INTANGIBLE ASSETS INCLUDING GOODWILL

12 Months Ended

Dec. 31, 2017

INTANGIBLE ASSETS INCLUDING GOODWILL

NOTE I. INTANGIBLE ASSETS INCLUDING GOODWILL

Intangible Assets

The following table details the company’s intangible asset balances by major asset class.

($ in millions)

	Gross					Net
	Carrying		Accumulated			Carrying
At December 31, 2017:	Amount		Amortization			Amount
Intangible asset class
Capitalized software	$	1,600	$	(790	)	$	810
Client relationships	2,358		(1,080		)	1,278
Completed technology	2,586		(1,376		)	1,210
Patents/trademarks	668		(256		)	413
Other*	47		(16		)	31

Total	$	7,260	$	(3,518	)	$	3,742

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

($ in millions)

	Gross					Net
	Carrying		Accumulated			Carrying
At December 31, 2016:	Amount		Amortization			Amount
Intangible asset class
Capitalized software	$	1,537	$	(661	)	$	876
Client relationships	2,831		(1,228		)	1,602
Completed technology	3,322		(1,668		)	1,654
Patents/trademarks	730		(205		)	525
Other*	46		(15		)	31

Total	$	8,466	$	(3,778	)	$	4,688

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

The net carrying amount of intangible assets decreased $946 million during the year ended December 31, 2017, primarily due to intangible asset amortization, partially offset by additions resulting from capitalized software. There was no impairment of intangible assets recorded in 2017 and 2016. The aggregate intangible amortization expense was $1,520 million and $1,544 million for the years ended December 31, 2017 and 2016, respectively. In addition, in 2017 and 2016, respectively, the company retired $1,753 million and $817 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 December 31, 2017:

($ in millions)

	Capitalized		Acquired
	Software		Intangibles		Total
2018	$	482	$	812	$	1,294
2019	248		671		920
2020	79		560		639
2021	—		446		446
2022	—		377		377

Goodwill

The changes in the goodwill balances by reportable segment, for the years ended December 31, 2017 and 2016, are as follows:

($ in millions)

											Foreign
											Currency
	Balance										Translation		Balance
	January 1,		Goodwill		Purchase Price						and Other		December
Segment	2017		Additions		Adjustments			Divestitures			Adjustments*		31, 2017
Cognitive Solutions	$	19,484	$	3	$	(38	)	$	(20	)	$	235	$	19,665
Global Business Services	4,607		—		2			—			204		4,813
Technology Services & Cloud Platforms	10,258		13		(2		)	—			179		10,447
Systems	1,850		—		0			—			13		1,862

Total	$	36,199	$	16	$	(38	)	$	(20	)	$	631	$	36,788

*Primarily driven by foreign currency translation.

($ in millions)

											Foreign
											Currency
	Balance										Translation			Balance
	January 1,		Goodwill		Purchase Price						and Other			December
Segment	2016		Additions		Adjustments			Divestitures			Adjustments*			31, 2016
Cognitive Solutions	$	15,621	$	3,821	$	5		$	(12	)	$	48		$	19,484
Global Business Services	4,396		303		4			(1		)	(95		)	4,607
Technology Services & Cloud Platforms	10,156		119		(12		)	(5		)	(1		)	10,258
Systems	1,848		—		(4		)	—			5			1,850

Total	$	32,021	$	4,244	$	(7	)	$	(18	)	$	(42	)	$	36,199

*Primarily driven by foreign currency translation.

There were no goodwill impairment losses recorded during 2017 or 2016 and the company has no accumulated impairment losses.

Purchase price adjustments recorded in 2017 and 2016 were related to acquisitions that were completed on or prior to September 30, 2017 or September 30, 2016, 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. Net purchase price adjustments of $38 million were recorded during 2017, with the primary drivers being deferred tax assets, other taxes payable and other current liabilities associated with the Truven Health Analytics, Inc. and The Weather Company acquisitions. Net purchase price adjustments of $7 million were recorded during 2016, with the primary drivers being deferred tax assets, accounts receivable, deferred income, inventory and other current liabilities.

- 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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