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Intangible Assets Including Goodwill
 3 Months Ended
Mar. 31, 2019
Intangible Assets Including Goodwill  
Intangible Assets Including Goodwill

 

12. Intangible Assets Including Goodwill:

 

Intangible Assets

 

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

 

 

 

At March 31, 2019

 

(Dollars in millions)

 

Gross Carrying

 

Accumulated

 

Net Carrying

 

Intangible asset class

 

Amount

 

Amortization

 

Amount

 

Capitalized software

 

$
1,665

 

$
(683

)

$
982

 

Client relationships

 
2,022

 
(1,150

)
872

 

Completed technology

 
2,032

 
(1,248

)
784

 

Patents/trademarks

 
635

 
(348

)
287

 

Other *

 
56

 
(25

)
30

 

 

 

 

 

 

 

 

 

Total

 

$
6,410

 

$
(3,454

)

$
2,956

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

 

 

At December 31, 2018

 

(Dollars in millions)

 

Gross Carrying

 

Accumulated

 

Net Carrying

 

Intangible asset class

 

Amount

 

Amortization

 

Amount

 

Capitalized software

 

$
1,568

 

$
(629

)

$
939

 

Client relationships

 
2,068

 
(1,123

)
945

 

Completed technology

 
2,156

 
(1,296

)
860

 

Patents/trademarks

 
641

 
(330

)
311

 

Other *

 
56

 
(23

)
32

 

 

 

 

 

 

 

 

 

Total

 

$
6,489

 

$
(3,402

)

$
3,087

 

 

 

 

 

 

 

 

 

 

 

 

 

 

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

 

The net carrying amount of intangible assets decreased $131 million during the first quarter of 2019, primarily due to intangible asset amortization, partially offset by additions resulting from capitalized software. The aggregate intangible amortization expense was $303 million and $340 million for the quarters ended March 31, 2019 and 2018, respectively. In addition, in the first three months of 2019, the company retired $273 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, 2019:

 

 

 

Capitalized

 

Acquired

 

 

 

(Dollars in millions)

 

Software

 

Intangibles

 

Total

 

2019 (for Q2 - Q4)

 

$
383

 

$
501

 

$
885

 

2020

 
379

 
565

 
944

 

2021

 
209

 
450

 
659

 

2022

 
11

 
382

 
393

 

2023

 

—

 
64

 
64

 

 

 

 

Goodwill

 

The change in the goodwill balances by segment, for the three months ended March 31, 2019 and for the year ended December 31, 2018 are as follows:

 

 

 

 

 

 

 

 

 

 

 

Foreign

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency

 

 

 

 

 

 

 

 

 

Purchase

 

 

 

Translation

 

 

 

(Dollars in millions)

 

Balance

 

Goodwill

 

Price

 

 

 

And Other

 

Balance

 

Segment

 

1/1/2019

 

Additions

 

Adjustments

 

Divestitures

 

Adjustments*

 

3/31/2019

 

Cloud & Cognitive Software

 

$
24,594

 

$

—

 

$
0

 

$

—

 

$
31

 

$
24,625

 

Global Business Services

 
4,711

 

—

 
0

 

—

 
(3

)
4,708

 

Global Technology Services

 
3,988

 

—

 

—

 

—

 
16

 
4,003

 

Systems

 
1,847

 

—

 

—

 

—

 
3

 
1,851

 

Other — divested businesses

 
1,126

 

—

 

—

 
(32

)

—

 
1,094

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$
36,265

 

$

—

 

$
0

 

$
(32

)

$
47

 

$
36,281

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Primarily driven by foreign currency translation.

 

 

 

 

 

 

 

 

 

 

 

Foreign

 

 

 

 

 

 

 

 

 

 

 

 

 

Currency

 

 

 

 

 

 

 

 

 

Purchase

 

 

 

Translation

 

 

 

(Dollars in millions)

 

Balance

 

Goodwill

 

Price

 

 

 

And Other

 

Balance

 

Segment

 

1/1/2018

 

Additions

 

Adjustments

 

Divestitures

 

Adjustments**

 

12/31/2018

 

Cloud & Cognitive Software*

 

$
24,973

 

$
9

 

$
0

 

$
(1

)

$
(388

)

$
24,594

 

Global Business Services*

 
4,782

 
24

 
(3

)

—

 
(92

)
4,711

 

Global Technology Services*

 
4,044

 

—

 
0

 

—

 
(56

)
3,988

 

Systems

 
1,862

 

—

 
0

 

—

 
(15

)
1,847

 

Other — divested businesses*

 
1,127

 
1

 
0

 
0

 
(2

)
1,126

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total

 

$
36,788

 

$
34

 

$
(3

)

$
(1

)

$
(553

)

$
36,265

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

*Recast to conform to 2019 presentation.

**Primarily driven by foreign currency translation.

 

In the first quarter of 2019, the company made a number of changes to its organizational structure and management system. With these changes, the company revised its reportable segments. Goodwill was reallocated to the new reporting segments, and as a result, an impairment assessment was performed. There were no goodwill impairment losses recorded during the first three months of 2019 or the full year of 2018 and the company has no accumulated impairment losses. For further information regarding the segment change, refer to note 8, “Segments.”

 

Purchase price adjustments recorded in the first three months of 2019 and full year 2018 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 during the first three months of 2019 and full year 2018 were not material.