Goodwill and other intangible assets

Goodwill and indefinite-lived intangible assets are evaluated for impairment annually or more frequently if an event occurs or circumstances change that could more likely than not reduce the fair value of a reporting unit or intangible asset below its carrying value. Based on this annual evaluation as of June 1, 2019 valuation date, the fair values of the Company’s reporting units exceeded their carrying amounts ranging from approximately 9% to approximately 269%. The fair value of the Boots reporting unit, within the Retail Pharmacy International segment, is in excess of its carrying value by approximately 9%. As at August 31, 2019, the carrying value of the goodwill of the Boots reporting unit is $2.6 billion. The fair values of certain indefinite-lived intangibles within the Boots reporting unit exceeded their carrying amounts ranging from approximately 3% to approximately 29%, except for the pharmacy licenses. As at August 31, 2019, the carrying value of these indefinite-lived intangibles within the Boots reporting unit is $6.9 billion. As a result of an annual evaluation, during the three months ended August 31, 2019, the Company recorded an impairment of $73 million on its pharmacy licenses in the Boots reporting unit, which was included in selling, general and administrative expenses in the Consolidated Statement of Earnings. The fair value of pharmacy licenses was determined using excess earnings method and thus represents Level 3 measurement.

The Company continues to closely monitor industry and market trends and the impact it may have on the Boots reporting unit and indefinite-lived intangibles as the challenging market conditions in the UK continued to impact the operating performance of the Boots reporting unit during the three months ended August 31, 2019.

The fair value for each reporting unit is estimated using both the income and market approaches. The income approach requires management to estimate a number of factors for each reporting unit, including projected future operating results, economic projections, anticipated future cash flows and discount rates. The market approach estimates fair value using comparable marketplace fair value data from within a comparable industry grouping. The determination of the fair value of the reporting units requires us to make significant estimates and assumptions. These estimates and assumptions primarily include, but are not limited to: the selection of appropriate peer group companies, control premiums appropriate for acquisitions in the industries in which we compete, discount rates, terminal growth rates, forecasts of revenue, operating income, depreciation, amortization and capital expenditures. Indefinite-lived intangible assets fair values are estimated using the relief from royalty method and excess earnings method of the income approach. These estimates can be affected by a number of factors including, but not limited to, general economic conditions, availability of market information as well as our profitability. Although the Company believes its estimates of fair value are reasonable, actual financial results could differ from those estimates due to the inherent uncertainty involved in making such estimates. Changes in assumptions concerning future financial results or other underlying assumptions could have a significant impact on either the fair value of the reporting units, the amount of the goodwill impairment charge, or both.

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			Walgreens Boots Alliance, Inc.
August 31, 2017	$	9,139	$	3,392		$	3,101		$	15,632
Acquisitions	1,344		—			4			1,348
Currency translation adjustments	—		(22		)	(44		)	(66		)
August 31, 2018	$	10,483	$	3,370		$	3,061		$	16,914
Acquisitions	8		—			—			8
Dispositions	—		(9		)	—			(9		)
Currency translation adjustments	—		(182		)	(171		)	(353		)
August 31, 2019	$	10,491	$	3,179		$	2,890		$	16,560

In fiscal 2019, the Company completed the analysis to assign fair values for assets acquired and liabilities assumed for the acquired Rite Aid stores resulting in decreases to goodwill of $13 million. In fiscal 2018, the Company purchased 1,932 stores from Rite Aid for total consideration of $4.3 billion, resulting in an increase of $1,344 million to goodwill and $2,054 million to intangible assets during the year. See note 2, acquisitions, for additional information.

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



	August 31, 2019		August 31, 2018
Gross amortizable intangible assets
Customer relationships and loyalty card holders¹	$	4,290	$	4,235
Favorable lease interests and non-compete agreements	654		680
Trade names and trademarks	461		489
Purchasing and payer contracts	382		390
Total gross amortizable intangible assets	5,787		5,794

Accumulated amortization
Customer relationships and loyalty card holders¹	$	1,262	$	997
Favorable lease interests and non-compete agreements	410		359
Trade names and trademarks	250		206
Purchasing and payer contracts	99		78
Total accumulated amortization	2,021		1,640
Total amortizable intangible assets, net	$	3,766	$	4,154

Indefinite-lived intangible assets
Trade names and trademarks	$	5,232	$	5,557
Pharmacy licenses	1,878		2,072
Total indefinite-lived intangible assets	$	7,110	$	7,629

Total intangible assets, net	$	10,876	$	11,783

¹Includes purchased prescription files.

Amortization expense for intangible assets was $552 million, $493 million and $385 million in fiscal 2019, 2018 and 2017, respectively.

Estimated future annual amortization expense for the next five fiscal years for intangible assets recorded at August 31, 2019 is as follows (in millions):



	2020		2021		2022		2023		2024
Estimated annual amortization expense	$	478	$	433	$	412	$	378	$	357