Goodwill and Intangible Assets



	U.S.			Canada		Europe			International			Consolidated
	(In millions)
Balance at December 31, 2015	$	—		$	551.4	$	1,408.7		$	23.2		$	1,983.3
Business acquisition⁽¹⁾	6,415.6			—		—			(0.6		)	6,415.0
Impairment related to India reporting unit⁽²⁾	—			—		—			(15.7		)	(15.7		)
Foreign currency translation	—			16.2		(148.2		)	(0.5		)	(132.5		)
Balance at December 31, 2016	$	6,415.6		$	567.6	$	1,260.5		$	6.4		$	8,250.1
Adjustments to preliminary purchase price allocation and synergy allocation⁽¹⁾	(487.1		)	295.0		100.0			—			(92.1		)
Business acquisition⁽³⁾	—			13.8		—			—			13.8
Foreign currency translation	—			55.7		177.5			0.5			233.7
Balance at December 31, 2017	$	5,928.5		$	932.1	$	1,538.0		$	6.9		$	8,405.5

(1)

On October 11, 2016, we completed the Acquisition and estimated preliminary goodwill of approximately $6.4 billion, which was initially allocated to our U.S. segment. During 2017, we recorded adjustments to our preliminary purchase price allocation resulting in a net decrease in goodwill of $92.1 million. Separately, early in the fourth quarter of 2017, and prior to the completion of the one year measurement period, we completed the allocation of goodwill to our reporting units, resulting in $295.0 million and $100.0 million allocated to the Canada and Europe reporting units, respectively, as of October 11, 2016. Refer to Note 4, "Acquisition and Investments" for further details.

In addition, the goodwill adjustment for 2016 reflects the final purchase price accounting adjustment associated with the April 1, 2015, acquisition of Mount Shivalik Breweries Ltd ("Mount Shivalik"), a regional brewer in India and is included within the India reporting unit of our International segment.


(2)	The International segment's goodwill impairment loss for 2016 resulted from an interim goodwill impairment assessment for the India reporting unit performed during the second quarter of 2016, triggered by the enactment of total alcohol prohibition in the state of Bihar, India on April 5, 2016.


(3)	During the fourth quarter of 2017, we completed the acquisition of Le Trou du Diable, a craft brewer located in Quebec. As part of the preliminary purchase price accounting in the fourth quarter of 2017, goodwill generated in conjunction with this acquisition has been recorded within our Canada segment, subject to normal purchase accounting adjustments.

The following table presents details of our intangible assets, other than goodwill, as of December 31, 2017:



	Useful life	Gross		Accumulated amortization			Net
	(Years)	(In millions)
Intangible assets subject to amortization:
Brands	10 - 50	$	5,215.3	$	(516.0	)	$	4,699.3
License agreements and distribution rights	15 - 28	236.3		(103.9		)	132.4
Other	2 - 40	148.3		(42.4		)	105.9
Intangible assets not subject to amortization:
Brands	Indefinite	8,216.6		—			8,216.6
Distribution networks	Indefinite	804.7		—			804.7
Other	Indefinite	337.6		—			337.6
Total		$	14,958.8	$	(662.3	)	$	14,296.5

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 December 31, 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 December 31, 2017, the estimated future amortization expense of intangible assets is as follows:



Year	Amount
	(In millions)
2018	$	224.7
2019	223.8
2020	222.8
2021	217.4
2022	213.3

Amortization expense of intangible assets was $222.1 million, $82.1 million, and $29.9 million for the years ended December 31, 2017, December 31, 2016, and December 31, 2015, respectively. The increase in amortization expense in 2016 and 2017 is primarily attributable to the addition of U.S. 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.

We completed our required annual goodwill and indefinite-lived intangible impairment testing as of October 1, 2017, the first day of our fourth quarter, and concluded there were no impairments of goodwill within our U.S., Europe, Canada or India reporting units. Further, there were no impairments of our other indefinite-lived intangible assets as a result of the annual review process.

Reporting Units and Goodwill

As of the date of our annual impairment test, performed as of October 1, 2017, the operations in each of the specific regions within our U.S., Canada, Europe and International segments are considered components based on the availability of discrete financial information and the regular review by segment management. We have concluded that the components within the U.S., Canada and Europe segments each meet the criteria as having similar economic characteristics and therefore have aggregated these components into the U.S., Canada and Europe reporting units, respectively. Additionally, we determined that the components within our International segment do not meet the criteria for aggregation, and therefore, the operations of our India business constitute a separate reporting unit at the component level.

The fair value of the U.S., Europe and Canada reporting units were estimated at approximately 28%, 18% and 26% in excess of carrying value, respectively, as of the October 1, 2017, testing date. The U.S. reporting unit was not tested for impairment in the prior year, as the Acquisition was completed after our annual October 1^st test date. In the current year testing, it was determined that the fair value of the U.S. reporting unit sufficiently exceeded its carrying value approximately one year following the Acquisition. The excess of the fair value over the carrying value of the Europe reporting unit slightly improved from the prior year. The improvement in the current year was driven by positive volume and revenue growth throughout 2017, as well as the benefit of incremental cost savings and synergies, which positively impacted the forecasted future cash flows of the Europe reporting unit. The fair value of our Canada reporting unit declined slightly from the prior year, as the reporting unit continued to face challenging market dynamics during the year, including continued performance declines within the Molson and Coors Light core brands, resulting in a reduction of forecasted results in comparison to the prior year. These declines were slightly offset by incremental cost savings initiatives included in the current year forecast. The fair value of the India reporting unit slightly improved from the prior year, as the economic outlook for the reporting unit continues to improve.

Although the fair value of each of our reporting units was determined to be sufficiently in excess of its respective carrying value as of the October 1, 2017, testing date, the fair value determinations are sensitive to further unfavorable changes in forecasted cash flows, macroeconomic conditions, market multiples or discount rates that could have an adverse impact.

See Note 1, "Basis of Presentation and Summary of Significant Accounting Policies" for further discussion of our determination of reporting units for purposes of goodwill impairment testing.

Indefinite-Lived Intangibles

The Coors and Miller indefinite-lived brands in the U.S. were recognized at their fair values upon completion of the Acquisition on October 11, 2016. Following the completion of our annual impairment testing as of October 1, 2017, the fair value of the Coors and Miller brand families were determined to be sufficiently in excess of their carrying values.

The fair value of the Coors Light brand distribution rights in Canada continues to be sufficiently in excess of its carrying value as of the testing date. Separately, during 2016, we recorded an aggregate impairment charge to the Molson core indefinite-lived brand asset of $495.2 million. The impairment charge was the result of a continued decline in performance of the Molson core brand asset throughout 2016, which drove a downward shift in management's forecast, along with a challenging market dynamic and competitive conditions that were not expected to subside in the near-term. At that time, we also reassessed the brand's indefinite-life classification and determined that the Molson core brands had characteristics that indicated a definite-life assignment was more appropriate, including prolonged weakness in consumer demand driven by increased economic and competitive pressures. Given these factors resulted in sustained declines in brand performance, and it was unclear when these ongoing pressures on the brands would subside, these brands were reclassified as definite-lived intangible assets as of October 1, 2016, and are being amortized over their remaining useful lives ranging from 30 to 50 years.

Our Europe indefinite-lived intangibles' fair values, including the Staropramen and Carling brands, continue to be sufficiently in excess of their respective carrying values as of the annual testing date. During 2015, we also recognized impairment charges on certain European indefinite-lived brands of $275.0 million. These brands were reclassified as definite-lived intangible assets as of September 30, 2015, and are being amortized over their remaining useful lives ranging from 30 to 50 years.

We utilized Level 3 fair value measurements in our impairment analysis of our indefinite-lived intangible brand assets, which utilizes an excess earnings approach to determine the fair values of the assets as of the testing date. The future cash flows used in the analysis are based on internal cash flow projections based on our long range plans and include significant assumptions by management as noted below. Separately, we assessed qualitative factors to determine whether it was more likely than not that the fair value of our water rights, an indefinite-lived intangible asset, was greater than its carrying amount and determined that a full quantitative analysis was not necessary.

Key Assumptions

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. For example, subsequent to the completion of our annual impairment testing, we considered the implications of the enactment of the 2017 Tax Act on our U.S. reporting unit and indefinite-lived brand valuations. The results of our preliminary analysis indicated that the implications are expected to be favorable, keeping all other assumptions constant.

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.

Definite-Lived Intangibles

Regarding definite-lived intangibles, we continuously monitor the performance of the underlying assets for potential triggering events suggesting an impairment review should be performed. Excluding the definite-lived intangible asset impairment charge associated with the triggering event which occurred in Bihar, India in 2016 further discussed below, no such triggering events that resulted in an impairment charge were identified in 2017, 2016, or 2015.

India Triggering Event and Interim Impairment Assessment

In the fourth quarter of 2015, a newly elected government in the state of Bihar, India announced plans to ban the sale of "country" liquor and to limit the sale of other forms of alcohol, such as beer, to certain government owned outlets, effective April 1, 2016. On April 5, 2016, four days after the start of the ban on "country" liquor, the government of the state of Bihar announced immediate changes to the ban, implementing a complete prohibition of the sale and consumption of all forms of alcohol. Due to this triggering event, and as the expected length of the prohibition was unclear and was expected to remain in effect for the foreseeable future, we performed an interim impairment assessment for the impacted tangible assets, intangible assets and the India reporting unit goodwill. Specifically, upon identification of the triggering event we completed step one of the goodwill impairment test comparing the fair value of the India reporting unit to its carrying value using a combination of discounted cash flow analyses and market approaches, which resulted in the need to complete step two. Upon completion of step two, we recorded an impairment of tangible assets of $11.0 million and impairment of goodwill and definite-lived intangibles of $19.8 million within special items during the second quarter of 2016. The remaining goodwill attributable to the India reporting unit of $6.9 million, based on foreign exchange rates at December 31, 2017, is associated with cash flows in other states in India, where alcohol sales are not prohibited. We continue to monitor legal proceedings impacting the regulatory environment as it relates to our ability to resume operations in the state. In addition, if the facts or circumstances associated with the expected collectibility of certain Bihar receivables due from the government of approximately $3 million, based on foreign exchange rates at December 31, 2017, adversely change or if future cash flows are adversely impacted relative to the projected cash flows used in the impairment analysis, we may incur additional impairment or other losses in future periods.