Intangible Assets Including Goodwill

9 Months Ended

Sep. 30, 2023

Goodwill and Intangible Assets Disclosure [Abstract]

Intangible Assets Including Goodwill

Intangible Assets Including Goodwill:

Intangible Assets

The following tables present the company's intangible asset balances by major asset class.

	At September 30, 2023
(Dollars in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount*
Intangible asset class:
Capitalized software	$	1,606	$	(734)	$	872
Client relationships	8,946		(3,253)		5,693
Completed technology	5,630		(2,321)		3,309
Patents/trademarks	1,805		(404)		1,401
Other**	17		(15)		2
Total	$	18,004	$	(6,726)	$	11,278

	At December 31, 2022
(Dollars in millions)	Gross Carrying Amount		Accumulated Amortization		Net Carrying Amount*
Intangible asset class:
Capitalized software	$	1,650	$	(705)	$	945
Client relationships	8,559		(2,951)		5,608
Completed technology	5,220		(2,045)		3,175
Patents/trademarks	2,140		(688)		1,452
Other**	19		(15)		4
Total	$	17,588	$	(6,404)	$	11,184

*Amounts as of September 30, 2023 and December 31, 2022 include a decrease in net intangible asset balances of $41 million and $198 million, respectively, due to foreign currency translation.

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

The net carrying amount of intangible assets increased $94 million during the first nine months of 2023, primarily due to additions of acquired intangibles of $1,406 million, primarily related to the acquisition of Apptio, Inc. in the current quarter and capitalized software, partially offset by intangible asset amortization. The aggregate intangible asset amortization expense was $572 million and $1,676 million for the third quarter and first nine months of 2023, respectively, compared to $577 million and $1,828 million for the third quarter and first nine months of 2022, respectively. In the first nine months of 2023, the company retired $1,327 million of fully amortized intangible assets, impacting both the gross carrying amount and accumulated amortization by this amount.

The future amortization expense relating to intangible assets currently recorded in the Consolidated Balance Sheet was estimated to be the following at September 30, 2023:

(Dollars in millions)	Capitalized Software		Acquired Intangibles		Total
Remainder of 2023	$	156	$	430	$	585
2024	448		1,703		2,151
2025	213		1,684		1,897
2026	55		1,661		1,716
2027	—		1,642		1,642
Thereafter	—		3,285		3,285

Goodwill

The changes in the goodwill balances by segment for the nine months ended September 30, 2023 and for the year ended December 31, 2022 were as follows:

(Dollars in millions)	Balance		Goodwill Additions		Purchase Price Adjustments				Foreign Currency Translation and Other Adjustments*		Balance
Segment	1/1/2023						Divestitures				9/30/2023
Software	$	43,657	$	3,447	$	(7)	$	—	$	(173)	$	46,923
Consulting	7,928		395		6		—		(26)		8,302
Infrastructure	4,363		12		—		—		(5)		4,370
Other	—		—		—		—		—		—
Total	$	55,949	$	3,854	$	(1)	$	—	$	(205)	$	59,596

(Dollars in millions)	Balance		Goodwill Additions		Purchase Price Adjustments				Foreign Currency Translation and Other Adjustments*		Balance
Segment	1/1/2022						Divestitures				12/31/2022
Software	$	43,966	$	568	$	(118)	$	—	$	(760)	$	43,657
Consulting	6,797		1,366		(42)		—		(192)		7,928
Infrastructure	4,396		—		—		(1)		(32)		4,363
Other**	484		—		—		(484)		—		—
Total	$	55,643	$	1,934	$	(159)	$	(485)	$	(984)	$	55,949

*Primarily driven by foreign currency translation.

**The company derecognized goodwill related to the divestiture of its healthcare software assets in the second quarter of 2022.

There were no goodwill impairment losses recorded during the first nine months of 2023 or full-year 2022 and the company has no accumulated impairment losses. Purchase price adjustments recorded in the first nine months of 2023 and full-year 2022 were related to acquisitions that were still subject to the measurement period that ends at the earlier of 12 months from the acquisition date or when information becomes available. Net purchase price adjustments recorded in the first nine months of 2023 were not material. Net purchase price adjustments recorded in 2022 primarily related to deferred tax assets and liabilities associated with the Turbonomic acquisition.