Goodwill and Other Intangible Assets

6 Months Ended

Feb. 28, 2015

Goodwill and Other Intangible Assets [Abstract]

8. Goodwill and Other Intangible Assets

Historically, Walgreens operations were within one reportable segment. As a result of the Second Step Transaction effective December 31, 2014, the Company realigned its reportable segments into the Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale segments (see Note 19, Segment Reporting). Goodwill added as a result of the Second Step Transaction has been preliminarily allocated to the Retail Pharmacy USA, Retail Pharmacy International and Pharmaceutical Wholesale reportable segments.

Changes in the carrying amount of goodwill by reportable segment consist of the following activity (in millions):

	Retail Pharmacy USA			Retail Pharmacy International			Pharmaceutical Wholesale			Total
August 31, 2014	$	2,359		$	-		$	-		$	2,359
Acquisitions		8,311			3,747			3,521			15,579
Sale of business⁽¹⁾		(706	)		-			-			(706	)
Other⁽²⁾		(3	)		-			-			(3	)
Currency translation adjustments		-			(99	)		(86	)		(185	)
February 28, 2015	$	9,961		$	3,648		$	3,435		$	17,044

⁽¹⁾	Represents Walgreens Infusion and Respiratory Services goodwill that has been reclassified as an asset held for sale. See Note 22, Subsequent Events for further details.

⁽²⁾	Other primarily represents immaterial purchase accounting adjustments for the Company's acquisitions.

As a result of the Second Step Transaction, the Company recorded $15.6 billion of goodwill and $11.5 billion of intangible assets in conjunction with the preliminary purchase accounting. See Note 7, Acquisitions for additional information regarding the transaction.

The carrying amount and accumulated amortization of intangible assets consist of the following (in millions):

	February 28, 2015		August 31, 2014
Gross Amortizable Intangible Assets
Purchased prescription files	$	925	$	1,079
Favorable lease interests		427		382
Purchasing and payer contracts		95		301
Non-compete agreements		154		151
Trade names and trademarks		735		191
Customer relationships		1,724		-
Loyalty card holders		716		-
Other amortizable intangible assets		4		4
Total gross amortizable intangible assets		4,780		2,108

Accumulated amortization
Purchased prescription files		471		474
Favorable lease interests		187		174
Purchasing and payer contracts		61		145
Non-compete agreements		82		70
Trade names and trademarks		84		69
Customer relationships		46		-
Loyalty card holders		10		-
Other amortizable intangible assets		1		4
Total accumulated amortization		942		936
Total amortizable intangible assets, net	$	3,838	$	1,172

Indefinite Lived Intangible Assets
Trade names and trademarks	$	6,136	$	8
Pharmacy licenses		2,251		-
Total indefinite lived intangible assets	$	8,387	$	8

Total intangible assets, net	$	12,225	$	1,180

The carrying amount of amortizable intangible assets and accumulated amortization included currency translation adjustments of $(129) million and $46 million, respectively, as of February 28, 2015.

The carrying amount of indefinite lived intangible assets included currency translation adjustments of $(76) million as of February 28, 2015.

Amortization expense for intangible assets was $209 million and $276 million for the three and six months ended February 28, 2015, respectively and $73 million and $143 million for the three and six months ended February 28, 2014, respectively.

Estimated annual amortization expense for intangible assets recorded at February 28, 2015 is as follows (in millions):

		2015				2016				2017				2018				2019
Estimated annual amortization expense:		$	426			$	465			$	424			$	388			$	366

- 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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