Goodwill and Other Purchased Intangible Assets

12 Months Ended

Dec. 31, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Purchased Intangible Assets

GOODWILL AND OTHER PURCHASED INTANGIBLE ASSETS

Goodwill

Goodwill and other purchased intangible assets are included in the identifiable assets of the segment to which the operations of the acquired entity have been assigned. Impairment tests are performed at least annually and more often as circumstances require. Any goodwill impairment, as well as the amortization of other purchased intangible assets, is charged against the respective segment’s operating income. Our annual impairment test was performed as of November 30, 2012, for all segments. In performing the goodwill impairment tests, the company uses a discounted cash flow approach corroborated by comparative market multiples, where appropriate, to determine the fair value of its businesses. Adverse changes in political and economic conditions, such as the potential for sequestration and/or actions on the national debt ceiling by the U.S. Government, or changes in other factors affecting the impairment analysis, such as discount rates, could result in an impairment of our goodwill in the future. Information Systems is the segment most sensitive to future impairment. Accumulated goodwill impairment losses at December 31, 2012, and 2011, totaled $570 million at the Aerospace Systems segment.

The changes in the carrying amounts of goodwill for the years ended December 31, 2012 and 2011, were as follows:



$ in millions	Aerospace Systems			Electronic Systems			Information Systems		Technical Services		Total
Balance as of December 31, 2010		$3,801			$2,402			$5,248		$925		$12,376
Businesses sold	—			(2		)	—		—		(2		)
Balance as of December 31, 2011		$3,801			$2,400			$5,248		$925		$12,374
Businesses acquired, sold and other	(43		)	10			39		51		57
Balance as of December 31, 2012		$3,758			$2,410			$5,287		$976		$12,431

Segment Realignments

On January 1, 2012, the company transferred its missile business (principally the ICBM program), from Aerospace Systems to Technical Services. In connection with this realignment, $51 million of goodwill was transferred from Aerospace Systems to Technical Services and is reflected in the amounts above for all years presented.

Purchased Intangible Assets

As of December 31, 2012 and 2011, gross contract, program, and other intangible assets were $1.8 billion and accumulated amortization was $1.7 billion. Net contract, program, and other intangible assets were $137 million, at December 31, 2012, and $155 million at December 31, 2011.

Amortization expense for 2012, 2011, and 2010, was $36 million, $37 million, and $71 million, respectively. The company’s purchased intangible assets are being amortized on a straight-line basis over an aggregate weighted-average period of 17 years and are included in other non-current assets in the consolidated statements of financial position. As of December 31, 2012, the expected future amortization of purchased intangibles for each of the next five years is $30 million in 2013, $18 million in 2014, $17 million in 2015, $11 million in 2016, and $10 million in 2017.

- 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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