Intangible Assets Including Goodwill

3 Months Ended

Mar. 31, 2018

Intangible Assets Including Goodwill

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

	At March 31, 2018
(Dollars in millions)	Gross Carrying		Accumulated			Net Carrying
Intangible asset class	Amount		Amortization			Amount
Capitalized software	$	1,540	$	(746	)	$	794
Client relationships	2,329		(1,135		)	1,194
Completed technology	2,571		(1,454		)	1,117
Patents/trademarks	661		(274		)	387
Other*	47		(17		)	30

Total	$	7,149	$	(3,627	)	$	3,521

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

	At December 31, 2017
(Dollars in millions)	Gross Carrying		Accumulated			Net Carrying
Intangible asset class	Amount		Amortization			Amount
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 non-proprietary business processes, methodologies and systems.

The net carrying amount of intangible assets decreased $221 million during the first quarter of 2018, primarily due to intangible asset amortization, partially offset by additions resulting from capitalized software. The aggregate intangible amortization expense was $340 million and $390 million for the quarters ended March 31, 2018 and 2017, respectively. In addition, in the first three months of 2018, the company retired $231 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 March 31, 2018:

	Capitalized		Acquired
(Dollars in millions)	Software		Intangibles		Total
2018 (for Q2 - Q4)	$	378	$	607	$	986
2019	292		672		964
2020	115		560		675
2021	8		446		454
2022	—		377		377

The change in the goodwill balances by reportable segment, for the three months ended March 31, 2018 and for the year ended December 31, 2017 are as follows:

										Foreign
										Currency
					Purchase					Translation
(Dollars in millions)	Balance		Goodwill		Price					And Other			Balance
Segment	01/01/18		Additions		Adjustments		Divestitures			Adjustments*			3/31/18
Cognitive Solutions	$	19,665	$	—	$	0	$	(1	)	$	(76	)	$	19,589
Global Business Services	4,813		—		—		—			39			4,852
Technology Services & Cloud Platforms	10,447		—		0		—			(15		)	10,433
Systems	1,862		—		—		—			(5		)	1,858

Total	$	36,788	$	—	$	0	$	(1	)	$	(56	)	$	36,732

*Primarily driven by foreign currency translation.

											Foreign
											Currency
					Purchase						Translation
(Dollars in millions)	Balance		Goodwill		Price						And Other		Balance
Segment	01/01/17		Additions		Adjustments			Divestitures			Adjustments*		12/31/17
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.

There were no goodwill impairment losses recorded during the first three months of 2018 or the full year of 2017 and the company has no accumulated impairment losses.

Purchase price adjustments recorded in the first three months of 2018 and full year 2017 were related to acquisitions that were completed on or prior to December 31, 2017 or September 30, 2017, 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 recorded during the first three months of 2018 were not material. 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.

- 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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