Goodwill and Other Intangible Assets

3 Months Ended

Aug. 31, 2012

Note 6—Goodwill and Other Intangible Assets.

The balance of goodwill as of August 31, 2012 and May 31, 2012 was $4,182.2 million and $4,114.4 million, respectively. The change in goodwill is primarily related to the goodwill recorded related to the trauma acquisition, which is described in Note 2 – Acquisitions. The increase in goodwill was also due to foreign currency fluctuations as the euro strengthened against the U.S. dollar.

The Company uses an accelerated method for amortizing customer relationship intangibles as the value for those relationships is greater at the beginning of their life. The accelerated method was calculated using historical customer attrition rates. The remaining finite-lived intangibles are amortized on a straight line basis. The decrease in the net intangible asset balance is primarily due to amortization and partially offset by the strengthening of the euro against the U.S. dollar.

The Company performs its annual assessment for impairment as of March 31 for all reporting units. The estimates and assumptions underlying the fair value calculations used in the Company’s annual impairment tests are uncertain by their nature and can vary significantly from actual results. Factors that management must estimate include, but are not limited to, industry and market conditions, sales volume and pricing, raw material costs, capital expenditures, working capital changes, cost of capital, and tax rates. These factors are especially difficult to predict when global financial markets are volatile. The estimates and assumptions used in its impairment tests are consistent with those the Company use in its internal planning. These estimates and assumptions may change from period to period. If the Company uses different estimates and assumptions in the future, impairment charges may occur and could be material.

Intangible assets consisted of the following at August 31, 2012 and May 31, 2012:


*(in millions)*	August 31, 2012
	Gross					Net
	Carrying		Accumulated			Carrying
	Amount		Amortization			Amount
Core technology	$	1,698.1	$	(406.3	)	$	1,291.8
Completed technology		604.2		(218.0	)		386.2
Product trade names		192.5		(55.6	)		136.9
Customer relationships		2,387.1		(708.0	)		1,679.1
Non-compete contracts		4.6		(3.3	)		1.3

Sub-total		4,886.5		(1,391.2	)		3,495.3
Corporate trade names		312.2		—			312.2
Currency translation		166.8		(33.4	)		133.4

Total	$	5,365.5	$	(1,424.6	)	$	3,940.9


*(in millions)*	May 31, 2012
	Gross					New							Net
	Carrying		Impairment			Carrying		Accumulated			Impairment		Carrying
	Amount		Charge			Amount		Amortization			Charge		Amount
Core technology	$	1,856.1	$	(185.7	)	$	1,670.4	$	(457.7	)	$	74.3	$	1,287.0
Completed technology		594.2					594.2		(206.7	)		—		387.5
Product trade names		184.5		—			184.5		(52.6	)		—		131.9
Customer relationships		2,666.1		(306.8	)		2,359.3		(859.3	)		191.6		1,691.6
Non-compete contracts		4.6		—			4.6		(3.1	)		—		1.5

Sub-total		5,305.5		(492.5	)		4,813.0		(1,579.4	)		265.9		3,499.5
Corporate trade names		323.5		(11.3	)		312.2		—			—		312.2
Currency translation		147.2		—			147.2		(28.5	)		—		118.7

Total	$	5,776.2	$	(503.8	)	$	5,272.4	$	(1,607.9	)	$	265.9	$	3,930.4

The weighted average useful life of the intangibles at August 31, 2012 is as follows:


		Weighted Average Useful Life
Core technology		16 Years
Completed technology		10 Years
Product trade names		14 Years
Customer relationships		15 Years
Non-compete contracts		2 Years
Corporate trade names		Indefinite life

Expected amortization expense for the intangible assets stated above, for the years ending May 31, 2013 through 2017 is $291.7 million, $282.6 million, $273.1 million, $267.7 million, and $263.6 million, respectively.

- 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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