Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

he components of, and changes in, the carrying amount of goodwill follow:

(MILLIONS OF DOLLARS)	U.S.		International			Total
Balance, December 31, 2017	$	671	$	839		$	1,510
Additions / Adjustments(a)	594		431			1,025
Other(b)	—		(16		)	(16		)
Balance, December 31, 2018	$	1,265	$	1,254		$	2,519
Additions / Adjustments(a)	102		—			102
Other(b)	—		(29		)	(29		)
Balance, December 31, 2019	$	1,367	$	1,225		$	2,592

^(a) For 2019, primarily relates to the acquisitions of Platinum Performance, Phoenix Lab and ZNLabs. See Note 5. Acquisitions and Divestitures

For 2018, primarily includes a $977 million purchase price allocation associated with the acquisition of Abaxis and $48 million related to the acquisition of a manufacturing business in Ireland. See Note 5. Acquisitions and Divestitures.     

^(b)   Includes adjustments for foreign currency translation. For 2018, also includes $2 million related to the divestiture of certain agribusiness products within our International segment.     

The gross goodwill balance was $3,128 million as of December 31, 2019, and $3,055 million as of December 31, 2018. Accumulated goodwill impairment losses (generated entirely in fiscal 2002) was $536 million as of December 31, 2019 and December 31, 2018.

B. Other Intangible Assets

The components of identifiable intangible assets follow:

	As of December 31, 2019							As of December 31, 2018
						Identifiable							Identifiable
	Gross					Intangible Assets,		Gross					Intangible Assets,
	Carrying		Accumulated			Less Accumulated		Carrying		Accumulated			Less Accumulated
(MILLIONS OF DOLLARS)	Amount		Amortization			Amortization		Amount		Amortization			Amortization
Finite-lived intangible assets:
Developed technology rights(a)(b)	$	1,938	$	(657	)	$	1,281	$	1,854	$	(523	)	$	1,331
Brands and tradenames(a)(b)	424		(223		)	201		378		(205		)	173
Other(a)(b)	441		(249		)	192		412		(178		)	234
Total finite-lived intangible assets	2,803		(1,129		)	1,674		2,644		(906		)	1,738
Indefinite-lived intangible assets:
Brands and tradenames	104		—			104		104		—			104
In-process research and development	105		—			105		197		—			197
Product rights	7		—			7		7		—			7
Total indefinite-lived intangible assets	216		—			216		308		—			308
Identifiable intangible assets	$	3,019	$	(1,129	)	$	1,890	$	2,952	$	(906	)	$	2,046

^(a)   Includes intangible assets associated with the acquisitions of Platinum Performance, Phoenix Lab and ZNLabs in 2019.

^(b)  In connection with the acquisition of Abaxis, the company recorded $894 million of intangible assets, as shown in the table below, representing the fair value at the acquisition date. See Note 5. Acquisitions and Divestitures for additional information.

	Gross Carrying		Weighted-average
(MILLIONS OF DOLLARS)	Amount		Life (years)
Finite-lived intangible assets:
Developed technology rights	$	610	10
Brands and tradenames	104		20
Other	180		4
Total	$	894

Developed Technology Rights

Developed technology rights represent the amortized cost associated with developed technology, which has been acquired from third parties and which can include the right to develop, use, market, sell and/or offer for sale the product, compounds and intellectual property that we have acquired with respect to products, compounds and/or processes that have been completed. These assets include technologies related to the care and treatment of cattle, swine, poultry, sheep, fish, dogs, cats and horses.

Brands and Tradenames

Brands and tradenames represent the amortized or unamortized cost associated with product name recognition, as the products themselves do not receive patent protection and legal trademark and tradenames. The more significant finite-lived brands are Platinum Performance, Excenel, and Lutalyse and the more significant indefinite-lived brands are the Linco family products and Mastitis. The more significant components of indefinite-lived trademarks and tradenames are indefinite-lived trademarks and tradenames acquired from SmithKlineBeecham. The more significant finite-lived trademarks and tradenames are finite-lived trademarks and tradenames acquired from Abaxis.

In-Process Research and Development

IPR&D assets represent R&D assets that have not yet received regulatory approval in a major market. The majority of these IPR&D assets were acquired in connection with our acquisition of Pharmaq.

IPR&D assets are required to be classified as indefinite-lived assets until the successful completion or abandonment of the associated R&D effort. Accordingly, during the development period after the date of acquisition, these assets will not be amortized until approval is obtained in a major market, typically either the U.S. or the EU, or in a series of other countries, subject to certain specified conditions and management judgment. At that time, we will determine the useful life of the asset, reclassify the asset out of IPR&D and begin amortization. If the associated R&D effort is abandoned, the related IPR&D assets will be written-off, and we will record an impairment charge.

There can be no certainty that IPR&D assets ultimately will yield a successful product.

Product Rights

Product rights represent product registration and application rights that were acquired from Pfizer in 2014.

C. Amortization

The weighted average life of our total finite-lived intangible assets is approximately 10.0 years. Total amortization expense for finite-lived intangible assets was $237 million in 2019, $157 million in 2018, and $100 million in 2017.

The annual amortization expense expected for the years 2020 through 2024 is as follows:

(MILLIONS OF DOLLARS)	2020		2021		2022		2023		2024
Amortization expense	$	224	$	199	$	188	$	177	$	158