Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2019

Goodwill and Intangible Assets Disclosure [Abstract]

Goodwill and Other Intangible Assets

NOTE 7. GOODWILL AND OTHER INTANGIBLE ASSETS

As discussed in Note 3, goodwill arises from the purchase price for acquired businesses exceeding the fair value of tangible and intangible assets acquired less assumed liabilities. We assess the goodwill of each of our reporting units for impairment at least annually as of the first day of the fourth quarter and as “triggering” events occur that indicate that it is more likely than not that an impairment exists. We elected to bypass the optional qualitative goodwill assessment allowed by applicable accounting standards and performed a quantitative impairment test for all reporting units as this was determined to be the most effective method to assess impairment across a large spectrum of reporting units.

We estimate the fair value of our reporting units primarily using a market approach, based on multiples of earnings before interest, taxes, depreciation and amortization (“EBITDA”) determined by current trading market multiples of earnings for companies operating in businesses similar to each of our reporting units, in addition to recent market available sale transactions of comparable businesses. In certain circumstances we also evaluate other factors including results of the estimated fair value utilizing a discounted cash flow analysis (i.e., an income approach), market positions of the businesses, comparability of market sales transactions, and financial and operating performance in order to validate the results of the market approach. If the estimated fair value of the reporting unit is less than its carrying value, we will impair the goodwill for the amount of the carrying value in excess of the fair value.

In 2019, we had twelve reporting units for goodwill impairment testing. The carrying value of the goodwill included in each individual reporting unit ranges from $15 million to approximately $3.8 billion. No goodwill impairment charges were recorded for the years ended December 31, 2019, 2018, and 2017, and no “triggering” events have occurred subsequent to the performance of the 2019 annual impairment test. The factors used by management in its impairment analysis are inherently subject to uncertainty. If actual results are not consistent with management’s estimates and assumptions, goodwill and other intangible assets may be overstated and a charge would need to be taken against net earnings.

In January 2017, the FASB issued ASU No. 2017-04, Intangibles—Goodwill and Other (Topic 350): Simplifying the Test for Goodwill Impairment, which aims to simplify the subsequent measurement of goodwill by removing Step 2 of the current goodwill impairment test, which requires a hypothetical purchase price allocation. Under the new standard, an impairment loss will be recognized in the amount by which a reporting unit's carrying value exceeds its fair value, not to exceed the carrying amount of goodwill. We adopted this standard on September 28, 2019 (the date of our annual goodwill impairment testing)

with no impact to our financial statements for the year ended December 31, 2019. The adoption of this standard will only impact future goodwill impairment calculations, as applicable.

The following is a rollforward of our goodwill by segment ($ in millions):

	Professional Instrumentation			Industrial Technologies			Total
Balance, January 1, 2018	$	3,331.0		$	1,229.3		$	4,560.3
Attributable to 2018 acquisitions	1,571.8			29.4			1,601.2
Foreign currency translation & other	(8.2		)	(20.2		)	(28.4		)
Balance, December 31, 2018	4,894.6			1,238.5			6,133.1
Attributable to adjustments to preliminary purchase price allocations for acquisitions completed in 2018	75.9			(1.2		)	74.7
Attributable to 2019 acquisitions	2,192.9			—			2,192.9
Attributable to the Tektronix Video Business Combination	(40.2		)	—			(40.2		)
Foreign currency translation & other	3.1			35.7			38.8
Balance, December 31, 2019	$	7,126.3		$	1,273.0		$	8,399.3

Finite-lived intangible assets are amortized over the shorter of their legal or estimated useful lives. The following summarizes the gross carrying value and accumulated amortization for each major category of intangible asset as of December 31 ($ in millions):

	2019					2018
	Gross Carrying Amount		Accumulated Amortization			Gross Carrying Amount		Accumulated Amortization
Finite-lived intangibles:
Patents and technology	$	1,041.4	$	(357.0	)	$	614.0	$	(280.8	)
Customer relationships and other intangibles	3,206.8		(792.5		)	2,204.2		(589.9		)
Trademarks and trade names	18.0		(0.2		)	—		—
Total finite-lived intangibles	4,266.2		(1,149.7		)	2,818.2		(870.7		)
Indefinite-lived intangibles:
Trademarks and trade names	728.5		—			528.8		—
Total intangibles	$	4,994.7	$	(1,149.7	)	$	3,347.0	$	(870.7	)

During 2019 we acquired finite-lived intangible assets, consisting primarily of customer relationships and developed technology, with a weighted average life of 11 years. During 2018, we acquired finite-lived intangible assets, consisting primarily of customer relationships and developed technology, with a weighted average life of 12 years. Refer to Note 3 for additional information on the intangible assets acquired.

Total intangible amortization expense in 2019, 2018, and 2017 was $293 million, $135 million and $65 million, respectively. Based on the intangible assets recorded as of December 31, 2019, amortization expense is estimated to be $336 million during 2020, $330 million during 2021, $315 million during 2022, $308 million during 2023, and $306 million during 2024.