GOODWILL AND OTHER INTANGIBLE ASSETS

12 Months Ended

May 28, 2017

GOODWILL AND OTHER INTANGIBLE ASSETS [Abstract]

NOTE 6. GOODWILL AND OTHER INTANGIBLE ASSETS

The components of goodwill and other intangible assets are as follows:

In Millions		May 28, 2017		May 29, 2016
Goodwill	$	8,747.2	$	8,741.2
Other intangible assets:
Intangible assets not subject to amortization:
Brands and other indefinite-lived intangibles		4,161.1		4,147.5
Intangible assets subject to amortization:
Franchise agreements, customer relationships, and other finite-lived intangibles		524.8		536.9
Less accumulated amortization		(155.5)		(145.8)
Intangible assets subject to amortization		369.3		391.1
Other intangible assets		4,530.4		4,538.6
Total	$	13,277.6	$	13,279.8

Based on the carrying value of finite-lived intangible assets as of May 28, 2017, amortization expense for each of the next five fiscal years is estimated to be approximately $28 million.

During the third quarter of fiscal 2017, we announced a new global organization structure to streamline our leadership, enhance global scale, and drive improved operational agility to maximize our growth capabilities. As a result of this global reorganization, we reassessed our operating segments and our reporting units. Under our new organization structure, our chief operating decision maker assesses performance and makes decisions about resources to be allocated to our segments at the North America Retail, Convenience Stores & Foodservice, Europe & Australia, and Asia & Latin America operating segment level. See Note 16 for additional information on our operating segments. Our reporting units were unchanged with the exception of combining our former U.S. Meals and U.S. Baking reporting units into a single reporting unit.

The changes in the carrying amount of goodwill for fiscal 2015, 2016, and 2017 are as follows:

In Millions		North America Retail		Convenience Stores & Foodservice		Europe & Australia		Asia & Latin America		Joint Ventures		Total
Balance as of May 25, 2014	$	5,975.1	$	921.1	$	866.1	$	390.0	$	498.2	$	8,650.5
Acquisition		589.8		-		-		-		-		589.8
Other activity, primarily foreign
currency translation		(18.7)		-		(147.0)		(103.0)		(96.7)		(365.4)
Balance as of May 31, 2015		6,546.2		921.1		719.1		287.0		401.5		8,874.9
Acquisitions		54.1		-		-		29.4		-		83.5
Divestitures		(184.5)		-		-		(1.9)		-		(186.4)
Other activity, primarily foreign
currency translation		(5.5)		-		(2.6)		(27.4)		4.7		(30.8)
Balance as of May 29, 2016		6,410.3		921.1		716.5		287.1		406.2		8,741.2
Divestiture		-		(2.3)		-		-		-		(2.3)
Other activity, primarily foreign
currency translation		(3.8)		-		(15.7)		25.3		2.5		8.3
Balance as of May 28, 2017	$	6,406.5	$	918.8	$	700.8	$	312.4	$	408.7	$	8,747.2

The changes in the carrying amount of other intangible assets for fiscal 2015, 2016, and 2017 are as follows:

In Millions		Total
Balance as of May 25, 2014	$	5,014.3
Acquisition		268.4
Impairment charge		(260.0)
Other activity, primarily amortization
and foreign currency translation		(345.7)
Balance as of May 31, 2015		4,677.0
Acquisitions		30.1
Divestiture		(119.6)
Other activity, primarily amortization
and foreign currency translation		(48.9)
Balance as of May 29, 2016		4,538.6
Other activity, primarily amortization
and foreign currency translation		(8.2)
Balance as of May 28, 2017	$	4,530.4

Our annual goodwill intangible asset test was performed on the first day of the second quarter of fiscal 2017. As of the assessment date, we determined there was no impairment of our goodwill intangible assets as their related fair values were substantially in excess of the carrying values, except for the Latin America reporting unit. We did not consider the new organization structure to be a triggering event requiring a subsequent goodwill impairment test as our reporting units remain unchanged, with the exception of combining the former U.S. Meals and U.S. Baking reporting units.

Our indefinite-lived intangible asset test was performed on the first day of the second quarter of fiscal 2017. As of the assessment date, there was no impairment of any of our indefinite-lived intangible assets as their related fair values were substantially in excess of the carrying values, except for the Immaculate Baking brand intangible asset.

The excess fair value above the carrying value of the Latin America reporting unit and the Immaculate Baking brand intangible asset is as follows:



In Millions	Carrying Value	Excess Fair Value Above Carrying Value
Latin America	$523.0	15%
Immaculate Baking	$12.0	17%

While having significant coverage as of our fiscal 2017 assessment date, the Progresso, Green Giant, and Food Should Taste Good brand intangible assets and U.S. Yogurt reporting unit had risk of decreasing coverage. We will continue to monitor these businesses for potential impairment.

In fiscal 2015, we made a strategic decision to redirect certain resources supporting our Green Giant business in our North America Retail segment to other businesses within the segment. Therefore, future sales and profitability projections in our long-range plan for this business declined. As a result of this triggering event, we performed an interim impairment assessment of the Green Giant brand intangible asset as of May 31, 2015, and determined that the fair value of the brand asset no longer exceeded the carrying value of the asset. Significant assumptions used in that assessment included our updated long-range cash flow projections for the Green Giant business, an updated royalty rate, a weighted-average cost of capital, and a tax rate. We recorded a $260.0 million impairment charge in restructuring, impairment, and other exit costs in fiscal 2015 related to this asset.

- 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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