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Goodwill, Customer Relationships and Other Intangible Assets

6 Months Ended

Jun. 30, 2011

Goodwill, Customer Relationships and Other Intangible Assets

Goodwill, Customer Relationships and Other Intangible Assets

(4) Goodwill, Customer Relationships and Other Intangible Assets

Goodwill, customer relationships and other intangible assets as of June 30, 2011 and December 31, 2010 consisted of the following:

		June 30, 2011

		(Dollars in millions)
Goodwill		$	20,266	10,261

Customer relationships, less accumulated amortization of $705 and $349		$	8,199	930

Other intangible assets
	Capitalized software, less accumulated amortization of $197 and $79	$	1,788	164
	Other intangible assets subject to amortization, less accumulated amortization of $47 and $3		362	40
	Indefinite-life intangible assets		418	418

	Other intangible assets, net	$	2,568	622

At June 30, 2011, the net carrying amounts of goodwill, customer relationships and other intangible assets included preliminary estimates of $10.005 billion, $7.365 billion and $1.954 billion, respectively, related to our April 1, 2011 acquisition of Qwest. We expect to complete the final determination of these estimates and related estimated lives for amortizable intangible assets no later than the first quarter of 2012. We also are in the process of assigning goodwill to our reporting units, which have been realigned within our new operating segments (see Note 12—Segment Information).

Total amortization expense for intangible assets for the six months ended June 30, 2011 was $525 million, which includes $420 million related to the Qwest acquisition. We amortize Qwest customer relationships over an estimated life of 10 years, using the sum-of-the-years-digits and straight-line methods, depending on the classification of the customer. We amortize Qwest capitalized software using the straight-line method over estimated lives ranging up to seven years and amortize other Qwest intangible assets predominantly using the sum-of-the-years digits method over an estimated life of four years. We estimate that total amortization expense for the years ending December 31, 2011 through 2015 (excluding the effects of the Savvis acquisition that was consummated on July 15, 2011) will be as follows (dollars in millions):


Year ending December 31,
	2011	$	1,442
	2012	$	1,652
	2013	$	1,489
	2014	$	1,323
	2015	$	1,136

We periodically review the estimated lives and methods used to amortize our intangible assets. The actual amounts of amortization expense may differ materially from our estimates, depending on the results of our periodic reviews and our final determinations of value related to Qwest's and Savvis' intangible assets.

- 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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