Intangible Assets Including Goodwill

9 Months Ended

Sep. 30, 2015

Intangible Assets Including Goodwill:

10. Intangible Assets Including Goodwill: The following table details the company’s intangible asset balances by major asset class:


	At September 30, 2015
(Dollars in millions)	Gross Carrying		Accumulated		Net Carrying
Intangible asset class	Amount		Amortization		Amount
Capitalized software	$	1,329	$	(593)	$	736
Client relationships		1,670		(886)		784
Completed technology		2,431		(1,333)		1,098
Patents/trademarks		291		(156)		134
Other*		32		(9)		23
Total	$	5,753	$	(2,977)	$	2,775

* Other intangibles are primarily acquired proprietary and non-proprietary business processes, methodologies and systems.

	At December 31, 2014
(Dollars in millions)	Gross Carrying		Accumulated		Net Carrying
Intangible asset class	Amount		Amortization		Amount
Capitalized software	$	1,375	$	(679)	$	696
Client relationships		2,208		(1,271)		937
Completed technology		2,831		(1,533)		1,298
Patents/trademarks		374		(214)		161
Other*		18		(6)		12
Total	$	6,806	$	(3,702)	$	3,104

* Other intangibles are primarily acquired proprietary and non-proprietary business processes, methodologies and systems.

The net carrying amount of intangible assets decreased $328 million during the first nine months of 2015, primarily due to amortization, partially offset by intangible asset additions resulting from capitalized software and acquisitions. The aggregate intangible amortization expense was $290 million and $884 million for the third quarter and first nine months of 2015, respectively, versus $339 million and $1,018 million for the third quarter and first nine months of 2014, respectively. In addition, in the first nine months of 2015, the company retired $1,608 million of fully amortized intangible assets, impacting both the gross carrying amount and accumulated amortization by this amount.

The amortization expense for each of the five succeeding years relating to intangible assets currently recorded in the Consolidated Statement of Financial Position is estimated to be the following at September 30, 2015:


	Capitalized		Acquired
(Dollars in millions)	Software		Intangibles		Total
2015 (for Q4)	$	122	$	167	$	289
2016		369		625		994
2017		200		518		718
2018		45		358		402
2019		—		231		231

The change in the goodwill balances by reportable segment, for the nine months ended September 30, 2015 and for the year ended December 31, 2014 are as follows:

									Foreign
									Currency
					Purchase				Translation
(Dollars in millions)	Balance		Goodwill		Price				And Other		Balance
Segment	01/01/15		Additions		Adjustments		Divestitures		Adjustments**		9/30/15
Global Business Services	$	4,555	$	—	$	0	$	(1)	$	(187)	$	4,367
Global Technology Services		3,530		62		0		—		(86)		3,506
Software		21,000		574		(1)		(8)		(608)		20,957
Systems Hardware		1,472		—		—		—		(27)		1,445
Total	$	30,556	$	637	$	(1)	$	(9)	$	(907)	$	30,275

** Primarily driven by foreign currency translation.

									Foreign
									Currency
					Purchase				Translation
(Dollars in millions)	Balance		Goodwill		Price				And Other		Balance
Segment	01/01/14		Additions		Adjustments		Divestitures		Adjustments**		12/31/14
Global Business Services*	$	4,855	$	—	$	0	$	(52)	$	(248)	$	4,555
Global Technology Services*		3,608		11		21		(2)		(108)		3,530
Software		21,121		430		(17)		(19)		(516)		21,000
Systems Hardware		1,601		—		—		(110)		(19)		1,472
Total	$	31,184	$	442	$	4	$	(183)	$	(891)	$	30,556

* Reclassified to conform with 2015 presentation.
** Primarily driven by foreign currency translation.

Purchase price adjustments recorded in the first nine months of 2015 and full year 2014 were related to acquisitions that were completed on or prior to December 31, 2014 or December 31, 2013, respectively, and were still subject to the measurement period that ends at the earlier of 12 months from the acquisition date or when information becomes available. There were no goodwill impairment losses recorded during the first nine months of 2015 or the full year of 2014 and the company has no accumulated impairment losses.

- 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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