Intangible Assets and Goodwill

3 Months Ended

Mar. 31, 2013

Goodwill and Intangible Assets Disclosure [Abstract]

A. Intangible assets

Intangible assets are comprised of the following:



		March 31, 2013
(Millions of dollars)	Weighted Amortizable Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships	15	$	2,715	$	(419	)	$	2,296
Intellectual property	11	1,754		(376		)	1,378
Other	10	295		(112		)	183
Total finite-lived intangible assets	13	4,764		(907		)	3,857
Indefinite-lived intangible assets - In-process research & development		18		—			18
Total intangible assets		$	4,782	$	(907	)	$	3,875



		December 31, 2012
	Weighted Amortizable Life (Years)	Gross Carrying Amount		Accumulated Amortization			Net
Customer relationships	15	$	2,756	$	(377	)	$	2,379
Intellectual property	12	1,767		(342		)	1,425
Other	10	299		(105		)	194
Total finite-lived intangible assets	13	4,822		(824		)	3,998
Indefinite-lived intangible assets - In-process research & development		18		—			18
Total intangible assets		$	4,840	$	(824	)	$	4,016

Customer relationship intangibles of $9 million, net of accumulated amortization of $1 million, were reclassified from Intangible assets to held for sale and/or divested during 2013, primarily related to the divestiture of portions of the Bucyrus distribution business, and are not included in the March 31, 2013 balances in the table above. See Note 19 for additional information on assets held for sale.

Amortization expense for both the three months ended March 31, 2013 and 2012 was $94 million. Amortization expense related to intangible assets is expected to be:



(Millions of dollars)
2013	2014	2015	2016	2017	Thereafter
$376	$370	$369	$360	$356	$2,138

B. Goodwill

Goodwill of $18 million was reclassified to held for sale and/or divested during 2013, primarily related to the divestiture of portions of the Bucyrus distribution business and the sale of certain Power Systems assets that were accounted for as a business, and is not included in the March 31, 2013 balance in the table below. See Note 19 for additional information on divestitures and assets held for sale.

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 for reporting units was impaired during the three months ended March 31, 2013 or 2012.

The changes in the carrying amount of the goodwill by reportable segment for the three months ended March 31, 2013 were as follows:



(Millions of dollars)
	December 31, 2012			Held for Sale and Business Divestitures ¹			Other Adjustments ²			March 31, 2013
Construction Industries
Goodwill	$	382		$	—		$	(30	)	$	352
Resource Industries
Goodwill	4,559			(8		)	(38		)	4,513
Impairments	(602		)	—			—			(602		)
Net goodwill	3,957			(8		)	(38		)	3,911
Power Systems
Goodwill	2,486			(10		)	(16		)	2,460
All Other ³
Goodwill	117			—			—			117
Consolidated total
Goodwill	7,544			(18		)	(84		)	7,442
Impairments	(602		)	—			—			(602		)
Net goodwill	$	6,942		$	(18	)	$	(84	)	$	6,840

¹ See Note 19 for additional details.

² Other adjustments are comprised primarily of foreign currency translation.

³ Includes All Other operating segment (See Note 15).

- 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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