227)
Adjusted total assets	35,103)	37,231)	7,180)	7,391)	8,546)
Activity Ratio
Adjusted total asset turnover²	0.48	0.40	1.68	1.62	1.43

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

¹ Total asset turnover = Net sales, includes excise taxes ÷ Total assets
= 16,846 ÷ 51,095 = 0.33

² Adjusted total asset turnover = Net sales, includes excise taxes ÷ Adjusted total assets
= 16,846 ÷ 35,103 = 0.48

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Activity ratio	Description	The company
Adjusted total asset turnover	An activity ratio calculated as total revenue divided by adjusted total assets.	Reynolds American Inc. adjusted total asset turnover ratio deteriorated from 2014 to 2015 but then slightly improved from 2015 to 2016.

	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Total assets	51,095)	53,224)	15,196)	15,402)	16,557)
Shareholders’ equity	21,711)	18,252)	4,522)	5,167)	5,257)
Solvency Ratio
Financial leverage¹	2.35	2.92	3.36	2.98	3.15
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Adjusted total assets	35,103)	37,231)	7,180)	7,391)	8,546)
Adjusted shareholders’ equity	5,719)	2,259)	(3,494)	(2,844)	(2,754)
Solvency Ratio
Adjusted financial leverage²	6.14	16.48	—	—	—

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

¹ Financial leverage = Total assets ÷ Shareholders’ equity
= 51,095 ÷ 21,711 = 2.35

² Adjusted financial leverage = Adjusted total assets ÷ Adjusted shareholders’ equity
= 35,103 ÷ 5,719 = 6.14

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	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Net income	6,073)	3,253)	1,470)	1,718)	1,272)
Shareholders’ equity	21,711)	18,252)	4,522)	5,167)	5,257)
Profitability Ratio
ROE¹	27.97%	17.82%	32.51%	33.25%	24.20%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income	6,073)	3,253)	1,470)	1,718)	1,272)
Adjusted shareholders’ equity	5,719)	2,259)	(3,494)	(2,844)	(2,754)
Profitability Ratio
Adjusted ROE²	106.19%	144.00%	—	—	—

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

¹ ROE = 100 × Net income ÷ Shareholders’ equity
= 100 × 6,073 ÷ 21,711 = 27.97%

² Adjusted ROE = 100 × Net income ÷ Adjusted shareholders’ equity
= 100 × 6,073 ÷ 5,719 = 106.19%

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	Dec 31, 2016	Dec 31, 2015	Dec 31, 2014	Dec 31, 2013	Dec 31, 2012
As Reported
Selected Financial Data (US$ in millions)
Net income	6,073)	3,253)	1,470)	1,718)	1,272)
Total assets	51,095)	53,224)	15,196)	15,402)	16,557)
Profitability Ratio
ROA¹	11.89%	6.11%	9.67%	11.15%	7.68%
Adjusted for Goodwill
Selected Financial Data (US$ in millions)
Net income	6,073)	3,253)	1,470)	1,718)	1,272)
Adjusted total assets	35,103)	37,231)	7,180)	7,391)	8,546)
Profitability Ratio
Adjusted ROA²	17.30%	8.74%	20.47%	23.24%	14.88%

Based on: 10-K (reporting date: 2016-12-31), 10-K (reporting date: 2015-12-31), 10-K (reporting date: 2014-12-31), 10-K (reporting date: 2013-12-31), 10-K (reporting date: 2012-12-31).

2016 Calculations

¹ ROA = 100 × Net income ÷ Total assets
= 100 × 6,073 ÷ 51,095 = 11.89%

² Adjusted ROA = 100 × Net income ÷ Adjusted total assets
= 100 × 6,073 ÷ 35,103 = 17.30%

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Profitability ratio	Description	The company
Adjusted ROA	A profitability ratio calculated as net income divided by adjusted total assets.	Reynolds American Inc. adjusted ROA deteriorated from 2014 to 2015 but then improved from 2015 to 2016 not reaching 2014 level.

Reynolds American Inc. (NYSE:RAI)

Analysis of Goodwill and Intangible Assets

Goodwill and Intangible Asset Disclosure

Adjustments to Financial Statements: Removal of Goodwill

Reynolds American Inc., Financial Data: Reported vs. Adjusted

Adjusted Financial Ratios: Removal of Goodwill (Summary)

Reynolds American Inc., Financial Ratios: Reported vs. Adjusted

Adjusted Total Asset Turnover

Adjusted Financial Leverage

Adjusted Return on Equity (ROE)

Adjusted Return on Assets (ROA)