NOTE 6 – GOODWILL AND OTHER INTANGIBLE ASSETS

During the year ended June 30, 2017, the Company acquired Too Faced and BECCA, which included the addition of goodwill of $705 million, amortizable intangible assets of $397 million (with a weighted-average amortization period of approximately 10 years) and non-amortizable intangible assets of $623 million. During the year ended June 30, 2018 and 2017, the Company recognized $12 million and $11 million, respectively, of goodwill associated with the continuing earn-out obligations related to the acquisition of the Bobbi Brown brand.

The intangible assets acquired in connection with the acquisitions of Too Faced and BECCA are classified as Level 3 in the fair value hierarchy. The estimate of the fair values of acquired amortizable intangible assets was determined using a multi-period excess earnings income approach. Fair value was determined under this approach by estimating future cash flows over multiple periods, as well as a terminal value, and discounting such cash flows at a rate of return that reflects the relative risk of the cash flows. The estimate of the fair values of acquired intangible assets not subject to amortization was determined using an income approach, specifically the relief-from-royalty method.

Goodwill

The Company assigns goodwill of a reporting unit to the product categories in which that reporting unit operates at the time of acquisition. The following table presents goodwill by product category and the related change in the carrying amount:

(In millions)	Skin Care			Makeup		Fragrance			Hair Care			Total

Balance as of June 30, 2016
Goodwill	$	184		$	460	$	255		$	393		$	1,292
Accumulated impairments	(29		)	—		—			(35		)	(64		)

	155			460		255			358			1,228


Goodwill acquired during the year	—			716		—			—			716
Impairment charges	(6		)	—		(22		)	—			(28		)

	(6		)	716		(22		)	—			688


Balance as of June 30, 2017
Goodwill	184			1,176		255			393			2,008
Accumulated impairments	(35		)	—		(22		)	(35		)	(92		)

	149			1,176		233			358			1,916


Goodwill acquired during the year(1)	—			10		—			—			10
Translation adjustments, goodwill	1			—		1			(2		)	—
Translation adjustments, accumulated impairments	(1		)	—		—			1			—

	—			10		1			(1		)	10


Balance as of June 30, 2018
Goodwill	185			1,186		256			391			2,018
Accumulated impairments	(36		)	—		(22		)	(34		)	(92		)

	$	149		$	1,186	$	234		$	357		$	1,926

(1)Includes remeasurement adjustment relating to the acquisition of Too Faced.

Other Intangible Assets

Other intangible assets include trademarks and patents, as well as license agreements and other intangible assets resulting from or related to businesses and assets purchased by the Company. Indefinite-lived intangible assets (e.g., trademarks) are not subject to amortization and are assessed at least annually for impairment during the fiscal fourth quarter or more frequently if certain events or circumstances exist. Other intangible assets (e.g., non-compete agreements, customer lists) are amortized on a straight-line basis over their expected period of benefit, approximately 4 years to 20 years. Intangible assets related to license agreements were amortized on a straight-line basis over their useful lives based on the terms of the respective agreements. The costs incurred and expensed by the Company to extend or renew the term of acquired intangible assets during fiscal 2018 and 2017 were not significant to the Company’s results of operations.

Other intangible assets consist of the following:

	June 30, 2018						June 30, 2017
(In millions)	Gross Carrying Value		Accumulated Amortization		Total Net Book Value		Gross Carrying Value		Accumulated Amortization		Total Net Book Value
Amortizable intangible assets:
Customer lists and other	$	697	$	332	$	365	$	696	$	279	$	417
License agreements	43		43		—		43		43		—

	$	740	$	375	365		$	739	$	322	417

Non-amortizable intangible assets:
Trademarks and other					911						910

Total intangible assets					$	1,276					$	1,327

The aggregate amortization expense related to amortizable intangible assets for fiscal 2018, 2017 and 2016 was $51 million, $35 million and $16 million, respectively. The estimated aggregate amortization expense for each of the next five fiscal years is as follows:

	Fiscal
(In millions)	2019		2020		2021		2022		2023

Estimated aggregate amortization expense	$	51	$	44	$	43	$	42	$	42

Fiscal 2017 Annual Impairment Testing

The Company assesses goodwill and other indefinite-lived intangible assets at least annually for impairment or more frequently if certain events or circumstances exist. Based on the Company’s annual goodwill and other intangible asset impairment testing as of April 1, 2017, the Company determined that the carrying values of the RODIN olio lusso and Editions de Parfums Frédéric Malle reporting units exceeded their fair values. This determination was made based on updated long-term plans, finalized and approved in June 2017, that reflected lower sales growth projections due to a softer than expected retail environment for those brands. As a result, a Step 2 impairment assessment was performed and the Company recorded an impairment charge of the goodwill related to these reporting units of $28 million. The fair values of the reporting units were based upon the average of the income approach, which utilizes estimated cash flows and a terminal value, discounted at a rate of return that reflects the relative risk of cash flows, and the market approach, which utilizes performance multiples based on market peers.

The Company also determined that the carrying values of the RODIN olio lusso and Editions de Parfums Frédéric Malle trademarks, as well as the RODIN olio lusso persona and customer relationship intangible assets exceeded their estimated fair values. The fair values of the trademarks were determined utilizing a royalty rate to determine discounted projected future cash flows. As a result, the Company recognized impairment charges of $3 million for the remaining carrying values of the RODIN olio lusso trademark, customer relationship and persona intangible assets. The Company also recognized an impairment charge for the Editions de Parfums Frédéric Malle trademark, which was de minimis.

The combined goodwill and other intangible asset impairment charges of $9 million and $22 million are reflected in the skin care and fragrance product categories, respectively, and $17 million and $14 million are reflected in the Americas and Europe, the Middle East & Africa regions, respectively.