Goodwill and Other Intangible Assets

9 Months Ended

Aug. 31, 2016

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill

Goodwill attributed to our reportable segments are as follows (in thousands):



	August 31, 2016		November 30, 2015
Capital Markets	$	1,642,293	$	1,653,588
Asset Management	3,000		3,000
Total goodwill	$	1,645,293	$	1,656,588

The following table is a summary of the changes to goodwill for the nine months ended August 31, 2016 (in thousands):



Balance at November 30, 2015	$	1,656,588
Translation adjustments	(11,295		)
Balance at August 31, 2016	$	1,645,293

Goodwill Impairment Testing

A reporting unit is an operating segment or one level below an operating segment. The quantitative goodwill impairment test is performed at the level of the reporting unit and consists of two steps. In the first step, the fair value of each reporting unit is compared with its carrying value, including goodwill and allocated intangible assets. If the fair value is in excess of the carrying value, the goodwill for the reporting unit is considered not to be impaired. If the fair value is less than the carrying value, then a second step is performed in order to measure the amount of the impairment loss, if any, which is based on comparing the implied fair value of the reporting unit’s goodwill to the carrying value of the reporting unit's goodwill.

Allocated equity plus allocated goodwill and intangible assets are used as a proxy for the carrying amount of each reporting unit. The amount of equity allocated to a reporting unit is based on our cash capital model deployed in managing our businesses, which seeks to approximate the capital a business would require if it were operating independently. Intangible assets are allocated to a reporting unit based on either specifically identifying a particular intangible asset as pertaining to a reporting unit or, if shared among reporting units, based on an assessment of the reporting unit’s benefit from the intangible asset in order to generate results.

Estimating the fair value of a reporting unit requires management judgment. Estimated fair values for our reporting units were determined using a market valuation method that incorporate price-to-earnings and price-to-book multiples of comparable public companies. In addition, as the fair values determined under the market approach represent a noncontrolling interest, we applied a control premium to arrive at the estimated fair value of each reporting unit on a controlling basis. We engaged an independent valuation specialist to assist us in our valuation process at August 1, 2016.

Our annual goodwill impairment testing at August 1, 2016 did not indicate any goodwill impairment in any of our reporting units. Substantially all of our goodwill is allocated to our Investment Banking, Equities, and Fixed Income reporting units for which the results of our assessment indicated that these reporting units had a fair value in excess of their carrying amounts based on current projections. At August 31, 2016, goodwill allocated to these reporting units is $1,642.3 million of total goodwill of $1,645.3 million. For the remaining less significant reporting unit, we have used a net asset approach for valuation and the fair value of each of the reporting units is equal to its book value.

Intangible Assets

Intangible assets are included in Other assets in the Consolidated Statements of Financial Condition. The following tables present the gross carrying amount, dispositions, accumulated amortization, net carrying amount and weighted average amortization period of identifiable intangible assets at August 31, 2016 and November 30, 2015 (dollars in thousands):



	August 31, 2016													Weighted average remaining lives (years)
	Gross cost		Disposals (1)			Impairment losses			Accumulated amortization			Net carrying amount		Weighted average remaining lives (years)
Customer relationships	$	126,081	$	—		$	—		$	(40,453	)	$	85,628	12.3
Trade name	128,845		—			—			(12,884		)	115,961		31.5
Exchange and clearing organization membership interests and registrations	11,860		(1,379		)	(1,284		)	—			9,197		N/A
Total	$	266,786	$	(1,379	)	$	(1,284	)	$	(53,337	)	$	210,786


(1)	Activity is related to the sale of certain exchange and clearing organization membership interests in the Futures reporting unit due to the exit of the business.



	November 30, 2015							Weighted average remaining lives (years)
	Gross cost		Accumulated amortization			Net carrying amount		Weighted average remaining lives (years)
Customer relationships	$	127,667	$	(34,754	)	$	92,913	12.9
Trade name	131,288		(10,315		)	120,973		32.3
Exchange and clearing organization membership interests and registrations	11,897		—			11,897		N/A
Total	$	270,852	$	(45,069	)	$	225,783

We performed our annual impairment testing of intangible assets with an indefinite useful life, which consists of exchange and clearing organization membership interests and registrations, at August 1, 2016. We elected to perform a quantitative assessment of membership interests and registrations that have available quoted sales prices as well as certain other membership interests and registrations that have declined in utilization. A qualitative assessment was performed on the remainder of our indefinite-life intangible assets. In applying our quantitative assessment, we recognized an impairment loss of $1.3 million on certain exchange membership interests and registrations. With regard to our qualitative assessment of the remaining indefinite-life intangible assets, based on our assessment of market conditions, the utilization of the assets and the replacement costs associated with the assets, we have concluded that it is not more likely than not that the intangible assets are impaired.

Amortization Expense

For finite life intangible assets, aggregate amortization expense amounted to $3.0 million and $9.1 million for the three and nine months ended August 31, 2016, respectively, and $3.1 million and $9.2 million for the three and nine months ended August 31, 2015, respectively. These expenses are included in Other expenses on the Consolidated Statements of Earnings.

The estimated future amortization expense for the five succeeding fiscal years is as follows (in thousands):



Remainder of fiscal 2016	$	3,049
Year ended November 30, 2017	12,198
Year ended November 30, 2018	12,198
Year ended November 30, 2019	12,198
Year ended November 30, 2020	12,198

- Definition

The entire disclosure for the aggregate amount of goodwill and a description of intangible assets, which may include (a) for amortizable intangible assets (also referred to as finite-lived intangible assets), the carrying amount, the amount of any significant residual value, and the weighted-average amortization period, (b) for intangible assets not subject to amortization (also referred to as indefinite-lived intangible assets), the carrying amount, and (c) the amount of research and development assets acquired and written off in the period, including the line item in the income statement in which the amounts written off are aggregated, if not readily apparent from the income statement. Also discloses (a) for amortizable intangibles assets in total and by major class, the gross carrying amount and accumulated amortization, the total amortization expense for the period, and the estimated aggregate amortization expense for each of the five succeeding fiscal years, (b) for intangible assets not subject to amortization the carrying amount in total and by major class, and (c) for goodwill, in total and for each reportable segment, the changes in the carrying amount of goodwill during the period (including the aggregate amount of goodwill acquired, the aggregate amount of impairment losses recognized, and the amount of goodwill included in the gain (loss) on disposal of a reporting unit). If any part of goodwill has not been allocated to a reportable segment, discloses the unallocated amount and the reasons for not allocating. For each impairment loss recognized related to an intangible asset (excluding goodwill), discloses: (a) a description of the impaired intangible asset and the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method for determining fair value, (c) the caption in the income statement or the statement of activities in which the impairment loss is aggregated, and (d) the segment in which the impaired intangible asset is reported. For each goodwill impairment loss recognized, discloses: (a) a description of the facts and circumstances leading to the impairment, (b) the amount of the impairment loss and the method of determining the fair value of the associated reporting unit, and (c) if a recognized impairment loss is an estimate not finalized and the reasons why the estimate is not final. May also disclose the nature and amount of any significant adjustments made to a previous estimate of an impairment loss.

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