Goodwill And Other Intangibles

12 Months Ended

Sep. 30, 2012

Goodwill and Intangible Assets Disclosure [Abstract]

(6) GOODWILL AND OTHER INTANGIBLES

Purchases of businesses are accounted for under the acquisition method, with substantially all goodwill assigned to the reporting unit that acquires the business. Under an impairment test performed annually, if the carrying amount of a reporting unit's goodwill exceeds its estimated fair value, impairment is recognized to the extent that the carrying amount exceeds the implied fair value of the goodwill. Fair values of reporting units are Level 3 measures, estimated primarily with an income approach that discounts future cash flows using risk-adjusted interest rates, and are subject to change due to changes in underlying economic conditions. See Note 3 for further discussion of changes in goodwill related to acquisitions and divestitures.

In prior periods, the Company discussed certain businesses for which the estimated fair value did not significantly exceed carrying value. Assumptions used in estimating fair value included successful execution of business plans and recovery in served markets. In the fourth quarter of 2012, the Company's annual goodwill impairment testing revealed that carrying value exceeded fair value for the embedded computing and power business and the DC power systems business, both in the Network Power segment. These businesses have been unable to meet their operating objectives and the Company anticipates that growth in sales and earnings for these businesses will be slower than previously expected, reflecting protracted weak demand and structural industry challenges in telecommunications and information technology end markets, and increased competition. As a consequence, the carrying value of these businesses was reduced by a noncash, pretax charge to earnings totaling $592 ($528 after-tax, or $0.72 per share). Management and the Board of Directors have discussed the unique market and technology challenges facing the embedded computing and power business and will pursue strategic alternatives, including a potential sale of this business with annual revenue of $1.4 billion. In 2011, the Company recorded a $19 ($0.03 per share) noncash, pretax impairment charge related to the Industrial Automation wind turbine pitch control business, reflecting a slowdown in investment for alternative energy.

The change in the carrying value of goodwill by business segment follows:



	Process Management			Industrial Automation		Network Power		Climate Technologies		Commercial & Residential Solutions
	Process Management			Industrial Automation		Network Power		Climate Technologies		Commercial & Residential Solutions		Total
Balance, Sept 30, 2010	$	2,274		1,379		3,997		464		542		8,656
Acquisitions	110							15				125
Divestitures				(1	)	(8	)			(6	)	(15	)
Impairment				(19	)							(19	)
Foreign currency translation and other	(16		)	34		1		4		1		24
Balance, Sept 30, 2011	$	2,368		1,393		3,990		483		537		8,771
Acquisitions	5					62		27				94
Divestitures										(102	)	(102	)
Impairment						(592	)					(592	)
Foreign currency translation and other	6			(55	)	(93	)	(9	)	6		(145	)
Balance, Sept 30, 2012	$	2,379		1,338		3,367		501		441		8,026

The gross carrying amount and accumulated amortization of identifiable intangible assets by major class follow:



	Customer Relationships			Intellectual Property		Capitalized Software		Total
	2011		2012	2011	2012	2011	2012	2011	2012
Gross carrying amount	$	1,499	1,537	1,110	1,125	971	1,046	3,580	3,708
Less: Accumulated amortization	330		459	518	606	763	805	1,611	1,870
Net carrying amount	$	1,169	1,078	592	519	208	241	1,969	1,838

Total intangible asset amortization expense for 2012, 2011 and 2010 was $318, $345 and $254, respectively. Based on intangible asset balances as of September 30, 2012, amortization expense is expected to approximate $308 in 2013, $274 in 2014, $244 in 2015, $197 in 2016 and $175 in 2017.

- 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.

+ References+ Details