Goodwill and Intangible Assets



	U.S.		Canada		Europe		International		Consolidated
Changes in Goodwill:			(In millions)
Balance at December 31, 2016	$	6,415.6	$	567.6	$	1,260.5	$	6.4	$	8,250.1
Adjustments to preliminary purchase price allocation⁽¹⁾	18.5		—		—		—		18.5
Foreign currency translation	—		20.9		101.3		0.4		122.6
Balance at June 30, 2017	$	6,434.1	$	588.5	$	1,361.8	$	6.8	$	8,391.2


(1)	During the second quarter of 2017, we recorded an adjustment to our preliminary purchase price allocation primarily related to certain accrued liabilities associated with the Acquisition. Refer to Note 4, "Acquisition and Investments" for further details.

The following table presents details of our intangible assets, other than goodwill, as of June 30, 2017:



	Useful life	Gross		Accumulated amortization			Net
	(Years)	(In millions)
Intangible assets subject to amortization:
Brands	10 - 50	$	5,075.3	$	(402.9	)	$	4,672.4
License agreements and distribution rights	15 - 28	231.8		(96.9		)	134.9
Other	2 - 40	144.2		(34.6		)	109.6
Intangible assets not subject to amortization:
Brands	Indefinite	8,164.9		—			8,164.9
Distribution networks	Indefinite	780.3		—			780.3
Other	Indefinite	337.5		—			337.5
Total		$	14,734.0	$	(534.4	)	$	14,199.6

The following table presents details of our intangible assets, other than goodwill, as of December 31, 2016:



	Useful life	Gross		Accumulated amortization			Net
	(Years)	(In millions)
Intangible assets subject to amortization:
Brands	10 - 50	$	4,876.3	$	(288.2	)	$	4,588.1
License agreements and distribution rights	15 - 28	225.9		(89.4		)	136.5
Other	2 - 40	129.3		(26.4		)	102.9
Intangible assets not subject to amortization:
Brands	Indefinite	8,114.2		—			8,114.2
Distribution networks	Indefinite	752.6		—			752.6
Other	Indefinite	337.6		—			337.6
Total		$	14,435.9	$	(404.0	)	$	14,031.9

The changes in the gross carrying amounts of intangibles from December 31, 2016, to June 30, 2017, are primarily driven by the impact of foreign exchange rates, as a significant amount of intangibles are denominated in foreign currencies.

Based on foreign exchange rates as of June 30, 2017, and the preliminary allocation of fair value to definite-lived intangible assets, the estimated future amortization expense of intangible assets is as follows:



Fiscal year	Amount
	(In millions)
2017 - remaining	$	110.1
2018	$	219.4
2019	$	218.5
2020	$	217.4
2021	$	212.0

Amortization expense of intangible assets was $55.1 million and $10.1 million for the three months ended June 30, 2017, and June 30, 2016, respectively, and $110.3 million and $19.7 million for the six months ended June 30, 2017, and June 30, 2016, respectively. The increase in amortization expense over the prior year is primarily attributable to the addition of MillerCoors definite-lived intangible asset amortization following the completion of the Acquisition, as well as the reclassification of the Molson core brand intangible assets from indefinite to definite-lived following the completion of our annual impairment test as of October 1, 2016. This expense is primarily presented within marketing, general and administrative expenses on the unaudited condensed consolidated statements of operations.

We completed our required annual goodwill and indefinite-lived intangible impairment testing as of October 1, 2016, the first day of our fourth quarter, and concluded there were no impairments of goodwill within our Canada, Europe or India reporting units; however, an impairment charge was recorded on the Molson core brand intangible asset in Canada as a result of this review. Outside of the Molson core brands impairment, there were no other impairments of our indefinite-lived intangible assets as a result of the annual review process.

Annual Goodwill Impairment Testing

Our 2016 annual goodwill impairment testing determined that the fair value of our Canada reporting unit had declined, largely due to continued economic and competitive challenges negatively impacting our business, including sustained challenges facing the Molson core brands. Our Europe reporting unit continued to be considered at risk of failing step one of the goodwill impairment test. Specifically, the fair value of the Europe and Canada reporting units were estimated at approximately 14% and 29% in excess of carrying value, respectively, as of the October 1, 2016, testing date. The fair value of the India reporting unit approximated its carrying value, as there were no significant changes indicating a reduction in the fair value of the reporting unit since our completion of the interim impairment assessment during the second quarter of 2016 or annual impairment assessment as of October 1, 2016.

Key Assumptions

As of the date of our annual impairment test, performed as of October 1, the Europe reporting unit goodwill is at risk of future impairment in the event of significant unfavorable changes in the forecasted cash flows (including prolonged, or further weakening of, adverse economic conditions or significant unfavorable changes in tax, environmental or other regulations, including interpretations thereof), terminal growth rates, market multiples and/or weighted-average cost of capital utilized in the discounted cash flow analyses. For testing purposes, management's best estimates of the expected future results are the primary driver in determining the fair value. Current projections used for our Europe reporting unit testing reflect continued challenging environments in the future followed by growth resulting from a longer term recovery of the macroeconomic environment, as well as the benefit of anticipated cost savings and specific brand-building and innovation activities. Fair value determinations require considerable judgment and are sensitive to changes in underlying assumptions and factors. As a result, there can be no assurance that the estimates and assumptions made for purposes of the annual goodwill and indefinite-lived intangible impairment tests will prove to be an accurate prediction of the future. Examples of events or circumstances that could reasonably be expected to negatively affect the underlying key assumptions and ultimately impact the estimated fair value of our reporting units and indefinite-lived intangibles may include such items as: (i) a decrease in expected future cash flows, specifically, a decrease in sales volume and increase in costs that could significantly impact our immediate and long-range results, a decrease in sales volume driven by a prolonged weakness in consumer demand or other competitive pressures adversely affecting our long-term volume trends, a continuation of the trend away from core brands in certain of our markets, especially in markets where our core brands represent a significant portion of the market, unfavorable working capital changes and an inability to successfully achieve our cost savings targets, (ii) adverse changes in macroeconomic conditions or an economic recovery that significantly differs from our assumptions in timing and/or degree (such as a recession or worsening of the overall European economy), (iii) volatility in the equity and debt markets or other country specific factors which could result in a higher weighted-average cost of capital, (iv) sensitivity to market multiples; and (v) regulation limiting or banning the manufacturing, distribution or sale of alcoholic beverages.

Based on known facts and circumstances, we evaluate and consider recent events and uncertain items, as well as related potential implications, as part of our annual assessment and incorporate into the analyses as appropriate. These facts and circumstances are subject to change and may impact future analyses.

While historical performance and current expectations have resulted in fair values of our reporting units and indefinite-lived intangible assets in excess of carrying values, if our assumptions are not realized, it is possible that an impairment charge may need to be recorded in the future.

Indefinite and Definite-Lived Intangibles

Regarding indefinite and definite-lived intangibles, we continuously monitor the performance of the underlying assets for potential triggering events suggesting an impairment review should be performed. No such triggering events were identified in the first half of 2017.