Intangible Assets and Goodwill

3 Months Ended

Mar. 31, 2012

Intangible Assets and Goodwill

Intangible Assets and Goodwill

7.Intangible Assets and Goodwill

A.  Intangible assets

Intangible assets are comprised of the following:

		March 31, 2012
(Millions of dollars)	WeightedAmortizableLife (Years)	GrossCarryingAmount		AccumulatedAmortization			Net
Customer relationships	15	$	2,811	$	(262	)	$	2,549
Intellectual property	11	1,805		(283		)	1,522
Other	10	305		(107		)	198
Total finite-lived intangible assets	13	4,921		(652		)	4,269
Indefinite-lived intangible assets - In-process research & development		18		—			18
Total intangible assets		$	4,939	$	(652	)	$	4,287

		December 31, 2011
(Millions of dollars)	WeightedAmortizableLife (Years)	GrossCarryingAmount		AccumulatedAmortization			Net
Customer relationships	15	$	2,811	$	(213	)	$	2,598
Intellectual property	11	1,794		(244		)	1,550
Other	11	299		(97		)	202
Total finite-lived intangible assets	13	4,904		(554		)	4,350
Indefinite-lived intangible assets - In-process research & development		18		—			18
Total intangible assets		$	4,922	$	(554	)	$	4,368

During the first quarter of 2012, we acquired finite-lived intangible assets aggregating $8 million due to the purchase of Cat Tohoku.  See Note 18 for details on this business combination.

Amortization expense for the three months ended March 31, 2012 and March 31, 2011 was $94 million and $22 million, respectively.  Amortization expense related to intangible assets is expected to be:

(Millions of dollars)
2012		2013		2014		2015		2016		Thereafter
$	375	$	372	$	367	$	362	$	352	$	2,553

B.  Goodwill

During the first quarter of 2012, we recorded goodwill of $16 million related to the acquisition of Cat Tohoku.  See Note 18 for details on this business combination.

We test goodwill for impairment annually and whenever events or circumstances make it more likely than not that an impairment may have occurred. We perform our annual goodwill impairment test as of October 1 and monitor for interim triggering events on an ongoing basis. Goodwill is reviewed for impairment utilizing a qualitative assessment or a two-step process. We have an option to make a qualitative assessment of a reporting unit’s goodwill for impairment. If we choose to perform a qualitative assessment and determine the fair value more likely than not exceeds the carrying value, no further evaluation is necessary. For reporting units where we perform the two-step process, the first step requires us to compare the fair value of each reporting unit, which we primarily determine using an income approach based on the present value of discounted cash flows, to the respective carrying value, which includes goodwill. If the fair value of the reporting unit exceeds its carrying value, the goodwill is not considered impaired. If the carrying value is higher than the fair value, there is an indication that an impairment may exist and the second step is required. In step two, the implied fair value of goodwill is calculated as the excess of the fair value of a reporting unit over the fair values assigned to its assets and liabilities. If the implied fair value of goodwill is less than the carrying value of the reporting unit’s goodwill, the difference is recognized as an impairment loss. No goodwill was impaired during the first quarter of 2012 or 2011.

The changes in the carrying amount of the goodwill by reportable segment for the first quarter of 2012 were as follows:

(Millions of dollars)	Construction Industries			ResourceIndustries			PowerSystems			Other		Consolidated Total
Balance at December 31, 2011	$	378		$	4,099		$	2,486		$	117	$	7,080
Business acquisitions(1)	16			—			—			—		16
Held for Sale(2)	—			(51		)	—			—		(51		)
Other adjustments(3)	(11		)	52			(5		)	—		36
Balance at March 31, 2012	$	383		$	4,100		$	2,481		$	117	$	7,081

(1)Purchase of Cat Tohoku.  See Note 18 for additional details.

(2)See Note 19 for additional details.

(3)Other adjustments are comprised primarily of foreign currency translation.