Goodwill and Other Intangible Assets

12 Months Ended

Dec. 31, 2021

Goodwill and Intangible Assets Disclosure [Abstract]

The following table details the changes in the carrying amount of goodwill:


	Engine Products		Fastening Systems		Engineered Structures		Forged Wheels		Total
Balances at December 31, 2019
Goodwill	$	2,883	$	1,607	$	289	$	7	$	4,786
Accumulated impairment losses	(719)		—		—		—		(719)
Goodwill, net	2,164		1,607		289		7		4,067
Impairment (See Note U)	—		—		(2)		—		(2)
Translation and other	24		13		—		—		37
Transfer from Engine Products to Engineered Structures(1)	(17)		—		17		—		—

Balances at December 31, 2020
Goodwill	2,890		1,620		306		7		4,823
Accumulated impairment losses	(719)		—		(2)		—		(721)
Goodwill, net	2,171		1,620		304		7		4,102

Impairment (See Note U)	—		(4)		—		—		(4)
Translation and other	(22)		(9)		—		—		(31)

Balances at December 31, 2021
Goodwill	2,868		1,611		306		7		4,792
Accumulated impairment losses	(719)		(4)		(2)		—		(725)
Goodwill, net	$	2,149	$	1,607	$	304	$	7	$	4,067

(1)In the first quarter of 2020, the Savannah operations was transferred from the Engine Products segment to the Engineered Structures segment and, as a result, goodwill of $17 was reallocated.

During the 2021 annual review of goodwill in the fourth quarter, management elected to perform qualitative assessments on the Engine Products and Forged Wheels reporting units and performed quantitative impairment tests on the Engineered Structures and Fastening Systems reporting units. The estimated fair values for the Engineered Structures and Fastening Systems reporting units exceeded their respective carrying values by approximately 30% and 50%, respectively; thus, there were no goodwill impairments. Under the quantitative impairment test, the evaluation of impairment involves comparing the current fair value of each reporting unit to its carrying value, including goodwill. Howmet uses a discounted cash flow (“DCF”) model to estimate the current fair value of its reporting units when testing for impairment, as management believes forecasted cash flows are the best indicator of such fair value. A number of significant assumptions and estimates are involved in the application of the DCF model to forecast operating cash flows, including sales growth, production costs, capital spending, and discount rate. Assumptions can vary among the reporting units. Cash flow forecasts are generally based on approved business unit operating plans for the early years and historical relationships in later years. The WACC rate for the individual reporting units is estimated with the assistance of valuation experts. The annual goodwill impairment tests in the fourth quarter of 2021, 2020, and 2019 indicated that goodwill was not impaired for any of the Company’s reporting units. If actual results or external market factors decline significantly from management’s estimates, future goodwill impairment charges (or the amount by which the carrying amount exceeds the reporting unit’s fair value without exceeding the total amount of goodwill allocated to that reporting unit) may be necessary and could be material.

During the first quarter of 2020, Howmet's market capitalization declined significantly compared to the fourth quarter of 2019. Over the same period, the equity value of our peer group companies and the overall U.S. stock market also declined significantly amid market volatility. In addition, as a result of the COVID-19 pandemic and measures designed to contain the spread, global sales to customers in the aerospace and commercial transportation industries impacted by COVID-19 had been and were expected to be negatively impacted, compared to 2019, as a result of disruption in demand. As a result of these macroeconomic factors, we performed a qualitative impairment test to evaluate whether it is more likely than not that the fair value of any of our reporting units is less than its carrying value. As a result of this assessment, the Company performed a quantitative impairment test in the first quarter of 2020 for the Engineered Structures reporting unit and concluded that although the margin between the fair value of the reporting unit and carrying value had declined from approximately 60% to approximately 15%, it was not impaired. Since the first quarter of 2020, there have been no indicators of impairment identified for the Engineered Structures reporting unit or any other reporting units or indefinite-lived intangible assets.

On January 1, 2020, management performed a quantitative impairment test of the Engines Products and Engineered Structures segments in connection with the Savannah business transfer. The estimated fair value of each of these reporting units substantially exceeded their carrying value; thus, there was no goodwill impairment at the date the business was transferred.

In the second quarter of 2019, the Company performed an interim impairment evaluation of goodwill for Engine Products in connection with the impairment of the long-lived assets of the Disks asset group. The estimated fair value of the Engine Products reporting unit was substantially in excess of its carrying value; thus, there was no impairment of goodwill.

Other intangible assets were as follows:


December 31, 2021	Gross carrying amount		Accumulated amortization		Intangibles, net
Computer software	$	206	$	(175)	$	31
Patents and licenses	67		(65)		2
Other intangibles	686		(202)		484
Total amortizable intangible assets	959		(442)		517
Indefinite-lived trade names and trademarks	32		—		32
Total intangible assets, net	$	991	$	(442)	$	549


December 31, 2020	Gross carrying amount		Accumulated amortization		Intangibles, net
Computer software	$	194	$	(169)	$	25
Patents and licenses	67		(65)		2
Other intangibles	700		(188)		512
Total amortizable intangible assets	961		(422)		539
Indefinite-lived trade names and trademarks	32		—		32
Total intangible assets, net	$	993	$	(422)	$	571

During the second quarter of 2019, the Company recorded a charge of $197 for intangible asset impairments associated with the Disks long-lived asset group which was recorded in Restructuring and other charges in the Statement of Consolidated Operations. See Note O for additional details.

Computer software consists primarily of software costs associated with enterprise business solutions across Howmet's businesses.

Amortization expense related to the intangible assets recorded in Provision for depreciation and amortization in the Statement of Consolidated Operations was $36, $40, and $58 for the years ended December 31, 2021, 2020, and 2019, respectively, and is expected to be in the range of approximately $34 to $39 annually from 2022 to 2026.